EUR/GBP clings to gains near 0.8375-80 region, lacks follow-through buying
- EUR/GBP caught fresh bids on Monday and recovered a part of the previous session’s losses.
- Tensions over the Northern Ireland Protocol of the Brexit agreement undermined the GBP.
- Absent relevant macro data might cap gains ahead of the ECB President Lagarde's comments.
The EUR/GBP cross maintained its bid tone through the early European session and was last seen trading near the daily high, around the 0.8375-0.8380 region.
The cross attracted fresh buying near the 0.8355 area, or a one-and-half-week low touched earlier this Monday and recovered a part of the previous session's steep decline. The British pound's relative underperformance comes amid tensions over the Northern Ireland protocol of the Brexit agreement and Friday's disappointing UK GDP figures.
That said, a more hawkish Bank of England policy decision should help limit any deeper losses for sterling, at least for now.
It is worth recalling that the BoE raised the benchmark interest rate by 25 bps and the vote distribution showed that four out of nine MPC members backed a more aggressive 50 bps increase in borrowing costs.
On the other hand, the European Central Bank officials have pushed back against bets for an early policy tightening. In fact, ECB member Olli Rehn warned on Saturday that overreacting to inflation by the central bank could stem the economic growth. Moreover, ECB's Gabriel Makhlouf said that investors are wrong to bet on a rate hike in June.
Hence, the market focus will be on the ECB President Christine Lagarde's testimony before the European Parliament for a fresh impetus later during the North American session. This might hold back traders from placing aggressive bullish bets amid absent relevant market-moving economic releases, either from the UK or the Eurozone.
Technical levels to watch