EUR/GBP refreshes session tops near 0.8575-80 region, lacks follow-through

• EUR/GBP caught some fresh bids on Tuesday amid the emergence of some selling around the GBP.
• A modest pickup in the USD demand weighed on the euro and might cap the upside for the cross.
• The market focus will remain glued to the upcoming BoE monetary policy meeting on Thursday.

The intraday selling around the sterling picked up pace during the early European session and pushed the EUR/GBP cross to fresh daily tops, around the 0.8575-80 region in the last hour.

The cross once again managed to find decent support and attracted some dip-buying near the 0.8545 region on Tuesday. In the absence of any fresh fundamental trigger, the British pound's relative underperformance could be attributed to concerns about the EU-UK collision over Northern Ireland protocol.

In the latest developments, Maros Sefcovic, a European Commission vice-president, warned in a speech on Friday that a downward spiral in relations could ensue if Britain continues with unilateral action. Separately, British Brexit minister David Frost said that time is now very pressing if we are to find solutions together.

This comes amid worries that the UK government’s decision to delay the final stage of easing lockdown measures to July 19 could hinder the nascent economic recovery. The combination of factors continued acting as a headwind for the sterling and assisted the EUR/GBP cross to erase a major part of the overnight losses.

On the other hand, the shared currency was weighed down by the emergence of some fresh buying around the US dollar. This, along with expectations for a hawkish shift by the Bank of England, might hold traders from placing aggressive bullish bets around the EUR/GBP cross and keep a lid on any further gains, at least for now.

Hence, the key focus will remain on the upcoming BoE monetary policy meeting on Thursday. Meanwhile, the good two-way price moves over the past one week or so points to indecision over the next leg of a directional move. This, in turn, suggests that investors are likely to wait for a fresh catalyst before positioning for a firm direction.

Technical levels to watch