EUR/GBP spikes to one-week tops after comments from EU's Šefčovič
|- The emergence of fresh selling around the British pound pushed EUR/GBP to one-week tops.
- EU-UK collision over Norther Ireland protocol, Brexit jitters weighed heavily on the sterling.
- A sustained move beyond a descending trend line will set the stage for additional gains.
The EUR/GBP cross caught some aggressive bids and shot to one-week tops, around the 0.8630 region in reaction to the latest Brexit headlines.
The British pound took a hit and weakened across the board after European Commission Vice President of Interinstitutional Relations and Foresight, Maroš Šefčovič, commented on the Northern Ireland protocol. The UK has to abide by the legal obligations on border controls and if it takes any unilateral action, the EU will react swiftly, said Šefčovič.
This comes on the back of speculations that the UK may delay plans to end restrictions fully on June 21 in light of the spread of the so-called Delta variant. The combination of factors weighed on the sterling, which, in turn, prompted some short-covering around the EUR/GBP cross and led to a strong intraday rally of around 45 pips.
On the other hand, the shared currency benefitted from the emergence of some fresh selling around the US dollar. This was seen as another factor that provided an additional boost to the EUR/GBP cross. Apart from this, the strong move up could further be attributed to some repositioning trade ahead of Thursday's ECB policy meeting.
From a technical perspective, the EUR/GBP cross was last seen flirting with a short-term descending trend-line resistance extending from April swing highs. A sustained move beyond will be seen as a fresh trigger for bullish traders and set the stage for an extension of the recent bounce from the 0.8565-60 strong horizontal support.
Levels to watch
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