EUR/GBP jumps back above 0.8900 mark, closer to overnight swing highs

The EUR/GBP cross caught some fresh bids during the early European session and jumped back above the 0.8900 round-figure mark in the last hour.

Following the previous day's pullback of around 40 pips, the cross regained positive traction for the third consecutive session on Tuesday and was supported by a pickup in demand for the shared currency. Bulls seemed rather unaffected by reports that German chancellor Angela Merkel wants to extend lockdown measures until February 15.

Even the COVID-19 vaccine rollout delay in Europe and Italian political crisis did little to weigh on the euro. It is worth reporting that Pfizer-BioNTech said on Friday that deliveries of its leading coronavirus vaccine to Europe will be delayed. Meanwhile, the Italian government faces a Senate vote on Tuesday that will decide PM Conte’s fate.

On the other hand, the British pound was undermined by weekend news related to the imposition of more travel restrictions in the UK. That said, a modest US dollar pullback from nearly one-month tops might help limit any deeper losses for the sterling. This, in turn, might turn out to be a key factor capping any strong gains for the EUR/GBP cross.

Moreover, investors might also refrain from placing aggressive bets, rather prefer to wait on the sidelines ahead of the latest ECB monetary policy update on Thursday. Hence, it remains to be seen if the EUR/GBP cross is able to capitalize on the positive move or meets with some fresh supply at higher levels, warranting some caution for bullish traders.

Meanwhile, the final version of the German consumer inflation figures, which matched original estimates, failed to provide any meaningful impetus to the EUR/GBP cross. Tuesday's economic docket also highlights the release of ZEW economic sentiment for Germany and the Eurozone, which might assist traders to grab some short-term opportunities.

Technical levels to watch