EUR/GBP refreshes session tops, around 0.8970 region ahead of Eurozone/UK PMIs

• EUR/GBP gained some positive traction on Monday and snapped three days of losing streak.
• The continuous surge in COVID-19 cases in the UK held the GBP bulls from placing fresh bets.
• The shared currency benefitted from the prevalent USD selling bias and remained supportive.

The EUR/GBP cross held on to its modest recovery gains through the early European session and was last seen hovering near daily tops, around the 0.8970 region.

As investors looked past the Brexit trade deal optimism, the cross opened with a modest bullish gap on the first trading day of 2021 and for now, seems to have stalled its recent slide to one-month lows. The fact that the Brexit agreement won’t apply to the UK services sector – which makes up 80% of the British economy – held the GBP bulls from placing fresh bets.

The British pound further weighed down by an unprecedented level of COVID-19 infection in the UK. British Prime Minister Boris Johnson warned on Sunday that tougher restrictions were likely on the way to curb the continuous surge in new cases. This was seen as another factor behind the sterling's relative underperformance against its European counterpart.

On the other hand, the shared currency continued benefitting from the prevalent bearish sentiment surrounding the US dollar. This, in turn, assisted the EUR/GBP cross to gains some positive traction on Monday and snap three consecutive days of losing streak. That said, the uptick lacked any strong follow-through and warrants some caution for bullish traders.

Market participants now look forward to the release of the final version of Manufacturing PMI prints from the Eurozone and the UK. Apart from this, developments surrounding the coronavirus saga will influence the GBP price dynamics and produce some short-term trading opportunities around the EUR/GBP cross.

Technical levels to watch