EUR/GBP moves away from multi-month tops, climbs to 0.8730-35 region

• EUR/GBP staged a modest bounce from the vicinity of 0.8700 mark, or multi-month lows.
• The shared currency got a minor lift following the release of upbeat ZEW survey results.
• Vaccine optimism continued might continue to underpin the sterling and cap the upside.

A modest pickup in demand for the shared currency pushed the EUR/GBP cross to fresh session tops, around the 0.8730-35 region in the last hour.

The cross staged a modest bounce from the vicinity of the 0.8700 round-figure mark and for now, seems to have stalled its recent downfall to the lowest level since May 2020. The common currency's relative outperformance against its British counterpart could be attributed to Tuesday's upbeat ZEW survey results.

In fact, the German ZEW Economic Sentiment Index improved further to 71.2 in February as against consensus estimates pointing to a modest fall to 59.5 from 61.8 previous. Adding to this, the Eurozone ZEW Economic Sentiment also surpassed market expectations for a reading of 57.0 and jumped to 69.6 from January's 58.3.

On the other hand, the sterling was seen consolidating its recent strong gains to multi-year tops against the USD and did little to influence the EUR/GBP cross. That said, the upside seems limited amid optimism that the UK's aggressive COVID-19 vaccinations would lead to a swifter economic recovery than its European peers.

It is worth reporting that the British government reached the milestone of vaccinating 15 million of its most vulnerable people, or a quarter of its population on February 15. This should allow the UK Prime Minister Boris Johnson to lift strict lockdown restrictions sooner rather than later and get the economy moving.

Even from a technical perspective, the formation of a downward sloping channel supports prospects for further weakness. This makes it prudent to wait for some strong follow-through buying before confirming that the EUR/GBP cross might have bottomed out in the near-term and positioning for any meaningful recovery.

Technical levels to watch