EUR/GBP hangs near three-month lows, just above 0.8500 mark

• EUR/GBP witnessed some follow-through selling for the fourth consecutive session on Wednesday.
• Hotter-than-expected UK CPI figures boosted the British pound and continued exerting pressure.
• The shared currency benefitted from a weaker USD and helped limit the downside, at least for now.

The EUR/GBP cross remained depressed through the mid-European session and was last seen hovering near the 0.8510 region, just above the three-month lows touched earlier this Wednesday.

The cross extended its recent sharp pullback from the 0.8615-20 region, or the highest level since mid-June touched last week and witnessed some selling for the fourth consecutive session. The British pound got a strong lift following the release of hotter-than-expected UK consumer inflation figures, which, in turn, exerted some pressure on the EUR/GBP cross.

In fact, the UK Office for National Statistics (ONS) reported that the headline CPI rose 2.5% YoY in June as against consensus estimates pointing to an uptick to 2.2% from the 2.1% previous. This marked the highest level in almost three years and fueled speculations that the Bank of England will have to consider scaling back its huge stimulus program sooner.

That said, a modest bounce in the shared currency, supported by a modest US dollar pullback, assisted the EUR/GBP cross to find some support near the key 0.8500 psychological mark. The mentioned level should now act as a key pivotal point for short-term traders, which if broken decisively should pave the way for an extension of the ongoing downward trajectory.

Meanwhile, a dispute over the size of the UK's Brexit bill and worries about the new coronavirus variant might hold the GBP bulls from placing any aggressive bets. This should lend some support to the EUR/GBP cross and help limit losses as market participants now look forward to the UK monthly employment details, due on Thursday, for a fresh impetus.

Technical levels to watch