EUR/GBP rallies to one-week tops, inches closer to mid-0.8500s

• EUR/GBP witnessed a strong intraday short-covering move from over one-year lows.
• Reports that the EU may hit vaccination target earlier than projected boosted the euro.
• A modest pickup in the USD demand weighed on the GBP and remained supportive.

The EUR/GBP cross caught some aggressive bids during the early European session and jumped to one-week tops, closer to mid-0.8500s in the last hour.

Having shown some resilience below the 0.8500 psychological mark, the cross staged a solid recovery from over one-year lows touched in the previous session. The shared currency's relative outperformance against its British counterpart could be attributed to reports that the EU may hit its vaccination target much earlier than projected.

Bloomberg – citing an internal memo from EU member states – reported that Germany, France, Italy, and Spain will have sufficient supplies to vaccinate at least 57% of their total populations by the end of June. This, along with a stronger Eurozone Sentix investor confidence index, which jumped to 13.1 for April, further underpinned the euro.

On the other hand, a modest pickup in the US dollar demand prompted some selling around the GBP/USD pair. This was seen as another factor that contributed to the EUR/GBP pair's strong intraday positive move of around 50 pips. It, however, remains to be seen if bulls can capitalize on the move or fail near the 0.8555-60 support-turned-resistance.

There isn't any major market-moving economic data due for release on Tuesday. Hence, developments surrounding the coronavirus saga will play a key role in influencing the EUR/GBP cross and allow traders to grab some short-term opportunities.

Technical levels to watch