EUR/GBP remains heavily offered below mid-0.8600s

The EUR/GBP cross maintained its heavily offered tone through the first half of the European session and refreshed daily lows, around the 0.8630-25 region in the last hour.

The cross witnessed aggressive selling on the first day of a new trading week and dropped back closer to last week's swing lows amid a strong pickup in demand for the British pound. The outcome of the Scottish Parliament election, where SNP fell short of winning the absolute majority, helped ease the UK political risks.

In fact, Nicola Sturgeon’s Scottish National Party (SNP) recorded its fourth consecutive victory and won on 64 seats – one short of an outright majority. This was seen as a key factor behind the sterling's relative outperformance against its European counterpart and exerted fresh downward pressure on the EUR/GBP cross.

This comes on the back of the optimistic outlook for the UK economy amid the gradual easing of restrictions. The UK Prime Minister Boris Johnson is scheduled to make a statement later today on the further reopening of the economy, which should now play a key role in influencing the EUR/GBP cross and provide some trading impetus.

On the other hand, the shared currency was seen consolidating in a range amid a modest US dollar strength and seemed unimpressed by Eurozone Sentix Investor Confidence Index. The gauge jumped to 21.0 in May, beating consensus estimates pointing to a reading of 14 by a big margin, though did little to lend any support to the EUR/GBP cross.

Technical levels to watch