European session review: GBP recovers as market participants assess BoE governor Bailey’s comments and reports that UK’s PM is to call for less aggressive lockdown than in March

GBP rose against its major rivals in the European session on Tuesday after the Bank of England’s (BoE) governor Andrew Bailey acknowledged that the return of COVID-19 reinforced downside risks in the central bank’s forecast and said that the policymakers would do everything they could to support the UK’s economy. He also noted that the BoE’s officials had looked very hard at the scope to cut rates further, including negative interest rates. However, he added that last week's BoE statement did not imply that it would necessarily use negative rates.

Meanwhile, looming coronavirus restrictions and uncertainty over the UK-EU post-Brexit trade relationship continued to weigh on the pound.

The UK’s Prime Minister Boris Johnson is to announce new restrictions later today as coronavirus cases in the world's fifth-largest economy continue growing. On the positive side, Johnson will reportedly call for a lockdown that is less aggressive than the first round of measures that was imposed in March.

On the EU-UK trade talks front, the BBC correspondent tweeted that the sources said that the EU's chief Brexit negotiator Michel Barnier is “coming to London for informal talks tomorrow" and the UK’s Cabinet Office minister Michael Gove is “heading to Brussels on 28th for Joint Committee talks”. Meanwhile, Sky News political editor tweeted that the EU source told her that “talks have been going a bit better than expected & there is a 'window of opportunity'”.