EUR/GBP clings to gains near two-week tops, around 0.8470-75 region

• EUR/GBP caught some fresh bids on Monday and climbed to over two-week tops.
• Brexit jitters acted as a headwind for the British pound and remained supportive.
• Hawkish BoE expectations held bulls from placing aggressive bets around the cross.

The EUR/GBP cross maintained its bid tone through the first half of the European session and was last seen hovering around the 0.8470 area, just below over two-week tops set earlier this Monday.

Following Friday's downfall, the EUR/GBP cross regained traction on the first day of a new week and is now looking to build on its recovery from YTD lows, around the 0.8400 mark touched last week. The British pound's relative underperformance comes amid the ongoing dispute over the post-Brexit fishing rights between the UK and France.

In the latest development, France seized a British boat last week and the UK threatened to take retaliatory action. On Sunday, the UK Prime Minister Boris Johnson and French President Emmanuel Macron met to ease the tension, though remain at loggerheads. Apart from this, a row over the Northern Ireland Protocol acted as a headwind for the sterling.

On the other hand, a subdued US dollar demand extended some support to the shared currency, which was seen as another factor that provided a modest lift to the EUR/GBP cross. That said, expectations for an imminent rate hike move by the Bank of England held traders from placing aggressive bearish bets around the GBP and capped gains for the cross.

On the economic data front, the UK Manufacturing PMI was finalized at 57.8 for September as against the 57.7 estimated originally. The data, however, did little to provide any meaningful impetus. The focus remains on the upcoming BoE monetary policy meeting on Thursday, which will help determine the near-term trajectory for the EUR/GBP cross.

Technical levels to watch