EUR/GBP holds steady above 0.8500 mark, moves little post-Eurozone CPI

• EUR/GBP struggled to capitalize on its modest intraday uptick to the 0.8530-35 region.
• A modest USD pullback prompted some short-covering move around the British pound.
• A combination of factors might act as a headwind for the sterling and help limit losses.

The EUR/GBP cross surrendered modest intraday gains and dropped to the lower end of its intraday trading range, around the 0.8515 region during the early European session.

Following the previous day's pullback from two-week tops, the EUR/GBP cross regained positive traction on Wednesday, albeit struggled to capitalize on the move beyond the 0.8530-35 region. The shared currency's relative underperformance comes amid growing market worries about the potential economic fallout from the fast-spreading Delta variant of the coronavirus.

That said, a combination of factors might continue to act as a headwind for the British pound and help limit any deeper losses for the EUR/GBP cross. Investors now seem concerned that job losses in the UK will rise after the furlough scheme ends in September. This, along with Wednesday's softer UK consumer inflation figures for July, should cap gains for the sterling.

Meanwhile, the EUR/GBP cross had a rather muted reaction and moved little after the Eurozone CPI for July was finalized at 2.2% YoY, matching original estimates. Nevertheless, the fundamental backdrop remains tilted in favour of bullish traders. Hence, any subsequent decline is more likely to be short-lived and might still be seen as a buying opportunity.

Technical levels to watch