EUR/GBP recovers further from YTD low set last week, climbs to 0.8630 region

• EUR/GBP scales higher for the second straight day and recovers further from the YTD low.
• Hawkish remarks by ECB officials underpin the shared currency and remain supportive.
• The setup supports prospects for additional gains towards the 0.8670 support breakpoint.

The EUR/GBP cross gains positive traction for the second successive day on Monday and recovers further from a fresh YTD low, around the 0.8565 region touched last week. The cross maintains its strong bid tone through the mid-European session and is currently placed near a three-day high, around the 0.8625-0.8630 region.

The shared currency's relative outperformance comes amid the recent hawkish remarks by several European Central Bank (ECB) officials, backing the case for additional rate hikes in the coming months. In fact, ECB policymaker Boštjan Vasle said on Friday that more rate hikes are needed to get inflation to the 2% target as core inflation remains high and persistent. Separately, ECB Governing Council member, Gabriel Makhlouf noted that the central bank has not reached the moment where it can say let's now stop.

Adding to this,  ECB President Christine Lagarde, speaking at the Hearing before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament, reiterated that price pressure remains strong in the Euro area. Lagarde added that there is no clear evidence that underlying inflation has peaked and that wage pressures have strengthened further. This overshadows last week's softer Eurozone CPI figures and continues to underpin the Euro, which, in turn, acts as a tailwind for the EUR/GBP cross.

The British Pound, on the other hand, struggles to attract any buyers as the market already seems to have priced in the prospects for another interest rate hike by the Bank of England (BoE). This, in turn, favours bullish traders and backs the case for a further near-term appreciating move for the EUR/GBP cross. Hence, some follow-through strength back towards testing a strong horizontal support breakpoint, around the 0.8670 region, looks like a distinct possibility. The said area should act as a pivotal point for short-term traders.

Technical levels to watch