• EUR/GBP gained traction for the third straight session and climbed to a three-day high on Monday.
• Expectations of a less hawkish BoE, Brexit woes undermined sterling and remained supportive.
• Bulls now seemed reluctant and preferred to move on the sidelines ahead of Lagarde's testimony.

The EUR/GBP cross attracted some dip-buying near the 0.8555-0.8560 region on Monday and turned positive for the second successive day. The momentum lifted spot prices back above the 0.8600 mark during the early part of the European session, though lacked bullish conviction.

The British pound's relative underperformance could be attributed to expectations that the Bank of England would opt for a more gradual approach to raising interest rates. This, along with the UK-EU impasse over the Northern Ireland Protocol of the Brexit agreement, further undermined sterling and acted as a tailwind for the EUR/GBP cross.

On the other hand, the shared currency drew some support from the emergence of some US dollar selling and the European Central Bank's explicit signal that it would hike interest rates in July. That said, nervousness over fragmentation risks held back bulls from placing aggressive bets around the euro and capped any further gains for the EUR/GBP cross.

Investors also preferred to wait for ECB President Christine Lagarde's testimony before the Committee on Economic and Monetary Affairs of the European Parliament later this Monday. Lagarde's remarks will play a key role in influencing the common currency and provide a fresh impetus to the EUR/GBP cross amid absent relevant market-moving economic releases.

Technical levels to watch