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EUR/GBP witnessed a turnaround on Thursday and dropped over 40 pips from one-week tops A strong pickup in demand for the British pound dragged the EUR/GBP cross to fresh daily lows, though lacked any follow-through selling below the 0.8600 round-figure mark. The cross struggled to capitalize on its intraday positive move to one-week tops, instead witnessed a dramatic turnaround from the 0.8640-45 region and has now erased a major part of the overnight gains. As investors digested the recent Brexit developments, renewed US dollar selling bias prompted aggressive short-covering around the British pound. This, in turn, was seen as a key factor that exerted some downward pressure on the EUR/GBP cross.

On the other hand, the euro bulls were a bit disappointed after the European Central Bank (ECB) steered clear of any taper talk at the latest policy meeting on Thursday. In the post-meeting press conference, ECB President Christine Lagarde reiterated that risks remain broadly balanced. With the GBP price dynamics turning out to be an exclusive driver of the EUR/GBP pair's intraday move, fresh COVID-19 jitters should help limit any further downside, at least for the time being. There are speculations that the UK may delay plans to end restrictions fully on June 21 in light of the spread of the so-called Delta variant. This makes it prudent to wait for acceptance below the 0.8600 mark before traders start positioning for any further depreciating move.