EUR/GBP rebounds sharply from 2-week lows on Nowotny's comments

   •  Hawkish comments by ECB’s Nowotny prompt some aggressive short-covering.
   •  Strong GBP bid tone keeps a lid on further strong up-move.
   •  Likely to consolidate ahead of Wednesday’s UK data and Draghi.

The EUR/GBP cross quickly reversed an early dip to sub-0.8700 level, over 2-week lows, and surged to fresh session tops in the past hour.

The shared currency rallied across the board following some hawkish comments by the ECB Governing Council member Ewald Nowotny, saying that the European Central Bank will end asset buys this year.

This coupled with some short-term trading stops being taken out on a move back above the 0.8700 handle might have further collaborated to the pair's sudden spike in the past hour or so. 

The up-move, however, lacked any strong follow-through amid a strong bid tone surrounding the GBP/USD major, which might continue to keep a lid on any meaningful recovery for the cross. 

In absence of any major market moving economic releases, either from the UK or Euro-zone, the cross seems more likely to enter a consolidation phase ahead of Wednesday's UK economic data and a scheduled speech by the ECB President Mario Draghi.

Technical levels to watch

On a sustained move beyond the 0.8725-30 region, a fresh bout of short-covering could lift the cross further towards 0.8760 horizontal hurdle en-route the 0.8785 heavy supply zone. On the flip side, the 0.8700-0.8690 region now becomes an immediate support to defend, which if broken might turn the cross vulnerable to accelerate the fall back towards retesting multi-month lows support near the 0.8670-65 zone.