EUR/GBP edges up above 0.8700 with UK’s PM Starmer in question

The Euro appreciates against a weaker Pound as pressure on UK Prime Minister Starmer grows.
Markets opened the week in a cautious tone with the US-Iran peace process on tenterhooks.
German PPI rose 2.5% in March, its strongest reading since August 2022.

Guillermo Alcala FXStreet

The Euro (EUR) advances on Monday against a somewhat weaker British Pound (GBP), as the UK Prime Minister, Keir Starmer, heads to the House of Commons to answer questions about former US ambassador Peter Mandelson’s vetting process.

Lord Mandelson’s appointment caused a scandal last year, due to his ties with convicted sex offender Jeffrey Epstein. Opposition parties are blaming Starmer for failing the security vetting for the position and calling on him to resign for misleading parliament on previous statements related to the appointment.

Cautious markets with the US-Iran peace process teetering

The market, meanwhile, remains cautious, with most currencies trading within previous ranges as the US and Iran exchange threats, with the second round of peace talks in question. The US has seized an Iranian cargo ship attempting to cross the Strait of Hormuz, and Iranian authorities said that they might not attend the peace talks scheduled for next Tuesday due to US violations of the ceasefire.

In Europe, German Producer Prices Index (PPI) data revealed that inflation at factory gates jumped 2.5% in March, its highest monthly reading in nearly four years, confirming the inflationary impact of the war in the Middle East. Year-on-year, the PPI contracted 0.2% following a 3.3% drop in February.

In the UK, the economic calendar is thin on Monday, with the focus on February’s employment report due on Tuesday. Jobless claimants are expected to have eased to a 21.4K increase, from 24.7K in January, while the Unemployment rate is seen steady at 5.2%, and wage inflation is easing somewhat. This will provide the Bank of England with some margin to keep interest rates on hold for some time.

Economic Indicator

Producer Price Index (MoM)

The Producer Price Index released by the Statistisches Bundesamt Deutschland measures the average changes in prices in the German primary markets. Changes in the PPI are widely followed as an indicator of commodity inflation. Generally speaking, a high reading is seen as positive (or bullish) for the EUR, whereas a low reading is seen as negative (or bearish).

Economic Indicator

Producer Price Index (YoY)

EUR/USD remains sidelined around 1.1600

EUR/USD clings to its decent gains on Monday and continues to move in a consolidative mood around the 1.1600 region. Improved risk appetite following the US-Iran agreement to reopen the Strait of Hormuz continues to weigh on the US Dollar, lending support to the risk complex. Looking ahead, investors are likely to remain on the sidelines ahead of Wednesday's FOMC meeting.

GBP/USD retreats from tops, back to 1.3420

GBP/USD keeps its advance past the 1.3400 yardstick at the beginning of the week. In the meantime, Cable continues to draw support from improved market sentiment following reports that the US and Iran have reached a framework agreement aimed at ending the conflict and reopening the Strait of Hormuz.

Gold stays firm, still below $4,400

Gold builds on its recent gains on Monday, climbing well north of the $4,300 mark per troy ounce. The yellow metal benefits from renewed selling pressure on the Greenback as investors reassess the implications of the US-Iran agreement to end hostilities and reopen the Strait of Hormuz. Market participants now turn their attention to Wednesday's FOMC gathering.