EUR/GBP is testing support at 0.8700 despite risk-on markets

EUR/GBP accelerates its decline, reaching session lows at 0.8700.
A two-week ceasefire agreement between the US and Iran has boosted risk appetite.
ECB speakers have reiterated the need for a tighter monetary policy.

Guillermo Alcala FXStreet

The Euro (EUR) accelerated its decline against the British Pound (GBP) on Wednesday, with bears testing support at 0.8700 at the time of writing. The Pound fares better than the common currency amid the positive market sentiment triggered by the ceasefire in Iran.

News that the US and Iran had reached a deal for a two-week ceasefire that includes the reopening of the critical Strait of Hormuz has boosted risk appetite on Wednesday, triggering sharp rallies of the Euro and the Pound against the safe-haven US Dollar.

The agreement arrived less than two hours before the US President Donald Trump’s deadline of Tuesday, 8:00 PM Easter time (00:00 GMT on Wednesday), and following a gloomy comment from the US president, who said that “a whole civilisation would die” if Iran failed to accept his demands.

With Macroeconomic events gaining prominence amid the ceasefire, data from the UK and the Euro Area have failed to cheer investors. UK housing prices contracted against expectations in March, while in the EU, German Factory Orders growth missed expectations, producer prices contracted further, and retail sales dropped.

Eurozone figures, however, relate to the month of February, before the start of Iran war and therefore, they have been practically ignored by the market.

On Tuesday, European Central Bank (ECB) officials, Dimitar Radev and Pierre Wunsch reiterated the bank’s concerns about growing inflationary risks, with the latter advocating for a rate hike as early as in April. These comments contrast with the Bank of England’s “wait and see” stance and provide some support to the Euro.

(This story was corrected on April 8 at 11:25 GMT to amend the line that stated that the pair had depreciated for the third consecutive day.)

Economic Indicator

Producer Price Index (MoM)

The Producer Price Index (PPI) released by the Eurostat is an index that measures the change in prices received by domestic producers of commodities in all stages of processing (crude materials, intermediate materials, and finished goods). Generally, a high reading is seen positive (or bullish) for the EUR, while a low reading is seen as negative (or bearish).

Economic Indicator

Retail Sales (MoM)

The Retail Sales data, released by Eurostat on a monthly basis, measures the volume of retail sales in the Eurozone. It shows the performance of the retail sector in the short term, which accounts for around 5% of the total value added of the Eurozone economies. Retail Sales data is widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the MoM reading comparing sales volumes in the reference month with the prior month. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish

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