Pound-to-Euro Rate Gains on Middle East Peace Hopes

– Written by


David Woodsmith

STORY LINK Pound-to-Euro Rate Gains on Middle East Peace Hopes

The Pound Euro (GBP/EUR) exchange rate strengthened on Tuesday, as hopes of de-escalation in the Middle East helped revive market risk appetite.

At the time of writing, GBP/EUR was trading at €1.1580, up almost 0.2% on the day.

The Pound (GBP) gained ground against its safe-haven rivals on Tuesday, as a recovery in risk appetite offered Sterling fresh support.

Markets had opened the week on a cautious footing after Israel and Iran traded attacks over the weekend, fuelling fears of a wider escalation in the Middle East.

However, tensions appeared to cool on Monday, with both sides reportedly agreeing to pause further strikes. US President Donald Trump also suggested that a peace agreement could be just ‘two or three days away’, helping to calm investors.

This allowed a cautiously optimistic tone to take hold during Tuesday’s session, lifting demand for the increasingly risk-sensitive Pound.

Sterling also benefited from a pullback in UK bond yields, after gilt yields eased from the two-week highs reached at the start of the week.

The Euro (EUR) struggled to gain traction on Tuesday, even after Germany released a stronger set of economic figures.

April’s trade data showed a rise in German exports, while industrial production also bounced back over the same period.

However, the improving market mood limited demand for the comparatively safer Euro.

With investors favouring riskier assets, the single currency slipped against some of its more risk-sensitive peers.

Near-Term GBP/EUR Forecast: Wider Market Drivers to Shape Direction

Looking ahead, Wednesday’s session could see the Pound Euro exchange rate take its cues from broader market movement, with notable data releases from both the UK and Eurozone in short supply.

For the Euro, US Dollar (USD) dynamics may prove influential due to the single currency’s strong negative correlation with the ‘Greenback’.

If the latest US inflation figures strengthen expectations for further Federal Reserve interest rate hikes, the US Dollar could climb, potentially dragging the Euro lower.

However, EUR movement may be limited ahead of Thursday’s European Central Bank (ECB) interest rate decision, with markets widely expecting policymakers to deliver another rate rise.

Meanwhile, the Pound may remain sensitive to shifts in the UK bond market.

Should hopes of a US-Iran peace deal continue to push gilt yields lower, Sterling could find some support.

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