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

The Euro (EUR) trades lower against the British Pound (GBP) for the third consecutive day 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 whole 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 soon as in April. These comments contrast with the Bank of England’s “wait and see” stance,. and provides some support to the Euro.