: EUR/GBP Holds Above 0.8400 Amid Weaker German PPI and Easing Geopolitical Tensions

EUR/GBP Holds Above 0.8400 Amid Easing Geopolitical Tensions and Deflationary Pressures

EUR/GBP continues to trade above the 0.8400 level, benefiting from an improved risk appetite fueled by easing geopolitical tensions, particularly surrounding the Russia-Ukraine situation. The announcement of potential ceasefire talks between Russia and Ukraine, as disclosed by US President Donald Trump, has led to optimism in the markets, supporting the Euro (EUR).

However, the Euro's gains are tempered by weaker-than-expected German Producer Price Index (PPI) data, which fell more sharply than anticipated in April. This points to ongoing deflationary pressures within the Eurozone, raising concerns about the economic recovery and inflation prospects.

In the UK, core Consumer Price Index (CPI) for April is expected to rise 3.6% year-on-year, slightly higher than the previous reading of 3.4%. This highlights persistent inflationary pressures in the UK, which could weigh on the British Pound (GBP).

Despite these positive market dynamics for the Euro, investor concerns over the potential for further interest rate cuts by the European Central Bank (ECB) are limiting the upside for EUR/GBP. Markets are currently pricing in near 90% odds for an ECB rate cut at its upcoming June meeting, which may cap any significant gains for the Euro in the short term.