
Improved market sentiment is helping the Euro (EUR) recover against the British Pound (GBP) on Monday, with Oil prices easing from six-month highs and France avoiding a debt rating downgrade over the weekend. As the European session opens, EUR/GBP is trading a few pips short of 0.8400, recovering from Friday’s low of 0.8361 after a 2.7% sell-off over the preceding four weeks.

A modest pullback in Oil prices is lending support to the Euro following reports that Qatari mediators reached Tehran on Sunday. Their visit forms part of a US-coordinated effort to ease regional tensions.
At the time of writing, Brent Oil has eased to 110.25 from Friday’s near-six-month high of 1.12.88. Although prices remain far too elevated for the Eurozone’s net-importing economies, hopes that the diplomatic efforts could prevent the conflict from escalating further are already putting pressure on the safe-haven USD and supporting broad-based gains in the Euro.
Despite continuing riots in several major French cities, ratings agency Moody’s left France’s debt rating at Aa3. Markets welcomed the decision, having expected a downgrade. A sharp fall in France’s Treasury yields at the start of the week added to the support for the Euro.
Monday’s economic calendar is led by the German IFO Business Climate release, but investors are likely to remain on the sidelines ahead of Thursday’s monetary policy decision from the European Central Bank (ECB). The Bank of England (BoE) follows next week, with markets preparing for a quarter-point rate increase. That prospect is highly likely to restrain Pound bears this week.