EUR/GBP eases to levels near 0.8700 amid mild risk-off markets

• EUR/GBP retreats towards 0.8700 but remains within the previous days' ranges.
• The Euro remains near one-month highs after rallying more thn 1% over the last three weeks.
• ECB-BoE monetary policy divergence is keeping EUR/GBP's downside attempts limited.

The Euro (EUR) is trading lower against the British Pound (GBP) on a calm week opening, with most markets closed on Easter Monday, and markets wary of risk, amid greater concerns about an escalation of the war in Iran. The pair is trading at 0.8720 at the time of writing, down from session highs at 0.8735, yet still within the last few days’ trading range.

Investors are holding their breath following fresh threats by US President Donald Trump to destroy Iran’s bridges and energy plants if Tehran does not open the Strait of Hormuz before Tuesday at 8 PM.

Earlier in the day, however, a report by Axios suggested that a group of regional mediators is negotiating a 45-day ceasefire that could lead to a peace deal. This has contributed to easing risk aversion somewhat, but Trump's mixed messages on the war are keeping traders on edge.

ECB-BoE monetary divergence

From a wider perspective, the pair is consolidating near one-month highs, as the Euro has shown greater resilience than the Pound amid the month-long war in the Middle East. The higher inflationary pressures have prompted European Central Bank (ECB) policymakers to suggest that a rate hike is coming, while BoE Governor Andrew Bailey played down the chances of any near-term monetary tightening.

In the calendar on Monday, the main focus will be on the Eurozone Sentix Investor Confidence index, which is likely to show the impact of the Iran war and the energy shock on institutional investors’ confidence. This reading is unlikely to provide any significant support to the common currency.