EUR/GBP rises above 0.8500 as Israel-Hamas tensions ease

• EUR/GBP appreciates due to improved risk sentiment, driven by potential for temporary ceasefire between Israel and Hamas.

• Israel has submitted revised proposal in hostage negotiations with Hamas, suggesting a possible ceasefire.

• The BoE is expected to keep interest rates steady at 4.25% on Thursday.

EUR/GBP gains ground after registering little losses in the previous session, trading around 0.8530 during the European hours on Monday. The currency cross receives support as the Euro (EUR) appreciates against its peers due to improved risk sentiment, driven by Israel's submission of revised proposal in hostage negotiations with Hamas, which could lead to a temporary ceasefire.

The Euro (EUR) also receives support as traders expect the European Central Bank (ECB) to pause its easing cycle to assess the impact of new US tariffs. The ECB vice-president Luis de Guindos said that the Eurozone’s economy had proven resilient but faced a number of risks, such as tariffs, that could curb growth.

UK Consumer Price Index (CPI) data will be eyed on Wednesday, with market expectations of prices growing at a moderate pace in May. Traders expect the Bank of England (BoE) to keep interest rates unchanged at 4.25% at its policy meeting on Thursday.

However, the risk-sensitive Euro may face challenges due to rising geopolitical tensions between Israel and Iran. Both countries continue attacking each other despite international calls for diplomacy and de-escalation. Iran fired multiple missiles targeting Israeli military-industrial centers and fuel facilities.

Iran informed mediators Qatar and Oman that it will not enter negotiations while under attack. A source denied reports that Tehran had approached Oman and Qatar with a request to engage the United States (US) to broker a ceasefire with Israel.