EUR/GBP steadies below 0.8650 with all eyes on UK elections

• EUR/GBP has found support at 0.8620 but remains capped below 0.8650.
• UK local elections are expected to deliver a significant setback to the Labour Party.
• In the Eurozone, German Factory Orders beat expectations in March.

The Euro (EUR) has found some support in the 0.8620 area against the British Pound (GBP), but upside attempts remain capped below a previous support area at 0.8650. Hopes of a peace deal in Iran have lifted market sentiment, but investors, however, await the results of local elections in the UK to make investment decisions on the Pound, and the upbeat German Factory Orders have failed to boost the common currency.

UK voters are heading to the polls for elections to choose 136 local authorities in England, as well as the Scottish and Welsh parliaments, with all signs pointing to a significant setback for the ruling Labour Party. If these forecasts are confirmed, political uncertainty and fresh concerns about the UK’s fiscal stability might add some pressure on the Pound.

On the geopolitical front, Tehran is expected to respond on Thursday to a US peace proposal, which would put an end to the war. The agreement, however, leaves key issues such as the status of the Strait of Hormuz unresolved, and is keeping investors’ enthusiasm limited and Oil prices at levels well above those before the war. This poses additional weight on Euro and Pound bulls.

In the Eurozone, German Factory Orders have posted a positive surprise with a 5% rise in March, beating expectations of a 1% increase and following a 1.4% growth in February. Later on the day, the Eurozone’s March Retail Sales are expected to show the impact of the Iran war on consumer spending, while a slew of European Central Bank (ECB) policymakers will provide further insight into the bank’s tightening calendar.