Euro recovers some ground against British Pound as Oil and French yields ease

• EUR/GBP nears 0.8400 as it recovers from Friday’s 17-month low of 0.8361.
• Oil prices have eased moderately following reports that Qatar is mediating a new peace plan between the US and Iran.
• France’s avoidance of a Moody’s debt downgrade over the weekend has also been welcomed by markets.

Trading a few pips below 0.8400 as the European session opens, EUR/GBP has recovered from Friday’s low of 0.8361 after a 2.7% sell-off over the previous four weeks. The Euro (EUR) is gaining against the British Pound (GBP) on Monday as sentiment improves somewhat, helped by Oil prices retreating from six-month highs and France avoiding a debt rating downgrade over the weekend.

Reports that Qatari mediators arrived in Tehran on Sunday as part of a US-coordinated effort to ease regional tensions have prompted a moderate pullback in Oil prices, lending support to the Euro.

At the time of writing, Brent Oil is trading at 110.25, down from Friday’s near-six-month high of 1.12.88. Although prices remain far too high for the Eurozone’s net-importing economies, hopes that diplomatic efforts might prevent a further escalation of the conflict are already putting pressure on the safe-haven USD and supporting broad Euro gains.

France retains Moody’s credit rating despite continuing riots

Despite continuing riots in some of France’s major cities, ratings agency Moody’s left the country’s debt rating at Aa3. Markets had expected a downgrade and welcomed the decision. A sharp fall in France’s Treasury yields at the start of the week offered further support to the Euro.

Monday’s main macroeconomic release is the German IFO Business Climate survey. Investors are nevertheless likely to remain on the sidelines ahead of Thursday’s monetary policy decision from the European Central Bank (ECB). With the Bank of England (BoE) due to decide on rates next week, markets are preparing for a quarter-point increase. That prospect is highly likely to restrain Pound bears this week.