- The EUR/GBP can be seen due to the improvement in the feeling of risk, driven by the possibility of a temporal hostilities between Israel and Hamas.
- Israel has submitted a proposal reviewed in the hostage negotiations with Hamas, suggesting a possible cessation of hostilities.
- The BOE is expected to maintain stable interest rates at 4.25% on Thursday.
The EUR/GBP gains ground after registering few losses in the previous session, quoting around 0.8530 during the European hours on Monday. The crossing of currencies receives support as the euro (EUR) can be seen in front of its peers due to the improvement in the feeling of risk, driven by the presentation of Israel of a proposal reviewed in the hostage negotiations with Hamas, which could lead to a temporal hostilities cease.
The euro (EUR) also receives support as operators expect the European Central Bank (ECB) to Pause its flexibility cycle to evaluate the impact of new US tariffs. The Vice President of the ECB, Luis de Guindos, said that the economy of the euro zone has proven to be resistant, but faces a series of risks, such as tariffs, which could stop growth.
The consumer price index (CPI) data of the United Kingdom will be observed on Wednesday, with market expectations that prices grow at a moderate rate in May. Operators expect the Bank of England (BOE) to maintain interest rates without changes in 4.25% at their policy meeting on Thursday.
However, the euro, risk -sensitive, could face challenges due to the growing geopolitical tensions between Israel and Iran. Both countries continue to attack each other despite international calls to diplomacy and de -escalation. Iran shot multiple missiles aimed at Israeli military-industrial centers and fuel facilities.
Iran informed the Catar and Oman mediators that it will not enter negotiations while under attack. A source denied the reports that Tehran had approached Oman and Qatar with a request to involve the United States (USA) in the mediation of a cessation of hostilities with Israel.
FAQS risk feeling
In the world of financial jargon, the two terms “appetite for risk (Risk-on)” and “risk aversion (risk-off)” refers to the level of risk that investors are willing to support during the reference period. In a “Risk-on” market, investors are optimistic about the future and are more willing to buy risk assets. In a “Risk-Off” market, investors begin to “go to the safe” because they are concerned about the future and, therefore, buy less risky assets that are more certain of providing profitability, even if it is relatively modest.
Normally, during periods of “appetite for risk”, stock markets rise, and most raw materials – except gold – are also revalued, since they benefit from positive growth prospects. The currencies of countries that are large exporters of raw materials are strengthened due to the increase in demand, and cryptocurrencies rise. In a market of “risk aversion”, the bonds go up -especially the main bonds of the state -, the gold shines and the refuge currencies such as the Japanese yen, the Swiss Franco and the US dollar benefit.
The Australian dollar (Aud), the Canadian dollar (CAD), the New Zealand dollar (NZD) and the minor currencies, such as the ruble (Rub) and the South African Rand (Tsar), tend to rise in the markets in which there is “appetite for risk.” This is because the economies of these currencies depend largely on exports of raw materials for their growth, and these tend to rise in price during periods of “appetite for risk.” This is because investors foresee a greater demand for raw materials in the future due to the increase in economic activity.
The main currencies that tend to rise during the periods of “risk aversion” are the US dollar (USD), the Japanese yen (JPY) and the Swiss Franco (CHF). The dollar, because it is the world reserve currency and because in times of crisis investors buy American public debt, which is considered safe because it is unlikely that the world’s largest economy between in suspension of payments. The Yen, for the increase in the demand for Japanese state bonds, since a great proportion is in the hands of national investors who probably do not get rid of them, not even in a crisis. The Swiss Franco, because the strict Swiss bank legislation offers investors greater protection of capital.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
