EUR/GBP gathers strength above 0.8700 ahead of Eurozone/UK PMI releases

• EUR/GBP strengthens near 0.8735 in Tuesday's early European session.
• UK fiscal concerns weigh on the Pound Sterling and create a tailwind for the cross. 
• Eurozone Consumer Confidence improved to -14.9 in September, stronger than expected. 

The EUR/GBP cross extends the rally to around 0.8735 during the early European session on Tuesday. The Pound Sterling (GBP) softens against the Euro (EUR) amid rising UK fiscal worries, following a significant increase in Britain's public borrowings. Traders will keep an eye on the preliminary reading of Purchasing Managers' Index (PMI) reports for September from the Eurozone and the UK later on Tuesday. 

The latest public finance figures showed that public sector net borrowing hit £18 billion, the highest for the month in five years. Economists expected government borrowing to come in significantly lower at £12.8 billion. Analysts believe that the move threatens to worsen the debt burden and intensify fiscal risks, which might exert some selling pressure on the GBP and create a tailwind for the cross. 

The upbeat Eurozone Consumer Confidence data released on Monday provides some support to the shared currency. The Consumer Confidence in the Euro area improved to -14.9 in September, compared to the previous reading of -15.5 and better than the expectation of -15.3.     

However, the escalating geopolitical tension in Russia could weigh on the EUR due to Europe's close economic and energy ties with Russia. The EU's Kaja Kallas said it is no accident that Russia violated European airspace three times in two weeks, adding that if Russian planes are violating airspace, every country has the right to defend itself. Meanwhile, Russia dismissed alleged violations of airspace by Russian jets, calling the claims baseless and aimed at escalating tensions, per Reuters.