- The EUR/GBP goes back as the sterling pound is strengthened, driven by optimism on commercial negotiations between the US and the United Kingdom.
- The Prime Minister of the United Kingdom, Keir Starmer, presses to ensure a commercial agreement with the US, after the announcement of President Trump about new tariffs.
- The euro gains land, supported by the generalized weakness of the US dollar amid growing concerns about the independence of the Federal Reserve.
The EUR/GBP loses ground after two days of profits, quoting around 0.8600 during the Asian hours on Tuesday. The sterling pound (GBP) is gaining traction, supported by optimism around commercial negotiations between the US and the United Kingdom. The Prime Minister of the United Kingdom, Keir Starmer, is pressing to finish a commercial agreement with the USA after the announcement of President Trump on new tariffs: 10% on products from the United Kingdom and 25% on imports of cars, steel and aluminum.
However, the EUR/GBP crossing received support behind the data of the United Kingdom consumer (CPI) index for March, which were softer than expected, increasing the expectations of a rate cut by the Bank of England (BOE) at the Mayo Policy meeting. The growing global uncertainty is also contributing to moderate expectations.
According to LSE data, the markets are now discounting 86 basic points of BOE feat cuts by the end of the year, with a better probability than the pair of a quarter cut in December. The weakest inflation can give the central bank more margin to support the economy in the midst of the increase in costs for homes and persistent global commercial tensions, which could affect the performance of the GBP.
On the side of the euro, the downward pressure on the EUR/GBP crossing is limited since the euro (EUR) gains land, driven by the generalized weakness of the US dollar. The concerns about the independence of the Federal Reserve have resurfaced after the comments of President Trump and the director of the National Economic Council, who indicated that Trump is still “studying” if replacing the president of the Fed, Jerome Powell.
The euro is also gaining strength due to the growing expectations of an increase in defense spending throughout the eurozone, particularly in Germany. In the front of monetary policy, the European Central Bank (ECB) cut its deposit rate at 25 basic points up to 2.25% – the lowest level from the beginning of 2023 – and eliminated the language that described its position as “restrictive.” The ECB recognized a deterioration in economic perspectives due to the increase in commercial tensions, and markets are now discounting three additional cuts of 25 basic points by the end of the year.
FAQS tariffs
Although tariffs and taxes generate government income to finance public goods and services, they have several distinctions. Tariffs are paid in advance in the entrance port, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and companies, while tariffs are paid by importers.
There are two schools of thought among economists regarding the use of tariffs. While some argue that tariffs are necessary to protect national industries and address commercial imbalances, others see them as a harmful tool that could potentially increase long -term prices and bring to a harmful commercial war by promoting reciprocal tariffs.
During the election campaign for the presidential elections of November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy. In 2024, Mexico, China and Canada represented 42% of the total US imports in this period, Mexico stood out as the main exporter with 466.6 billion dollars, according to the US Census Office, therefore, Trump wants to focus on these three nations by imposing tariffs. It also plans to use the income generated through tariffs to reduce personal income taxes.
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.
