EU Exemption from US Metal Tariffs could Inspire Euro to Pound (EUR/GBP) Exchange Rate Rally
A near-term event which may have a strong positive effect on the Euro could be an update on US metal tariff plans, specifically if the EU is granted an exemption.
US President Donald Trump targeted the EU when first introducing the tariff plans, but there have been efforts to prevent these charges from being enacted.
EU Trade Commissioner Cecilia Malmstroem has been a key figure in the talks and recently suggested that an exemption could be imminent;
‘This afternoon, [Mr Trump] will make an announcement on possible exclusions. We expect that we are on that list, we don’t know for sure’.
European Commission Vice President Jyrki Katainen has been more cautiously optimistic, stating;
‘Cecilia Malmstroem had a good, very fruitful visit to Washington.
We have good opportunities now to solve the issue and stabilize, or calm down, the problem’.
If the EU does manage to secure an exemption then a Euro to Pound exchange rate rally could occur.
This is not guaranteed, however, as former US Trade Representative Robert Zoellick has suggested room for conflict between the EU and the Trump administration;
‘[The US is] playing hardball. It fits into the whole notion that they don’t really see the systemic aspects of this.
They see it as transactional. They see it as case by case. Clearly that’s how President Trump operates’.
Will Pound to Euro Exchange Rate Gains Grow on BoE Interest Rate Decision?
In the near-term, current Pound to Euro exchange rate gains could expand when the Bank of England (BoE) holds its interest rate decision for March.
The UK central bank is tipped to leave interest rates untouched at 0.5% today, but the BoE’s minutes and a press conference may both spark a GBP/EUR advance.
If the minutes and BoE Governor Mark Carney hint at a UK interest rate hike taking place around May this year, the Pound could rally against the Euro and other peers.
GBP traders will specifically be looking out for signs that the recent UK inflation slowdown and wage growth results have changed the outlook of BoE policymakers.
Risk of GBP/EUR Exchange Rate Slump on Upcoming UK GDP Growth Data
Although the Pound may be on track for additional near-term gains, further ahead there is a danger of a Sterling slide from UK GDP growth rate figures for Q4 2017.
The data, out on 2nd April, is predicted to show a slowdown in both annual and quarterly GDP growth, which may lower confidence among Pound traders.
If the GDP growth rate figures show a forecast-matching or exceeding slowdown, then the Pound to Euro exchange rate could take a tumble in the coming weeks.
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