Home » GBP » Pound Euro (GBP/EUR) Exchange Rate Steady, US-EU Trade War Haunts European Markets

Pound Euro (GBP/EUR) Exchange Rate Steady, US-EU Trade War Haunts European Markets

Pound and Euro coins on a five-Pound note.

GBP/EUR Exchange Rate Rangebound on Rising US-EU Trade War Fears

The Pound Euro (GBP/EUR) exchange rate held steady at around €1.125 after a US-EU trade war haunted European markets, following the announcement that the US would impose $7.5 billion worth of tariffs on EU exports.

Robert Lighthizer, the US Trade Representative, commented:

‘For years, Europe has been providing massive subsidies to Airbus that have seriously injured the US aerospace industry and our workers. Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies.’

As a result, the Euro has failed to gain on the Pound today, and with no Eurozone economic data due out until next week, it is unlikely that the European currency will make any significant gains on the Pound throughout Friday’s session.

Today will see a speech by Luis De Guindos, the Vice President of the European Central Bank. Any dovish comments about the Eurozone’s economic health could begin to weigh on the EUR/GBP exchange rate.

GBP/EUR Exchange Rate Flat as UK Markets Await Formal EU Verdict on New Brexit Deal

The Pound held steady against the single currency today following Prime Minister Boris Johnson’s ‘final’ Brexit proposal, which has yet to be formally rejected by the European Union and has continued to maintain some optimism in Sterling.

However, after the European Parliament declared that the UK’s new proposals for an alternative to the Irish backstop were not ‘even remotely’ acceptable for a deal, Sterling traders have become more cautious on the increasing likelihood of a UK-EU no-deal on October 31.

Ireland’s Prime Minister Leo Varadkar commented:

‘I am reassured by what Prime Minister Johnson said today: that he is not proposing that there should be any new physical infrastructure on the island of Ireland linked to customs or customs checks – but that is actually in contradiction to the papers presented by the UK government yesterday.’

GBP has also remained unmoved after the all-important British service sector PMI fell into unexpected contraction territory yesterday. Consequently, this has raised fears of a near-term recession for the economy and held back Sterling’s gains against the ‘Greenback’ today.

GBP/EUR Outlook: Brexit Developments to Remain in Spotlight

Euro traders will be looking ahead to Monday’s release of August’s German factory orders figure, which is expected to ease by -1.5%. As a result, we could see the Euro sink against the Pound on heightened recession fears for the Eurozone’s powerhouse economy.

Meanwhile, Sterling traders will be awaiting Tuesday’s speech by the Governor of the Bank of England Mark Carney. Any dovish comments about the British economy – or post-Brexit – could weigh heavily on the GBP/EUR exchange rate.

Brexit developments, however, will likely remain the driving force behind the GBP/EUR exchange rate next week. Any indications of souring UK-EU relations could begin to weigh on the Pound.

Comments are closed.