- US weighs $3.1 billion in new EU tariffs
- Bank of America calls GBP an emerging market currency
- German IFO business expectations beats estimates
- Pound-euro exchange rate is barely changed at +0.05% this week
GBP/EUR was lower by 9 pips (-0.10%) to 1.1060 as of 3pm GMT.
Pound versus Euro was little changed, using yesterday’s close as midpoint for range bound trading. Yesterday too was directionless with a +0.02% rise.
GBP: British pound an ‘EM currency’ says BofA
The pound was mostly moving in sync with subdued risk sentiment, with a note from Bank of America contrasting it with an EM currency garnering some attention.
A notice published by the USTR (Office of the United States Trade Representative) – the agency responsible for developing and recommending US trade policy said the US could impose $3.1 Billion in new tariffs on the EU. The idea of an EU-US trade war has been off the table for a while but would be a significant risk to the euro. If the above were to happen, there is a good chance of a tit-for-tat response from the EU.
EUR: German business sentiment improves in June
A vast improvement in German business optimism in June is in keeping with the tone across financial markets, though had no lasting impact on the euro.
German IFO data on Wednesday showed ‘expectations’ – a guide to business’s outlook on the future rose to 91.4 over the 87.0 expected and up from the 80.1 in May. The reputation of German industry has been tarnished in the past week by the fall from grace of Wirecard on allegations of a multi-billion euro fraud.
The euro was little moved after comments from top ECB policymaker and chief economist Philip Lane. One takeaway was that Lane prefers asset purchases as a tool to tackle the current crisis over negative interest rates. Lane’s view that “the scale of the initial rebound may not be a guide for the recovery” seems to be a widespread concern for central bankers.