- Pound (GBP) falls for a second straight day
- UK is hit with a 10% trade tariff
- Euro (EUR) rises despite a 20% trade tariff
- Eurozone growth could be negatively impacted
The pound-euro (GBP/EUR) exchange is falling for a second day. The pair fell 0.06% in the previous session, settling on Tuesday at €1.1964. It traded between €1.1920 and €1.2011. At 17:00 UTC, GBP/EUR is trading -0.82% at €1.1866.
The pound is falling against the euro but rising against the US dollar as investors assess Trump’s trade tariff announcement and its potential impact.
While President Trump imposed a 10% trade tariff on the UK economy, Britain stated that it believes it is close to a trade deal with the US, which could mitigate the impact of the levy.
UK Prime Minister Kier Starmer had said that he would remain calm and focus on striking a new economic partnership with the US rather than escalating a tit for tat trade war.
The news comes as Britain’s economy remains weak and vulnerable to the global economic slowdown.
On the data front, UK service sector PMI data was encouraging. The service sector PMI showed a pickup in activity and new orders last month, although another survey highlighted concerns about rising employment costs, US tariffs, and a weaker economic outlook for businesses.
The euro has surged against its major peers, proving to be the currency of choice, together with the yen, as investors sell out of the US dollar following Trump’s tariff announcements. The market is increasingly concerned over the threat of a recession in the US, selling out of both U.S. stocks and the US dollar a very telling sign.
Trump announced a 20% tariff on all goods imported from the European Union. EU Chief Ursula von der Leyen said this was a major blow to the world economy and that the bloc was prepared to respond with countermeasures if talks in Washington fail.
While tariff news was the major driving force in the FX market, data was also released. The latest eurozone services PMI index came in at 51, up from February’s 50.6, marking a 2-month high.
