- Pound (GBP) is lower after gains last week
- UK unemployment and CPI data are due this week
- Euro (EUR) is higher even as relations with Trump deteriorate
- Trump threatens tariffs to get Greenland
The Pound-Euro (GBP/EUR) exchange rate is falling after gains last week. The pair rose 0.05% in the previous week, settling on Friday at €1.1538. It traded between €1.1503 and €1.1561. At 13:30 UTC on Monday GBP/EUR trades -0.05% lower at €1.1532.
The pound is falling modestly against the euro following five straight weeks of gains. The pound is under modest pressure against the euro but is gaining strongly against the US dollar, even after President Trump threatened additional 10% tariffs on the UK and some European countries in his pursuit of Greenland.
Still, moves could be limited as sterling looks ahead to UK unemployment and CPI data on Tuesday and Wednesday. While the pound has held up well this year, this data could start weighing on sterling. UK unemployment is at 5.1% and could continue rising. The UK economy isn’t performing well. UK GDP data last week were stronger than expected, but only thanks to one-offs, leaving the underlying growth outlook unchanged.
The EUR is rising against the pound and the USD even after President Trump threatened additional 10% tariffs by February 1 on the UK, Norway, and six EU countries that sent troops to Greenland for a military exercise this week.
Meanwhile, European leaders are considering imposing tariffs of €93 billion on the US or restricting American companies’ access to the bloc’s market in response to Donald Trump’s threat. This marks the most serious crisis in transatlantic relations for decades.
This also makes for an interesting start to the World Economic Forum in Davos, where Trump is speaking on Wednesday. The hope is that EU leaders and Trump will meet on the sidelines to arrange a deal and avoid the tariffs set to take effect at the start of next month.
When the data front eurozone inflation cooled by more than expected to 1.9% year on year, down from the preliminary reading of 2% and down from the 2.1% a level recorded in November.
The data supports the view that the ECB will leave rates unchanged for the foreseeable future.
