- Pound (GBP) is falling after no change yesterday
- The UK-US signed a trade agreement on the sidelines of the G7
- Euro (EUR) gains on safe haven flows
- German ZEW economic sentiment data is due
The Pound-Euro (GBP/EUR) exchange rate is falling, after a flat finish yesterday. The pair was unchanged yesterday at 0.01% in the previous session, settling on Monday at €1.1743. It traded between €1.1718 and €1.1770. At 10:30, GBP/EUR trades -0.05% at €1.1737.
The pound is edging lower, indicating a major risk-off mood in the market as the Iran-Israel conflict enters its fifth straight day with few signs of de-escalation. Stock markets across Europe are under pressure, and oil prices are rising.
Separately, the UK and the US signed an agreement on Monday formally lowering some of the tariffs on imports from Britain as the two sides continue working towards a formal trade deal.
This latest agreement, reached on the sidelines of the G7 summit in Canada, reaffirmed that tariff rates on British automobiles were at 10% down from 25% and removed tariffs on the UK space sector, although aluminium remains an unresolved issue. Other industries, such as pharmaceuticals, were also not mentioned. Trump added that Britain would have protection against future tariffs “because I like them”.
The EUR is rising against the pound as attention turns to German ZEW economic sentiment data, which is due to be released shortly. Economists expect economic sentiment to improve in June, rising to 35 from 25.2 in May. The current situation subcomponent of the report is also expected to improve, rising to -74 from -82.
Last month, the ZEW indicator of economic sentiment showed a major improvement in Germany, owing to the stabilising domestic political situation and optimism surrounding trade talks with Trump.
However, it is worth noting that there have been few trade talk developments in recent weeks. Attention is starting to turn towards the July 9 deadline when unilateral tariffs will come into play if no trade deal has been agreed.
