GBP/EUR Exchange Rate Stable Following US Tariff Threat
The Pound Sterling to Euro (GBP/EUR) exchange rate is struck trading in a narrow range this morning after the US threatened to place $11bn worth of tariffs on EU good.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1620, virtually unchanged from this morning’s opening rate.
Euro (EUR) Shaken by Trump’s Tariff Proposals
The Euro (EUR) is rangebound against the Pound (GBP) and the majority of its other peers this morning as investors were spooked by the announcement that the US may impose new tariffs on the EU in retaliation for EU subsidies to Airbus.
US trade representative, Robert Lighthizer, announced that Trump is ready to impose tariffs on $11bn worth of EU goods including French cheese, wine and aircraft.
🇪🇺 🇺🇸 The EU reacts to planned U.S. tariffs on $11 billion of EU goods as a result of alleged subsidies to Airbus SE by saying the bloc is preparing similar action against American products in a tit-for-tat case at the World Trade Organization concerning aid to Boeing – Bloomberg
— Christophe Barraud🛢 (@C_Barraud) April 9, 2019
Observers fear that the response from the EU could quickly escalate into a tit-for-tat trade battle similar to the one seen between the US and China last year.
Such an exchange could lead the US to target Europe’s vital automotive industry, likely increasing the risks to the Eurozone and placing further pressure on the Euro.
Lee Hardman and Fritz Louw, currency analysts at MUFG, said:
‘Downside risks for the Euro from escalating trade tensions would heighten more significantly if the Trump administration also decides to raise tariffs on imports of autos.’
Pound (GBP) Flat amid Heightened Brexit Uncertainty
At the same time, the Pound (GBP) remains paralysed this morning as a cloud of Brexit uncertainty continues to hang over the currency.
This uncertainty is reaching fever pitch ahead of an emergency EU summit on Wednesday, in which EU leaders will decide whether to grant Theresa May’s request for another Brexit extension.
Another delay is far from given, with a number of EU leaders and officials questioning the merits of another extension without a clear plan from May over how this extra time will be used.
France’s Secretary of State for European Affairs, Amélie Montchalin, said:
‘We want to understand what the UK needs this extension for. Then come the questions of the conditions; what role the UK wants to play during this extension time, in what kind of decisions it wants to take part.’
Should another extension be granted, the focus will then be on the length of the delay as well as the conditions it may come with.
GBP/EUR Exchange Rate Forecast: Dovish ECB to Weaken Euro?
Looking ahead, the upcoming EU summit will undoubtedly dominate movement in the Pound Euro (GBP/EUR) exchange rate tomorrow.
However, in the meantime, the Euro may be influenced by the European Central Bank’s (ECB) latest rate decision.
While no policy changes are expected from the bank this month, another dovish outlook could see EUR exchange rates come under pressure tomorrow afternoon.
Meanwhile the UK will publish its latest GDP figures, with Sterling potentially coming under fire as economists forecast UK growth will have stagnated in February.