Pound Euro Exchange Rate Bounces Back Above €1.17 amid US-France Trade Spat

GBP/EUR Exchange Rate Buoyed as Markets Spooked By US-France Trade Tensions

The Pound to Euro (GBP/EUR) exchange rate is back on the front foot this morning as markets respond to Washington’s threat to impose tariffs on key French exports.

At the time of writing the GBP/EUR exchange rate is trading at around €1.1717, up roughly 0.3% from the day’s opening levels.

Euro (ECB) Undermined by US Threat to Tax Champagne and French Cheese

The Euro (EUR) is under fire this morning after the US threatened to impose tariffs on a number of key French exports in retaliation to France’s new digital services tax.

France wants to impose a 3% tax on digital companies with global revenues over €750m as it seeks to prevent large tech firms from avoiding taxes in Europe by declaring these profits overseas.

However Washington says this tax unfairly discriminates again US companies such as Google, Facebook and Apple.

The Trump administration announced it could impose tariffs of up to 100% on iconic French exports such as champagne, cheese, handbags and make-up.

US Trade Representative Robert Lighthizer, said:

‘[The proposal] sends a clear signal that the United States will take action against digital tax regimes that discriminate or otherwise impose undue burdens on US companies.’

Unsurprisingly the move has soured the mood in the Eurozone this morning, with the Euro coming under fire amidst fears the tariffs could hurt the bloc’s already weakened economy.

Pound (GBP) Firms as Polls Shows Rising Support for Conservatives

The Pound (GBP) is trending higher this morning as GBP investors cheer the latest UK opinion poll as it suggested the Conservatives’ lead over Labour is growing once more.

In the latest survey conducted by consultancy group, Kantar, support for the Tories rose to 44%, putting Boris Johnson’s party 12 points ahead of Labour.

Hopes that the Tories may be able to secure a majority in next week’s general election has help to underpin Sterling’s strength in recent weeks.

GBP investors favour a Conservative government on the hopes it will be able to pass Johnson’s EU withdrawal deal and provide markets will more clarity on Brexit.

GBP/EUR Exchange Rate Forecast: Gloomy Services PMI to Limit the Appeal of Sterling?

Looking ahead, while UK opinion polls will likely continue to act as the main catalyst of movement in the Pound to Euro (GBP/EUR) exchange rate through the remainder of the week, we may also see the pairing influenced by tomorrow’s services PMI.

This is expected to confirm that growth in the UK’s all important Service sector contracted in November, striking its worst levels in 40-years.

Meanwhile, the publication of the Eurozone’s own Services PMI will also be in focus tomorrow, with a weak reading likely to keep the pressure on the Euro.

Matthew Andrews

Contact Matthew Andrews