GBP/EUR Exchange Rate Rangebound on EU-US Tariff Headlines
The Pound to Euro (GBP/EUR) exchange rate is stuck trading in a narrow range this morning as trade tensions between the EU and US begin to flare again.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1056, virtually unchanged from this morning’s opening levels.
Euro (EUR) Subdued on US Aircraft Tariff Announcement
The Euro (EUR) is currently rangebound against the Pound (GBP) this morning, after the US government announced it will maintain 15% tariffs on Airbus aircraft, as well as the 25% tariffs announced on a range of European goods last year.
U.S. leaves tariffs on Airbus aircraft unchanged at 15%, despite moves by the European Union to resolve a 16-year-old dispute over aircraft subsidies https://t.co/rhk9dPfq4L via @andrea_shalal @davidshepardson $AIR pic.twitter.com/4ExebLl7io
— Reuters Business (@ReutersBiz) August 13, 2020
U.S. Trade Representative Robert Lighthizer claimed that the EU has not taken significant action to comply with a World Trade Organization (WTO) ruling on EU state subsidies to Airbus.
While the US opted not to impose fresh tariffs on vodka, gin and beer as it had threatened, analysts fear the dispute could escalate is the WTO allows the EU to go ahead with its own tariffs in its ruling on US state subsidies to Boeing.
Neil Wilson, Chief Market Analyst at Markets.com suggests:
‘The US is maintaining 15% tariffs on Airbus aircraft and 25% tariffs on an array of European goods, including food and wine, despite moves by the EU to end the trade dispute.
‘Crucially it did not follow through with a threat to hike tariffs, however it still leaves the risk of further escalation when the EU is likely to win WTO approval to strike back with its own tariffs.’
Pound (GBP) Consolidates Losses on UK Employment Fears
The Pound (GBP) is nursing its losses this morning, having fallen sharply against the Euro (EUR) on Wednesday in response to the UK’s latest GDP figures.
This saw the Office for National Statistics (ONS) report that the UK economy had shrunk a record 20.4% in the second quarter, plunging the UK into its first recession in over a decade.
While the figures were certainty worrying for GBP, it was Chancellor Rishi Sunak subsequent comments which proved most alarming for market.
Sunak has warned that the UK is ‘grappling with something that is unprecedented’ and that people should not assume that ‘absolutely everybody can and will be able to go back to the job they had’.
This has fed into concerns that the UK is facing an impending unemployment crisis once the government’s furlough scheme lapses in October.
GBP investors fear that unemployment could surge to double figures by the end of 2020, something which could significantly impact household spending and slow any economic recovery.
GBP/EUR Exchange Rate Forecast: Eurozone GDP to Confirm Record Slump in Growth?
Looking ahead to the end of this week’s session, the Pound to Euro (GBP/EUR) exchange rate may be able to stave off any additional losses following the publication of the latest Eurozone GDP estimate.
The latest estimate looks set to confirm the Eurozone economy shrank at a record pace in the second quarter, plunging the bloc into a deep recession.
The GDP release will be accompanied by the Eurozone’s employment report, with preliminary figures from the second quarter likely to put more pressure on the Euro amidst forecasts employment growth will have contracted 1.7%.
Meanwhile, any upside in the Pound looks limited in light of the UK’s current economic gloom.