EUR/GBP turns upside down after US-EU tariff deal confirmation
- The EUR/GBP surrenders early gains and turns negative in the aftermath of US-EU tariff deal confirmation.
- This week, investors will focus on an array of the EU economic data.
- Investors expect the BoE to cut interest rates next month.
The EUR/GBP pair gives back its early gains and declines to near 0.8730 during the European trading session on Monday. The pair had a strong opening after the United States (US) and the European Union (EU) announced that they have reached a framework trade agreement.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.50% | 0.08% | 0.16% | 0.10% | 0.60% | 0.44% | -0.06% | |
| EUR | -0.50% | -0.45% | -0.29% | -0.41% | 0.10% | -0.06% | -0.56% | |
| GBP | -0.08% | 0.45% | -0.06% | 0.05% | 0.55% | 0.39% | -0.10% | |
| JPY | -0.16% | 0.29% | 0.06% | -0.06% | 0.39% | 0.26% | -0.08% | |
| CAD | -0.10% | 0.41% | -0.05% | 0.06% | 0.47% | 0.34% | -0.15% | |
| AUD | -0.60% | -0.10% | -0.55% | -0.39% | -0.47% | -0.15% | -0.66% | |
| NZD | -0.44% | 0.06% | -0.39% | -0.26% | -0.34% | 0.15% | -0.49% | |
| CHF | 0.06% | 0.56% | 0.10% | 0.08% | 0.15% | 0.66% | 0.49% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
The deal between the both sides of the Atlantic indicates that the US has imposed 15% tariffs on imports from the EU, which is half than what President Donald Trump threatened in the mid of the month. The US-EU trade deal confirmation has undermined fears of disruption in the global trade flow.
Meanwhile, the deal also shows that the EU will invest $600 billion in the US on top of existing expenditures.
Going forward, investors will focus on the preliminary Harmonized Index of Consumer Prices (HICP) for July and Q2 Gross Domestic Product (GBP) data from the Eurozone and its major nations this week. The inflation and GDP data will significantly influence market expectations for the European Central Bank’ (ECB) monetary policy outlook for the remainder of the year. In the policy meeting last week, the ECB left its key interest rates steady.
In the United Kingdom (UK), traders are increasingly confident that the Bank of England (BoE) will reduce interest rates by 25 basis points (bps) in the policy meeting next week. BoE dovish bets have surged due to cooling labor market conditions.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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