Euro Pound Sterling (EUR/GBP) Exchange Rate Muted as Markets Focus on US Tariffs
The Euro Pound Sterling (EUR/GBP) exchange rate remained largely flat, leaving the pairing trading at around £0.9045.
The single currency received some support today after the latest unemployment data from France. The jobless rate did not rise as high as expected.
However, the currency remained under pressure after trade tensions between the European Union and US increased.
Washington said it would maintain its 15% tariffs on Airbus and aircraft. There would also be 25% tariffs on other goods from Europe.
The United States decided not to exacerbate a 16-year trade dispute over aircraft subsidies by dishing out fresh tariffs. Although, the bloc said it wanted to negotiate a fix to end the row.
A European Commission spokesperson noted:
‘The Commission acknowledges the decision of the US not to exacerbate the ongoing aircraft dispute by increasing tariffs on European products.’
Pound (GBP) Muted After Britain’s Economy Shrinks by Over 20%
Sterling remained flat against the single currency as it was able to benefit from US Dollar weakness. Added to this, traders shrugged off the latest UK growth data which showed the economy plunged into the first recession in 11 years.
However, GBP remained flat against the Euro as traders remained cautious about the long-term outlook for the economy.
The latest GDP data showed the economy shrank by a record 20.4% in the second quarter. This was also a substantially larger contraction compared to the bloc’s -12.1% decline.
Sterling did not suffer significant losses following this news, as it was largely outweighed by US Dollar weakness.
In a note to clients, RBC strategists wrote:
‘In reality, most market participants had been pencilling in a decline in Q2 GDP of ‘around’ 20% for some time now so yesterday’s release from the ONS didn’t come as too much of a surprise even if the magnitude of the contraction dwarfs anything any of us have experienced before.’
Meanwhile, Brexit continues to weigh on the currency as the 31 December deadline approaches.
Added to this, today Britain said it would step up demands to the US to drop tariffs on a range of goods. This includes tariffs on single malt Scotch whisky after industry warnings.
Euro Pound Outlook: Traders Eye Latest Eurozone GDP
Looking ahead to Friday, traders will be focused on the latest Eurozone growth data. This could send the Euro (EUR) lower against the Pound (GBP).
If the latest GDP data from the bloc shows Q2 activity contracted at a faster pace than forecast, the single currency will suffer losses.
Added to this, EUR could suffer further losses if the latest flash employment change data shows a high number of people were left out of work in Q2.
If data shows the Eurozone’s employment change has plummeted more than expected between April and June it will send the Euro Pound (EUR/GBP) exchange rate lower.