In the foreign exchange market, the EUR/GBP currency cross has been on an upward trend, edging closer to the 0.8700 mark. This movement comes as risk sentiment improves following an important announcement from US President Donald Trump.
On Sunday, Trump declared less severe tariffs on Chinese imports, including semiconductors and electronics. However, he also clarified that these goods would still be subject to the existing 20% tariffs related to fentanyl, dispelling earlier rumors of them being free from any tariffs or facing the much – higher 145% duties. This news provided a boost to market confidence, causing the EUR/GBP pair to trade around 0.8670 during the Asian trading hours on Monday, marking its third consecutive session of strength.
Concerns Over Trump’s Policies and Their Potential Impact
While the tariff announcement had a positive immediate impact on risk sentiment, not everyone is optimistic about the long – term implications. German Chancellor – in – waiting Friedrich Merz, in an interview with Handelsblatt on Saturday, expressed deep concerns about Trump’s economic strategies. He warned that “President Trump’s policies are increasing the risk that the next financial crisis will hit sooner than expected.” Merz also advocated for a new transatlantic trade agreement, suggesting that “Zero percent tariffs on everything—that would be better for both sides.” His statements highlight the uncertainty and potential risks that still loom over the global economy due to the ongoing trade tensions.
Impact of UK 10 – Year Gilt Yields and Trade Tensions on EUR/GBP
Despite the upward movement of the EUR/GBP pair, its upside potential might be limited. The Pound Sterling (GBP) is receiving support from the rise in UK 10 – year gilt yields, which climbed to 4.76%. This increase in yields is a result of the continued volatility in global bond markets, mainly driven by the intensifying US – China trade tensions. China’s Ministry of Finance recently announced a significant tariff hike on US goods, raising duties from 84% to 125% in response to Trump’s earlier decision to increase tariffs on Chinese imports to 145%. These tit – for – tat tariff actions are creating ripples in the financial markets, influencing bond yields and, consequently, currency valuations.
UK GDP Data and Its Influence on the Pound
UK GDP data for February also played a role in shaping the currency dynamics. The data showed that the UK economy expanded by 0.5%, which was stronger than expected. This marked the fastest monthly growth in nearly a year, with broad – based gains across key sectors. The growth was partly attributed to a surge in pre – tariff manufacturing. This positive economic data led investors to adjust their expectations for aggressive Bank of England (BoE) rate cuts. Although markets still expect at least three quarter – point reductions this year, the better – than – expected GDP figures have provided some support to the Pound, which in turn affects the EUR/GBP exchange rate.
Related Topics:
EUR/GBP Holds Steady Near 0.8400 in the Wake of UK Employment Data
Euro’s Woes Send EUR/GBP Below 0.8400 Amid Market Turmoil
EUR/USD Retests Resistance as GBP/USD Gains; EUR/GBP Hits 3-Month Low
