EUR/GBP extends losing streak on sluggish US-EU trade talks
|- EUR/GBP declines to near 0.8410 as the Euro underperforms its risky peers due to the absence of progress in US-EU trade talks.
- The US and China have agreed to reduce tariffs by 115% for 90 days.
- BoE Lombardelli warned that restrictive monetary policy is weighing on the UK economy.
The EUR/GBP pair extends its losing streak for the sixth trading day on Monday. The pair slides to near 0.8415 during European trading hours as the Euro (EUR) weakens after the announcement of a 90-day tariff pause by the United States (US) and China earlier in the day.
Washington and Beijing have agreed to reduce tariffs by 115% in a scheduled briefing after trade talks in Switzerland over the weekend. The announcement has strengthened the US Dollar and global equities, but has weighed on second-level currencies, such as Japanese Yen (JPY) and the Swiss Franc (CHF), and risk-perceived currencies.
The Euro underperforms its risky peers as the European Union (EU) remains the only major trading partner, outside North America, which has not reported any meaningful progress in trade discussions with the US, since the announcement of reciprocal tariffs by President Donald Trump.
Meanwhile, the EU has prepared countermeasures if its trade talks with the US don’t conclude positively. On Thursday, the European Commission launched a public consultation paper that contained countermeasures on up to €95 billion of US imports if trade talks fail to deliver a satisfactory result for the bloc.
On the United Kingdom (UK) front, the nation emerged as the first to announce a trade deal with Washington on Thursday. Britain has also announced a bilateral deal with India. A substantial progress by London in closing trade deals has strengthened the Pound Sterling (GBP).
Additionally, the retention of a “gradual and careful” monetary expansion cycle approach by the Bank of England (BoE) in the monetary policy announcement on Thursday has also supported the British currency. The BoE reduced interest rates by 25 basis points (bps) to 4.25% but maintained moderate policy-expansion guidance.
During European trading hours, BoE Deputy Governor Claire Lombardelli signaled more interest rate cuts. “There is still a lot of evidence that monetary policy is weighing on the economy,” Lombardelli said, according to Mace News.
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