- EUR/GBP edges higher as the Euro gains support amid growing fears of a potential US recession.
- The ECB also warned that US-imposed tariffs could severely impact economic growth, adding to expectations of further monetary easing.
- UK PM Keir Starmer is working to secure a trade agreement with the US following Trump’s announcement of new tariffs.
EUR/GBP extends its gains for the second successive session, trading around 0.8600 during the Asian hours on Monday. The currency cross strengthens as the Euro (EUR) advances against its counterparts, supported by persistent weakness in the US Dollar (USD) amid rising concerns about a potential US recession and questions surrounding the Federal Reserve’s (Fed) independence.
However, the Euro faced challenges after the European Central Bank (ECB) cut interest rates for the seventh time in a year last week. The ECB also cautioned that economic growth could be significantly impacted by US tariffs, reinforcing expectations for further policy easing in the coming months.
Moreover, ECB policymaker Madis Müller noted that the decline in energy prices and the impact of tariffs supported the recent rate cut. Müller emphasized that monetary policy is no longer acting as a constraint and highlighted that key indicators are trending in the right direction. However, he also warned that increasing economic fragmentation could lead to upward pressure on prices.
The upside potential of the EUR/GBP cross may be capped as the Pound Sterling (GBP) also strengthens, buoyed by optimism over ongoing US-UK trade talks. UK Prime Minister Keir Starmer is aiming to secure a deal with the US following President Trump’s announcement of 10% tariffs on UK goods and a 25% levy on imports of automobiles, steel, and aluminum.
UK Prime Minister Keir Starmer and US President Donald Trump held their first conversation on Friday since the imposition of tariffs on UK goods, describing the trade talks as "ongoing and productive." According to a Downing Street official, Starmer reaffirmed his commitment to "free and open trade" while underscoring the importance of safeguarding the national interest.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
BRANDED CONTENT
Choosing a broker that aligns with your trading needs can significantly impact performance. Our list of the best regulated brokers highlights the best options for seamless and cost-effective trading.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
Gold leaps toward $3,450 as Israel launches attacks on Iran
Gold price rises to over five-month highs, nearing $3,450 in the Asian trading hours on Friday. Israel confirmed strikes on Iran's nuclear facilities, fuelling a broad wave of risk aversion while driving the safe-haven Gold price through the roof. Rising Fed rate cut bets also underpin the non-yielding Gold.
AUD/USD remains heavy below 0.6500 amid intense risk aversion on Israel-Iran confict
AUD/USD is off the low but remains heavy below 0.6500 in Friday's risk-off Asian affair. Trump's fresh tariff news and escalating Israel-Iran geopolitical tensions weigh on investors' sentiment and the risk-sensitive Aussie. Broad US Dollar rebound also adds to the pair's downside.
USD/JPY holds losses near 143.00 amid geopolitical risks
USD/JPY keeps the red near 143.00, reversing a quick dip to the 142.80 region in Asian trading on Friday. The global risk sentiment takes a hit amid an escalation of geopolitical tensions in the Middle East, which boosts the Japanese Yen's safe-haven status.
Solana dips 10% despite DeFi Development Corp's plan to raise $5 billion to boost SOL treasury
Solana is down 10% on Thursday after DeFi Development Corporation announced an equity line of credit agreement with RK Capital Management to raise $5 billion in sales of its shares to stack additional SOL.
US tariffs here to stay, trade deals ‘largely symbolic’
Despite legal challenges to IEEPA tariffs, US trade policy remains firm. Tariffs on steel and aluminium have doubled, and new sectoral tariffs are expected. Trade deals may emerge, but most will be symbolic. Effective tariff rates will stay high throughout 2025.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.