The EUR/GBP loses traction to around 0.8315 in the early European session on Monday.
The BOE said it would be cautious about future movements in the face of an expected increase in inflation and global economic uncertainty.
The BOE promises a gradual approach after the reduction of a quarter cord
The EUR/GBP crossing in negative territory about 0.8315 during the early European session on Monday. Concerns about the threat of possible US tariffs to the euro zone weaken to the euro (EUR). Later, on Wednesday, investors await the speech of the president of the European Central Bank (ECB), Christine Lagarde, to obtain a new impulse.
The president of the United States, Donald Trump, said Friday that there would be an announcement later in the week on reciprocal tariff some exemption. On Sunday night, German Chancellor Olaf Scholz declared that the European Union (EU) can act “in an hour” if Trump imposes tariffs threatened to the block. Any sign of a commercial war in escalation between the US and the euro zone could drag the currency shared downward.
In addition, the growing expectation that the ECB will further reduce interest rates contributes to the fall of the EUR. The ECB member, Boris Vujcic, said that the anticipation of three more rates reductions this year is reasonable, although it will take until the beginning of the second quarter to know more certainly if they will materialize.
The governor of the Bank of England (BOE), Andrew Bailey, guided a cautious and gradual approach to rate reduction, and warned that inflation could temporarily rise to about 3.7% in the third quarter of the year before returning to the path of 2 % due to the highest energy prices.
Euro Faqs
The euro is the currency of the 19 countries of the European Union that belong to the Eurozone. It is the second most negotiated currency in the world, behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily business volume of more than 2.2 billion dollars a day. The EUR/USD is the most negotiated currency pair in the world, with an estimate of 30 %of all transactions, followed by the EUR/JPY (4 %), the EUR/GBP (3 %) and the EUR/AUD (2 %).
The European Central Bank (ECB), based in Frankfurt (Germany), is the Eurozone reserve bank. The ECB establishes interest rates and manages monetary policy. The main mandate of the ECB is to maintain price stability, which means controlling inflation or stimulating growth. Its main tool is the rise or decrease in interest rates. Relatively high interest rates (or the expectation of higher types) usually benefit the euro and vice versa. The GOVERNMENT BOOK of the ECB makes decisions about monetary policy in meetings that are held eight times a year. The decisions are made by the directors of the National Banks of the Eurozone and six permanent members, including the president of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the harmonized consumer prices index (IPCA), are an important economic indicator for the euro. If inflation increases more than expected, especially if it exceeds 2% of the ECB, it forces the ECB to rise interest rates to control it again. Relatively high interest rates compared to their counterparts usually benefit the euro, since they make the region more attractive as a place for global investors to deposit their money.
Published data measure the health of the economy and can have an impact on the euro. Indicators such as GDP, manufacturing and services PMIs, employment and consumer trust surveys can influence the direction of the single currency. A strong economy is good for the euro. Not only attracts more foreign investment, but it can encourage the ECB to raise interest rates, which will directly strengthen the euro. Otherwise, if economic data is weak, the euro is likely to fall. The economic data of the four largest economies in the euro zone (Germany, France, Italy and Spain) are especially significant, since they represent 75% of the economy of the euro area.
Another important fact that is published on the euro is the commercial balance. This indicator measures the difference between what a country earns with its exports and what you spend on imports during a given period. If a country produces highly demanded export products, its currency will gain value simply by the additional demand created by foreign buyers seeking to buy those goods. Therefore, a positive net trade balance strengthens a currency and vice versa in the case of a negative balance
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
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