The EUR/GBP loses impulse below 0.8650 while the operators prepare for updating the EU-EE.U agreement.

  • The EUR/GBP drops to about 0.8620 in the first bars of the European session on Wednesday, with a 0.21% drop in the day.
  • Trump said the EU ‘probably’ will receive new rates on Thursday.
  • The excess of growing tax risks in the United Kingdom could weigh on the GBP and limit the fall of the crossing.

The EUR/GBP cross loses traction around 0.8620 during the early European session on Wednesday. The euro (EUR) weakens in front of the sterling pound as the renewed tariff threats of US President Donald Trump concern the markets.

Trump said Tuesday that the European Union (EU) “will probably” receive a letter establishing its new US tariff rate on Thursday, adding that the US president said that the block had gone from being “very hard” to “very friendly.”

These comments occurred in the midst of EU increasing attempts to avoid general “general” reciprocal rates on their exports to the US, which were scheduled to enter into force on Wednesday but have been postponed until August 1. However, tariff uncertainty and fears of a commercial war could undermine the shared currency in the short term.

The policy manager of the European Central Bank (ECB), Boris Vujcic, one of the most hawk members of the Governing Council, said that the Central Bank should not worry too much about a temporary breach of the inflation target of 2% and should not hurry in more movements of interest rates. Vujcic added that the ECB has the “luxury of waiting”, and the incoming data “will determine what we are going to do.”

After eight cutting quarter in a year, those responsible for the ECB have suggested that the flexibility cycle is coming to an end. With inflation near the objective and economy so far resistant to multiple winds against. Markets anticipate a pause this month, but at least one more reduction before the end of the year. A minus dovish posture of the ECB could help limit euro losses.

On the other hand, the risks of tax risks in the United Kingdom could limit the potential of the sterling pound. Last week, the Treasury Chancellor of the United Kingdom, Rachel Reeves, violated her own fiscal rules by increasing the standard allocation for universal credit, which is estimated to increase the financial burden by £ 4.8 billion for fiscal year 2029-2030. According to a Barclays analysis, it is very likely that the United Kingdom government needs to increase taxes in the autumn budget to address the growing budgetary concerns.

LIBRA ESTERLINA – FREQUENTLY QUESTIONS


The sterling pound (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most commercialized currency exchange unit (FX) in the world, representing 12% of all transactions, with an average of $ 630 billion a day, according to data from 2022. Its key commercial peers are GBP/USD, which represents 11% of FX, GBP/JPY (3%) and EUR/GBP (2%). The sterling pound is issued by the Bank of England (BOE).


The most important factor that influences the value of sterling pound is the monetary policy decided by the Bank of England. The Bank of England bases its decisions itself has achieved its main objective of “price stability”: a constant inflation rate of around 2%. Its main tool to achieve this is the adjustment of interest rates. When inflation is too high, the Bank of England will try to control it by raising interest rates, which makes access to credit for people and companies more expensive. This is generally positive for sterling pound, since higher interest rates make the United Kingdom a more attractive place for global investors to invest their money. When inflation falls too much it is a sign that economic growth is slowing down. In this scenario, the Bank of England will consider lowering interest rates to reduce credit, so that companies will borrow more to invest in projects that generate growth.


Published data measure the health of the economy and can affect the value of sterling pound. Indicators such as GDP, manufacturing and services PMI and employment can influence the direction of the sterling pound.


Another important fact that is published and affects the pound sterling 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 benefit exclusively from 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

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