By Nick Harrison
The Great British Pound has posted a strong week against the Euro and is quoting the highest levels seen since mid-December. The main reason behind this is that US President Donald Trump has reinforced his promise to impose tariffs on the EU. Late on Wednesday, Trump reaffirmed his intention to enforce 25% tariffs on Canada and Mexico and also announced plans to add the EU to the list of nations facing trade penalties for exports to the US. The EU has swiftly responded by saying they will counter these threats from the US, but the fallout so far has seen investors sell off the Euro and reinvest in the safer haven of the US Dollar and this has ultimately helped the Pound strengthen against the Euro. Just to put this into perspective, a EUR 200,000 property would now cost you £1,500 less than a week ago, so these market movements are directly impactful to your budgets to buy abroad.
The Euro has also been under some pressure since the German election results were released recently. Political uncertainty will always weigh on a currency and investors were very keen to see the fallout from Germany. The CDU/CSU Centre Right party led by Friedrich Merz won the election but not by a majority and it is now implied that a coalition will be a slow moving process and we will likely not see any solid decisions until after Easter. The far right still pose a threat to German politics so this story will be a very interesting read as it plays out.
Risk aversion has helped strengthen the US Dollar and yesterday saw a selloff of the Pound against the Greenback. Sterling dropped a cent against the USD yesterday and this shows that investors are getting quite nervous about Trump’s aggressive new policies with his global trade tariffs. These trade tensions are pushing investors to buy up safe haven currencies such as the USD & Japanese Yen, so the short term outlook seems a little fragile for riskier currencies like the Euro & Pound.
On a positive note, UK Prime Minister Kier Starmer has now met President Trump over in the US and it would seem that a possible tariff free trade deal could be on the cards. Their first meeting seems to have had a positive outcome, so we will now see how this new “special relationship” develops.
Watch out for the German inflation figure today – The Eurozone, as mentioned, is under the spotlight at the moment, so anything outside of the 0.4% forecasted figure could move the market again today.
Do reach out to our Currency Consultants who will help keep you aware of what is happening in the market and how we can help you make informed decisions about the right time to reduce the risk on your FX exposure.
Economic Data Today
German CPI Figure – Throughout the day
US Core PCE Price Index – 1.30pm
Highlights for next week
ECB Rate announcement – Thursday 1.15pm
US Non-Farm Payrolls – Friday 1.30pm