February 12, 2025 – Written by Frank Davies
STORY LINK Pound to Euro (GBP/EUR) Exchange Rate News: Flat as Trade Tensions Escalate
The Pound to Euro (GBP/EUR) exchange rate saw little movement on Tuesday as investors remained cautious amid deepening concerns over transatlantic trade tensions.
At the time of writing, GBP/EUR was trading at approximately €1.2006, showing minimal change from Tuesday’s opening levels.
The Euro (EUR) faced headwinds on Tuesday as fears of an impending US-EU trade conflict rattled market sentiment.
On Monday, US President Donald Trump confirmed a 25% tariff on all steel and aluminium imports into the US, igniting tensions with key trading partners.
European Commission President Ursula von der Leyen responded swiftly, condemning the tariffs as ‘unwarranted’ and pledging strong countermeasures to protect EU industries.
The potential for escalating trade disputes has unsettled EUR investors, with analysts warning that a prolonged tariff battle could further slow the Eurozone’s already fragile economic recovery.
Speculation is now rising that the European Central Bank (ECB) may be forced to cut interest rates more aggressively in the coming months to shield the economy from the fallout.
The Pound (GBP) traded sideways on Tuesday following remarks from Bank of England (BoE) Governor Andrew Bailey.
Bailey refrained from commenting on monetary policy but took a firm stance against the proposed rollback of financial regulations introduced after the 2008 financial crisis.
He argued that stability in the financial sector should not be compromised in the pursuit of economic growth, a position that contrasts with UK Chancellor Rachel Reeves’ plans to streamline financial rules to boost the UK economy.
While his comments did little to move GBP exchange rates, they added to the ongoing policy debate over the UK’s long-term economic strategy.
Looking ahead, the Pound Euro exchange rate may be influenced by the UK’s latest GDP figures, set for release in the second half of the week.
Economists expect preliminary data for Q4 2024 to show the UK economy contracted by 0.1%, following stagnation in the previous quarter.
If confirmed, concerns over sluggish economic growth—combined with persistent inflation—could reinforce fears of stagflation and put further pressure on Sterling.
Meanwhile, the Euro’s movement may be dictated by its negative correlation with the US Dollar (USD). If upcoming US inflation data strengthens the Greenback, the Euro could weaken.
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TAGS: Pound Euro Forecasts
