The Euro (EUR) is facing a challenging situation against the British Pound (GBP) on Monday as it struggles to gain momentum and recover from last week’s losses. Even after receiving some support from the United States (US) President Donald Trump’s decision to postpone the imposition of tariffs on European imports until July 9, the EUR/GBP pair is still unable to break above the 0.8400 level. This is due to the British pound’s strength, supported by stable UK fundamentals and inflation expectations.
Initially, Trump announced a 50% tariff on all goods from the European Union (EU), but later extended the deadline after a conversation with European Commission President Ursula von der Leyen. She stated that the EU is ready to negotiate and reach an agreement quickly. Furthermore, comments from European Central Bank (ECB) President Christine Lagarde have also prevented further losses for the Euro. Lagarde emphasized the importance of strengthening the Euro’s position globally amidst increasing geopolitical and economic uncertainty. She stressed the need for trust-building through robust institutions, capital markets, and a commitment to economic security.
However, despite these attempts, EUR/GBP remains below the 0.8400 threshold, as the British pound continues to benefit from positive domestic data and stable inflation expectations. On Tuesday, the Eurozone is set to release important sentiment indicators for May, including Business Climate, Consumer Confidence, Economic Sentiment, Industrial Confidence, and Services Sentiment. These reports will offer valuable insights into the economic outlook for businesses and consumers in the region.
The outcome of these reports could be crucial in determining whether the Euro can maintain its recent strength against the British Pound. If the readings are higher than expected, it could boost confidence in the Eurozone’s resilience, potentially delaying any further rate cuts by the ECB and providing a boost to the Euro. On the other hand, weaker sentiment figures may weigh on the Euro, especially if ECB policymakers like Klaas Knot and Joachim Nagel adopt a dovish stance in their speeches later in the day. In this situation, bears in the EUR/GBP pair may regain control, especially if UK fundamentals continue to remain strong and support the Pound.