- The EUR/GBP is still under pressure as the markets are increasingly waiting for further cuts of the ECB, potentially already in June.
- The European Commission has initiated a public consultation proposing possible retaliatory measures to the US tariffs.
- Nael Sterling will strengthen after US President Donald Trump announces a new US-UK trade agreement.
EUR/GBP stops its Thursday loss by trading about 0.8490 in the early hours of Europe on Friday. However, a couple of upside down can be overcome, as the euro (EUR) remains under pressure if the European Central Bank (ECB) has further expected interest rates, which is already at the June meeting. Although ECB officials are still optimistic that inflation returns to a sustainable 2% goal until the end of the year, the eurozone's economic outlook remains.
In the field of trade, the European Commission has initiated a public consultation describing possible countermeasures in response to US tariffs. The aim of the proposal is up to EUR 95 billion from US imports, if trade negotiations fail, but is ashamed of Tuesday with a estimated estimate of EUR 100 billion.
European Commissioner for Commerce Maros Sefcovic announced Wednesday that the Commission will soon announce measures to balance the economic impact of US tariffs. “Tomorrow, we will announce the following preparatory steps both in the field of possible balancing measures and for further discussions in important areas,” he said. However, Sefcovic emphasized that the EU's main emphasis is still on the conclusion of the agreed agreement with the US, albeit at any cost.
The EUR/GBP pair can also put pressure on the pound sterling (GBP) support after US President Donald Trump's announcement on US-UK trade transactions. If the contract retains 10% of British goods, it includes access to US procurement and delays in US agriculture and beef on the UK's market access, pointing to a modest initial extent.
In the meantime, the Bank of England (Boe) reduced its main interest rate by 25 base points on Thursday according to expectations. The central bank, however, adopted a more parkled tone, claiming that political support would be gradually secured and the tariffs persist for so long to control inflation risks.
Surprisingly, the two policy makers voted unchanged, signaling a cautious approach. As a result, investors have modestly changed their expectations, now estimating about the end of the year of cutting rates of about 59 base points.
Central Bank
Central banks have a major mandate that ensures stability of the state or region. Economics are constantly facing inflation or deflation as the prices of certain goods and services fluctuate. The steady increase in the same goods mean inflation, and the constant lower prices of the same goods mean deflation. The central bank's task is to keep demand in line with its political rate. The largest central banks, such as the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BOE), is a mandate to keep inflation near 2%.
There is one important tool at the disposal of the Central Bank to get inflation higher or lower, which means that the rate of the comparative policy, commonly called interest rate, is adapted. At pre -communication moments, the central bank gives a statement at its political rate and gives additional reasons why it will either remain or change (cutting or hiking). Local banks adjust their savings and loan rates accordingly, which in turn makes it harder or easier or easier to make a loan for people's savings or borrowing and investing in their business. If the central bank hikes interest rates significantly, it is called financial effort. If it reduces its comparative base, it is called financial mitigation.
The central bank is often politically independent. The members of the Central Bank Political Council will pass a series of panels and listening before appointing a political government. Every member of the Management Board often has a certain conviction on how the central bank should control inflation and subsequent monetary policy. Members who want a very loose monetary policy with low interest rates and cheap loans to significantly increase the economy, while it is satisfied with seeing inflation in just over 2%, called pigeons. Members who want to reward the savings and keep inflation all the time are called hawks and do not rest until inflation is or is just under 2%.
Usually there is a chairman or president of each meeting, must create a consensus between Hawks or pigeons, and have its own final word when it falls to a vote exchange to avoid 50-50 tillage, whether current policy should be adjusted. The chairman will have speeches that can often be watched live, which conveys the current financial position and prospect. The central bank tries to move its monetary policy without causing violent impetus, stocks or its currency. All central members of the central bank guide their attitude towards the markets before the event of the political meeting. A few days before the political meeting until the transmission of a new policy, members are prohibited from publicly speaking. This is called a power outage.
