The euro weakened against the British pound as EUR/GBP fell toward 0.8250, pressured by renewed trade tensions after former U.S. President Donald Trump threatened to impose 25% tariffs on European Union exports. The announcement rattled currency markets, fueling uncertainty over EU-U.S. trade relations.
Trump’s tariff warning has raised fears of potential economic strain on key European industries, including automobiles and agriculture. Investors reacted by pulling out of the euro, leading to a broad-based decline in the currency. The pound, in contrast, found support amid expectations that the UK could be less impacted by U.S. trade policy shifts.
Financial markets are closely monitoring the possibility of retaliatory measures from the EU, which could escalate tensions and further weigh on the euro. Concerns over trade friction add to existing economic pressures in the eurozone, where sluggish growth and persistent inflation risks have kept sentiment fragile.
The tariff threat comes as the European Central Bank navigates a delicate policy path. With inflation showing signs of moderation but economic growth remaining tepid, the ECB faces a challenging environment that could limit its ability to support the currency. Any further escalation in trade disputes may complicate the bank’s monetary policy outlook.
Meanwhile, the British pound has remained relatively resilient, bolstered by expectations that the Bank of England may maintain a tighter policy stance for longer than its European counterpart. Investors view the UK’s economic resilience as a key factor in the currency’s recent performance.
As markets digest the latest developments, EUR/GBP remains vulnerable to further downside risks, particularly if trade tensions intensify or economic data from the eurozone disappoints. Traders will be watching for official EU responses and further signals from U.S. policymakers that could shape the next move in the currency pair.
