Pound Euro Exchange Rate Subdued amid ‘Trump Trade’

November 17, 2024 - Written by David Woodsmith

STORY LINK Pound Euro Exchange Rate Subdued amid ‘Trump Trade’

The Pound Euro (GBP/EUR) exchange rate traded sideways on Thursday as ‘Trump trade’ weighed on both currencies, with the Republican Party retaining control of the House of Representatives.

At the time of writing, GBP/EUR traded at €1.2021, virtually unchanged from the start of the session.

The British Pound (GBP) had a difficult day on Thursday, losing value against stronger currencies and staying flat elsewhere. This was due to a lack of significant economic news and some nervousness ahead of the UK's GDP data release on Friday.

Adding to the Pound's troubles were worries about potential US tariffs after Donald Trump's presidential win. Economists are concerned that Trump's suggested policies, such as 10% tariffs on European exports, could hurt the British economy. The National Institute of Economic and Social Research (NIESR) warned that these measures could cut UK growth in half and increase inflation, leading to a possible scenario of slow economic growth and high interest rates.

Meanwhile, the Euro (EUR) faced similar pressure from 'Trump trade,' as the incoming President's proposed tariffs could potentially impact Eurozone growth.

Concerns were renewed following confirmation that the Republican Party maintained its majority in the House of Representatives, securing control over both chambers of Congress and the White House. This alignment will facilitate Donald Trump's ability to implement his policy agenda.

Additionally, a larger-than-expected decline in Eurozone industrial production in September added further pressure on EUR.

Pound Euro Exchange Rate Forecast: UK GDP to See GBP/EUR Slide?

On Thursday night, the Pound could strengthen if Bank of England (BoE) Governor Andrew Bailey hints in his speech that interest rates may remain steady at the December meeting.

However, Sterling might face challenges by the end of the week. On Friday, the UK's third-quarter GDP growth rate is set to be released, with economists predicting a slowdown from 0.5% to 0.2%. If the data meets these expectations, the GBP/EUR exchange rate could be negatively affected.

Regarding the Euro, the absence of significant Eurozone data on Friday may leave the currency without a clear direction. The Euro’s inverse relationship with the US Dollar (USD) could influence EUR exchange rates, with a strong ‘Greenback’ potentially putting downward pressure on the common currency.

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TAGS: Pound Euro Forecasts