Pound to Euro Hits 1.2 as Dollar Jumps on Trump Tariffs

February 3, 2025 - Written by Frank Davies

STORY LINK Pound to Euro Hits 1.2 as Dollar Jumps on Trump Tariffs

The Pound Sterling (GBP) rallied past the 1.20 handle against the Euro (EUR) in early Monday trade.

The US Dollar posted significant gains in Asia on Monday following President Trump’s confirmation of tariffs on Mexico and Canada while overall volatility surged.

The Pound to Dollar exchange rate (GBP/USD) slumped to 10-day lows at 1.2250 on dollar strength before a recovery to 1.2295.

The Pound to Euro exchange rate (GBP/EUR) jumped to 1.2030 before consolidating just below 1.2000 as the Euro came under pressure.

Global equities were under pressure and the FTSE 100 index will open sharply lower.

Over the weekend, President Trump confirmed that 25% tariffs would be imposed from February 4th on goods from Mexico and Canada, although there would be a lower 10% tariff on Canadian oil imports.

Trump also announced a 10% tariff on imports from China.

As far as Europe is concerned, he stated that tariffs are coming very soon while he stated that the UK is out of line, but that something can be worked out.

The dollar posted net gains while the Euro posted sharp losses amid fears that tariffs would tip the Euro-Zone economy into recession.

In relative terms, the Euro-Zone damage was likely to be larger than the UK

Although the potential UK hit could be less severe, the Pound was undermined by the slide in risk appetite.

Trump used the International Emergency Economic Powers Act (IEEPA) to impose tariffs which circumvents the need for Congressional approval.

There is, however, the potential for legal challenges given that using emergency powers to impose trade tariffs have not been used before and could be ruled as against the constitution.

There is also the potential for negotiations and concessions with a high degree of uncertainty triggering further sharp moves.

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TAGS: Pound Euro Forecasts