Pound to Euro Rate Tests 1.17 Lows, Odds of "Full-blown Global Trade War Growing"

April 7, 2025 - Written by Frank Davies

STORY LINK Pound to Euro Rate Tests 1.17 Lows, Odds of "Full-blown Global Trade War Growing"

The Pound to Euro rate slumped to 7-month lows near 1.1700 on Monday, with risk appetite plunging further in Asia amid uncompromising talk from the US Administration which increased fears over an extended trade war.

Pressure for reassuring talk from governments and central banks will intensify.

IG market analyst Tony Sycamore commented; "Things have gone from bad to worse.”

There was a brief rally attempt later in the Asian session, but equity markets were heavily in the red at the European open.

US S&P 500 index futures are close to 5.0% lower with the US index entering a bear market following a 20% slide from the peak. The FTSE 100 index is 5.0% lower and hit a 12-month low.

In this environment, the yen and Swiss franc continued to gain strong support while the Pound came under pressure.

The Euro again secured some net support on liquidity grounds.

The Pound to Euro (GBP/EUR) exchange rate slumped to 7-month lows at 1.1700.

The Pound to Dollar (GBP/USD) exchange rate hit 1-month lows at 1.2830 before a recovery to 1.2900 with the dollar gaining only limited defensive support.

Rodrigo Catril, senior FX strategist at National Australia Bank commented; "Given the U.S. is at the epicentre of the trade war, the USD has been suffering from outflows with investors "looking to diversify away from U.S. assets."

Trade fears have dominated again during the session.

MUFG commented; “This time is different, with trade war 2.0 larger and more pervasive than the first trade war in 2018-2019. China has intensified its trade retaliation against the US.”

It added; “The chance of a full-blown global trade war is growing, and the negative impact of higher global tariffs and uncertainty will hurt the global economy through lower global trade and investments.”

Pressure for a shift in the US stance will grow if equity markets continue to slide.

IG’s Sycamore added; "If there isn't some sort of walking back of the announcements, then we're heading for a liquidity event and liquidity will get sucked out of these markets big time across all asset classes."

Pepperstone head of research Chris Weston commented; “Both President Trump and Treasury Secretary Bessent seem unnerved by the reaction in markets, and the markets will look to test their resolve this week.”

Market pressure for interest rate cuts will continue with traders now expecting four rate cuts this year.

Nick Twidale, chief analyst at AT Global Markets added “If Trump keeps the hard line we will take more hits on risk. Deals taking months is not a good thing for global trade and probably not what investors expect from this administration which has pulled back swiftly on tariffs in recent months.”

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TAGS: Pound Euro Forecasts