14 Mar 2025

EUR/GBP may experience further depreciation as the Euro weakens in response to an escalating trade conflict between the United States and the European Union. President Trump has threatened to impose an extraordinary 200% tariff on all European wines and champagne, raising significant concerns within global markets. The UK economy is anticipated to have grown slightly by 0.1% in January, a decrease from the 0.4% growth recorded in December.

After experiencing losses in the previous two trading sessions, EUR/GBP is currently stable, trading around 0.8380 during the Asian trading hours on Friday. The currency pair has faced challenges as the Euro (EUR) has weakened against other currencies due to the intensifying trade dispute between the US and the EU. The announcement by President Trump regarding the potential 200% tariff on European wines and champagne during Thursday’s early US session has heightened anxieties in global markets.

Market participants are expected to closely observe Germany's February Harmonized Index of Consumer Prices (HICP), as well as the UK’s January Gross Domestic Product (GDP) and factory data, which are scheduled for release later today.

Joachim Nagel, a member of the European Central Bank (ECB) and President of the Bundesbank, cautioned that US tariffs on imports could potentially push Germany, the largest economy in Europe, into another recession, exacerbating its economic challenges. "We are in a world with tariffs, so we could expect maybe a recession this year if the tariffs take effect," Nagel stated on Thursday.

Traders will be vigilant regarding the UK GDP figures, as the Bank of England (BoE) has expressed concerns about the economic outlook. In its February policy meeting, the BoE revised its GDP growth forecast for the year to 0.75%, down from the previous estimate of 1.5% made in November.

The UK economy is projected to have experienced modest growth of 0.1% in January, a slowdown from the 0.4% growth observed in December. Additionally, monthly factory data is expected to indicate a decline for the first time.