"Standout" Rally for Pound and Dollar Against Euro on US-EU Trade Deal Reaction

The Pound and US Dollar rallied sharply against the Euro on Tuesday as foreign exchange markets reacted to Monday’s EU-US trade deal announcement.

At the time of writing, the GBP/EUR was trading at around €1.1539, up almost 0.2% from Tuesday’s opening levels.

According to Lloyds Bank economists, "Yesterday one of the stand-out market movers was the euro, down more than 1% versus the US Dollar intraday. Schatz yields were were lower too.

"The read across from both the FX and bond moves being that the US-EU framework agreement on trade setting 15% tariffs for most EU exports to the US would be a drag on the euro area.

"Indeed, that is what the June ECB staff macroeconomic projections foresaw too. Tariffs of 15% for the EU might be less severe than the 30% previously mooted, but that rate is still more of a headwind than the 10% baseline assumed by the ECB’s June projections."

The Euro (EUR) faced sustained pressure on Tuesday, retreating against most major currencies as markets continued to absorb the implications of the recently announced EU–US trade agreement.

After an initial boost on Monday, the single currency reversed course as further details of the deal failed to meet investor expectations.


Discontent from key Eurozone members, including Germany and France, added to the downbeat tone, raising concerns about the bloc’s unity on the issue.

This scepticism surrounding the agreement weighed heavily on Euro sentiment, keeping the common currency on the defensive throughout Tuesday’s European session.

The Pound (GBP) struggled to find clear direction on Tuesday, with a quiet UK economic calendar keeping Sterling broadly rangebound against most of its major peers.

In the absence of any domestic catalysts, GBP movement was largely dictated by prevailing market sentiment.

Caution crept into global markets following reports of a new EU–US trade agreement, which triggered a more risk-averse tone.

As a result, the risk-sensitive Pound lost ground against some of its traditional safe-haven currencies.

However, Sterling managed to edge higher against more volatile rivals as investors dialled back their appetite for riskier assets.


Looking ahead to Wednesday’s European session, the Pound Euro (GBP/EUR) exchange rate is likely to be influenced by a series of key Eurozone data releases.

The day begins with Germany’s latest retail sales figures. A rebound is expected for June, and a stronger-than-forecast print could lend the Euro some early support.

Shortly after, attention will turn to the Eurozone’s second-quarter GDP estimate. Economists forecast a slight contraction in growth, which may dampen EUR sentiment if confirmed.

In addition, the Eurozone’s latest economic sentiment index will be published. Forecasts point to an improvement in morale, and if the report reflects an uptick in confidence, the Euro may regain its footing.

Meanwhile, the UK’s economic calendar remains empty, leaving the Pound directionless mid-week.

With no domestic data to provide momentum, GBP is likely to once again be influenced by broader market sentiment and external drivers.

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