The euro slipped behind the pound and dollar on Monday, losing 0.2% value against both currencies. It appears the newly signed trade deal between the EU and US is to blame, with Europe seen as the loser in the agreement.
Despite all the turmoil in the US, with lawmakers voicing their displeasure and President Trump’s firing of the Bureau of Labor’s head statistician after the department revealed a major slowdown in the jobs market, the pound gained little ground on the dollar.
With Thursday’s interest rate cut hanging over the week, it may be that traders are simply hesitant to buy or sell pounds, instead waiting for the Monetary Policy Committee’s decision. The Bank of England is widely expected to make a cut. However, with recently rising interest rates and unemployment and the growing economic uncertainty introduced by US trade tariffs, there is a chance the Bank’s economists will adopt the US Federal Reserve’s ‘wait and see’ approach. The Fed has held interest rates steady to gauge the impact of all these dramatic economic shifts before making any changes.
Over in the US, the fallout from Trump’s decision to fire statistician Erika McEntarfer on Friday continues to bubble. Various non-partisan groups have put out statements calling for a congressional investigation of McEntarfer’s firing. However, Friday’s sharp drop in the dollar didn’t continue on Monday.
A new poll of EU investors reveals one of the first snapshots of reactions to the US-EU trade deal and it’s widely seen as a loss for Europe. The Sentix index measures the sentiment of thousands of investors, and their confidence in Europe’s prospects fell from 4.5 in July to -3.7 in August, with an even steeper drop in Germany.
The deal locks in a 15% tariff on all EU exports, three times the current 4.8% rate, but half the threatened 30%.
The EU still has two packages of retaliatory tariffs prepared, but they have been pushed back by six months to give time to see what other agreements may be struck with the US.
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