Pound-to-Euro Through 1.19 After Trump Lashes Out at EU

Economic

Summary:

Euro weakens against Pound Sterling after Trump tariff threat.

The Pound to Euro exchange rate (GBP/EUR) rose through the key 1.19 barrier in Friday trade after U.S. President Donald Trump threatened to impose a 50% tariff on all European Union imports starting June 1, accusing the bloc of unfair trade practices.

In a Truth Social post, Trump claimed the EU was “formed for the primary purpose of taking advantage of the United States on trade,” citing “powerful trade barriers” and “unjustified lawsuits against American companies.”

Derek Halpenny, Head of Research for Global Markets EMEA at MUFG Bank Ltd, says the Euro "has dropped sharply" in reaction to the news, as investors bet a tariff hit will force the European Central Bank into cutting interest rates more than currently anticipated.

"A 50% tariff could result in a big hit on euro-zone GDP and would likely prompt the ECB to cut the policy rate more aggressively," he says.

The developments sent a jolt through markets, where investors were getting used to the idea that the worst had passed on the trade war front.

GBP/EUR was higher 0.20% at 1.1918, ensuring our Week Ahead Forecast published on Monday is playing out beautifully: Pound-to-Euro Through 1.19 After Trump Lashes Out at EU_1

Pound-to-Euro Through 1.19 After Trump Lashes Out at EU_1

Above: GBP/EUR at daily intervals with annotations sketched in Monday's Week Ahead Forecast.

U.S. equity markets reacted swiftly, with S&P 500 and Nasdaq 100 futures falling 1.1% and 1.3%, respectively. Trump also warned he would apply a 25% tariff on Apple Inc. products if the company failed to manufacture iPhones in the U.S., sending Apple shares lower.

The move came just days after the EU offered a new trade proposal that included tariff reductions and cooperation on issues like energy and AI. However, U.S. Commerce Secretary Howard Lutnick dismissed the EU effort, calling negotiations “impossible.”

In response, the EU is preparing retaliatory tariffs targeting €95 billion ($107 billion) of U.S. exports, even as it temporarily delayed a separate set of duties on U.S. steel and aluminium.

Dr. Christoph Swonke at Germany's DZ Bank says:

"Should the now threatened US tariffs of 50% actually come to pass, the EU will certainly respond with counter-tariffs. In this case, it is unlikely that the tariffs will be limited to selected products such as motorcycles, jeans, peanut butter, or bourbon whiskey.

"More far-reaching measures are conceivable. For example, the service businesses of major US tech giants in Europe could come under greater scrutiny. An escalation of the tariff disputes would likely result in significant growth losses and, at the same time, higher inflation rates for both the US and the EU."

Source: Poundsterlinglive

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Warren Takunda

Economic

US President Donald Trump announced on Sunday that he had agreed to delay the implementation of a 50% tariff on EU imports to 9 July, following a phone call with European Commission President Ursula von der Leyen.

The announcement sparked a sharp rebound in US stock futures and boosted European equities on Monday.

“I agreed to the extension — July 9, 2025 — It was my privilege to do so,” Trump posted on Truth Social, quoting von der Leyen’s statement on X, in which she wrote:

“The EU and US share the world’s most consequential and close trade relationship. Europe is ready to advance talks swiftly and decisively. To reach a good deal, we would need the time until July 9.”

Trump had originally announced 20% “reciprocal tariffs” on the EU on 2 April before reducing them to 10% for 90 days.

However, he threatened to impose a 50% tariff from 1 June, citing a lack of progress in negotiations due to disagreements among EU member states. According to the bloc’s trade chief, Maroš Šefčovič, the EU submitted a revised trade proposal to the US last week.

In a social media post on Friday, Trump criticised the EU’s non-tariff barriers, including VAT regimes, “ridiculous corporate penalties,” non-monetary trade restrictions, and “unjustified lawsuits against American companies,” which he claimed contributed to an annual trade deficit of over $250 billion (€219 billion). “Our discussions with them are going nowhere!” he wrote, justifying his move to raise import levies.

Trump’s tariff threats triggered broad market sell-offs in both the US and Europe on Friday, representing a renewed escalation in global trade tensions, just two weeks after the latest round of US-China trade talks.

European stock markets open higher

Major stock benchmarks in Europe opened higher on Monday following Trump’s reversal. The Euro Stoxx 600 jumped 1.00%, and the DAX surged 1.67% as of 9:25 am CEST.

“It's obviously a derivation of the Trump put. But it's prompting traders to place their bets that any new tariff threat is bluster and any existing tariff will eventually be lowered,” said Kyle Rodda, a senior market analyst at Capital.com Australia.

The US stock futures also rebounded significantly, with the Dow Jones Industrial Average rising 0.85%, the S&P 500 up 1%, and the Nasdaq 100 climbing 1.19%.

Asian markets were mixed in the early trading on Thursday, with Japan’s Nikkei 225 and South Korea’s Kospi rising, while Australia's ASX 200 and China’s Hang Seng Index fell.

The euro hits a one-month high as dollar weakens

The euro extended gains against the US dollar during Monday’s Asian session. As of 3:35 am CEST, the EUR/USD pair rose above 1.40, its highest level since 29 April.

The dollar remained under pressure after Trump’s tariff threats on Friday, with the US dollar index falling below 99 for the first time in May.

“While part of the dynamic is the market pricing in policy convergence between the US and the rest of the world, I think the major driver of dollar depreciation is the marginal loss of confidence in US assets,” Rodda said.

Recently, Moody’s downgraded the US credit rating, citing concerns over rising government debt and the widening budget deficit. Trump’s proposed tax cuts and spending plans are also facing stiff opposition in Congress.

These compounding factors have renewed sell-offs in US assets, including equities, the dollar, and government bonds, in the past week.

Source: Euronews

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Gerik

Economic

Stocks

Markets Rebound on Tariff Reprieve

European stock markets opened the week on a high note, with the pan-European STOXX 600 index rising 1% by early Monday trading, recouping Friday’s 0.9% loss. The recovery followed U.S. President Donald Trump’s decision to postpone the implementation of a proposed 50% tariff on EU goods, extending the deadline from June 1 to July 9 after discussions with European Commission President Ursula von der Leyen.

This extension provided immediate relief to investors concerned about a sharp escalation in trade tensions, prompting a widespread rebound across sensitive sectors.

Autos and Luxury Lead the Charge

Industries most vulnerable to transatlantic tariff shocks—such as automobiles and luxury goods—saw some of the largest gains. The STOXX automobiles and parts index rose 1.4%, with Mercedes-Benz climbing 2.1%, BMW up 2%, and Volkswagen advancing 1.9%. These companies are highly exposed to U.S. demand and global supply chains, and any tariff reduction or delay directly improves their earnings outlook.

Luxury brands with significant U.S. customer bases also surged. Kering, LVMH, and Richemont each posted gains ranging from 1.5% to 2.4%, reflecting improved investor confidence in cross-border consumer resilience.

Broader Sector Gains Reflect Eased Risk Perception

Banking stocks, which are closely tied to economic sentiment and interest rate dynamics, jumped 1.5%, while technology led all sectors with a 1.9% gain. The tech rally reflects broader global optimism, fueled in part by anticipation of strong earnings from industry leaders like Nvidia, whose upcoming quarterly report is expected to influence sentiment far beyond U.S. borders.

Although trading volumes were relatively subdued due to public holidays in the U.S. and UK, the market reaction underscored how critical trade policy clarity is for European investors. U.S. futures also climbed more than 1%, hinting at a risk-on mood returning globally.

Upcoming Economic Data Could Shape Market Trajectory

While the tariff delay delivered short-term support, European markets are also bracing for a data-heavy week. Key indicators include euro zone economic sentiment readings, as well as German unemployment and inflation figures for May. These will help clarify the state of the regional economy and shape expectations for European Central Bank policy moving into the second half of the year.

Trump’s decision to delay EU tariffs provided European markets with a temporary reprieve, but the underlying uncertainty in trade negotiations continues to loom. For now, investors have welcomed the breathing space, but the July 9 deadline ensures that volatility could resurface quickly if talks falter. In the meantime, equity markets appear poised to capitalize on earnings momentum and easing short-term geopolitical risk.

Source: Reuters

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Economic

Forex

Rupee Rises as Dollar Sentiment Sours

The Indian rupee appreciated sharply on Monday, crossing the 85/USD threshold for the first time since early May and settling at 84.82, up 0.4% intraday. The gain extends Friday’s 0.9% surge and aligns with a broader rally in Asian currencies, driven by shifting expectations surrounding U.S. economic policy and foreign exchange dynamics.

This renewed strength came as the dollar index dropped to a one-month low of 98.8, down 0.3% for the day. The decline was sparked by U.S. President Donald Trump’s unexpected decision to delay the imposition of 50% tariffs on European Union goods until July 9—an abrupt turn that revived concerns about trade policy volatility and U.S. fiscal discipline.

Stronger Yuan Adds Momentum to Asian FX Rally

The Indian rupee was not alone in its ascent. The Chinese yuan reached a seven-month high, further supporting regional currency gains. While many Asian currencies have rallied by up to 7% this quarter, the rupee had been an underperformer—still down 0.3% month-to-date before Monday’s recovery. The yuan’s momentum served as a tailwind for the rupee, strengthening investor confidence across emerging market assets.

MUFG Bank noted that financial markets are beginning to interpret U.S. trade policy shifts as indirectly signaling support for a weaker dollar, particularly against Asian currencies. The perception that the Trump administration may welcome local currency appreciation in Asia to rebalance trade relationships is fueling further FX positioning.

Forward Premiums Decline Amid Rally and Yield Dynamics

In the derivatives space, dollar-rupee forward premiums fell in response to the rupee’s strength. The 1-year implied yield dropped below 2%—to 1.99%—for the first time in two months. This suggests a combination of bullish rupee sentiment and rising short-tenor U.S. bond yields, which have narrowed interest rate differentials.

Uncertainty over the Federal Reserve’s next moves continues to suppress dollar demand, especially as markets digest the implications of a massive U.S. spending and tax bill that could add $3.8 trillion to federal debt over the next decade. In contrast, domestic expectations in India remain anchored to a potential easing cycle by the Reserve Bank of India (RBI), a divergence that could further compress forward premiums.

Temporary Tailwinds May Face Structural Headwinds

The rupee’s recent rebound reflects broader regional optimism tied to a softening dollar, trade policy reprieves, and the yuan’s strength. However, structural headwinds remain, including India’s relatively slower currency performance over the quarter and potential challenges in sustaining foreign inflows amid global monetary policy divergence.

For now, the sentiment is positive, but the rupee’s medium-term trajectory will likely hinge on whether the RBI initiates rate cuts, how the Fed responds to inflation data, and if the Trump administration’s trade threats materialize into longer-term structural shifts—or remain politically driven flashpoints.

Source: Reuters

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Economic

Forex

Trump’s Tariff Reversal Fuels Euro Rally, Dampens Dollar Outlook

The euro surged to its highest level in a month on Monday after U.S. President Donald Trump unexpectedly postponed a sweeping 50% tariff package on European Union exports. Markets reacted swiftly, pushing the euro up by 0.55% intraday to $1.1418 before settling at $1.1394. The reversal came just two days after Trump’s aggressive announcement, underscoring the volatile nature of U.S. trade policy and its impact on global currency markets.

Trump’s decision followed a call with European Commission President Ursula von der Leyen, who requested more time to finalize a deal. The new deadline—July 9—marks the conclusion of a 90-day suspension period initially triggered by Trump's "Liberation Day" tariff proclamation on April 2. While the delay calmed immediate concerns, analysts warned that the structural tensions behind the tariff threats remain unresolved.

Dollar Weakens Across the Board Amid Policy Uncertainty

The greenback broadly declined against major currencies, with the U.S. Dollar Index falling 0.15% to 98.93, extending last week’s 1.9% drop. The dollar lost ground even against traditional safe-haven currencies like the yen and Swiss franc. It dipped to 142.23 yen and reached a two-and-a-half-week low of 0.8193 against the franc.

Market participants cited increasing discomfort with the erratic trajectory of U.S. trade policy as well as the fiscal implications of Trump’s new economic agenda. The president’s proposed tax and spending bill, currently being debated in Congress, would add an estimated $3.8 trillion to the federal debt over the next decade, according to the Congressional Budget Office. Trump acknowledged on Sunday that the bill is likely to undergo "significant" revisions in the Senate.

“Sell America” Narrative Returns as Growth Risks Shift

Traders revived the “Sell America” theme that dominated markets in April, reflecting concerns that the U.S. may be shifting toward a less disciplined fiscal stance. Ray Attrill, head of FX research at National Australia Bank, commented that investors are now bracing for a weaker dollar trajectory in the medium term, driven by trade tensions, rising debt levels, and policy inconsistency.

Chris Weston, head of research at Pepperstone, echoed this sentiment, noting that the current strategy marks a pivot from fiscal conservatism to an overtly expansionary agenda. “It is fast becoming a consensus view that the USD is on the path to a multi-year decline,” he stated.

Optimism Returns to Risk-Sensitive Assets

Improved market sentiment also lifted other risk-sensitive currencies. The British pound gained 0.39%, reaching its highest level since February 2022, while the Swiss franc and Japanese yen appreciated modestly against the dollar despite an overall risk-on environment.

Currency strategist Michael Pfister of Commerzbank cautioned against over-interpreting Trump’s tariff pause as a lasting solution. “The brief respite from tariffs that we enjoyed was only temporary,” he said. “It is questionable what has changed fundamentally from just one phone call.”

Still, the broader market response suggests that investors are clinging to hopes that diplomacy can prevent further trade fragmentation and global economic disruption. Equities had fallen late last week amid uncertainty, but the tariff delay and anticipation of upcoming earnings and economic data—particularly the Fed’s preferred inflation gauge, the PCE Index—could provide a new focal point for direction.

Trump’s abrupt pivot on EU tariffs offered immediate relief to currency markets, lifting the euro and restoring confidence in risk assets. However, the episode highlights deeper structural anxieties surrounding U.S. policy direction—both on trade and fiscal discipline. As Washington leans toward expansionary spending and unpredictable tariffs, investors are recalibrating expectations, with the dollar’s relative strength increasingly in question. The path forward may hinge not only on trade outcomes but on how global markets interpret America’s evolving macroeconomic narrative.

Source: Reuters

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Russia-Ukraine Conflict

Putin’s Escalation Sparks Sharp Rebuke from Trump

In a dramatic response to Russia’s most intense aerial offensive since the beginning of the war in Ukraine, U.S. President Donald Trump sharply criticized Russian President Vladimir Putin, calling him “absolutely CRAZY” in a social media post on Truth Social. Trump’s reaction comes after Russia launched a massive overnight barrage involving at least 367 drones and missiles, resulting in at least 12 deaths, including three children, according to Ukrainian authorities.

The scale of the attack marked a grim milestone—it was the largest in terms of weapons fired, even though earlier strikes caused more casualties. The assault, which targeted multiple Ukrainian cities, has escalated the conflict to one of its most violent phases in over three years.

Trump’s condemnation was blunt and personal: “Something has happened to him. He has gone absolutely CRAZY,” he said, referencing Putin’s apparent determination to seize the entirety of Ukraine. Trump warned that such ambitions could lead to Russia’s collapse, stating, “If he does, it will lead to the downfall of Russia!”

More Sanctions Under Consideration, But Tone Remains Divided

Speaking from Morristown, New Jersey, Trump did not rule out the imposition of additional sanctions on Moscow, citing the continuing violence and loss of life. “He’s killing a lot of people. I’m not happy about that,” Trump told reporters. While sanctions are a familiar policy tool, their effectiveness in halting Russian advances remains uncertain amid ongoing offensives and geopolitical gridlock.

Despite his denunciation of Putin, Trump’s message was not uniformly sympathetic toward Ukraine. He publicly criticized Ukrainian President Volodymyr Zelenskiy, saying the leader “is doing his country no favours by talking the way he does,” and warned that Zelenskiy’s remarks “better stop.” This dual criticism highlights Trump’s complex stance—positioning himself as both a peace-seeking intermediary and a vocal critic of both warring leaders.

Russia’s Airstrike: Tactical Shift or Symbolic Message?

Sunday’s attack was not only notable for its size but also for the level of coordination and technological integration, with hundreds of drones and missiles overwhelming Ukrainian defenses. The strike may indicate a strategic pivot by Moscow or a deliberate display of force ahead of upcoming diplomatic events, including potential peace discussions.

While the Kremlin has not commented on Trump’s remarks, it continues to frame the conflict as a “special military operation” designed to prevent NATO expansion. Ukraine, on the other hand, maintains that Russia is waging an unprovoked war of aggression—one that has cost tens of thousands of lives and reshaped the security architecture of Eastern Europe.

Stalemate Persists as Diplomacy Falters

Trump has repeatedly called for a negotiated settlement to the war, yet the positions of Kyiv and Moscow remain fundamentally opposed. With Russia intensifying its eastern campaign and Ukraine under continuous bombardment, prospects for ceasefire or peace talks remain remote.

The U.S. president’s latest rhetoric underscores the increasing frustration among global powers as the war drags on, even while they remain divided on policy approaches. Washington’s strategic posture is being closely watched, particularly in light of Trump’s past statements advocating a realignment of U.S. global commitments.

As the Russia-Ukraine conflict enters a more violent and uncertain stage, Trump’s combative comments signal renewed pressure from Washington—but also introduce mixed messaging. While condemning Russian aggression, he has continued to criticize Ukraine’s leadership, highlighting ongoing tension within Western diplomatic strategy. Whether additional sanctions will shift the war’s trajectory remains unclear, but the scale of the latest attack and the rhetoric surrounding it affirm one reality: peace remains a distant and increasingly complex goal.

Source: Reuters

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Economic

Tariffs Return, and So Does a Strategic Loophole

As U.S. trade tensions rise again under the Trump administration’s renewed tariff regime, companies are turning to an old, legal strategy in customs law known as the “first sale rule” to reduce import costs. Though the rule has existed since 1988, it is now receiving revived interest across sectors as firms scramble to protect profit margins amid escalating import duties.

The rule allows U.S. importers to declare customs duties based on the price of the first sale in a chain of international transactions—typically the manufacturer’s price—rather than the price paid to a middleman or distributor. For example, if a Chinese manufacturer sells a product to a Hong Kong distributor for $5, who in turn sells it to a U.S. importer for $10, duties can be calculated on the original $5 sale rather than the higher intermediary price. The final retail price, say $40, becomes irrelevant for duty purposes.

Revived Usage Amid Rising Tariff Risks

Lawyers and consultants confirm that interest in the first sale rule is surging in lockstep with new tariff threats. Brian Gleicher, senior attorney at Miller & Chevalier, emphasized that while the rule has always been legal, the spike in 25% tariffs on Chinese imports back in 2018 marked the first major wave of corporate interest. With the Trump administration once again signaling tough import measures—most recently threatening 50% duties on EU goods and 25% on Apple products not made in the U.S.—businesses are urgently re-evaluating their customs strategies.

Sid Paruthi, partner at Moss Adams, noted that “calls started coming in” during the 2018 tariffs and have picked up again this year. This resurgence is not limited to traditional manufacturing or consumer goods, but also includes biotech, electronics, and even BBQ equipment producers.

Strict Conditions, High Rewards

To qualify for the rule, importers must meet several legal criteria: there must be multiple arms-length sales in the supply chain, involving unrelated parties; documentation must prove the goods were destined for the U.S. from the beginning; and clear records of the original transaction price must be maintained. While these requirements introduce complexity, especially when vendors are reluctant to disclose pricing structures, the cost savings often outweigh the administrative burden.

Corporate consultant Rich Taylor, based in Ningbo, China, emphasized the importance of trust and transparency among suppliers, intermediaries, and importers. “If you don’t use it, your competitor might—and you’ll lose that cost advantage,” he warned. He has been advising Fortune 500 firms on this rule since the original Trump-era tariffs began.

Who’s Using It—and Why It Matters

Luxury and high-value goods producers stand to gain the most. Italian fashion house Moncler recently told investors that applying the first sale rule has had a “significant benefit” for its cost structure, noting that its industrial price is often just half the intercompany transfer price. Similarly, Swiss biotech firm Kuros Biosciences announced operational changes that will enable it to adopt the method by shifting wholesale functions to Zurich.

Other adopters include Traeger, a U.S. BBQ equipment brand, and Fictiv, a manufacturing technology firm, both of which acknowledged the rule during their recent earnings calls as part of broader strategies to offset escalating trade costs.

Implications for U.S. Trade Policy

While entirely legal, the growing reliance on the first sale rule raises strategic questions. It directly challenges the effectiveness of the Trump administration’s goal to boost domestic production and tariff revenue by making imports more expensive. By circumventing higher intermediary prices, importers effectively reduce duty obligations, weakening the intended financial pressure behind tariff policy.

U.S. Customs and Border Protection has not released recent usage data for the first sale rule, and the White House has yet to comment on its broader implications. However, the growing interest across industries—from biotech to apparel—signals a systemic shift in how companies navigate global trade regulations without technically violating them.

As the U.S. navigates a more protectionist trade landscape, the first sale rule has emerged as a vital, legal countermeasure for cost-conscious importers. While it does not violate trade law, its use could blunt the intended impact of tariff hikes and delay shifts toward onshoring. For now, companies that can manage the documentation and build trust across their supply chains are poised to gain a significant competitive advantage—proving that in global trade, agility and compliance can go hand in hand.