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These are the key developments impacting the Pound Sterling against the Euro and Dollar that you should know about.
The British Pound opens with a rise against the Dollar, while treading water against the Euro.
The relative calm seen in the main GBP exchange rates suggests a pause in recent trends, but all evidence points to these trends extending.
This means those with payment requirements should be leaning on a higher probability that GBP/EUR declines and GBP/USD rises.
GBP/USD Latest and Outlook
Trump greets Brazil’s President Jair Bolsonaro in 2020, upon his arrival to Mar-a-Lago in Palm Beach. Official White House Photo by Shealah Craighead.
The Dollar end of the equation is looking particularly interesting today, with events in Brazil underpinning why the Greenback's decline is unlikely to be over.
U.S. President Donald Trump wielded a 50% import tariff on Brazilian imports, by far the largest tariff announced so far. This is not so much to do with trade imbalances, but rather with Brazil's internal issues.
Former Brazilian President Jair Bolsonaro is to stand trial for an alleged attempt to overthrow the sitting President. Trump clearly has a soft spot for Bolsonaro, and it looks as though he will use tariffs to help his mate.
Analysts have reacted with the predictable dismay, warning that it signals that tariff uncertainty is not going to fade anytime soon.
"Long-run, NOTHING has changed on our view for foreign managers to hedge their US Dollar assets more – and this will bring structural weakness to the US$ throughout 2025 and 2026," says Richard Cochinos, FX Strategist at RBC Capital Markets.
"This development is also by no means positive for the US dollar," says Michael Pfister at Commerzbank. "Trump is clearly trying to use tariffs to achieve various goals. Can we really be sure that we are safe from such attacks? After last night, I have my doubts."
The Pound to Dollar exchange rate dipped below 1.3550 on Tuesday as it pulled back from the July 01 1.3788 high. The latest developments see it recover to settle above 1.36 again.
Technical studies confirm a bullish outlook, and a retest of 2025 highs is surely at hand in the coming weeks.
GBP/EUR Latest and Outlook
Picture by Kirsty O'Connor / Treasury.
The Pound to Euro exchange rate is interesting because it strips out global factors and offers us a better window into UK affairs.
And the view isn't pretty: a slowing economy and perennial fears about the sustainability of UK public finances.
Traders have contended with the sight of the top finance minister, Rachel Reeves, breaking down in tears in parliament over failed welfare reforms, prompting a selloff in both UK bonds and the Pound.
The issue cropped up again on Tuesday when the Office for Budget Responsibility released its latest risk report, that made clear the country's finances are simply unsustainable.
The answer, it seems, is to impose a wealth tax on the country's very richest (this YouGov poll is ominous: we have long suspected the government uses YouGov to poll impending policy decisions. It was used regularly during the Covid pandemic to inform the government's lockdown policies).
There's no credible economist who says this will work, so we can assume there are no answers to our problems other than the steady ratcheting up of taxes, which simply stymy economic activity.
Incidentally, new research shows that being on some combinations of out-of-work benefits will earn you more than a full-time job on the minimum wage does. This just highlights how muddled the UK's fiscal priorities are.
The productive sector is rapidly being crowded out by the non-productive.
For now, though, the time of reckoning is not upon us, and this could allow GBP/EUR to find its feet, particularly given the UK's bond yields are still highly attractive.
However, there is a distinct whiff of risk in GBP right now, and this will limit GBP/EUR upside.
We think a journey to 1.15 is underway.