Sterling stronger on US-UK breakthrough

The EURGBP cross extended its decline to around 0.8435 in early European trading on Monday, with the pound sterling strengthening against the euro on positive developments in the US-UK trade agreement last week.

Trader will focus on the speeches of the Bank of England policymakers, including Megan Greene, Catherine Mann and Alan Taylor.

US President Donald Trump last week said that he will continue to impose a new 10% tariff on imports of most British goods, but will reduce higher tariffs on imports of British cars, steel and aluminium.

These positive developments surrounding the US-UK trade deal lifted the GBP and act as a headwind for the currency cross.

A gradual and careful policy-easing approach by the BoE contributed to the GBP’s upside.

The UK central bank cut interest rates by a quarter percentage point in a divided decision last week and suggested that the growth risks posed by Trump’s global trade war haven’t derailed its plan to ease policy only cautiously.

The BoE estimated the UK economy to grow at a faster pace of 1%, up from 0.75% projected in the February meeting.

On the euro’s front, growing expectations of further interest rate cuts by the European Central Bank weigh on the shared currency.

Furthermore, ECB Governing Council member Olli Rehn said on Friday that the central bank should cut its interest rate next month if its new forecasts confirm an outlook of disinflation and waning growth momentum.

(Source: OANDA)