Ella 
EUR/GBP rose for the second day in a row, trading around 0.8350 during the European session on Tuesday. The currency crosses rose as the British pound (GBP) weakened following comments by Bank of England (BoE) Monetary Policy Committee member Catherine Mann late Monday.
According to the Financial Times, the Bank of England’s Mann said British businesses may find it difficult to raise prices this year as layoffs and weak consumer spending keep a lid on inflation. Mann is expected to speak again, suggesting that companies’ pricing power is weakening, reducing inflationary pressures. Comments from Bank of England Governor Andrew Bailey on Tuesday evening will also be closely watched.
In terms of data, the British Retail Consortium (BRC) same-store retail sales in January 2025 increased by 2.5% year-on-year, lower than the 3.1% increase in December, but exceeded market expectations by 0.2%. BRC chief executive Helen Dickinson noted that while performance remained strong, its sustainability in the coming months remained uncertain.
On Monday, U.S. President Donald Trump imposed 25% tariffs on steel and aluminum imports, eliminating all exemptions and overturning previous trade deals with key U.S. allies. German Chancellor Olaf Scholz earlier warned that the European Union (EU) could react “within the hour” if the United States goes ahead with proposed tariffs on European goods. The escalation in trade tensions has increased risk aversion, weighing on the risk-sensitive euro and limiting gains in EUR/GBP.
Additionally, the euro could face challenges as expected U.S. tariffs heighten concerns about potential deflationary pressures in the euro zone, with markets now pricing in a possible drop in the deposit rate to 1.87% in December.
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