SONIA: Call spread strip

SX5E (17th Apr) 5600c, bought for 4.5 in  6.5k.

GBP/USD bumped to new daily highs as the modest background USD weakness continues into the NY crossover. This latest strength puts spot through yesterday's highs with range of NY highs on Monday at 1.2959, with a slight pick-up in volumes supporting the step higher, although total activity on the day remains subdued relative to the average you'd expect to see for this time of day.

• The 15 minute candle chart shows downtrendline resistance drawn off 1.2941 has been broken, helping pressure EUR/GBP to 50-dma support of 0.8346.

Since US President Donald Trump's re-election, the UK gov't has seemingly sought to act as a diplomatic bridge between the US and Europe. UK PM Sir Keir Starmer has taken a non-combative stance towards the US with regards to tariff action. Whereas the EU imposed retaliatory tariffs in March following the initial US tariffs on steel and aluminium, the UK held off. With the UK gov't talking up a potential economic agreement with the US, the Starmer gov't has been reluctant to rock the boat on the issue.

• Ahead of the 'reciprocal' tariffs to be announced by Trump this evening, the EU has said that 'all options are on the table' in terms of retaliation. In contrast, UK Education Secretary Bridget Philipson said earlier this morning, "...what business and industry wants, is to for us to maintain a calm and quite pragmatic approach during this time and not engage in a kneejerk response, because the last thing that anybody would want is a trade war with the US.”
• However, even with the supposed offer of a cut in the digital services tax (DST) for American tech giants, the US is expected to include the UK as part of the 'big bang' of tariff impositions.
• The EU's threat of hitting US services will cause concern in Westminster. The UK's trade exports to the US skew heavily in favour of services, which are not set to be part of today's announcement. The EU bringing services into the mix could risk the Trump administration imposing its own tariffs on services across the board, not just against the EU, risking a much more significant hit to the UK economy.
• Opinion polling shows that the UK public would be largely in favour of retaliatory tariffs (see chart below), but with the governing Labour party and main opposition Conservatives both opposed, it appears unlikely that there will be a change in tack, at least in the short term. 

Chart 1. Opinion Poll, 'If the US were to place tariffs on EU* goods imported to the US, would you support or oppose the EU responding by placing tariffs on American goods imported to the EU? % *Question referred to British/UK goods in the Britain survey'

Source: YouGov, Fieldwork 6-24 March 2025