EUR/GBP flat lines near 0.8450 amid Trump tariff threats, growing BoE rate cut bets

• EUR/GBP trades flat around 0.8440 in Wednesday's early European session. 
• The Euro weakens after Trump vowed to hit the EU with tariffs. 
• UK Unemployment Rate rose in the three months through November, increasing the chance the BoE will cut rates next month.

The EUR/GBP cross holds steady around 0.8440 on Wednesday during the early European trading hours. US President Donald Trump tariff threats could undermine the Euro (EUR) against the Pound Sterling (GBP) in the near term. However, the rising likelihood the Bank of England (BoE) will lower rates next month might cap the downside for the cross. Investors will closely monitor the speech by the European Central Bank's (ECB) President Lagarde later on Wednesday. 

Trump on Tuesday vowed to hit the European Union (EU) with tariffs and said his administration was discussing 25% tariffs against Canada and Mexico, as well as duties on China. Valdis Dombrovskis, the European Union's commissioner for the economy, said on Wednesday that Europe will respond to any tariffs imposed by Trump in a proportionate way. 

"If there is a need to defend our economic interests, we will respond in a proportionate way," said Dombrovskis. The concerns about an economic slowdown in the Eurozone economy and uncertainty surrounding Trump's tariff threats could exert some selling pressure on the shared currency. 

On the other hand, financial markets see a greater chance of an interest rate cut at the BoE meeting after the recent UK labor market data showed rising rates of Unemployment Rate and wage growth.  This, in turn, might weigh on the GBP and cap the downside for the cross. The markets have priced in a nearly 91% odds of reduction at the meeting on February 6. "We still think the Bank of England will cut interest rates at the next meeting in February, from 4.75% to 4.50%, and continue to cut rates gradually thereafter," noted Capital Economics analysts.