02/10/2025
Written by: Ian Morley
GBPEUR
Summary:
The pound regained some ground against the euro on Monday, with the pair moving back above 1.1630 following a string of losses last week. Sterling was buoyed by optimism around ongoing UK-US trade negotiations, as Prime Minister Starmer pushed for a formal agreement in light of Trump’s recent tariff measures. Meanwhile, the euro was supported by a broadly weaker US dollar and rising geopolitical tensions.
Outlook:
The euro remains well bid on continued US dollar weakness and safe-haven demand across the eurozone. However, dovish signals from the European Central Bank (ECB), which recently cut rates to 2.25% and hinted at further easing, may limit euro strength in the medium term. GBP could see more volatility this week if BoE rate cut expectations shift further following softer UK inflation data.
EURUSD
Summary:
The euro extended gains against the US dollar on Monday, pushing above 1.1500 for the first time in over three years. The move was driven by a steep USD sell-off, with concerns about the Fed’s independence following repeated attacks from President Trump on Jerome Powell. Traders are increasingly pricing in deeper rate cuts amid deteriorating confidence in the US economy.
Outlook:
While the euro is gaining from dollar weakness, concerns remain over potential EU retaliation to US tariffs. If the Fed maintains its current stance and global trade talks deteriorate, EURUSD may continue to find support, but upside could be limited without fresh risk appetite.
GBPUSD
Summary:
Sterling briefly approached 1.3400 on Monday before retreating slightly, still holding firm in the 1.3370 range. GBP strength was underpinned by hopes of a UK-US trade deal and general USD weakness as political turmoil grows in the US.
Outlook:
While UK rate cut expectations are building, the pound continues to draw relative support compared to the USD. If geopolitical and Fed concerns continue to weigh on the dollar, GBPUSD could look to test 1.3400 again. However, weak UK inflation figures may cap gains in the short term.
USDAUD
Summary:
The Australian dollar extended its rally on Monday, with the pair falling as low as 0.6630. A sharp drop in the USD—spurred by Fed independence concerns—helped lift the AUD, even as local data showed slowing momentum in the domestic economy.
Outlook:
The Aussie may come under renewed pressure if commodity markets cool or if geopolitical tensions weigh further on global risk appetite. Nonetheless, continued dollar weakness may cushion the downside in the near term.
USDCAD
Summary:
The Canadian dollar continued to strengthen, pushing USD/CAD toward 1.3830. Despite weaker oil prices, CAD benefitted from broad USD selling and reduced confidence in US monetary policy leadership.
Outlook:
USD/CAD will remain sensitive to shifts in oil markets and sentiment around Fed policy. Further pressure on the USD could open room for CAD to extend its gains, but falling crude prices may act as a headwind.
USDCHF
Summary:
The dollar remains under pressure against the Swiss franc, with the pair hovering near 0.8070—its lowest levels in over a decade. Growing political and monetary instability in the US has driven strong demand for safe-haven currencies like the franc.
Outlook:
If US political uncertainty intensifies and global growth fears mount, safe-haven flows are likely to keep CHF in demand. Any talk of SNB intervention could moderate gains, but the broader trend remains dollar-negative for now.
Final Summary:
The US dollar remains on the back foot as political instability, criticism of the Fed, and Trump’s tariff policies weigh heavily on sentiment. The euro and sterling are both benefitting from the Greenback’s decline, although caution remains high due to trade tensions and rate cut expectations. Safe-haven demand continues to support the Swiss franc, while risk-sensitive currencies like the Aussie and Loonie gain selectively on the back of USD weakness. All eyes now turn to further developments in trade negotiations and central bank commentary.