02/10/2025
Written by: Ian Morley
Daily Currency Market Update – 7th May 2025
GBP/EUR
Summary: GBP/EUR surged to a one-month high near 1.1780 before retracing to 1.1750 as Sterling outperformed amid growing anticipation of a Bank of England rate cut. Investors remain focused on Thursday’s BoE policy meeting, where a 25-bps cut is widely expected. Meanwhile, political uncertainty in Germany is weighing on the Euro, as Conservative leader Friedrich Merz failed to secure a majority in the Bundestag, sparking fears of instability.
Outlook: The BoE’s policy announcement on Thursday will be a key driver for GBP/EUR. If the central bank signals a more dovish approach, Sterling may struggle. Meanwhile, further political uncertainty in Germany could continue to pressure the Euro.
GBP/USD
Summary: GBP/USD climbed above 1.3400 on Tuesday, buoyed by optimism surrounding a potential US-UK trade deal. Despite Tuesday’s gains, the pair has dipped slightly to 1.3350 ahead of today’s Federal Reserve rate decision. Markets anticipate the Fed will hold rates steady, but Powell’s comments will be crucial in determining the Dollar’s direction.
Outlook: If Powell hints at a pivot towards rate cuts, GBP/USD could see further upside. However, any uncertainty in trade negotiations with the US may weigh on Sterling.
EUR/USD
Summary: EUR/USD advanced nearly 0.5% on Tuesday, benefiting from broad-based US Dollar weakness, before stabilising above 1.1350 in the European session. Traders are awaiting the Fed’s policy statement, hoping for signals of a more accommodative stance.
Outlook: The Fed’s rate decision and Powell’s comments will set the tone for EUR/USD. If the Fed maintains a cautious stance, Dollar strength could cap Euro gains.
USD/AUD
Summary: AUD/USD hit a fresh 2025 high above 0.6500 after China’s central bank announced policy easing, cutting the Reserve Requirement Ratio (RRR) by 50 bps and the policy rate by 10 bps. The pair retreated slightly during the European session but remains supported by improving sentiment over US-China trade discussions scheduled for this weekend.
Outlook: Market focus will remain on trade developments between the US and China, which could drive volatility in AUD/USD. The Fed’s stance will also play a role, with dovish commentary likely benefiting the Aussie.
USD/CAD
Summary: USD/CAD edged higher to 1.3790 in early Wednesday trading, as investors positioned cautiously ahead of the Federal Reserve’s rate decision. Improved risk sentiment following a joint press conference between Canadian PM Mark Carney and US President Donald Trump helped limit the pair’s gains.
Outlook: Oil price movements and US-Canada trade discussions will be key for USD/CAD in the near term. The Fed’s rate stance could also impact the pair, with a hawkish message supporting the Dollar.
USD/CHF
Summary: USD/CHF remained soft near 0.9050 as the US Dollar struggled against the Swiss Franc ahead of the Fed’s policy announcement. The Swiss National Bank’s dovish stance continues to fuel speculation of further rate cuts in June, adding to CHF’s strength.
Outlook: The Fed’s comments on rate cuts and inflation will be pivotal for USD/CHF direction. If Powell signals prolonged rate stability, the Dollar could see some support.
Final Summary
Currency markets remain in a holding pattern ahead of today’s Federal Reserve rate decision and Fed Chair Powell’s comments. Investors will be searching for signals of a potential shift towards rate cuts, which could weigh on the US Dollar. The Pound Sterling remains supported by optimism around a possible US-UK trade agreement, while the Euro is navigating political uncertainty in Germany. Commodity-linked currencies, including the Australian and Canadian Dollars, are reacting to trade developments, with China’s policy easing supporting the Aussie. Looking ahead, central bank decisions from the Fed today and the BoE tomorrow will be crucial in shaping currency market trends.