02/10/2025
Written by: Ian Morley
Daily Currency Market Update – 12th May 2025
GBP/EUR
Summary: GBP/EUR climbed above 1.1850 in early trading, supported by optimism surrounding the US-UK trade agreement and renewed bets on European Central Bank rate cuts. While the Bank of England maintains a cautious stance on monetary easing, ECB policymakers continue to signal potential rate reductions, pressuring the Euro.
Outlook: Traders will monitor BoE speeches for further policy signals, while dovish ECB comments could keep downward pressure on the Euro. Any unexpected developments in trade negotiations may add volatility.
GBP/USD
Summary: GBP/USD is consolidating below 1.3300 after reversing Friday’s recovery. The US Dollar remains broadly stronger following progress in US-China trade negotiations, easing fears of a recession. Meanwhile, the UK’s latest employment data, due Tuesday, may provide additional direction for Sterling.
Outlook: Upcoming US consumer inflation data could influence Fed policy expectations and impact GBP/USD movement. Markets are also closely watching speeches from BoE and Federal Open Market Committee officials for further clues.
EUR/USD
Summary: EUR/USD struggles near 1.1240, weighed down by expectations of ECB rate cuts and cautious investor sentiment. While the Euro found brief support from US-China trade optimism, uncertainty around US-EU trade negotiations and European economic data keeps the pair under pressure.
Outlook: The Euro may remain vulnerable ahead of further ECB policy signals and Washington’s response to European Commission trade countermeasures. Key US inflation data on Tuesday could also drive near-term volatility.
USD/AUD
Summary: AUD/USD is holding above 0.6400 as risk appetite improves following progress in US-China trade negotiations. With China being Australia’s largest trading partner, positive sentiment around stabilising relations benefits the Aussie.
Outlook: Key Australian economic releases on Tuesday, including consumer confidence and business conditions data, may provide fresh cues for AUD/USD direction. Developments in US-China trade talks will also remain critical.
USD/CAD
Summary: USD/CAD is consolidating near 1.3940, supported by optimism surrounding US trade policy. The Canadian Dollar remains under pressure after the unemployment rate rose to 6.9%, highlighting weaknesses in tariff-sensitive sectors like manufacturing.
Outlook: Canadian labour market data and evolving expectations for the Bank of Canada’s policy stance will influence the pair. Meanwhile, oil price fluctuations and US inflation figures may impact USD/CAD movement.
USD/CHF
Summary: USD/CHF has edged higher to 0.8340 amid easing concerns over a US-China trade war. Optimism in negotiations undermines demand for the safe-haven Swiss Franc, while the Federal Reserve’s hawkish stance provides support for the US Dollar.
Outlook: Persistent geopolitical risks may limit the downside for CHF. Meanwhile, traders will watch Fed officials’ comments for further rate policy guidance, which could drive USD/CHF direction.
Final Summary
Currency markets are reacting to improving risk sentiment following progress in US-China trade negotiations, with the US Dollar broadly supported. The Pound Sterling benefits from optimism surrounding the UK-US trade agreement, while the Euro remains under pressure amid expectations of further ECB rate cuts. Commodity-linked currencies, such as the Australian and Canadian Dollars, are influenced by trade developments and domestic economic indicators. Looking ahead, traders will focus on upcoming inflation data from the US and key central bank speeches for further market direction.