02/10/2025
Written by: Ian Morley
Daily Currency Market Update – 19th May 2025
GBPEUR
Summary:
The Pound has held firm against the Euro, trading in the high 1.18s as markets weigh diverging monetary outlooks. Positive UK GDP data and fading equity market volatility have helped maintain upward pressure on the pair. A potential EU-UK trade facilitation deal is also underpinning sentiment toward the Pound, aligning it more closely with European markets.
Outlook:
With midweek UK inflation data expected, GBP could see further gains if figures remain elevated, reducing the likelihood of immediate BoE rate cuts. However, expectations of an ECB cut remain strong, which could continue to cap EUR upside and keep the pair in a bullish trend for now.
EURUSD
Summary:
The Euro has recovered ground against the US Dollar, trading around 1.1200. The recovery follows Moody’s downgrade of the US credit rating from Aaa to Aa1, which triggered a wave of Dollar selling. Meanwhile, expectations for another ECB rate cut in the near future have added a layer of uncertainty for the Euro.
Outlook:
The immediate outlook for EURUSD depends on the balance between ECB dovishness and US fiscal concerns. If trade tensions remain contained and European inflation stays subdued, the Euro could hold recent gains or consolidate further around current levels.
GBPUSD
Summary:
GBPUSD is trading comfortably above 1.3300, driven by a weaker US Dollar and upbeat UK economic data. Moody’s downgrade of US credit quality and ongoing speculation over Fed rate cuts have weighed heavily on the Greenback.
Outlook:
If UK inflation figures later this week come in hot, GBPUSD could extend gains, especially with markets doubting any near-term Fed tightening. However, geopolitical or trade-related developments could still sway sentiment.
AUDUSD
Summary:
The Australian Dollar remains range-bound near 0.6400. Weaker-than-expected Chinese retail data and subdued market risk appetite are capping upside. Traders are cautious ahead of Tuesday’s RBA policy decision, where a rate cut is widely expected.
Outlook:
Should the RBA deliver the anticipated rate cut, AUD may come under renewed pressure unless global sentiment improves. Conversely, a surprise hold or a more hawkish tone could offer the Aussie some near-term support.
USDCAD
Summary:
USDCAD is holding steady around 1.3970. Soft oil prices and mixed economic signals from both Canada and the US have kept the pair range-bound. The downgrade of the US credit rating has limited Dollar strength.
Outlook:
Oil price movements and commentary from Fed officials will guide short-term direction. Progress on US-Canada trade discussions could lend support to CAD and push the pair lower.
USDCHF
Summary:
USDCHF is trading near 0.8360, having pulled back due to Dollar weakness following the US credit rating downgrade. The pair remains sensitive to risk sentiment and central bank outlooks.
Outlook:
The Swiss Franc may face its own pressure from expectations of a June SNB rate cut. However, if global uncertainty remains elevated, safe-haven flows could continue supporting CHF, keeping USDCHF under pressure.
Final Summary:
The downgrade of the US credit rating has shaken markets, triggering Dollar weakness and boosting major counterparts including the Pound and Euro. Risk sentiment remains fragile, with inflation data and central bank speeches in focus this week. Currencies linked to global trade and commodities, like AUD and CAD, continue to face mixed pressures.