02/10/2025
Written by: Ian Morley
Daily Currency Market Update – 21st May 2025
GBP/EUR
Summary: GBP/EUR has dipped slightly to 1.1830 despite the release of the UK’s hotter-than-expected inflation data. The UK’s Consumer Price Index (CPI) rose to 3.5% year-on-year in April, surpassing forecasts of 3.3%. Meanwhile, ECB policymakers have indicated that a rate cut in June remains a possibility, keeping the Euro on uncertain footing.
Outlook: Investors will be watching comments from ECB policymakers later today for further guidance. If dovish signals emerge, the Euro could face additional downward pressure, supporting GBP/EUR in the near term.
GBP/USD
Summary: GBP/USD surged to a three-year high near 1.3470 after the UK CPI print reinforced expectations that the Bank of England may delay monetary easing. Meanwhile, the US Dollar remains under pressure following Moody’s downgrade of the US credit rating and ongoing uncertainty surrounding President Trump’s tax bill.
Outlook: Market participants will monitor US political developments and economic data for fresh direction. Fed officials’ concerns over stagflation could weigh further on the Dollar, supporting Sterling’s gains.
EUR/USD
Summary: EUR/USD continues its advance towards 1.1350, benefiting from the broadly weaker US Dollar. The European Central Bank will publish its Financial Stability Review later in the day, potentially offering insights into policymakers’ outlook on economic risks.
Outlook: If the ECB signals ongoing concerns about financial stability, the Euro’s gains may be limited. US trade and tariff negotiations will also play a role in shaping sentiment for the pair.
USD/AUD
Summary: AUD/USD holds firm near 0.6420 despite rising odds of further Reserve Bank of Australia rate cuts. Optimism surrounding the US-China trade truce has supported the Australian Dollar, while Federal Reserve officials’ concerns over declining business sentiment have weighed on the Greenback.
Outlook: Australia’s political developments and US trade measures on Chinese technology exports may drive AUD/USD movement in the near term.
USD/CAD
Summary: USD/CAD trades below 1.3900 as the US Dollar weakens further. Rising crude oil prices and softened Canadian CPI figures have bolstered the Loonie, while ongoing speculation about Bank of Canada rate policy adds to market uncertainty.
Outlook: Oil price developments and speeches from Federal Open Market Committee (FOMC) members will be key for USD/CAD direction. Traders will also monitor shifts in US fiscal policy for additional cues.
USD/CHF
Summary: USD/CHF slipped to a two-week low near 0.8220 amid sustained US Dollar weakness. The Swiss Franc has benefited from safe-haven demand as concerns over US-China trade tensions persist.
Outlook: If risk sentiment deteriorates further, USD/CHF could continue its downward trend. The US fiscal situation and upcoming central bank guidance will remain in focus.
Final Summary
Pound Sterling rallied after the UK’s CPI data exceeded expectations, reinforcing speculation that the Bank of England may hold off on rate cuts. The US Dollar continues to struggle following Moody’s credit downgrade and concerns over trade policies. The Euro maintains its upward momentum ahead of ECB commentary, while commodity-linked currencies like the Australian and Canadian Dollars are reacting to trade developments and inflation data. Looking ahead, investors will watch central bank speeches and geopolitical shifts for further guidance.