01/10/2025
Written by: Ian Morley
Daily Currency Market Update – 8th July 2025
GBP/EUR
Summary: The Pound remained under pressure from mounting UK fiscal concerns. Chancellor Reeves’ welfare spending concessions have raised fears of future tax hikes, while Deutsche Bank now expects a 25bp BoE rate cut in August, followed by two more by year-end. The Euro held firm ahead of German Trade Balance data, supported by hopes of a preliminary US–EU trade agreement that could lock in a 10% tariff rate beyond the 1st August deadline.
Outlook: If UK fiscal credibility continues to erode and the ECB maintains a steady tone, GBP/EUR may remain on the defensive.
GBP/USD
Summary: GBP/USD rebounded toward 1.3650 after Monday’s decline, supported by a softer US Dollar and delayed tariff implementation. President Trump signed an executive order pushing the 25% tariffs on Japan and South Korea to 1st August, easing immediate trade fears. However, the Pound’s upside remains limited by domestic fiscal risks and expectations of BoE easing.
Outlook: With the FOMC minutes and UK GDP data due later this week, GBP/USD may remain range-bound. A dovish Fed tone could support Sterling, but UK fiscal uncertainty may cap gains.
EUR/USD
Summary: EUR/USD recovered to 1.1750 after falling 0.6% on Monday. The Euro found support as the Eurozone was excluded from Trump’s tariff list, with reports suggesting a deal may be announced this week. However, weak Eurozone retail sales and concerns over slowing domestic demand continue to weigh on sentiment.
Outlook: If a US–EU trade deal is confirmed and Eurozone data stabilises, EUR/USD could extend gains. However, global trade uncertainty may limit upside.
USD/AUD
Summary: AUD/USD rallied to 0.6535 after the RBA surprised markets by holding rates at 3.85%. Governor Bullock signalled a cautious approach to easing, citing the need for more data to confirm inflation is on track. The Aussie also benefited from Trump’s tariff delay and China’s move to expand its Bond Connect programme.
Outlook: If risk sentiment holds and the Fed leans dovish, AUD/USD could remain supported. However, renewed tariff threats or weak Chinese data may cap gains.
USD/CAD
Summary: USD/CAD dipped to 1.3650 as the Loonie held firm following confirmation that Canada was not targeted by Trump’s new tariffs. The pair was also weighed down by softer US Dollar sentiment and optimism over a bilateral trade deal by 21st July.
Outlook: Canadian employment data and US trade developments will be key. If oil prices stabilise and trade optimism persists, USD/CAD could drift lower.
USD/CHF
Summary: USD/CHF fell to 0.7960 as safe-haven demand for the Swiss Franc returned amid renewed tariff concerns. Trump’s threat of additional 10% tariffs on BRICS-aligned countries and the broader uncertainty around US trade policy weighed on risk appetite.
Outlook: Swiss CPI and the FOMC minutes will guide direction. If US fiscal concerns persist and the Fed signals caution, USD/CHF could test fresh multi-year lows.
Final Summary
Currency markets remain cautious as investors digest the RBA’s surprise policy hold and Trump’s delayed but expanded tariff threats. The Pound is weighed down by UK fiscal uncertainty, while the Euro finds support from trade optimism. The US Dollar is mixed, supported by strong labour data but pressured by political and fiscal concerns. Commodity-linked currencies like the Aussie and Loonie benefit from improved sentiment, while the Swiss Franc remains firm on safe-haven flows. Focus now turns to the FOMC minutes and UK GDP data for the next major catalysts.