01/10/2025
Written by: Ian Morley
Daily Currency Market Update – 18th July 2025
GBP/EUR
Summary: GBP/EUR trades near 1.1550, with Sterling under pressure following a rise in UK unemployment to 4.7% — the highest in four years. Despite stronger-than-expected inflation earlier this week, markets are now pricing in an 89% chance of a BoE rate cut in August. Meanwhile, the Euro remains steady as the ECB signals it may delay its final rate cut until December, with German PPI data showing a modest 0.1% monthly rise but extending its annual deflationary trend.
Outlook: If UK labour market concerns persist and Eurozone data remains stable, GBP/EUR may struggle to break higher. The market will watch for Eurozone current account figures and ECB commentary for further direction.
GBP/USD
Summary: GBP/USD holds above 1.3400 after a volatile week, supported by a modest rebound in Sterling and dovish Fed commentary. Fed Governor Waller reiterated support for a July rate cut, citing economic risks and downplaying tariff-driven inflation. However, strong US Retail Sales and falling jobless claims have tempered expectations, with markets now seeing a lower probability of a September cut.
Outlook: Today’s US housing data and Michigan Consumer Sentiment will be key. If sentiment improves and inflation expectations remain elevated, GBP/USD could face renewed downside.
EUR/USD
Summary: EUR/USD trades above 1.1600, recovering from three-week lows as risk appetite improves. The Euro remains pressured by trade uncertainty, with the US threatening 30% tariffs on EU imports, but dovish Fed signals and upbeat corporate earnings have helped stabilise the pair.
Outlook: Eurozone construction output and US sentiment data will guide direction. If risk appetite holds and Fed rhetoric remains cautious, EUR/USD may attempt a move toward 1.1650.
USD/AUD
Summary: AUD/USD rebounds to 0.6500 after Thursday’s sharp decline, supported by dovish Fed commentary and stabilising US-China trade rhetoric. However, the Aussie remains weighed down by weak domestic employment data and softer Chinese retail sales.
Outlook: If US sentiment data disappoints and risk appetite improves, AUD/USD could extend gains. RBA rate cut expectations and Chinese growth signals remain key headwinds.
USD/CAD
Summary: USD/CAD trades just below 1.3750, consolidating after touching a three-week high. The pair is supported by strong US data and lingering trade uncertainty, with Trump confirming a 35% tariff on Canadian imports from August 1. Oil prices have edged higher but remain capped, limiting support for the Loonie.
Outlook: US housing and sentiment data will be pivotal. If Fed dovishness persists and oil prices firm, USD/CAD may drift lower, though trade tensions could limit downside.
USD/CHF
Summary: USD/CHF dips to 0.8030, down 0.3% on the day, as safe-haven demand for the Swiss Franc intensifies amid tariff uncertainty and Fed policy ambiguity. Despite strong US data, concerns over central bank independence and geopolitical tensions continue to support CHF.
Outlook: US sentiment and housing data will shape near-term movement. If risk aversion deepens, USD/CHF could test fresh multi-year lows below 0.8000.
Final Summary
Sterling remains fragile amid rising UK unemployment and growing expectations of BoE easing. The US Dollar consolidates weekly gains, supported by strong macro data but tempered by dovish Fed commentary. The Euro stabilises despite trade tensions, while commodity-linked currencies like the Aussie and Loonie are mixed on domestic data and geopolitical developments. The Swiss Franc continues to attract safe-haven flows. Focus now turns to US housing and sentiment data for the next directional cues.