01/10/2025
Written by: Ian Morley
Daily Currency Market Update – 21st August 2025
GBP/EUR
Summary: GBP/EUR slips to 1.1530 despite hotter-than-expected UK inflation data tempering expectations for further BoE rate cuts this year. July CPI rose to 3.8% YoY, driven by food and travel costs, prompting markets to push back the timing of the next rate reduction to March 2026. Meanwhile, ECB President Lagarde flagged slower Eurozone growth amid lingering trade uncertainty.
Outlook: Flash PMI data from Germany and the Eurozone will be key for near-term direction. A strong Eurozone print could support the Euro, while Sterling may find support if UK PMI surprises to the upside.
GBP/USD
Summary: GBP/USD softens to near 1.3450, pressured by a modest rebound in the US Dollar and anticipation around PMI releases. Despite elevated UK inflation, Sterling failed to gain traction, while the Dollar remains supported by diminishing odds of a September Fed rate cut.
Outlook: Focus shifts to UK and US PMI data later today. Hawkish signals from Powell at Jackson Hole tomorrow could lift the Dollar further, while persistent UK inflation may limit Sterling downside.
EUR/USD
Summary: EUR/USD trades below 1.1650, weighed by cautious sentiment and steady Eurozone CPI. The Kremlin’s cool response to peace talks between Trump and Zelenskyy has dampened optimism, while ECB commentary suggests softer Q4 growth.
Outlook: Eurozone PMI data will be closely watched. A strong print could help the Euro recover, though geopolitical uncertainty and Fed expectations remain key headwinds.
USD/AUD
Summary: AUD/USD marks a two-month low at 0.6418 despite upbeat Australian PMI data. Composite PMI rose to 54.9, but the Aussie remains under pressure amid expectations for further RBA easing and a firm US Dollar ahead of Powell’s speech.
Outlook: Traders eye US PMI and Jackson Hole for cues. If risk sentiment deteriorates or Fed signals hawkishness, AUD/USD may extend losses.
USD/CAD
Summary: USD/CAD holds steady near 1.3870 as markets price in a 70% chance of a BoC rate cut in September. Canadian inflation data showed a sharp deceleration in key measures, reinforcing expectations for further easing.
Outlook: US PMI and Jackson Hole remain pivotal. A dovish Fed could weigh on the Dollar, but BoC rate cut bets may limit CAD upside.
USD/CHF
Summary: USD/CHF edges higher to 0.8050, supported by Fed minutes and anticipation of Powell’s Jackson Hole remarks. Swiss inflation remains below target, and newly imposed US tariffs on Swiss imports may pressure the SNB to ease further.
Outlook: Swiss trade data and US PMI releases will guide near-term moves. A hawkish Fed tone could lift USD/CHF, while weak Swiss data may reinforce downside risks for the Franc.
Final Summary
Sterling remains under pressure despite elevated inflation, while the Euro struggles amid geopolitical uncertainty and soft growth signals. The US Dollar is firm ahead of key PMI data and Powell’s Jackson Hole speech, with rate cut expectations still in flux. Commodity-linked currencies like the Aussie and Loonie face headwinds from domestic easing prospects, while the Swiss Franc contends with trade-related risks and subdued inflation.