August 2025 Market Roundup

• Written by: Ian Morley
• 29/08/2025

Monthly Market Update: August 2025

Currency Movements:

US Dollar (USD)
The Dollar had a strong month, supported by resilient economic data and tempered expectations of near-term Fed rate cuts. Early weakness followed soft labour figures, but the Greenback rebounded as inflation indicators—particularly PPI—came in hotter than expected. Strong GDP and PMI data reinforced USD’s strength, though speculation around Fed leadership changes created bouts of volatility.

British Pound (GBP)
Sterling saw significant swings in August. The Bank of England delivered a 25 bp rate cut in early August, but the narrow 5–4 vote signalled caution and prompted a rally, as markets dialled back expectations for further easing. Strong UK GDP, employment, and inflation data supported the Pound mid-month, although by month-end Sterling consolidated as traders looked ahead to September’s policy signals.

Euro (EUR)
The Euro struggled through August. Weak German industrial data, soft retail sales, and ongoing political uncertainty in France weighed heavily on sentiment. The ECB maintained a cautious tone, and despite occasional boosts from stronger German PMI and GDP figures, EUR/USD slipped back toward 1.1600 as the month closed.

Swiss Franc (CHF)
The Franc remained resilient but traded cautiously. Safe-haven demand was balanced against pressure from the newly enacted 39% US tariff on Swiss exports and weak domestic inflation. SNB easing speculation lingered, yet the CHF continued to hold firm against both USD and EUR, ending the month around multi-year highs.

Australian Dollar (AUD)
The Aussie faced sustained pressure across August. While supported briefly by strong trade surplus data and upbeat Chinese exports, weak domestic Retail Sales and inflation expectations, coupled with renewed US tariff threats on China, left AUD vulnerable. By month-end, AUD/USD traded below 0.6500.

Canadian Dollar (CAD)
The Loonie traded defensively for much of August. It weakened on soft industrial data and subdued oil prices but found some support from stronger inflation figures. Expectations for further BoC easing kept CAD under pressure, with USD/CAD holding near 1.3865 by month-end.

Events Driving the Market:

1. Bank of England ‘Hawkish Cut’
   The BoE cut rates by 25 bps in early August, but the narrow 5–4 vote and cautious tone tempered expectations for further easing. This provided support for Sterling, which rallied against both USD and EUR.
2. US Inflation & Fed Policy Outlook
   Stronger-than-expected PPI and resilient GDP data boosted the Dollar, pushing back the likelihood of a September Fed cut. However, political noise surrounding Fed independence and leadership changes kept volatility elevated.
3. Eurozone Weakness & French Political Risk
   German industrial and retail data disappointed, while French political uncertainty—focused on PM Bayrou’s confidence vote—added pressure to the Euro. ECB commentary remained cautious, limiting investor appetite for EUR.
4. Commodity Currencies Under Pressure
   The Australian Dollar weakened on poor domestic data and tariff fears, while the Canadian Dollar was weighed down by soft industrial performance and oil price weakness. BoC easing expectations kept CAD subdued.
5. Swiss Franc Balancing Act
   The CHF was pulled in two directions—demand from geopolitical risks and safe-haven flows versus pressure from tariffs and soft inflation. Despite this, the Franc ended August strong, underpinned by investor caution.

Market Outlook:

As we move into September, markets will be focused on upcoming US inflation and jobs data, which will be key in shaping expectations for a potential Fed rate cut. For Sterling, attention will turn to UK inflation and labour figures to confirm whether the BoE will slow its easing cycle. The Euro remains vulnerable to weak German data and ongoing political uncertainty in France. Commodity currencies will continue to track global trade sentiment, Chinese growth signals, and energy prices, while the Swiss Franc is likely to stay supported by safe-haven flows unless domestic weakness deepens.