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Market Insight 07-10-2025

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  • Market Insight 07-10-2025

Daily Market Update: 7 October 2025

Key Currency Pair Movements

GBP/EUR

  • Summary: GBP/EUR is still near 1.15. Trading in a tight range.
  • Outlook: The pair may appreciate further as the Euro (EUR) struggles with political instability in France, following the Prime Minister’s resignation. Pound Sterling is receiving support from market caution regarding the Bank of England’s (BoE) policy stance, with MPC members cautioning that recent inflation shocks should not be viewed as temporary.

GBP/USD

  • Summary: The pair is edging lower and trading near 1.3450 early Tuesday. It closed virtually unchanged on Monday, managing to hold its ground against the US Dollar by capturing capital outflows from the Euro.
  • Outlook: The downside seems limited as the Pound Sterling (GBP) is supported by market caution over the BoE’s policy stance. The pair depreciates as the US Dollar (USD) extends gains following hawkish remarks from a Fed President.

EUR/USD

  • Summary: The pair is on the back foot and trading below 1.1700 in the European session, extending its decline for a second consecutive day.
  • Outlook: France’s political and fiscal crisis is keeping the Euro (EUR) on the defensive this week, following the shock resignation of Prime Minister Sebastien Lecornu after only 27 days. German Factory Orders contracted by 0.8% in August, missing market expectations. ECB President Christine Lagarde stated the bank has met its disinflation targets, though some central bank officials are hinting that the possibility of another rate cut is still on the table.

AUD/USD

  • Summary: The Australian Dollar (AUD) is depreciating.
  • Outlook: The decline follows the release of weak domestic data, including a 3.5% MoM fall in Westpac Consumer Confidence in October.

USD/CHF

  • Summary: The pair remains subdued around 0.7950.
  • Outlook: The Swiss Franc (CHF) is receiving support from rising inflation expectations, which diminishes fears of the Swiss National Bank (SNB) pushing interest rates into negative territory.

Final Summary

The US Dollar (USD) is staying resilient against its peers, with the USD Index gaining traction and rising 0.2% to 98.30. This stability comes despite the US government shutdown entering its seventh day and the market pricing in a high 94% probability of a Fed rate cut in October.

The Greenback is supported by hawkish remarks from Kansas City Fed President Jeffrey Schmid, who stressed that inflation remains excessively high.

Political instability in France is the dominant market driver in Europe, with Prime Minister Sebastien Lecornu’s resignation leading to a sell-off in the Euro. German Factory Orders also showed a contraction in August.

Today, focus is on speeches from a slew of Federal Reserve policymakers, including Vice Chair of Supervision Michelle Bowman and Stephen Miran, which might set the USD’s direction. Policymakers from the European Central Bank (ECB), including President Christine Lagarde, are also scheduled to speak.