19/12/2025
Written by: Ian Morley
Daily Currency Market Update – 19th December 2025
GBP/EUR
Summary: GBP/EUR climbed back above 1.1400 after the BoE cut rates by 25bps to 3.75% in a close 5–4 vote. Governor Bailey’s deciding vote underscored divisions within the MPC. Softer UK inflation reinforced dovish expectations, though analysts see scope for further cuts only in early 2026. Meanwhile, ECB left rates unchanged at 2% and Lagarde reiterated policy is “in a good place.” Revised forecasts pointed to stronger growth and inflation returning to 2% by 2028.
Outlook: GBP/EUR may remain supported if UK retail sales surprise positively today. ECB commentary will guide Euro sentiment.
GBP/USD
Summary: GBP/USD steadied near 1.3380 after Thursday’s volatility. Sterling drew support from BoE’s hawkish‑leaning cut, while softer US CPI (headline 2.7% y/y, core 2.6%) weighed on USD. The Dollar later recovered as cautious sentiment limited selling. GBP/USD defended its 200‑day SMA, backing the case for further upside.
Outlook: GBP/USD may consolidate until US Michigan sentiment data later today. BoE divisions will remain a key driver.
EUR/USD
Summary: EUR/USD extended losses to 1.1715, marking a fourth consecutive decline. ECB held rates steady and Lagarde dismissed speculation of hikes, stressing uncertainty. German confidence data weakened further, while producer prices contracted 2.3% y/y. US CPI undershot expectations, reinforcing Fed cut bets, though USD found support on risk aversion.
Outlook: Euro may remain pressured unless ECB signals hawkishness. US sentiment data later today will provide fresh cues.
AUD/USD
Summary: AUD/USD slipped toward 0.6600 as USD strength weighed. Despite rising Australian inflation expectations (4.7% in December) and robust private sector credit (+0.6% m/m, +7.4% y/y), AUD lost ground. RBA tightening speculation remains intact, with markets pricing a hike as early as February.
Outlook: AUD may regain ground if RBA tightening bets firm. US sentiment data and Chinese macro trends will guide direction.
USD/CAD
Summary: USD/CAD traded subdued near 1.3780, struggling to break higher. Softer US CPI boosted Fed cut expectations, while CAD remained supported by BoC’s stance that policy is “about the right level.” Oil weakness capped CAD gains, though geopolitical tensions limited downside.
Outlook: CAD may strengthen if Canadian retail sales surprise positively. US sentiment data will be key for USD/CAD.
USD/CHF
Summary: USD/CHF recovered to 0.7950 as USD rebounded. Softer US CPI reinforced Fed cut bets, but CHF was capped by trade data showing Switzerland’s surplus widened to CHF 3.84bn in November. SNB remains unlikely to return to negative rates, supporting CHF stability.
Outlook: USD/CHF may remain rangebound unless US sentiment data surprises. SNB policy clarity will shape CHF sentiment.
Final Summary
Sterling steadied after BoE’s close‑vote cut, with GBP/EUR back above 1.1400 and GBP/USD holding near 1.3380. The Euro extended losses as ECB reaffirmed its cautious stance. The US Dollar recovered despite softer inflation, weighing on AUD and CAD. The Swiss Franc traded steady as USD/CHF rebounded on USD strength.