March 2025 Market Roundup

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Monthly Market Update: March 2025

Currency Movements:

US Dollar (USD): The USD saw a volatile month, initially strengthening on strong US labour market data and hawkish Federal Reserve rhetoric. Mid-month, the greenback dipped slightly as inflation data suggested a gradual easing, but demand returned towards month-end as geopolitical uncertainties increased risk-off sentiment.

British Pound (GBP): GBP experienced a choppy month, facing downward pressure as UK inflation cooled more than expected, prompting speculation on earlier-than-anticipated rate cuts from the Bank of England. However, stronger-than-expected retail sales and improved business sentiment helped limit losses against both the EUR and USD.

Euro (EUR): The EUR struggled against both the USD and GBP throughout March. Weakening economic data from Germany and dovish signals from the European Central Bank added to the pressure, although inflation figures towards the end of the month provided some stabilisation.

Events Driving the Market:

  1. US Federal Reserve Outlook
    The Fed remained in focus this month, with Chair Powell reaffirming a data-dependent approach to rate cuts. While markets initially priced in a June cut, stronger-than-expected jobs data led to a reassessment, with expectations shifting towards later in the year.
  2. Bank of England Rate Speculation
    UK inflation figures came in lower than expected, increasing speculation that the BoE could be one of the first major central banks to cut rates in 2025. However, resilient retail sales and business optimism provided GBP with some support.
  3. European Central Bank Signals
    The ECB maintained a cautious stance, with policymakers hinting at the potential for rate cuts in the second half of the year. German industrial data remained weak, adding to pressure on the EUR.
  4. Geopolitical Risk & Safe-Haven Flows
    Geopolitical tensions in Eastern Europe and the Middle East contributed to fluctuating market sentiment, supporting safe-haven currencies like the USD and JPY.

Market Outlook:

As we move into April, market focus will remain on central bank guidance, particularly regarding potential rate cuts. The Fed’s next moves, UK inflation trends, and ECB economic indicators will all play a crucial role in shaping currency movements in the coming weeks.