01/10/2025
Written by: Ian Morley
Daily Currency Market Update – 1st July 2025
GBP/EUR
Summary: GBP/EUR back to 1.1670 after falling to 1.1640 as the Euro softens following weaker-than-expected German inflation data. German HICP eased to 2.0% YoY in June, missing forecasts of 2.2%, while monthly inflation rose just 0.1%. The Pound remains supported by stronger UK PMI data and cautious optimism around the UK–US trade deal. However, BoE Governor Bailey reiterated that the path for interest rates remains “gradually downwards,” reinforcing expectations of rate cuts later this year.
Outlook: Eurozone HICP inflation data and Bailey’s comments at the ECB Forum will be key. If Eurozone inflation also cools, GBP/EUR could stabilise or edge higher.
GBP/USD
Summary: GBP/USD trades near 1.3750, just below multi-year highs, as the US Dollar remains under pressure. The Greenback weakened after President Trump sent a handwritten note to Fed Chair Powell urging rate cuts to 1%, raising concerns over central bank independence. Meanwhile, BoE Governor Bailey acknowledged labour market softening but maintained a cautious tone on inflation.
Outlook: Powell’s remarks at the ECB Forum and US ISM Manufacturing PMI and JOLTS data will guide direction. If Powell signals dovish intent, GBP/USD could retest recent highs.
EUR/USD
Summary: EUR/USD hovers near 1.1780 after briefly topping 1.1800 for the first time since 2021. The Euro remains supported by institutional inflows and ECB policy divergence from the Fed. However, overbought technical conditions and softer German inflation data may limit further upside.
Outlook: Eurozone HICP and Powell’s speech will be pivotal. A dovish Fed and steady Eurozone inflation could keep EUR/USD elevated, though profit-taking may trigger a modest pullback.
USD/AUD
Summary: AUD/USD trades near 0.6600, a fresh 2025 high, supported by improved risk sentiment and strong Chinese PMI data. China’s Caixin Manufacturing PMI rose to 50.4 in June, beating expectations. Meanwhile, the US Dollar remains under pressure from fiscal concerns and Fed rate cut speculation.
Outlook: The pair may remain firm if Powell maintains a dovish tone and US data underwhelms. However, soft Australian credit growth and weaker domestic PMI may cap gains.
USD/CAD
Summary: USD/CAD holds near 1.3600 as the Loonie benefits from improved risk appetite and optimism around renewed US–Canada trade talks. Canada suspended its digital services tax, prompting the US to resume negotiations. Meanwhile, the Dollar remains subdued amid Fed uncertainty and fiscal concerns.
Outlook: US data and Powell’s comments will be key. If sentiment remains positive and oil prices stabilise, USD/CAD could drift lower.
USD/CHF
Summary: USD/CHF extends its decline to 0.7920, its lowest since 2011, as the Swiss Franc remains supported by safe-haven flows and a fragile Middle East ceasefire. The Dollar is weighed down by political pressure on the Fed and soft macro data.
Outlook: Swiss Retail Sales and PMI data, along with Powell’s speech, will guide direction. If US data disappoints and Fed credibility remains in question, USD/CHF could test new lows.
Final Summary
The US Dollar continues to weaken amid political interference concerns, fiscal uncertainty, and growing expectations of Fed rate cuts. Sterling holds firm on resilient UK data and trade optimism, while the Euro benefits from ECB–Fed policy divergence. Commodity-linked currencies like the Aussie and Loonie are supported by improved sentiment and trade developments. The Swiss Franc remains strong as safe-haven demand persists. All eyes now turn to the ECB Forum and key US data for the next directional cues.