06/02/2025
Written by: Ian Morley
Daily Currency Update – 3rd February 2025
GBPEUR
Summary: Pound Sterling remained resilient against the Euro despite broader market volatility caused by new trade tariffs imposed by the US. The ECB’s recent 25bps rate cut, combined with growing expectations for further easing, continues to weigh on the Euro.
Outlook: Investors will be closely monitoring inflation data from the Eurozone. If inflation slows further, it could reinforce expectations of additional rate cuts by the ECB, keeping the Euro weak. Meanwhile, the BoE is expected to cut rates by 25bps this week, which could limit Sterling’s gains.
GBPUSD
Summary: Pound dropped below 1.2300 against the US Dollar as markets reacted to President Trump’s announcement of sweeping tariffs on Canada, Mexico, and China. The risk-averse sentiment boosted the Dollar, pushing GBP/USD lower to near 1.2250.
Outlook: The upcoming BoE rate decision will be a key driver for Sterling. Traders expect a 25bps rate cut, and a dovish outlook could add further downside pressure. Meanwhile, US ISM Manufacturing PMI and labour market data will provide further direction for the Dollar.
EURUSD
Summary: The Euro slumped to a multi-week low, trading near 1.0200, as Trump’s tariffs boosted demand for the safe-haven US Dollar. The ECB’s dovish stance, combined with expectations of further rate cuts, added to the Euro’s weakness.
Outlook: The Euro remains vulnerable to further downside, particularly if Eurozone inflation data disappoints. US economic releases, including ISM Manufacturing PMI and employment data, will dictate the next move for the USD.
USDCAD
Summary: USD/CAD surged above 1.4700 for the first time since 2003, driven by Trump’s 25% tariffs on Canadian imports. The Bank of Canada’s recent rate cut and dovish outlook further weakened the Loonie.
Outlook: With tariffs set to take effect tomorrow, volatility in CAD is expected to remain high. Any response from the Canadian government, alongside US economic data, will influence the pair’s direction in the coming days.
AUDUSD
Summary: The Australian Dollar declined to 0.6140 as risk sentiment deteriorated following Trump’s trade announcements. Although Australian retail sales were better than expected, they failed to lift the AUD.
Outlook: Market focus is shifting towards the RBA’s upcoming decision, where a 25bps rate cut is increasingly likely. Further downside risks remain if global trade tensions escalate, particularly given Australia’s strong trade ties with China.
USDCHF
Summary: The US Dollar extended its rally against the Swiss Franc, pushing USD/CHF above 0.9150. The Dollar gained strength from trade tensions and higher demand for safe-haven assets.
Outlook: The CHF could see some support from risk aversion, but a strong USD and expectations of a less dovish Fed stance may keep USD/CHF elevated. Key US economic data this week will be crucial in setting the next direction for the pair.
Final Summary:
The US Dollar remains in firm control following President Trump’s aggressive trade measures, which have rattled global markets. The Euro and the Pound remain under pressure ahead of key central bank decisions, while commodity currencies like the CAD and AUD are struggling due to trade concerns. The coming days will be pivotal, with economic data and geopolitical developments likely to drive further volatility.