28/10/2025
Written by: Ian Morley
Daily Currency Market Update – 3rd September 2025
GBP/EUR
Summary: GBP/EUR breaks below recent support as UK fiscal concerns mount. Sterling weakened after long-term UK borrowing costs surged to their highest level since 1998, triggering a broader sell-off in gilts. Traders now question the government’s ability to manage its deficit ahead of the Autumn Budget. Meanwhile, the Euro remains steady ahead of ECB President Lagarde’s speech, supported by hawkish commentary from Isabel Schnabel. But there is still lingering uncertainty over French political stability.
Outlook: Sterling may remain under pressure if fiscal concerns persist. Eurozone inflation and Lagarde’s remarks will be key for direction, while French political risk remains a potential drag on the Euro.
GBP/USD
Summary: GBP/USD extends its decline to near 1.3350, weighed by surging UK gilt yields and a risk-off market tone. The 30-year UK yield hit 5.72%, its highest since 1998, as investors brace for potential tax hikes or spending cuts. The US Dollar gained on safe-haven flows and rising Treasury yields, with the DXY holding near 98.40.
Outlook: Sterling may struggle unless UK fiscal clarity improves. US JOLTS data and Friday’s NFP will guide Fed expectations and broader USD sentiment.
EUR/USD
Summary: EUR/USD trades below 1.1650 after Tuesday’s 0.5% drop, pressured by global bond market volatility and cautious sentiment ahead of Eurozone CPI. The Euro found modest support from revised Eurozone Services PMI at 50.7, though debt concerns and French political uncertainty continue to weigh.
Outlook: Euro may stabilise if Lagarde signals policy continuity. US Factory Orders and JOLTS data will shape near-term USD moves.
AUD/USD
Summary: AUD/USD holds above 0.6500, supported by stronger-than-expected Q2 GDP at 1.8% y/y and upbeat Chinese Services PMI at 53.0. However, gains are capped by USD strength and risk aversion.
Outlook: AUD may remain range-bound as traders await US labour data and Fed Beige Book. Domestic inflation resilience continues to dampen RBA easing expectations.
USD/CAD
Summary: USD/CAD rises to near 1.3800, extending its three-day rally. The pair is supported by higher US yields and safe-haven flows, while the Canadian Dollar faces pressure from dovish BoC expectations and weak Q2 GDP.
Outlook: CAD may remain under pressure unless trade talks with the US show progress. US data and Fed commentary will be pivotal.
USD/CHF
Summary: USD/CHF trades firmly near 0.8050, buoyed by risk-off sentiment and rising US yields. The pair is supported by safe-haven demand for the Dollar, while Swiss CPI data due Thursday may influence SNB rate expectations.
Outlook: USD/CHF may remain elevated if global risk aversion persists. Swiss inflation and US labour data will guide direction.
Final Summary
Sterling weakens on UK fiscal concerns and surging gilt yields, while the Euro holds steady ahead of Lagarde’s speech. The US Dollar gains on safe-haven flows and rising Treasury yields, with markets focused on JOLTS and NFP data. Commodity currencies like AUD and CAD are mixed, supported by domestic resilience but capped by global uncertainty. The Swiss Franc trades cautiously ahead of CPI data and SNB policy signals.