06/02/2025
GBP/USD
Summary:
The GBP/USD pair has experienced a significant drop, trading towards 1.3150 following dovish remarks from BoE Governor Andrew Bailey. His suggestion that the Bank could take a more aggressive stance on rate cuts if inflation continues to ease has led to strong selling pressure on the Pound. In addition, rising geopolitical tensions in the Middle East and safe-haven flows into the US Dollar have weighed further on the GBP.
Outlook:
With the BoE likely to cut rates again in the near future and the USD supported by haven flows, the outlook for GBP/USD remains bearish. Unless there is a significant improvement in UK inflation data, we expect continued pressure on the Pound, particularly as risk aversion grows due to Middle East tensions. The next critical level to watch is the psychological 1.3100 mark.
EUR/GBP
Summary:
EUR/GBP surged above 0.8350, benefiting from Bailey’s dovish stance on future UK interest rates. Expectations that the European Central Bank (ECB) will also cut rates have softened some of the Euro’s gains, but the cross continues to climb as the Pound weakens.
Outlook:
With both the BoE and ECB likely to implement further rate cuts, EUR/GBP will likely remain volatile. However, as UK economic growth looks more vulnerable, the Euro is likely to retain an edge over the Pound. The cross may face resistance at 0.8400, but the bias remains upward unless UK inflation data surprises to the upside.
EUR/USD
Summary:
EUR/USD continues its downtrend, now trading in the 1.1030s as concerns about a slowing European economy grow. Lower-than-expected inflation data from the Eurozone is raising expectations of more aggressive ECB rate cuts. Meanwhile, the US Dollar is being bolstered by safe-haven demand and solid economic data, including robust job figures.
Outlook:
With strong US economic data and geopolitical risks fuelling demand for the Dollar, EUR/USD is expected to remain under pressure. Unless the ECB strikes a more cautious tone or US economic indicators soften, the Euro may continue to lose ground, with the next key support level at 1.1000.
AUD/USD
Summary:
The Australian Dollar has been pressured lower amid increased geopolitical tensions and risk aversion in global markets. Despite a stronger-than-expected trade balance for August, the AUD has struggled as investors turn to safe-haven assets like the USD. However, the currency remains supported by China’s stimulus measures, which are boosting commodity prices.
Outlook:
While risk-off sentiment is likely to weigh on the AUD in the short term, the outlook is mixed. The RBA’s relatively hawkish stance and positive trade data could limit downside risks. Traders will closely monitor US data releases and Middle East developments, with 0.6300 acting as key support for AUD/USD.
Final Summary:
The currency markets are being driven by a combination of dovish central bank outlooks and rising geopolitical tensions. The British Pound remains under pressure due to expectations of more aggressive rate cuts from the BoE, while the US Dollar is benefiting from safe-haven flows and solid economic data. The Euro faces challenges as concerns about European growth persist, and the Australian Dollar is caught between risk-off sentiment and positive trade dynamics. Expect continued volatility as markets digest economic data and geopolitical risks.