06/02/2025
Written by: Ian Morley
Daily Currency Update – 4th February 2025
GBPEUR
Summary: The Pound remains firm against the Euro as GBP/EUR trades near 1.2020. The Euro has come under pressure due to expectations of further rate cuts from the European Central Bank (ECB) and concerns over potential US tariffs on European imports. Meanwhile, the Bank of England’s upcoming policy decision is keeping the Pound’s movements relatively contained.
Outlook: The ECB’s dovish stance and the risk of US trade barriers on European exports could weigh further on the Euro. However, markets may hold off on aggressive moves until after the BoE’s decision on Thursday. If the BoE signals a softer stance, the Pound may lose some of its strength against the Euro.
GBPUSD
Summary: The Pound dipped slightly against the US Dollar, trading around 1.2400 as risk sentiment remained cautious due to ongoing tariff tensions. The USD initially surged on news of new US tariffs on China, Canada, and Mexico but later retreated after Trump agreed to a 30-day delay on Canadian and Mexican imports. Meanwhile, China has retaliated with tariffs on US coal, LNG, crude oil, and farm equipment.
Outlook: The upcoming US Non-Farm Payrolls (NFP) data on Friday will be a key driver for GBP/USD. A strong reading could reinforce the Fed’s cautious stance on rate cuts and support the Dollar. The BoE’s decision later this week will also be crucial—any dovish shift from the UK central bank could put downward pressure on Sterling.
EURUSD
Summary: EUR/USD has continued its downward trend, trading around 1.0280 after failing to hold gains. The pair weakened further after the implementation of US tariffs on Chinese imports, alongside concerns that Trump may also target European exports. The Eurozone’s recent inflation data was slightly higher than expected but has done little to lift the Euro due to the ECB’s continued dovish outlook.
Outlook: The Euro remains vulnerable to additional downside, particularly if the US Dollar continues to strengthen amid trade tensions. Markets will also closely watch Trump’s next move regarding potential tariffs on the EU. Friday’s NFP data and further comments from the Fed will determine the next directional move for the pair.
USDCAD
Summary: USD/CAD surged to its highest level since 2003 near 1.4800 on Monday before retracing to around 1.4450. The Canadian Dollar was hit by concerns over Trump’s tariff policies, but the temporary 30-day suspension of tariffs on Canadian imports provided some relief. Meanwhile, declining oil prices have further pressured the CAD.
Outlook: The Bank of Canada’s dovish stance suggests further weakness in the Canadian Dollar, particularly if Trump proceeds with the tariffs after the 30-day pause. Lower oil prices could also continue to weigh on CAD, though any signs of policy divergence between the Fed and BoC may impact market direction.
AUDUSD
Summary: The Australian Dollar has struggled as trade war concerns between the US and China intensify. China has announced a 15% tariff on US coal and LNG, along with a 10% tariff on crude oil and farm equipment. The Aussie was also weighed down by speculation that the Reserve Bank of Australia (RBA) could begin cutting interest rates soon.
Outlook: AUD remains at risk of further declines, particularly if tensions between the US and China escalate. Additionally, if the RBA signals imminent rate cuts at its next meeting, the AUD could face more selling pressure. However, any de-escalation in trade tensions or stronger risk sentiment could provide some support.
USDCHF
Summary: USD/CHF has edged higher to 0.9125 as markets monitor trade negotiations between the US and China. The Swiss Franc remains supported by its safe-haven appeal, particularly as China retaliates with its own tariffs against the US. Meanwhile, Swiss retail sales came in stronger than expected, rising by 2.6% year-over-year.
Outlook: The direction of USD/CHF will likely depend on how trade negotiations evolve. If tensions rise further, demand for the Swiss Franc could increase. However, if the US economy continues to show strength, the Dollar may maintain its momentum. Traders will also be watching upcoming economic data and Fed speeches for further cues.
Final Summary:
Markets remain focused on trade tensions, particularly between the US, China, and Europe, as Trump’s tariff policies continue to drive volatility. The US Dollar has seen mixed movements, initially rallying on tariff news before retracing after delays on Canadian and Mexican imports. The Pound and Euro remain vulnerable ahead of key central bank decisions this week, while commodity-linked currencies such as the CAD and AUD continue to face pressure. Looking ahead, Friday’s US Non-Farm Payrolls data will be a key event that could shape market direction in the near term.