25/04/2025
Written by: Ian Morley
GBPEUR
Summary:
The Pound gained ground against the Euro on Monday, pushing up to around 1.2120, helped by broad-based weakness in the US Dollar, which lifted risk appetite. The Euro also softened slightly despite hotter-than-expected Eurozone inflation data, with the market largely focused on the ongoing uncertainty around the European Central Bank’s (ECB) next moves. Meanwhile, reports of a potential Ukraine peace plan and a one-month truce proposal from France and the UK also supported the Euro.
Outlook:
Attention will now shift to the ECB meeting later this week, where a 25 basis point rate cut is expected. However, any hawkish hints from President Christine Lagarde could offer the Euro some support. For Sterling, focus remains on Bank of England (BoE) commentary, with markets expecting a cautious, gradual approach to rate cuts. The Pound may also be influenced by broader risk sentiment, particularly around global trade tensions and US tariffs.
EURUSD
Summary:
EUR/USD surged over 1% on Monday, recovering much of last week’s losses as the US Dollar came under pressure. Optimism over a potential peace plan in Ukraine boosted the Euro, while the market reacted negatively to the start of Trump’s tariffs on Canadian, Mexican, and Chinese imports. The Euro held steady near 1.0500 in early trading on Tuesday.
Outlook:
The ECB’s policy decision on Thursday will be the primary focus, with a 25bp rate cut widely expected. Traders will be closely watching Lagarde’s comments on the economic outlook and inflation risks. Meanwhile, the Euro will remain sensitive to headlines around US tariffs, especially if further escalation with China or retaliatory measures are announced.
GBPUSD
Summary:
Sterling rose sharply on Monday, climbing towards 1.2700 as the US Dollar weakened. Uncertainty around Trump’s trade policies and the potential economic fallout pressured the Dollar, while the Pound found some support from relatively stable UK economic sentiment.
Outlook:
The Pound’s near-term outlook will be driven by risk sentiment and global trade developments, particularly Trump’s tariff policies and the potential knock-on effects on the UK economy. With limited UK data this week, GBP/USD will likely take its lead from broader USD movements and Wednesday’s US ISM Services PMI and Friday’s Nonfarm Payrolls.
USDCAD
Summary:
USD/CAD pushed higher on Monday, nearing 1.4500, as the Canadian Dollar weakened in response to Trump’s tariffs. The imposition of 25% tariffs on Canadian imports, with some exemptions for energy products, weighed heavily on the Loonie. Softer oil prices also contributed to CAD weakness.
Outlook:
The focus for CAD will remain firmly on trade tensions with the US. Any further retaliatory measures from Canada or a deterioration in US-Canada relations could put additional pressure on the Loonie. Broader risk sentiment, oil prices, and US data releases will also play key roles in determining the pair’s next moves.
AUDUSD
Summary:
The Australian Dollar struggled on Tuesday, trading near 0.6200 after the Reserve Bank of Australia’s (RBA) February minutes highlighted downside risks to the economy. Retail Sales data showed a modest 0.3% monthly increase, but broader concerns around slowing growth and global trade tensions weighed on the currency.
Outlook:
The AUD will likely remain under pressure amid global risk aversion linked to Trump’s tariffs and China’s response. Given Australia’s close economic ties to China, any further escalation in the US-China trade dispute could drag AUD/USD lower. The market will also look ahead to speeches from RBA officials for clues on the policy outlook.
USDCHF
Summary:
USD/CHF slipped to around 0.8960 as the safe-haven Swiss Franc strengthened in response to mounting concerns over a global tariff war. The US Dollar faced additional pressure as hopes for a Ukraine peace deal lifted market sentiment, reducing demand for safe-haven assets like the Dollar.
Outlook:
With trade tensions dominating the headlines, the Swiss Franc is likely to remain in demand as a safe haven. The focus for USD/CHF will be on upcoming US economic data, particularly jobs data later in the week, which could influence the Federal Reserve’s stance on future rate moves.
Final Summary:
Markets are bracing for ongoing volatility as Trump’s tariffs come into effect, prompting retaliation from Canada and China. This has introduced significant uncertainty into global trade, weighing on the US Dollar. In Europe, attention turns to the ECB’s rate decision, while in the UK, the BoE’s cautious approach is expected to underpin Sterling. Safe haven flows into the Swiss Franc continue, while commodity currencies like the AUD and CAD face downside risks.
This week’s key focus will be the ECB meeting, US ISM Services PMI, and Friday’s Nonfarm Payrolls, all of which could drive further volatility across the major currency pairs.