25/04/2025
Written by: Ian Morley
Daily Currency Update – 4th April 2025
GBPEUR
Summary: The pound initially made gains against the euro following the market reaction to Trump’s tariffs, but those gains were erased by the afternoon as the euro strengthened. Market sentiment shifted, leading to a sharp decline in GBPEUR as investors reassessed the economic impact of retaliatory tariffs from the EU.
Outlook: With the euro gaining momentum, GBPEUR could face further downside risk unless UK economic data provides fresh support. Focus will be on ECB commentary and any signs of additional monetary policy adjustments.
EURUSD
Summary: The euro saw a significant rise against the US dollar, reaching fresh highs before stabilising. While the dollar continued to struggle amid trade war fears, the euro benefitted from market adjustments and expectations of a coordinated EU response to the tariffs.
Outlook: If risk sentiment remains fragile and the US economy shows further signs of slowdown, the euro may retain its strength. However, the possibility of a hawkish Fed response could limit further upside for EURUSD.
GBPUSD
Summary: The pound initially rallied against the US dollar, but later in the session, some of those gains were given up as market sentiment turned cautious. The USD saw a slight recovery as traders positioned for potential Federal Reserve intervention in response to inflationary pressures from the tariffs.
Outlook: GBPUSD may remain volatile as traders react to trade policy updates and upcoming US economic data. If risk aversion persists, the dollar could regain some ground against the pound.
USDAUD
Summary: The Australian dollar initially benefitted from USD weakness but has since come under heavy selling pressure. The risk-off sentiment and declining commodity prices contributed to AUD’s sharp fall against the dollar.
Outlook: If market uncertainty continues and demand for safe-haven assets rises, the US dollar could extend its gains against the AUD. Further moves will depend on Chinese trade data and broader risk sentiment.
USDCAD
Summary: The Canadian dollar followed a similar trajectory to the Australian dollar, initially gaining but now falling hard against the US dollar. Weaker oil prices and renewed demand for the USD have weighed on the Loonie.
Outlook: The direction of USDCAD will depend on upcoming Canadian employment data and further trade war developments. A continued slide in oil prices could put additional pressure on CAD.
USDCHF
Summary: The Swiss franc remained resilient against the US dollar, benefiting from safe-haven flows. However, the dollar’s late-session recovery kept the pair within a narrow range.
Outlook: Market sentiment remains key for USDCHF movements. If global uncertainty escalates further, CHF could see more demand, but any hawkish signals from the Fed could strengthen the dollar.
Final Summary: After an initial market reaction to Trump’s tariff announcement, currency markets saw significant reversals. The pound lost its early gains against both the euro and the dollar, while the Australian and Canadian dollars fell sharply. The euro remained strong, benefiting from expectations of an EU response to US tariffs. The US dollar saw a modest late-session recovery as traders reassessed Fed policy prospects. Looking ahead, markets remain volatile, with trade tensions and upcoming economic data likely to drive further moves.