12/05/2025
Written by: Ian Morley
Daily Currency Update – 6th February 2025
GBPEUR
Summary: The Pound held steady against the Euro on Wednesday as markets positioned ahead of today’s Bank of England (BoE) rate decision. GBP/EUR traded higher around 1.2020 as concerns over Trump’s proposed tariffs on the European Union weighed on the Euro. The ECB’s recent rate cut and weak economic data from the Eurozone have further pressured the single currency.
Outlook: The BoE is widely expected to lower rates by 25 basis points to 4.5% today. Traders will closely monitor Governor Andrew Bailey’s press conference for insights into future rate policy. Any cautious messaging could limit GBP gains, while further concerns over Trump’s trade policies may keep the Euro on the back foot.
GBPUSD
Summary: Sterling briefly touched a one-month high at 1.2550 on Wednesday before retreating below 1.2500 as markets adjusted expectations ahead of the BoE’s decision. The US Dollar remains under pressure following disappointing ISM Services PMI data, while improving risk sentiment has weighed on demand for the safe-haven Greenback.
Outlook: The BoE’s policy decision will be the key driver for GBP today. Should the central bank indicate a gradual rate-cutting cycle, GBP may remain supported. However, with US Nonfarm Payrolls (NFP) due on Friday, USD volatility is expected to rise. Strong labour data from the US could push GBP/USD lower.
EURUSD
Summary: The Euro failed to hold above 1.0400 and traded around 1.0380 early Thursday. The ECB’s dovish stance and concerns over Trump’s tariffs on the EU have weighed on the Euro. Meanwhile, Fed officials continue to stress a cautious approach to rate cuts, supporting the USD.
Outlook: The Eurozone Retail Sales data will provide further direction for the Euro today. If the data disappoints, EUR/USD may weaken further. Attention will also turn to US labour market data at the end of the week, which could influence Fed policy expectations and USD direction.
USDCAD
Summary: USD/CAD traded near 1.4315 as the Canadian Dollar found support from an improving trade balance and easing concerns over Trump’s tariffs. Canada reported its first trade surplus in 10 months, and Trump’s decision to delay tariff implementation on Canada by 30 days provided temporary relief to the Loonie.
Outlook: The short-term outlook for USD/CAD will depend on upcoming US economic data, including Friday’s NFP. Strong US labour data could renew USD strength, while any escalation in trade tensions may put downward pressure on CAD.
AUDUSD
Summary: The Australian Dollar remained under pressure, trading near 0.6260, as renewed US-China trade tensions and weaker-than-expected Australian Trade Balance data weighed on sentiment. US President Trump’s plans to impose tariffs on China and potential global trade disruptions have hurt the risk-sensitive Aussie Dollar.
Outlook: AUD/USD remains vulnerable as markets await the US PCE inflation data and key labour market reports. If US data surprises to the upside, the USD could gain further ground, pushing AUD lower. The RBA’s expected rate cut in February also adds to the downside risk for the Aussie.
USDCHF
Summary: USD/CHF rebounded from the 0.9000 level on Thursday, trading near 0.9030 as a modest USD recovery helped stabilise the pair. The Swiss Franc had strengthened earlier in the week due to risk aversion and speculation about future Fed rate cuts.
Outlook: While the USD is seeing a temporary bounce, expectations for two Fed rate cuts this year may limit any sustained gains. The safe-haven appeal of the CHF could keep USD/CHF under pressure, particularly if geopolitical tensions or trade concerns resurface.
Final Summary:
Markets are focused on today’s BoE rate decision, with expectations of a 25bp cut. The Euro remains under pressure amid weak data and trade concerns, while the US Dollar stabilises ahead of key labour market reports. The Canadian Dollar has found temporary support, while the Australian Dollar remains weak due to trade worries. Expect volatility to pick up ahead of US NFP data on Friday, which will shape expectations for Fed policy in the coming months.