06/02/2025
GBP/EUR
Summary:
The GBP/EUR pair traded in a narrow range, with little direction as both currencies faced pressures. The Euro struggled amid expectations of further European Central Bank (ECB) rate cuts by the end of the year. Meanwhile, the Pound remained under pressure after dovish comments from the Bank of England (BoE) Governor Andrew Bailey, who hinted at a faster rate-cutting cycle if inflation data continues to improve.
Outlook:
The outlook for GBP/EUR remains tied to central bank policies and economic data. UK GDP data due later this week could either support or further pressure the Pound. The ECB is also likely to cut rates by another 25 basis points in the coming months, potentially limiting the Euro’s strength.
EUR/USD
Summary:
EUR/USD dropped towards 1.0950 as the US Dollar gained strength amid safe-haven demand driven by concerns over Chinese economic woes and escalating tensions in the Middle East. The Fed’s hawkish stance also contributed to the Dollar’s rally, as traders reduced expectations for aggressive rate cuts after better-than-expected US employment data. The Euro continued to struggle with expectations of ECB rate cuts as inflation declines.
Outlook:
The focus will shift to the FOMC minutes and upcoming US inflation data, which could influence Fed policy and, by extension, the Dollar’s direction. Should the data support further rate cuts, EUR/USD could see some recovery. On the other hand, if the Fed maintains its cautious approach, the pair may remain under pressure. ECB rate cuts are expected, which could add more downside to the Euro. Key levels to watch are support at 1.0920 and resistance at 1.1000.
GBP/USD
Summary:
GBP/USD has been trending lower, with the pair trading below 1.3100 amid a stronger US Dollar. The Pound has been weighed down by dovish BoE comments, with traders expecting a faster rate-cutting cycle. The US Dollar, supported by diminishing expectations of aggressive Fed rate cuts and safe-haven flows due to geopolitical tensions, continues to outperform.
Outlook:
The pair’s direction will depend on upcoming US inflation data and the release of the FOMC minutes. The Fed’s policy stance and UK GDP figures later this week could provide further insight into the future trajectory of GBP/USD. Traders are eyeing support around 1.3050, with a break lower potentially leading to further declines. Resistance remains at 1.3150, where any sustained break could suggest a short-term recovery.
NZD/USD
Summary:
NZD/USD experienced significant selling pressure after the Reserve Bank of New Zealand (RBNZ) cut interest rates by 50 basis points, bringing the policy rate down to 4.75%. The New Zealand economy is showing signs of excess capacity, prompting the central bank to take action to lower inflationary pressures. The US Dollar’s strength also contributed to the decline in the Kiwi.
Outlook:
NZD/USD is likely to remain under pressure as markets digest the RBNZ’s policy shift. US inflation data and the Fed’s minutes are expected to play a significant role in determining the pair’s near-term direction. A break below 0.6100 could lead to further downside, while any rebound might be capped around 0.6200 as the RBNZ’s dovish stance weighs on the New Zealand Dollar.
Final Summary
Currency markets have been driven by central bank expectations and geopolitical factors. The US Dollar remains strong on safe-haven demand and reduced expectations of aggressive Fed rate cuts, while the Euro and Pound face pressures from expected rate cuts by their respective central banks. Traders will be closely monitoring upcoming US inflation data and the FOMC minutes for further clues on future policy moves. Markets are likely to remain volatile in the near term.