25/04/2025
Written by: Ian Morley
GBP/EUR
Summary:
GBP/EUR remains relatively stable, with GBP holding its ground. With economic concerns in the Eurozone, including a revision in Germany’s GDP projections from +0.3% to -0.2% for 2024. This comes amid growing speculation of further interest rate cuts by the ECB, as inflation pressures continue to ease.
Outlook:
The ECB is expected to announce another 25-bps rate cut in its next policy meeting, with another one likely by year-end, leading to continued EUR softness. The UK’s economic data could provide GBP with a modest boost, with ongoing uncertainty in Europe likely to weigh on the currency. GBP/EUR is expected to trade within its current range with potential upside if the Eurozone’s economic woes deepen.
EUR/USD
Summary:
EUR/USD saw selling pressure this week, hovering below the 1.0950 level, as traders await the crucial US Consumer Price Index (CPI) data. US Dollar gained strength after the release of the Federal Reserve’s hawkish minutes, with investors betting on the possibility of further rate cuts by the end of 2024. Meanwhile, weak economic data from Germany failed to support the Euro.
Outlook:
EUR/USD will likely remain under pressure ahead of the US inflation data release. If the CPI figures show a larger-than-expected decrease, the USD could soften, leading to a rebound for EUR/USD. However, sustained USD strength is likely in the short term due to market sentiment favouring the Dollar and the Euro’s challenges from weak economic performance in the Eurozone.
GBP/USD
Summary:
GBP/USD edged lower this week, trading below 1.3100 as the USD gained strength on the back of hawkish Fed minutes and strong US employment data. Despite signs of stability in the UK economy, Sterling struggled to hold ground against a surging USD.
Outlook:
The pair will be sensitive to upcoming US CPI data and UK economic figures. Should US inflation come in lower than expected, GBP/USD could regain lost ground. However, any signs of persistent inflation may reinforce expectations of further Fed rate cuts, potentially keeping GBP/USD under pressure.
AUD/USD
Summary:
The Australian Dollar recovered slightly after a five-day losing streak, but upside gains were capped by a stronger US Dollar. Economic concerns in China, Australia’s largest trading partner, continue to weigh on the AUD as the lack of further stimulus measures from Beijing disappointed markets.
Outlook:
AUD/USD will remain sensitive to China’s economic performance and US inflation data. Should China’s growth outlook improve, the AUD may see a more sustained recovery. However, continued USD strength, particularly if US inflation surprises to the upside, may limit gains for AUD in the short term.
Final Summary
Currency markets have been dominated by USD strength this week as traders anticipate key US inflation data. Meanwhile, the Euro continues to struggle amidst weak German economic data and expectations of further ECB rate cuts. In the near term, we expect the Dollar to retain its strength unless US inflation data disappoints, while GBP and AUD may experience limited upside amidst domestic and international headwinds.