25/04/2025
Written by: Ian Morley
Daily Currency Update – 12th February 2025
GBPEUR
Summary: The Euro remains under pressure due to concerns over potential reciprocal tariffs from the US, which could impact European exports. Additionally, the Bank of England’s (BoE) Monetary Policy Committee member Catherine Mann made dovish comments, reinforcing expectations of rate cuts this year.
Outlook: The Euro may face further downside if the Trump administration moves forward with reciprocal tariffs, particularly on European automobile imports. Meanwhile, the Pound’s near-term direction will be shaped by the upcoming UK GDP data, with expectations of a 0.1% contraction in Q4 2024.
GBPUSD
Summary: The Pound rebounded on Tuesday, snapping a three-day losing streak and trading around 1.2450. Investors remain cautious ahead of the US Consumer Price Index (CPI) release. The Federal Reserve (Fed) maintained a hawkish stance, with Chair Powell stating that there is no urgency to cut interest rates.
Outlook: The US CPI data will be the key driver for GBP/USD today. If inflation remains elevated, expectations for prolonged higher US interest rates could strengthen the Dollar, putting pressure on Sterling. Additionally, UK GDP data later in the week will provide further direction for the Pound.
EURUSD
Summary: The Euro gained over 0.5% against the US Dollar on Tuesday, rising above 1.0350 before stabilising. The Dollar weakened following Powell’s testimony, where he reaffirmed that the Fed is in no rush to adjust policy. However, concerns over Trump’s trade policies continue to weigh on the Eurozone outlook.
Outlook: The US CPI release will be the primary driver of EUR/USD today. A stronger-than-expected inflation print could boost the Dollar, reversing some of the Euro’s gains. Additionally, ongoing developments around reciprocal tariffs may add further volatility to the pair.
USDCAD
Summary: USD/CAD gained momentum on Tuesday, rising to around 1.4295. The US Dollar was supported by Powell’s testimony, while rising crude oil prices provided some support to the Canadian Dollar. The Trump administration’s tariffs on steel and aluminium imports, including those from Canada, remain a risk factor for the Loonie.
Outlook: The US CPI data will likely dictate USD/CAD’s movement today. If inflation surprises to the upside, it could reinforce expectations of a prolonged Fed rate pause, strengthening the Dollar. Meanwhile, oil prices and any developments on trade tariffs will also impact CAD.
AUDUSD
Summary: The Australian Dollar struggled on Tuesday, trading below 0.6300. US tariff concerns and expectations of a rate cut from the Reserve Bank of Australia (RBA) have weighed on the AUD. Meanwhile, rising geopolitical tensions in the Middle East have increased risk aversion, further pressuring the currency.
Outlook: The AUD remains vulnerable amid ongoing trade uncertainty and rate cut expectations. The Fed’s stance and today’s US CPI data could drive further losses for the Australian Dollar. Any updates on Australia’s potential exemption from US metal tariffs will also be closely monitored.
Final Summary:
Market attention remains on the US CPI data, which will heavily influence expectations for the Fed’s future policy. The Euro and Pound are under pressure due to concerns over US trade policies and weak economic outlooks, while the Australian and Canadian Dollars face additional risks from tariffs and central bank policy expectations. The Swiss Franc could see increased demand if geopolitical tensions escalate further.