12/12/2025
Written by: Ian Morley
Daily Currency Market Update – 12th December 2025
GBP/EUR
Summary: GBP/EUR broke below 1.1400 as Sterling lagged the Euro. Weak UK GDP data (-0.1% m/m in October, second consecutive monthly contraction) reinforced expectations of a BoE cut to 3.75% next week. Markets remain confident of at least two further cuts in 2026. In contrast, ECB officials signalled stability, with consensus expecting rates to remain at 2.0% through 2026–27. Narrowing yield spreads continue to pressure GBP.
Outlook: GBP/EUR may remain defensive unless UK data surprises positively. ECB growth revisions and BoE vote split will be pivotal.
GBP/USD
Summary: GBP/USD eased to 1.3375 after weak UK GDP data, though the pair held firm overall as USD remained fragile post‑Fed. The ONS reported GDP fell 0.1% in October, defying expectations of growth. Industrial Production rose 1.1% m/m, while Manufacturing output disappointed at 0.5%. Traders remain confident of a BoE cut next week.
Outlook: GBP/USD may consolidate until UK labour and CPI data next week. US NFP on Tuesday will be key for USD direction.
EUR/USD
Summary: EUR/USD held near 1.1730 after touching two‑month highs at 1.1762. The Euro remained supported by monetary policy divergence, with ECB stability contrasting Fed dovishness. German HICP confirmed inflation at 2.6% y/y in November. USD weakness persisted after Fed’s 25bps cut and cautious guidance.
Outlook: Euro may remain firm unless risk aversion deepens. US NFP and ECB decision next week will guide momentum.
AUD/USD
Summary: AUD/USD traded steady above mid‑0.6600s, close to three‑month highs. The Aussie drew support from RBA’s hawkish stance, with Governor Bullock signalling rate cuts may not be needed. USD weakness after Fed’s dovish cut added tailwinds, despite mixed Australian jobs data earlier in the week.
Outlook: AUD may remain resilient if RBA tone stays hawkish. US Fedspeak today and NFP next week will be pivotal.
USD/CAD
Summary: USD/CAD consolidated near 1.3770, its lowest since September. CAD outperformed on BoC’s hawkish tilt, with Governor Macklem signalling rates are “about the right level.” Divergence with Fed’s dovish stance weighed on USD. Oil’s recent decline capped CAD gains but recovery limited USD upside.
Outlook: CAD may strengthen further if oil stabilises. US and Canadian trade data later today will provide fresh impetus.
USD/CHF
Summary: USD/CHF remained fragile near 0.7950 after Fed’s dovish cut. Markets expect at least two Fed cuts in 2026, while SNB held rates at 0% and reiterated reluctance to return to negative rates. CHF traded broadly calm after Thursday’s SNB meeting.
Outlook: USD/CHF may remain pressured unless Fed signals hawkishness. US NFP and SNB commentary will shape CHF sentiment.
Final Summary
Sterling weakened on disappointing GDP data, with GBP/EUR breaking below 1.1400 and GBP/USD easing to 1.3375. The Euro held firm near two‑month highs as ECB stability contrasted Fed dovishness. The Australian Dollar consolidated near three‑month highs on RBA hawkishness, while the Canadian Dollar outperformed on BoC stability. The Swiss Franc strengthened modestly as USD/CHF remained under pressure after Fed’s cut.