25/04/2025
Written by: Ian Morley
Daily Currency Update – 13th February 2025
GBPEUR
Summary: The Pound strengthened against the Euro following better-than-expected UK GDP data, which showed a 1.4% annual expansion in Q4, beating market expectations of 1.1%. The Euro remained under pressure as expectations for further ECB rate cuts increased, with the central bank having already lowered borrowing costs five times since June 2024.
Outlook: With traders anticipating three more ECB rate cuts this year, the Euro could remain vulnerable in the short term. Meanwhile, cautious comments from Bank of England officials about the pace of rate cuts could provide some support for the Pound. Market participants will now look towards Eurozone GDP data on Friday for further direction.
GBPUSD
Summary: GBP/USD climbed above 1.2500 after upbeat UK economic data, but gains were limited as traders digested hotter-than-expected US inflation data. The US Consumer Price Index (CPI) rose by 3% in January, while the core CPI increased by 0.4% month-on-month, dampening hopes of a near-term Federal Reserve rate cut.
Outlook: Attention now shifts to US Producer Price Index (PPI) data and potential tariff announcements from President Trump, which could impact risk sentiment and the Dollar. If the US maintains a firm stance on rates, the Pound could struggle to make further gains.
EURUSD
Summary: EUR/USD saw volatility after initially dipping towards 1.0300 on the US CPI release but later rebounded to trade near 1.0450. The Euro remains weighed down by expectations of further ECB rate cuts, while the Dollar faced pressure from improved risk sentiment.
Outlook: The next major test for the pair comes from US PPI inflation data and Eurozone GDP figures. If US inflation remains sticky, the Fed may hold rates higher for longer, supporting the Dollar. Conversely, weak Eurozone data could increase expectations of further ECB easing, pressuring the Euro.
USDCAD
Summary: The Canadian Dollar gained ground, with USD/CAD falling to its lowest level since mid-December near 1.4250. Bank of Canada meeting minutes highlighted concerns over the impact of potential US trade tariffs on inflation. Meanwhile, falling crude oil prices limited CAD’s upside.
Outlook: The focus now shifts to US PPI data and further developments on US trade policy. If President Trump announces reciprocal tariffs, risk sentiment could sour, potentially boosting the USD.
AUDUSD
Summary: The Australian Dollar stabilised following gains in Consumer Inflation Expectations, which rose to 4.6% in February from 4.0% previously. However, the risk-sensitive AUD remains under pressure amid rising expectations of a Reserve Bank of Australia (RBA) rate cut and ongoing concerns about global trade tensions.
Outlook: The US Dollar’s next move will be determined by inflation data and Trump’s trade stance. If the Fed maintains a hawkish stance, the AUD could weaken further. Meanwhile, any signs of easing trade tensions could provide a boost to the Aussie.
USDCHF
Summary: USD/CHF fell below 0.9100 as the Dollar struggled following the US inflation report. The Swiss Franc benefited from its safe-haven appeal amid geopolitical tensions in the Middle East, while Swiss CPI data showed inflation slowing to 0.4% year-on-year, the lowest since April 2021.
Outlook: If risk sentiment remains fragile, the Swiss Franc could stay supported. However, stronger US inflation data may limit downside pressure on the USD. The focus remains on Trump’s tariff announcements and broader geopolitical developments.
Final Summary:
The Pound gained on the Euro and the US Dollar following stronger-than-expected UK GDP data, while the Euro struggled amid expectations of further ECB rate cuts. The US Dollar remains in focus, with inflation data reinforcing expectations that the Fed will keep rates higher for longer. Meanwhile, risk sentiment is being driven by geopolitical developments and President Trump’s potential tariff announcements, which could impact trade-sensitive currencies like the CAD and AUD.