06/02/2025
GBP/EUR
Summary:
The Pound continued to fall against the Euro, as concerns over the UK’s fiscal health and stagflation risks weighed on sentiment. The Euro remains steady despite weaker Eurozone economic data, supported by relative stability in bond markets.
Outlook:
With UK inflation data due on Wednesday, traders will closely watch how it shapes expectations for the Bank of England’s (BoE) next moves. For now, the Pound is likely to stay under pressure, while the Euro could find support from a weaker Sterling and cautious investor sentiment.
GBP/USD
Summary:
GBP/USD declined further, slipping below 1.2200 as worries about UK economic conditions overshadowed a modest pullback in US Treasury yields. Market participants remain focused on stagflation risks in the UK, while the US Dollar finds support from its safe-haven appeal.
Outlook:
The US Producer Price Index (PPI) data later today will provide additional insights into the Federal Reserve’s policy trajectory. Meanwhile, UK CPI figures on Wednesday could trigger further downside for the Pound if inflation surprises on the upside, raising concerns about the BoE’s policy constraints.
EUR/USD
Summary:
EUR/USD held steady around 1.0250, recovering slightly from last week’s losses as the US Dollar weakened amid profit-taking. The Euro faces challenges from weaker Eurozone growth prospects but is benefiting from the Dollar’s pause and its position relative to other struggling currencies like the Pound.
Outlook:
EUR/USD remains in a consolidative phase but could test lower levels if the US Dollar regains momentum after today’s PPI release. Key resistance lies at 1.0290, with support near 1.0177.
AUD/USD
Summary:
The Australian Dollar remained under pressure despite a slight rebound, as concerns over US-China trade relations and expectations of a Reserve Bank of Australia (RBA) rate cut continue to weigh on sentiment. Rising commodity prices provided limited support for the AUD.
Outlook:
The AUD’s trajectory depends on China’s stimulus efforts and upcoming Australian employment data. However, the divergent policy outlook between the RBA and the Federal Reserve may limit any sustained recovery in the AUD/USD pair.
USD/CAD
Summary:
USD/CAD hovered around 1.4400, as the Canadian Dollar found support from stronger-than-expected domestic employment data and rising crude oil prices. The broader strength of the US Dollar limited the CAD’s gains.
Outlook:
Higher oil prices should provide a tailwind for the CAD, but today’s US PPI data could lead to renewed USD strength if the figures suggest continued inflationary pressures. Markets will also monitor the Bank of Canada’s upcoming meeting for further clues on its policy direction.
Final Summary
The Pound extended its losses across the board, reflecting heightened concerns about the UK’s economic outlook. Meanwhile, risk sentiment remains fragile, and markets are awaiting key inflation data and central bank guidance later this week for further direction.