25/04/2025
Written by: Ian Morley
GBPEUR
Summary:
The euro extended its gains against the pound on Friday, with GBP/EUR trading around 1.1560. Sentiment was lifted by news that President Trump’s tariffs on Chinese imports were less severe than initially feared, prompting a partial recovery in risk appetite. While the UK has seen robust economic data—February GDP grew 0.5%—the pound has remained on the back foot against the euro, weighed by market expectations of Bank of England rate cuts and lingering trade-related uncertainty.
Outlook:
The euro could remain supported if global concerns over trade policy escalation persist, particularly as the EU contemplates a new transatlantic agreement. However, any signs of stronger UK data or reduced expectations for aggressive BoE cuts could help limit further GBP downside.
EURUSD
Summary:
EUR/USD held its ground near 1.1360 despite escalating US-China trade tensions. The pair had previously climbed on a broader USD sell-off, fuelled by fears that Trump’s aggressive tariff stance could drive the US economy into a recession. The EU’s 90-day pause on its retaliatory tariffs echoed Washington’s suspension, giving some hope for de-escalation.
Outlook:
With US data pointing to weaker consumer sentiment and slowing inflation, the dollar could face continued pressure. However, any renewed strength in US macroeconomic indicators or hawkish Fed commentary might offer temporary support to the greenback.
GBPUSD
Summary:
Sterling extended its rally against the dollar, reaching above 1.3150, buoyed by improved sentiment and continued USD weakness. The sharp decline in US consumer sentiment and the likelihood of Fed rate cuts have weighed on the dollar, while UK GDP and bond yield strength support the pound.
Outlook:
Traders will watch this week’s UK employment and inflation reports for confirmation of economic resilience. Any upside surprises could delay BoE rate cuts and further lift GBP. However, the pair may be vulnerable to profit-taking after recent sharp gains.
USDAUD
Summary:
The Australian dollar extended its rally, trading around 0.6330 as risk sentiment stabilised and US dollar weakness persisted. Strong Chinese export data and less severe tariffs than feared helped bolster AUD, a key proxy for China-related trade flows.
Outlook:
Ongoing trade tension remains a headwind, but if Chinese stimulus measures ramp up and global sentiment stabilises, AUD could retain a bullish bias. A reversal in risk sentiment, however, would likely weigh heavily on the pair.
USDCAD
Summary:
USD/CAD continued its slide, nearing 1.3850, with the Loonie gaining on capital flows away from the dollar and despite soft oil prices. Investors are repositioning as fears of a US-led recession mount due to the trade war escalation.
Outlook:
If oil prices remain under pressure and Canadian data underwhelms, the Loonie may struggle to extend its gains. That said, USD weakness may dominate in the near term, keeping pressure on the pair.
USDCHF
Summary:
The dollar bounced slightly against the Swiss franc, rising to 0.8170 after hitting its lowest level since 2011 last week. Safe-haven flows remain strong amid market uncertainty, with CHF holding firm on risk aversion.
Outlook:
The pair may continue to see volatility as investors juggle between fading USD strength and ongoing global uncertainty. If tensions flare up again, safe-haven demand could push the franc higher once more.
Final Summary:
Currency markets remain heavily driven by developments in the US-China trade dispute. While Trump’s softer-than-expected tariffs brought some short-term relief, concerns over the broader economic impact and rising global uncertainty are fuelling dollar weakness. The euro and pound are benefitting from the USD’s fall, while risk-sensitive currencies like AUD and CAD show resilience. The week ahead will be shaped by key economic data and ongoing political developments.