01/10/2025
Written by: Ian Morley
Daily Currency Market Update – 16th May 2025
GBP/EUR
Summary: GBP/EUR remains in a tight trading range near 1.1880 as markets digest recent UK and Eurozone economic data. The UK economy’s solid Q1 GDP growth of 0.7% may temper expectations for aggressive Bank of England rate cuts, providing support for Sterling. Meanwhile, the Euro remains under pressure as ECB policymakers reaffirm their cautious stance on monetary easing amid ongoing concerns over global trade uncertainty.
Outlook: Investors will be watching for further BoE policy signals and Eurozone employment trends. ECB policymakers’ commentary could influence sentiment, with any dovish hints potentially weighing on the Euro.
GBP/USD
Summary: GBP/USD has climbed to 1.3330 as the US Dollar weakens following soft Retail Sales and Producer Price Index (PPI) data. The Greenback suffered after disappointing consumer spending figures and subdued producer inflation. Market expectations remain firm that the Federal Reserve will keep interest rates steady in the upcoming policy meetings.
Outlook: Traders are looking ahead to next week’s UK Consumer Price Index (CPI) release, which will shape BoE rate expectations. Meanwhile, Fed policy developments and consumer sentiment figures may influence USD movement.
EUR/USD
Summary: EUR/USD rebounded to near 1.1200 as the US Dollar softened after weaker-than-expected PPI data. While the Greenback struggled, ECB officials hinted at potential rate cuts, limiting the Euro’s upside. Eurozone employment figures showed a surprise increase, lending modest support to the Euro.
Outlook: The pair may experience volatility ahead of the University of Michigan Consumer Sentiment Index release. Further dovish commentary from ECB policymakers could keep the Euro’s gains in check.
USD/AUD
Summary: AUD/USD holds firm above 0.6400 as global trade tensions ease following the preliminary US-China tariff reduction agreement. Australia’s labour market remains resilient, with strong April job gains supporting the Aussie. However, uncertainty over US restrictions on Chinese tech firms could weigh on risk sentiment.
Outlook: The trajectory of AUD/USD will depend on upcoming global trade developments and risk sentiment. Traders will be watching for any changes in US-China relations that could impact commodity-linked currencies.
USD/CAD
Summary: USD/CAD has softened to 1.3950 as the US Dollar struggles following weaker economic data. Crude oil prices remain subdued, limiting the Canadian Dollar’s upside despite improving sentiment around North American trade negotiations.
Outlook: Oil price movements and US Fed rate expectations will be key drivers for USD/CAD. Any significant moves in energy markets could impact the pair’s near-term direction.
USD/CHF
Summary: USD/CHF trades near 0.8330 as soft US inflation figures weigh on the Dollar. Despite dovish sentiment from the Swiss National Bank, safe haven flows into CHF persist amid lingering global economic uncertainties.
Outlook: Traders will monitor upcoming Swiss economic releases and Fed policy signals. Any signs of prolonged US inflation weakness could drive further downside pressure on USD/CHF.
Final Summary
Currency markets are responding to weak US economic data, with the Dollar retreating against major peers. Sterling remains supported by stronger-than-expected UK GDP figures, while ECB policymakers’ cautious stance continues to weigh on the Euro. Commodity-linked currencies, such as the Australian and Canadian Dollars, are reacting to trade developments, with crude oil prices influencing CAD sentiment. Looking ahead, investors will focus on upcoming inflation reports and central bank commentary for further direction.