25/04/2025
Written by: Ian Morley
GBP/EUR
Summary:
GBP has been under pressure following the release of UK inflation data for September, which showed a larger-than-expected decline in the Consumer Price Index (CPI). Annual inflation dropped to 1.7%, below the forecast of 1.9% and the Bank of England’s (BoE) target of 2%. This sharp deceleration in price pressures has prompted expectations for an interest rate cut by the BoE. Meanwhile, the Euro has gained ground, benefiting from the softening of the Pound and anticipation of the European Central Bank (ECB) potentially cutting rates further by 25 basis points in its upcoming policy meeting.
Outlook:
With the BoE now expected to shift to a more dovish stance, further weakness in the GBP is likely. If the ECB follows through with its expected rate cut, it could limit the Euro’s gains, keeping GBP/EUR within a narrow range. However, if the ECB delivers a surprise or signals a slower pace of easing, GBP/EUR could see some recovery. In the near term, the pair will likely remain sensitive to further inflation data and central bank actions.
GBP/USD
Summary:
GBP/USD has extended its decline below the 1.3000 level following the release of weak UK inflation data. The annual CPI came in at 1.7%, below the forecast, triggering a sell-off in the Pound. Meanwhile, the US Dollar continues to strengthen, supported by expectations of moderate rate cuts from the Federal Reserve and robust US economic data, such as Nonfarm Payrolls and ISM Services PMI. The combination of soft UK inflation and the firm USD has pushed GBP/USD lower.
Outlook:
GBP/USD is likely to remain under bearish pressure as the market digests the possibility of a BoE rate cut and the Fed’s slower pace of easing. Further weakness in the Pound could push the pair below 1.2900, especially if upcoming US Retail Sales data strengthens the USD further. Unless there is an unexpected positive turn in UK data, the pair is poised for continued downward movement in the short term.
EUR/USD
Summary:
EUR/USD remains pressured below 1.0900 as risk sentiment deteriorates, and the US Dollar continues its upward trajectory. The Euro has weakened ahead of the ECB’s policy meeting, where a 25 basis point rate cut is widely expected. Geopolitical concerns and soft economic data from China have also weighed on market sentiment, pushing the pair lower.
Outlook:
With the ECB expected to cut rates and the Fed showing resilience in US economic data, EUR/USD is likely to face further downside risks. The pair may test support levels near 1.0850, especially if the ECB delivers a dovish outlook. Any signs of improvement in Eurozone data or an unexpected shift from the ECB could provide some relief, but the near-term outlook remains bearish.
AUD/USD
Summary:
AUD/USD has fallen below 0.6700, pressured by weaker-than-expected Chinese trade data and concerns about China’s economic outlook. The Australian Dollar has been struggling as the USD continues to benefit from stronger economic data and moderate interest rate expectations from the Federal Reserve.
Outlook:
The pair could face further downside, particularly if Chinese economic data continues to disappoint. Any improvement in risk sentiment or positive developments in China’s stimulus plans could provide support for the AUD, but for now, the outlook remains bearish as long as USD strength persists.
Final Summary:
The currency market remains driven by a strong US Dollar, supported by resilient US economic data and expectations of moderate Fed rate cuts. Meanwhile, the British Pound has suffered significant losses following weak UK inflation data, fuelling expectations of a BoE rate cut. The Euro is under pressure ahead of an anticipated ECB rate cut, while risk-sensitive currencies like the AUD remain vulnerable to China’s economic performance. Central bank policies will continue to be the main driver of currency movements in the near term.