25/04/2025
Written by: Ian Morley
Daily Currency Update – 17th March 2025
GBPEUR
Summary: The Pound weakened against the Euro as disappointing UK GDP data weighed on Sterling. The UK economy unexpectedly contracted by 0.1% in January, raising concerns about future growth prospects. Meanwhile, the Euro found support following Germany’s agreement on debt reform, which includes a substantial increase in state spending.
Outlook: The Bank of England (BoE) is expected to leave interest rates unchanged at 4.5% on Thursday. However, any indication of a slower pace of easing compared to the European Central Bank (ECB) could lend some support to the Pound. For the Euro, developments in German fiscal policy and expectations around ECB rate cuts will continue to influence movement.
GBPUSD
Summary: The Pound remains in a narrow trading range against the US Dollar, hovering around 1.2930. Friday’s weak UK GDP figures have dampened sentiment, but expectations that the BoE will maintain a more cautious approach to rate cuts have prevented a sharp decline. Meanwhile, the US Dollar remains steady ahead of this week’s Federal Reserve meeting, with markets closely watching for signals on future rate decisions.
Outlook: The Fed is widely expected to keep rates steady at 4.25%-4.50%. Market focus will be on Chair Jerome Powell’s comments regarding future rate cuts. If the Fed signals a cautious approach to easing, the USD could strengthen, putting pressure on GBP/USD. Conversely, any dovish signals may provide support for the Pound.
EURUSD
Summary: The Euro is consolidating around 1.0880 as investors await the Fed’s policy announcement on Wednesday. The single currency has been supported by optimism over German debt restructuring and improved sentiment regarding a potential Russia-Ukraine peace agreement.
Outlook: The key driver for EUR/USD will be the Fed’s interest rate decision and economic projections. If the Fed signals fewer rate cuts than expected, the USD could gain strength, pushing EUR/USD lower. However, if Powell acknowledges risks from Trump’s tariff policies and hints at further easing, the Euro could benefit.
USDCAD
Summary: USD/CAD is trading just above 1.4350, with the Canadian Dollar finding some support from rising oil prices. Expectations of multiple Fed rate cuts this year are keeping the USD under pressure, while the market is also closely watching Canadian CPI data for February.
Outlook: If Canadian inflation data comes in higher than expected, it could reduce expectations for BoC rate cuts, strengthening the CAD. On the other hand, if the Fed maintains a cautious stance on rate cuts, the USD could find some renewed support, limiting downside risks for USD/CAD.
AUDUSD
Summary: The Australian Dollar remains under pressure against the US Dollar, despite positive economic data from China. AUD/USD is trading above 0.6330, but risk sentiment remains fragile following Trump’s renewed tariff threats.
Outlook: Market participants are watching for further developments regarding US-China trade relations. If tensions escalate, the AUD could face further losses. However, if Chinese stimulus measures boost market sentiment, the Aussie Dollar may find some support.
USDCHF
Summary: The US Dollar weakened slightly against the Swiss Franc, trading around 0.8845. Safe-haven flows into the CHF continue to limit upside movement for USD/CHF as concerns over geopolitical risks and global trade tensions persist.
Outlook: The Fed’s decision will be key for USD/CHF. If Powell signals a more hawkish stance, the USD could recover some losses. However, ongoing global uncertainties and risk aversion could keep the Swiss Franc supported in the near term.
Final Summary:
Markets are in a holding pattern ahead of key central bank decisions this week. The Fed’s policy statement and economic projections on Wednesday will be the main driver for the US Dollar. The Pound remains under pressure following weak GDP data, while the Euro is benefiting from German fiscal reforms. The Canadian Dollar is supported by higher oil prices, and the Australian Dollar is facing trade-related risks. Safe-haven demand continues to benefit the Swiss Franc.