02/10/2025
Written by: Ian Morley
GBPEUR
Summary:
The Pound weakened against the Euro on Wednesday following the release of softer-than-expected UK inflation data. While GBP had surged to just over 1.17 early in the session, it pulled back as CPI figures showed inflation easing to 2.6% in March, lower than February’s 2.8%. This supports expectations for a Bank of England rate cut in May. Meanwhile, the Euro held steady ahead of the European Central Bank’s policy decision, with markets widely anticipating a sixth consecutive rate cut.
Outlook:
The focus now turns to the ECB’s rate announcement and accompanying comments from President Lagarde. While a 25bps cut is priced in, any signals on future easing could influence the Euro’s direction. For the Pound, rate cut expectations and continued pressure from weak inflation data are likely to keep a lid on gains.
EURUSD
Summary:
EUR/USD rallied to its highest daily close since February 2022 at 1.1400 on Wednesday, supported by a softening US Dollar amid growing concerns over the economic fallout of Trump’s tariffs. However, the pair is consolidating slightly lower in early Thursday trading, hovering near 1.1350.
Outlook:
The ECB’s policy decision will be a key driver today. While a rate cut is expected, dovish language could cap further Euro gains. Conversely, continued US economic uncertainty and cautious Fed commentary may keep the Dollar under pressure.
GBPUSD
Summary:
The Pound edged lower against the US Dollar after retreating from a six-month high of 1.3292 reached on Wednesday. A softer-than-expected UK CPI print fuelled BoE rate cut bets, weighing on Sterling. Meanwhile, the Dollar gained some support from stronger US retail sales data.
Outlook:
Markets will now look to upcoming US data, including jobless claims and housing starts, for further guidance. GBP may remain under pressure if UK rate cut expectations intensify, though broader USD weakness linked to trade tensions could offer support.
USDAUD
Summary:
The Australian Dollar gave back recent gains after a six-day rally, dropping back to 0.6340. Employment data missed expectations, with a rise in the unemployment rate to 4.1% and softer job creation figures. Meanwhile, the US Dollar regained ground on the back of robust consumer spending figures.
Outlook:
With the RBA’s May meeting approaching, the market is pricing in a 25bps rate cut. AUD remains vulnerable to weaker domestic data and global trade concerns, particularly involving China. The trajectory of US trade policy remains a key risk for the Aussie.
USDCAD
Summary:
USD/CAD rebounded to near 1.3885 following a dip on Wednesday after the Bank of Canada kept rates unchanged at 2.75%. Hawkish Fed signals and strong US retail data provided a lift to the Greenback, while rising oil prices helped limit CAD losses.
Outlook:
While the BoC signalled caution amid economic uncertainty, markets are still expecting rate cuts later this year. Oil prices will remain a key driver for CAD, but for now, USD strength may continue to dominate.
USDCHF
Summary:
USD/CHF is trading near 0.8160 after hitting its lowest level since 2011 earlier in the week. Despite a mild recovery, the US Dollar remains pressured by safe-haven demand for the Swiss Franc as trade tensions escalate globally.
Outlook:
With risk sentiment fragile, the Franc may continue to attract demand. However, speculation about potential SNB action to rein in the currency’s strength could limit further CHF gains.
Final Summary:
Sterling has slipped against both the Euro and Dollar after softer UK inflation data reinforced expectations for a May BoE rate cut. The Euro holds firm ahead of today’s ECB meeting, while the US Dollar has shown signs of stabilisation thanks to stronger domestic data. However, Trump’s tariff measures and the global response remain the central theme driving market sentiment.