25/04/2025
Written by: Ian Morley
Daily Currency Update – 18th February 2025
GBPEUR
Summary: The Pound gained against the Euro after stronger-than-expected UK employment data. The UK’s unemployment rate remained steady at 4.4%, beating forecasts of a rise to 4.5%, while employment increased significantly by 107,000. The Euro remains under pressure amid expectations that the ECB will continue its rate-cutting cycle, with policymakers comfortable with three additional rate reductions this year.
Outlook: The focus now shifts to Bank of England Governor Andrew Bailey’s speech and Germany’s ZEW Economic Sentiment survey. If Bailey strikes a cautious tone, it may limit GBP gains. Meanwhile, any further signs of weakness in the Eurozone economy could keep the Euro on the back foot.
GBPUSD
Summary: The Pound recovered from earlier losses following the positive UK labour market report but remains capped below 1.2650. The US Dollar rebounded as US bond yields climbed, with markets adjusting to expectations that the Federal Reserve will hold rates steady for longer due to persistent inflation concerns.
Outlook: The next key data points will be the UK CPI figures on Wednesday and the FOMC minutes later in the week. If UK inflation surprises to the upside, it could boost GBP, while any hawkish signals from the Fed could reinforce USD strength.
EURUSD
Summary: The Euro remains under pressure against the US Dollar, trading near 1.0450. The ECB’s dovish stance, with policymakers comfortable with three more rate cuts this year, continues to weigh on the Euro. Meanwhile, the USD strengthened as rising US Treasury yields supported demand for the Greenback.
Outlook: Market participants will be watching Germany’s ZEW sentiment data and further developments in the ECB’s policy stance. If the data disappoints, EUR/USD could see further downside. Additionally, any Fed commentary reinforcing a cautious stance on rate cuts could push the pair lower.
USDCAD
Summary: USD/CAD remains steady below 1.4200 as traders await Canadian CPI data. The Canadian Dollar is under pressure amid concerns over Trump’s tariff threats and expectations that the Bank of Canada will maintain a dovish stance. However, rising oil prices provided some support to the Loonie.
Outlook: The Canadian CPI report will be the key driver for USD/CAD today. A weaker-than-expected inflation print could push USD/CAD higher, while stronger-than-expected data may offer some relief to the Canadian Dollar.
AUDUSD
Summary: The Australian Dollar remained steady despite the Reserve Bank of Australia cutting interest rates by 25bps to 4.10%, marking the first cut in four years. Governor Bullock suggested that further cuts were not guaranteed, helping to stabilise the AUD.
Outlook: AUD will remain sensitive to global risk sentiment and US economic data. If the Fed signals a prolonged period of tight monetary policy, it could weigh on AUD/USD. Additionally, any escalation in US-China trade tensions could add further pressure.
USDCHF
Summary: USD/CHF traded around 0.9030 as the US Dollar strengthened on higher Treasury yields and hawkish Fed expectations. However, geopolitical risks in the Middle East continue to support safe-haven demand for the Swiss Franc.
Outlook: The Swiss Franc’s movements will be influenced by risk sentiment and geopolitical developments. Any further escalation in global tensions could see CHF strengthen, while continued USD strength may push USD/CHF higher.
Final Summary:
The Pound gained after strong UK employment data, but upcoming inflation figures will be key for its direction. The Euro remains under pressure as expectations of further ECB rate cuts weigh on sentiment. The US Dollar is strengthening on rising Treasury yields, while the Canadian Dollar awaits inflation data. The Australian Dollar held firm despite the RBA rate cut, and geopolitical risks continue to support the Swiss Franc. The focus now shifts to UK inflation data, FOMC minutes, and further developments in US trade policy.