01/10/2025
Written by: Ian Morley
Daily Currency Market Update – 18th June 2025
GBP/EUR
Summary: GBP/EUR extended its decline to around 1.1690 following the release of softer UK inflation data. Headline CPI eased to 3.4% year-on-year in May, down from 3.5% in April, while core inflation also cooled. The data reinforced expectations that the Bank of England will keep rates unchanged at Thursday’s meeting. Meanwhile, the Euro remains supported by hawkish ECB commentary, with policymakers suggesting the easing cycle may be nearing its end despite geopolitical risks.
Outlook: The pair may remain under pressure if risk sentiment deteriorates further. We will monitor Eurozone HICP inflation and ECB speeches for additional direction.
GBP/USD
Summary: GBP/USD trades near 1.3460 after rebounding modestly from earlier losses. The Pound initially came under pressure from risk aversion and softer inflation data, but found support as markets await the Federal Reserve’s policy decision. The Fed is expected to hold rates steady, though any dovish signals could weigh on the Dollar.
Outlook: Sterling’s direction will hinge on the Fed’s tone and forward guidance. If the Fed signals rate cuts later this year, GBP/USD could regain upward momentum.
EUR/USD
Summary: EUR/USD remains subdued below 1.1500 as geopolitical tensions and rising oil prices weigh on risk appetite. Despite upbeat German ZEW sentiment data, the Euro struggled to recover amid concerns that the Israel-Iran conflict could escalate. The US Dollar gained on safe-haven demand, even as US Retail Sales and Industrial Production data disappointed.
Outlook: The Fed’s policy statement and dot plot projections will be key for EUR/USD. A dovish Fed could ease Dollar strength, offering the Euro some relief.
USD/AUD
Summary: AUD/USD edged higher above 0.6500 after Tuesday’s sharp losses, supported by stronger-than-expected Chinese Retail Sales data. However, the Aussie remains vulnerable to risk-off flows as Middle East tensions persist. Tehran has reportedly urged regional powers to mediate a ceasefire, but markets remain cautious.
Outlook: The Australian Dollar’s trajectory will depend on global risk sentiment and upcoming domestic labour market data. A further escalation in geopolitical tensions could cap gains.
USD/CAD
Summary: USD/CAD holds firm near 1.3680 after rallying on Tuesday amid heightened geopolitical risk. The Canadian Dollar trimmed some losses as oil prices surged to multi-month highs, supported by fears of supply disruption. However, the Greenback remains underpinned by safe-haven demand and anticipation of the Fed’s policy outlook.
Outlook: Crude oil price trends and the Fed’s tone will guide USD/CAD. A dovish Fed could limit further Dollar gains, while geopolitical risks may continue to support the pair.
USD/CHF
Summary: USD/CHF softened to around 0.8160 as safe-haven flows into the Swiss Franc intensified. The pair snapped a three-day winning streak as investors grew increasingly concerned about potential US involvement in the Israel-Iran conflict. The Fed’s decision later today could influence the next leg of movement.
Outlook: If the Fed signals a cautious stance or hints at rate cuts, the Dollar may weaken further, supporting CHF. However, any signs of de-escalation in the Middle East could reduce safe-haven demand.
Final Summary
Currency markets remain dominated by geopolitical tensions, with the Israel-Iran conflict fuelling safe-haven flows and lifting the US Dollar. The Pound weakened following softer UK inflation data, while the Euro struggled despite hawkish ECB rhetoric. Commodity-linked currencies like the Australian and Canadian Dollars are reacting to risk sentiment and oil price movements. The Swiss Franc continues to benefit from safe-haven demand. All eyes now turn to the Federal Reserve’s policy decision and forward guidance for the next major catalyst.