25/04/2025
Written by: Ian Morley
Daily Currency Update – 19th February 2025
GBPEUR
Summary: The Pound strengthened against the Euro following higher-than-expected UK inflation data. January’s Consumer Price Index (CPI) came in at 3.0% (YoY), surpassing the 2.8% forecast. Core inflation also rose to 3.7%. The stronger data led to speculation that the Bank of England may delay rate cuts, boosting Sterling. Meanwhile, the Euro remains under pressure as markets expect further rate cuts from the European Central Bank (ECB).
Outlook: The focus now turns to UK Retail Sales and PMI data later this week, which could influence the Bank of England’s stance on rate cuts. For the Euro, continued weak economic data could increase expectations for ECB easing, potentially pushing the pair lower.
GBPUSD
Summary: The Pound traded higher against the US Dollar as stronger UK inflation data supported expectations that the BoE may hold rates steady for longer. However, the Dollar remained firm as investors awaited the release of the Federal Reserve’s FOMC meeting minutes. Additionally, Trump’s renewed threats of 25% tariffs on auto, semiconductor, and pharmaceutical imports added to global uncertainty, providing some safe-haven support for the USD.
Outlook: If the FOMC minutes indicate a hawkish stance, the USD could strengthen, limiting further gains for GBP/USD. However, any signals of hesitation on rate cuts from the BoE could keep the Pound supported in the short term.
EURUSD
Summary: The Euro struggled against the Dollar, trading around 1.0450, as expectations for further ECB rate cuts weighed on the currency. US President Trump’s latest tariff threats on key imports, including autos and semiconductors, contributed to risk aversion, supporting the USD. Meanwhile, the Eurozone’s ZEW Economic Sentiment Index slightly missed expectations, adding to the bearish outlook for the Euro.
Outlook: The upcoming FOMC minutes will be key for USD direction. If the Fed signals a cautious approach to rate cuts, the Dollar could see further upside. The Euro remains vulnerable to ECB policy expectations and any further signs of weakness in Eurozone economic data.
USDCAD
Summary: USD/CAD moved higher, trading near 1.4200, as the US Dollar gained strength ahead of the FOMC minutes. Meanwhile, Canada’s inflation data came in at 1.9% (YoY) in January, matching expectations but limiting the likelihood of an immediate rate cut from the Bank of Canada. Oil prices provided some support to the Canadian Dollar, capping further USD/CAD gains.
Outlook: If the Fed remains cautious on rate cuts, USD/CAD could see further upside. However, strong Canadian data or rising oil prices may limit gains for the pair. Market focus will be on upcoming US economic data and any shifts in sentiment regarding the BoC’s rate outlook.
AUDUSD
Summary: The Australian Dollar recovered some losses against the USD despite Trump’s renewed tariff threats. The Reserve Bank of Australia (RBA) recently cut rates, and weaker-than-expected wage growth data reinforced expectations of further easing. However, the USD softened slightly as investors awaited the FOMC minutes.
Outlook: AUD remains vulnerable to risk sentiment and US economic developments. If the Fed signals a firm stance on holding rates, the USD could strengthen, pushing AUD/USD lower. Additionally, any further RBA rate cut signals could weigh on the Aussie Dollar.
USDCHF
Summary: USD/CHF traded lower, hovering near 0.9030, as geopolitical tensions surrounding Russia and Ukraine boosted demand for the safe-haven Swiss Franc. The Dollar remained steady ahead of the FOMC minutes, with traders looking for further guidance on the Fed’s monetary policy outlook.
Outlook: If geopolitical risks persist, safe-haven demand could keep CHF supported. However, a hawkish tone in the FOMC minutes could provide fresh support for the USD. Any unexpected developments in US tariff policy or global risk sentiment will also play a key role in determining direction.
Final Summary:
The Pound gained against major peers following stronger-than-expected UK inflation data, which reduced expectations of immediate BoE rate cuts. The Euro remains under pressure as markets anticipate further easing from the ECB. The US Dollar remains firm ahead of the FOMC minutes, with Trump’s renewed tariff threats adding to market uncertainty. Commodity currencies, including the Australian and Canadian Dollars, remain vulnerable to shifting risk sentiment and central bank expectations.