Market Insight 20-01-2025

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  • Market Insight 20-01-2025

GBP/EUR

Summary:
GBPEUR trades near 1.1810 in early European trading, with the pound under pressure due to weak UK data increasing expectations of Bank of England (BoE) rate cuts. The European Central Bank (ECB) continues to emphasise gradual rate reductions amid economic uncertainty, while softer UK inflation and slowing economic growth reinforce BoE rate cut bets.

Outlook:
The ECB’s cautious approach may provide stability for the euro, but further rate cuts in the UK could weigh on the pound in the short term. Market focus will shift to the UK employment data on Tuesday, which could offer more direction for the pair.

GBP/USD

Summary:
GBP/USD has gained modestly to trade near 1.2180 as the US dollar weakens ahead of Donald Trump’s second inauguration. However, weak UK retail sales and GDP figures have capped significant gains for the pound.

Outlook:
Expectations for a 25-basis-point BoE rate cut in February and concerns over the UK’s fiscal outlook may limit further upside for GBP/USD. Meanwhile, the US Federal Reserve’s potential hawkish stance and Trump’s policies could provide some support for the dollar, keeping the pair range bound.

EUR/USD

Summary:
EUR/USD has risen above 1.0300 as the US dollar weakens amid a risk-on sentiment ahead of Trump’s inauguration. Speculation about Trump’s tariff policies and their inflationary impact has also contributed to dollar softness.

Outlook:
While ECB policymakers are expected to deliver further rate cuts, the market remains cautious about the impact of US tariffs on Eurozone inflation. The pair could remain volatile, with any surprising policy announcements from the Fed or ECB likely to drive movement.

AUD/USD

Summary:
The Australian dollar is holding its ground against the US dollar, supported by strong economic data from China, including robust GDP growth and retail sales figures. However, concerns over Trump’s policy pledges are keeping the market cautious.

Outlook:
AUD/USD may face headwinds as expectations grow for Reserve Bank of Australia (RBA) rate cuts next month. Market participants will be watching the upcoming Australian inflation report for clues on the RBA’s next move.

USD/CAD

Summary:
USD/CAD has retreated slightly after reaching multi-year highs. A weaker US dollar and easing Middle East tensions have weighed on crude oil prices, limiting gains for the Canadian dollar.

Outlook:
Investors remain cautious ahead of Trump’s inaugural address, which could bring further clarity on US economic policies. Crude oil price fluctuations will continue to influence the commodity-linked Canadian dollar, while Fed rate expectations could provide additional direction for the pair.

Final Summary:


Today’s market activity is largely influenced by political and economic events surrounding Donald Trump’s second inauguration. Investors remain cautious as they await clarity on potential US tariff policies and central bank rate decisions. With upcoming economic data releases, including UK employment figures and Australia’s inflation report, further market movement is expected in the coming days.