01/10/2025
Written by: Ian Morley
Daily Currency Market Update – 20th May 2025
GBP/EUR
Summary: The Euro edged higher on Monday as Eurozone inflation figures remained stable, reinforcing expectations of an ECB rate cut later this year. Meanwhile, Sterling found modest support from renewed UK-EU cooperation, but the pair stayed within a well-defined range.
Outlook: The pair’s movement today will likely hinge on ECB speeches and Germany’s Producer Price Index (PPI). Any dovish signals from ECB officials could weigh on the Euro, while Sterling’s trajectory will depend on forward guidance from BoE policymakers.
GBP/USD
Summary: GBP/USD remains near 1.3360 as the US Dollar struggles following Moody’s downgrade of the US credit rating from Aaa to Aa1. The Greenback weakened further amid expectations of additional Federal Reserve rate cuts later this year, while investors await the UK’s inflation report on Wednesday for clues on BoE policy direction.
Outlook: We will closely monitor Fed officials’ statements today for insights into future monetary policy. Meanwhile, Sterling could see some volatility ahead of Wednesday’s UK Consumer Price Index (CPI) release.
EUR/USD
Summary: EUR/USD consolidated near 1.1250 after rising 0.7% on Monday, supported by US Dollar weakness. The European Commission will publish preliminary Consumer Confidence Index data for May later in the day, which could offer additional guidance on sentiment within the Eurozone.
Outlook: If the Consumer Confidence figures exceed expectations, the Euro could see further upside. However, traders will also pay attention to ECB officials’ comments, which may signal policy shifts.
USD/AUD
Summary: AUD/USD declined to 0.6420 following interest rate cuts by both the Reserve Bank of Australia (RBA) and the People’s Bank of China (PBoC). The RBA lowered its Official Cash Rate (OCR) by 25 basis points, citing risks from global trade tensions, while the PBoC cut its Loan Prime Rates.
Outlook: The Australian Dollar’s movement will depend on broader risk sentiment and developments in US-China trade relations, particularly following Washington’s latest warnings on Chinese tech exports.
USD/CAD
Summary: USD/CAD remains in a tight range near 1.3950 ahead of Canada’s Consumer Price Index (CPI) release. Inflation in Canada is expected to decline sharply to 1.6% in April, down from 2.3% in March, reinforcing expectations for further rate cuts from the Bank of Canada (BoC).
Outlook: If inflation drops more than forecast, the Canadian Dollar could face additional selling pressure. Meanwhile, crude oil prices remain subdued, which may also influence CAD performance.
USD/CHF
Summary: USD/CHF softened to 0.8335 as the US Dollar remained under pressure. The Swiss National Bank’s (SNB) chairman warned that high financial market uncertainty is “poison” for growth, driving safe-haven flows into the Swiss Franc.
Outlook: We will watch upcoming US inflation data and central bank speeches for clues on USD/CHF direction. If Fed officials signal a more accommodative stance, the Greenback could weaken further, supporting the Swiss Franc.
Final Summary
Currency markets are reacting to shifts in central bank policy expectations, with the US Dollar under pressure following Moody’s rating downgrade. Sterling remains stable ahead of the UK’s CPI release, while the Euro is supported by expectations of stable inflation. The Australian Dollar weakened after rate cuts from the RBA and PBoC, while the Canadian Dollar awaits inflation data for fresh direction. Looking ahead, traders will focus on central bank guidance and key economic releases to shape market sentiment.