06/02/2025
Written by: Ian Morley
GBPEUR
Summary:
GBPEUR remains steady near 1.1835 during early European trading. The Euro faces headwinds following US President Donald Trump’s tariff threats against the EU, which have raised concerns about economic repercussions. Meanwhile, the Pound faces pressure from rising UK unemployment and growing expectations of a rate cut by the Bank of England (BoE).
Outlook:
The Euro may remain under pressure if Trump’s tariffs materialise, while the Pound’s near-term direction will depend on the BoE’s February meeting. Market pricing suggests a 91% chance of a 25bps rate cut, potentially weighing on GBP further. Traders will also watch for any developments from the ECB’s upcoming meeting and speeches.
GBPUSD
Summary:
GBP/USD holds above 1.2300 but has edged lower as the US Dollar regains strength. Trump’s less aggressive tariff proposals compared to campaign rhetoric have eased market concerns, moderating safe-haven demand for the Dollar.
Outlook:
The Pound could remain volatile as markets assess Trump’s next moves on tariffs. The Dollar’s outlook hinges on whether the Federal Reserve keeps interest rates steady, as expected, and whether inflation remains under control. GBP traders will focus on UK data, including preliminary PMI figures later in the week.
EURUSD
Summary:
EUR/USD trades with mild losses around 1.0415, pressured by Trump’s tariff threats and dovish expectations from the European Central Bank (ECB). The Eurozone economy faces challenges as markets anticipate a potential rate cut at the ECB’s January meeting.
Outlook:
The Euro’s downside may persist if Trump escalates tariff measures or if the ECB signals a more accommodative stance. Any unexpected hawkishness from ECB President Lagarde during her speech at the World Economic Forum could provide temporary support to the currency.
USDCAD
Summary:
USD/CAD remains in positive territory around 1.4350. The US Dollar benefits from a modest rebound, while the Canadian Dollar is pressured by falling oil prices and expectations of further Bank of Canada (BoC) rate cuts.
Outlook:
The pair’s direction will depend on developments in US trade policy and oil market dynamics. While the BoC’s dovish stance could weigh on the CAD, any stabilisation in oil prices might cap losses. The USD is likely to remain sensitive to risk sentiment and geopolitical developments.
AUDUSD
Summary:
AUD/USD struggles amid renewed US tariff threats against China, Australia’s largest trading partner. The Australian Dollar remains under pressure, with softer domestic inflation data and expectations of an imminent Reserve Bank of Australia (RBA) rate cut adding to its woes.
Outlook:
The AUD may face further challenges if tensions between the US and China escalate. However, the currency could see a rebound if Australia’s upcoming inflation report exceeds expectations, reducing the likelihood of aggressive RBA easing.
USDCHF
Summary:
USD/CHF trades higher around 0.9070, supported by renewed US Dollar strength following Trump’s tariff remarks. The Swiss Franc’s safe-haven appeal remains intact due to ongoing geopolitical tensions between Russia and Ukraine.
Outlook:
While the USD could gain further if inflationary risks deter the Federal Reserve from cutting rates significantly, the CHF may continue to benefit from geopolitical uncertainties. Markets will watch for signals from the Swiss National Bank (SNB) on future policy directions.
Final Summary
Currency markets remain sensitive to geopolitical risks and central bank policies. US President Trump’s tariff threats dominate sentiment, while economic data and central bank meetings in the coming weeks will drive volatility. The US Dollar shows resilience, but caution is warranted as markets navigate these complex dynamics.