01/10/2025
Written by: Ian Morley
Daily Currency Market Update – 22nd May 2025
GBP/EUR
Summary: GBP/EUR remains range-bound as traders adopt a cautious approach ahead of key economic data releases. Both economies are set to publish preliminary Purchasing Managers Index (PMI) figures today, which could provide further direction. The Pound Sterling continues to receive support from higher-than-expected inflation figures released on Wednesday, reinforcing speculation that the Bank of England may hold off on rate cuts. Meanwhile, expectations for an ECB rate cut in June persist, keeping the Euro under pressure.
Outlook: The PMI figures from the UK and Eurozone will be pivotal in determining short-term movement in GBP/EUR. Any signs of stronger economic activity in the Eurozone could lend temporary support to the Euro, while Sterling may remain buoyant if UK data exceeds forecasts.
GBP/USD
Summary: GBP/USD has edged higher to 1.3450 in early trading, supported by continued weakness in the US Dollar following Moody’s downgrade of the US credit rating. The Greenback remains under pressure as fiscal concerns and expectations of further Federal Reserve rate cuts weigh on investor sentiment. Meanwhile, the UK’s stronger-than-expected inflation data has kept Sterling well-supported.
Outlook: We will be closely watching US PMI figures and Initial Jobless Claims data for further direction. If US economic indicators show signs of weakness, the Dollar could remain under pressure, allowing GBP/USD to extend gains.
EUR/USD
Summary: EUR/USD is hovering near 1.1350, marking a two-week high ahead of the Eurozone PMI release. Market sentiment remains cautious as investors await the European Central Bank’s Monetary Policy Meeting Accounts for further clues on rate adjustments. Meanwhile, continued concerns over US trade policies and fiscal instability weigh on the Dollar, supporting the Euro’s advance.
Outlook: The Euro could gain further ground if PMI figures indicate stronger business activity. However, ECB officials’ policy signals later in the day could influence sentiment, particularly if dovish remarks reinforce expectations of rate cuts.
USD/AUD
Summary: AUD/USD is holding above 0.6420, trimming gains as traders assess global economic data. The Australian Dollar initially strengthened as risk sentiment improved following signs of easing US-China trade tensions. However, softer Australian Services PMI figures have tempered upside momentum.
Outlook: The US PMI release and global trade headlines will be key drivers for AUD/USD in the near term. Any developments indicating a shift in US-China trade policy could impact risk sentiment and affect Aussie movement.
USD/CAD
Summary: USD/CAD remains under pressure near 1.3850 as the Canadian Dollar gains support from rising crude oil prices. Higher inflation figures released earlier this week have dampened expectations of a Bank of Canada rate cut, lending additional strength to CAD. Meanwhile, ongoing concerns about US fiscal policies continue to weigh on the Dollar.
Outlook: Canadian inflation figures and crude oil price trends will influence USD/CAD’s trajectory. The US macroeconomic releases scheduled for today could also create short-term volatility.
USD/CHF
Summary: USD/CHF has extended its downside toward 0.8250 as the US Dollar remains weak amid fiscal concerns. Safe-haven flows into the Swiss Franc have strengthened following renewed uncertainty in US economic policy and global trade developments.
Outlook: The Swiss Franc may remain supported if risk sentiment deteriorates further. We will be monitoring US PMI data and broader geopolitical developments for any shifts in safe-haven demand.
Final Summary
Currency markets remain cautious ahead of key PMI releases from major economies, which could provide fresh insights into business activity and future policy direction. The US Dollar continues to struggle following Moody’s credit downgrade and concerns over fiscal instability. The Pound Sterling remains supported by strong inflation data, while the Euro awaits further ECB policy signals. Commodity-linked currencies, such as the Australian and Canadian Dollars, are reacting to risk sentiment and domestic economic indicators. Looking ahead, we will watch central bank commentary and economic releases for further market movement.