Market Insight 23-01-2025

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  • Market Insight 23-01-2025

GBPEUR

Summary:
The Euro has weakened amid expectations of further interest rate cuts by the European Central Bank (ECB), with policymakers signalling dovish intentions. Meanwhile, the Pound is cautiously stable as markets have largely priced in a 25bps rate cut by the Bank of England (BoE) in February.

Outlook:
The Euro could face further pressure if the ECB confirms its dovish stance, with additional rate cuts expected throughout the year. For the Pound, upcoming UK PMI data on Friday will be a key driver, potentially offering clarity on the economic outlook.

EURUSD

Summary:
EUR/USD trades with a mild negative bias near 1.0410, weighed down by US President Trump’s renewed tariff threats against the Eurozone and China. The pair remains pressured by expectations of further ECB rate cuts, which contrast with the Federal Reserve’s relatively stable outlook.

Outlook:
The Euro’s movement will depend on Thursday’s Eurozone Consumer Confidence data and developments around Trump’s tariff policies. If the ECB maintains a dovish tone, the USD may strengthen further, keeping EUR/USD under pressure.

GBPUSD

Summary:
GBP/USD has stabilised above 1.2300, trading around 1.2315, after correcting lower earlier this week. The Pound faces headwinds from concerns about the UK’s economic outlook, while the USD is steady, supported by cautious market sentiment.

Outlook:
The Pound’s direction will hinge on Friday’s UK PMI data, which could signal the pace of economic activity. Meanwhile, the USD may gain support if US Initial Jobless Claims data shows resilience in the labour market.

USDCAD

Summary:
USD/CAD continues to trade positively near 1.4380. The Canadian Dollar remains pressured by weaker-than-expected inflation data and President Trump’s announcement of potential tariffs on Canadian imports.

Outlook:
The pair is likely to remain supported if Canada’s Retail Sales figures, due later today, disappoint expectations. However, a stabilisation in oil prices could limit the CAD’s losses.

AUDUSD

Summary:
AUD/USD trades under pressure, weakened by softer domestic inflation data and concerns about US-China trade tensions. The Australian Dollar has also been weighed down by a decline in mining stocks amid lower commodity prices.

Outlook:
The Australian Dollar could face further challenges if inflation data next week confirms a weaker outlook, increasing the likelihood of Reserve Bank of Australia (RBA) rate cuts. Any escalation in US-China trade tensions could also weigh heavily on the AUD.

USDJPY

Summary:
USD/JPY trades within a tight range around 156.50 ahead of the Bank of Japan’s (BoJ) monetary policy decision. Market participants expect a 25bps rate hike, adding some caution to the Yen’s movements.

Outlook:
The Yen could strengthen if the BoJ delivers a hawkish outlook alongside the expected rate hike. However, continued stability in US Treasury yields may keep USD/JPY anchored in the near term.

Final Summary

Currency markets are stabilising ahead of key data releases and policy decisions. The Euro and Australian Dollar face pressure from dovish central bank expectations and external risks, while the Pound and Canadian Dollar remain sensitive to upcoming domestic data. The US Dollar benefits from cautious market sentiment but remains tied to geopolitical developments, including President Trump’s tariff announcements.