Market Insight 27-01-2025

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  • Market Insight 27-01-2025

GBP/EUR

  • Summary: GBP/EUR moved slightly higher, trading near 1.1870. Positive UK PMI data provided support for the Pound last week, but gains are capped by concerns over weaker UK inflation and GDP figures.
  • Outlook: As the European Central Bank (ECB) is expected to cut its Deposit Facility rate by 25 basis points on Thursday, EUR may face further pressure. However, dovish expectations for the BoE could limit GBP’s upside.

GBP/USD

  • Summary: GBP/USD trades softer at 1.2460, retreating from last week’s gains. A modest rebound in the US Dollar, driven by risk aversion and Trump’s trade tariff threats, has weighed on the Pound.
  • Outlook: Markets await the BoE’s Quarterly Bulletin and US macro data, including durable goods orders and GDP figures, for further direction. A dovish BoE stance could exacerbate GBP/USD downside risks.

EUR/USD

  • Summary: EUR/USD edged lower, trading around 1.0450, after hitting a six-week high on Friday. Risk aversion supported the US Dollar, while traders remained cautious ahead of the ECB meeting.
  • Outlook: The ECB’s expected rate cut, and President Lagarde’s press conference could drive EUR/USD fluctuations. Meanwhile, US data and Federal Reserve Chair Powell’s comments on Wednesday are likely to provide further cues.

AUD/USD

  • Summary: AUD/USD slipped to 0.6460 as risk-sensitive AUD suffered from concerns over Trump’s policies and weaker-than-expected Chinese PMI data.
  • Outlook: Despite optimism around China’s economic stimulus, AUD may struggle due to external uncertainties. The Fed’s monetary policy decision will also weigh on market sentiment.

USD/CAD

  • Summary: USD/CAD rose near 1.4400 as speculation of US tariffs on Canada drove CAD weakness. Market expectations of a BoC rate cut this week added further pressure on the Loonie.
  • Outlook: USD/CAD could remain under upward pressure, with focus on BoC’s decision and US economic data releases this week.

USD/CHF

  • Summary: USD/CHF climbed above 0.9050, supported by the USD’s safe-haven appeal amid tariff-related uncertainty and global trade tensions.
  • Outlook: Any signs of Fed dovishness or geopolitical developments may temper USD gains, while CHF could remain stable as a risk hedge.

Final Summary

This week holds significant volatility potential with central bank decisions from the ECB and Fed. While the US Dollar benefits from a cautious market mood, the trajectory of GBP, EUR, and AUD will depend heavily on policy signals and economic data.