25/04/2025
Written by: Ian Morley
Daily Currency Update – 28th February 2025
GBPEUR
Summary:
The Pound strengthened against the Euro on Thursday, with GBP/EUR breaking 1.21. Despite dovish expectations around the Bank of England’s upcoming policy decisions, the Pound found support from stronger-than-expected UK business confidence data and ongoing optimism around the UK’s economic outlook following recent positive trade discussions. The Euro, meanwhile, struggled under the weight of Trump’s threats of tariffs on European goods and further signs of economic slowdown across the Eurozone.
Outlook:
The focus for this pair remains on central bank policy divergence and external risks. While markets expect the BoE to cut rates this year, recent data has given some hope that the UK economy may avoid a deeper slowdown, which could limit the scale of those cuts. For the Euro, attention will remain on the risk of escalating US-EU trade tensions and the potential for further ECB easing later in the year. Overall, GBP could retain a slight edge if UK data holds firm and no fresh Brexit-style concerns re-emerge.
GBPUSD
Summary:
GBP/USD slipped below 1.2600 on Thursday, extending losses into Friday morning. The Pound faced pressure from the same trade-related concerns after Trump’s meeting with PM Starmer, while the US Dollar continued to benefit from safe-haven flows driven by Trump’s tariff agenda. Data showing solid US Q4 GDP at 2.3% provided additional support for the Dollar.
Outlook:
With the US PCE inflation data due later today, GBP/USD could see further movement depending on whether the data reinforces the view that the Federal Reserve will hold rates steady for longer. If inflation surprises to the upside, the Dollar could strengthen further, keeping GBP/USD under pressure. At the same time, BoE rate cut expectations remain a drag on the Pound, limiting any recovery.
EURUSD
Summary:
EUR/USD fell sharply on Thursday and continued to trade below 1.0400 on Friday morning. The Euro was weighed down by Trump’s tariff threats against the EU, which added to broader risk aversion. While German retail sales data showed a modest monthly gain of 0.2%, it was not enough to lift the Euro, especially with the US Dollar benefiting from safe-haven flows and solid economic data.
Outlook:
Today’s US PCE inflation data will be the key driver for the pair. Strong inflation data could reinforce the Fed’s cautious stance, boosting the Dollar further. Meanwhile, expectations for another ECB rate cut, potentially as soon as March, will likely cap any meaningful upside for the Euro.
USDCAD
Summary:
USD/CAD climbed for the sixth consecutive day, trading near 1.4450 after Trump confirmed that 25% tariffs on Canadian goods would go into effect on 4th March. This, combined with softer oil prices, continued to weigh on the Canadian Dollar. Strong US data and the Fed’s reluctance to signal near-term rate cuts also supported the Greenback.
Outlook:
With the PCE data and Canadian GDP both due today, the pair could see some volatility. Any signs that US inflation is remaining sticky could push USD/CAD higher, particularly with ongoing trade risks acting as a further headwind for the Canadian Dollar.
AUDUSD
Summary:
AUD/USD fell over 1% on Thursday, extending its losing streak to five days, and continued to weaken into Friday. Trump’s reaffirmation of additional 10% tariffs on Chinese goods weighed heavily on the China-linked Aussie. Domestic data also disappointed, with private capital expenditure unexpectedly contracting in Q4, adding to the bearish pressure.
Outlook:
Further downside could be on the cards for the Aussie if the US PCE data comes in strong, reinforcing the Fed’s cautious stance. Additionally, any further trade-related headlines targeting China will likely add to the AUD’s struggles, given Australia’s close economic ties with China.
USDCHF
Summary:
USD/CHF edged higher to near 0.9000 as the Dollar benefitted from safe-haven flows amid rising global trade tensions. Trump’s confirmation of upcoming tariffs on Mexico, Canada, and China reinforced support for the Greenback. However, softer Swiss inflation data has increased expectations of further rate cuts from the Swiss National Bank, limiting the Franc’s upside.
Outlook:
The PCE data will be a key driver for USD/CHF today. If inflation data supports the Fed’s view that rates will need to stay higher for longer, USD/CHF could push higher. However, any escalation in geopolitical tensions or a risk-off shift could bring safe-haven flows back to the Franc.
Final Summary:
The market’s attention is firmly on today’s US PCE inflation data, which will guide expectations for Fed policy. Trump’s escalating tariff threats against Canada, Mexico, the UK, and the Eurozone continue to drive safe-haven demand for the US Dollar. The Pound and Euro remain under pressure from both domestic rate cut expectations and external trade risks, while the Australian and Canadian Dollars face additional strain due to trade tensions and weaker domestic data. Volatility is likely to remain elevated into next week.