06/02/2025
GBPEUR
Summary: The Pound strengthened against the Euro as the European Central Bank (ECB) delivered a widely expected 25 basis point rate cut. The ECB kept its policy statement unchanged, with President Christine Lagarde refraining from committing to future rate moves. Meanwhile, weak Eurozone GDP data added further pressure on the Euro.
Outlook: The market remains focused on potential further ECB rate cuts, which could keep the Euro under pressure. Attention now shifts to upcoming UK data and the Bank of England’s (BoE) policy meeting next week, where a 25bp rate cut is expected. If the BoE signals a more cautious approach to rate cuts, Sterling could find further support.
GBPUSD
Summary: The Pound traded within a tight range against the US Dollar, consolidating around 1.2400 as investors digested US GDP data and Trump’s latest tariff threats. The US economy grew at a slower-than-expected 2.3% in Q4, while jobless claims fell, offering mixed signals for the USD. Market sentiment was also affected by Trump’s social media post, in which he reiterated plans to impose a 25% tariff on Canadian and Mexican goods and threatened 100% tariffs on BRICS nations if they attempt to introduce a new reserve currency.
Outlook: Today’s focus is on the US PCE inflation data, the Federal Reserve’s preferred inflation gauge. If the data comes in stronger than expected, it could reinforce the Fed’s cautious stance and support the USD. However, if inflation slows, expectations for a mid-year Fed rate cut could strengthen, potentially lifting GBP/USD.
EURUSD
Summary: The Euro struggled against the US Dollar after the ECB’s rate cut and weaker-than-expected Eurozone GDP figures. The pair dropped below 1.0400 as traders digested the ECB’s lack of commitment to future rate moves. The US Dollar remained steady despite mixed economic data, with slower GDP growth but lower jobless claims
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Outlook: The next key catalyst for EUR/USD will be today’s US PCE inflation data. A stronger reading could reinforce expectations that the Fed will keep rates elevated, pushing EUR/USD lower. However, any weakness in US inflation data may give the Euro some room to recover, though further downside risks remain due to expectations of more ECB easing.
USDCAD
Summary: USD/CAD hovered just below 1.4500 after retreating from multi-year highs. The Bank of Canada (BoC) cut interest rates by 25bp, as expected, and hinted at more easing, putting pressure on the Canadian Dollar. Meanwhile, Trump’s latest tariff threats against Canada added further uncertainty for the Loonie.
Outlook: The focus now shifts to Canadian GDP data and US PCE inflation figures later today. Any dovish signals from the BoC or strong US inflation data could push USD/CAD higher. However, a recovery in oil prices may provide some support for CAD, limiting further upside for the pair.
AUDUSD
Summary: The Australian Dollar attempted to stabilise after four consecutive days of losses but remained under pressure due to renewed US-China tariff concerns and expectations of an upcoming Reserve Bank of Australia (RBA) rate cut. Trump reiterated that his administration is actively working on implementing tariffs against China, which could weigh on Australia’s trade outlook.
Outlook: Traders will closely watch today’s US PCE inflation data for further direction. A stronger USD could push AUD/USD lower, while weaker US inflation data might allow for a short-term recovery. However, with Australian inflation easing and the RBA expected to cut rates soon, the outlook for AUD remains bearish.
USDCHF
Summary: USD/CHF held above 0.9100, supported by the Federal Reserve’s cautious stance. While the US GDP data was weaker than expected, Powell’s comments reinforced that the Fed is in no rush to cut rates. Meanwhile, geopolitical risks in the Middle East helped support safe-haven demand for the Swiss Franc, limiting USD/CHF gains.
Outlook: The next key driver will be the US PCE inflation data. A higher-than-expected reading could reinforce the Fed’s hawkish stance and push USD/CHF higher. Conversely, weaker inflation data may lead to some USD weakness, allowing the Franc to gain ground.
Final Summary:
Markets are focused on today’s US PCE inflation data, which could have significant implications for Fed rate expectations. The ECB rate cut and weak Eurozone GDP have put further pressure on the Euro, while Sterling is consolidating ahead of next week’s BoE decision. The Canadian and Australian Dollars remain weak amid dovish central bank outlooks and trade concerns. The Swiss Franc is holding firm as geopolitical risks continue to provide safe-haven demand.