• [gtranslate]

May 2025 Market Roundup

  • Home
  • May 2025 Market Roundup

Monthly Market Update: May 2025

Currency Movements:

US Dollar (USD)
The US Dollar saw a mixed performance in May. Early in the month, it was supported by the Federal Reserve’s steady policy stance and safe-haven flows amid global uncertainty. However, weaker-than-expected inflation data mid-month and a US credit rating downgrade by Moody’s triggered broad USD weakness. The Dollar struggled toward month-end, weighed down by stagflation concerns and fiscal uncertainty.

British Pound (GBP)
Sterling strengthened notably in May, buoyed by a series of stronger-than-expected economic data releases, including GDP, inflation, and retail sales. Despite the Bank of England delivering a 25bps rate cut early in the month, markets began to push back expectations of further cuts. Trade optimism with the US and an upgraded UK growth forecast by the IMF added to GBP resilience.

Euro (EUR)
The Euro remained under pressure for much of May, as markets continued to price in a rate cut from the European Central Bank in June. Mixed economic data—particularly from Germany—and political uncertainty kept gains capped. Nonetheless, stable inflation figures and a delayed US tariff decision helped the Euro recover some ground by month-end.

Australian Dollar (AUD)
The AUD started the month weaker due to cautious Reserve Bank of Australia sentiment and mixed Chinese data. However, improved Chinese industrial figures and better-than-expected Australian jobs and inflation data allowed the Aussie to recover later in the month.

Canadian Dollar (CAD)
CAD came under pressure early in May due to soft oil prices and concerns over potential US trade barriers. However, it rebounded mid-month thanks to stronger Canadian inflation and retail sales figures. The “Sell America” theme in FX markets also helped CAD gain against the USD.

Swiss Franc (CHF)
The Franc held firm throughout May, supported by persistent safe-haven flows. Despite expectations of a rate cut by the Swiss National Bank in June, US fiscal concerns and global risk aversion kept USD/CHF near multi-year lows.

Events Driving the Market:

  1. Federal Reserve & Inflation Misses
    US CPI and PPI came in below expectations, softening the Dollar mid-month and raising questions about the Fed’s ability to maintain a hawkish stance. Later, concerns over US fiscal sustainability added to USD headwinds.
  2. Bank of England Rate Cut & UK Economic Strength
    While the BoE cut rates by 25bps, the move was offset by stronger-than-expected GDP, inflation, and retail sales. The Pound remained resilient as markets reconsidered the pace of future BoE easing.
  3. ECB Dovish Signals
    The ECB continued to hint at a June rate cut, with policymakers emphasising downside risks to growth. Weak German employment and consumer data reinforced this outlook, keeping the Euro capped.
  4. US Credit Downgrade & Trade Policy
    Moody’s downgrade of the US credit rating mid-month created a wave of Dollar selling. Meanwhile, President Trump’s shifting stance on trade tariffs introduced additional market volatility.
  5. Global Trade Sentiment
    Sentiment improved slightly by month-end as US-China and US-EU trade tensions eased. This supported risk-sensitive currencies like AUD and CAD.

Market Outlook:

Looking ahead to June, all eyes will be on central bank meetings, with the ECB and SNB expected to deliver rate cuts. The Fed’s stance remains data-dependent, while the BoE’s tone will be closely watched for signals on further easing. Trade policy developments and fiscal updates from the US will continue to influence global sentiment and currency flows.

Sterling may remain supported if UK data continues to outperform, while the Euro and Swiss Franc face downward pressure from rate cut expectations. Commodity-linked currencies will be sensitive to Chinese data and global risk appetite.