Currency news / January 30, 2025

Over to the ECB

3 min read Thanim Islam

Thanim IslamJanuary 30, 2025

Market snapshot:

BoC cuts rates while the Fed maintains a steady course
ECB to cut interest rates by 25bp later today

Yesterday's currency recap

The Bank of Canada (BoC) cut interest rates by 25bp taking the headline rate down to 3%. The bank dropped its guidance on future rate moves due to the threat Donald Trump's tariffs potentially pose to the Canadian economy, such as diminished growth and higher inflation. As a result, CAD was marginally weaker. Should Donald Trump impose tariffs on Canada over the weekend, then markets see potential for CAD to weaken further.

Yesterday, the Federal Reserve (Fed) took a bold stance holding rates, with Chairman Powell indicating that only clear and undeniable signs of economic easing will prompt further rate cuts. Markets continue to price in two rate cuts this year: 25bp in June and 25bp in December.

Today's GBP rates

Currency pair	Daily move*	Indicative rate**
GBPAUD	0.35%	1.9969
GBPCAD	0.24%	1.7964
GBPCHF	0.30%	1.1284
GBPDKK	0.05%	8.8069
GBPEUR	0.05%	1.1934
GBPJPY	-0.30%	192.9900
GBPNOK	0.04%	14.0422
GBPNZD	0.20%	2.1998
GBPSEK	-0.10%	13.6718
GBPUSD	-0.10%	1.2432

*Daily move - against G10rates at 7:30am, 30.01.25
** Indicative rates - interbank rates at 7:30am, 30.01.25

Key data points

Currency	Event	Period	Consensus	Previous
EUR	ECB Interest Rate Decision	Jan	2.75%	3.00%
EUR	GDP QoQ	Q4	0.10%	0.40%
EUR	GDP YoY	Q4	1.00%	0.90%
USD	GDP Annualized	Q4	2.70%	3.10%
USD	Core PCE QoQ	Q4	2.50%	2.20%
USD	Initial Jobless Claims	Jan 25	225,000	223,000

What we think

Markets have fully priced in a 25bp rate cut by the European Central Bank (ECB) today, taking the headline rate down to 2.75%. The accompanying statement will be the crucial compass guiding us through the ECB's future intentions.

Recent data has suggested that economic activity in Europe has been improving, with inflation rising and markets reducing the amount of rate cuts forecast this year.

Should Lagarde’s comments after the decision align then we could well see the number of expected rate cuts reduce and thus a stronger EUR. We’ll also be looking out for any comments surrounding the threat of Trump tariffs on Europe and what this also means for monetary policy.

The EUR is marginally weaker this morning after German GDP numbers for Q4 came in softer than expected.

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