FX Outlook
Daily FX Report

Daily FX Report

Pound Nears Key September 2024 High as Euro Gains Stall

Tue 29 April 2025 07:00

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Daria Efanova Head of Research

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EUR / USD

The EUR/USD pair continues to remain elevated, maintaining positions above the critical 1.14 support level as well as technical levels, including the 200-day, 50-day, and 20-day moving averages, with strong institutional interest observed around 1.138. Recent price action shows the euro gaining against the dollar, climbing from 1.136 to 1.142, despite the European Central Bank's growing concerns about euro strength, which has appreciated nearly 10% against the dollar this year.

The pair's upward momentum occurs against a backdrop of moderating inflation pressures in the eurozone, with upcoming German and eurozone inflation data expected to show further cooling, potentially influencing ECB's rate decision in June. Market sentiment has improved following reduced trade tensions and positive signals from China regarding US goods tariff exemptions, though underlying uncertainties persist in the broader economic landscape.

Dollar weakness is helping to maintain the elevated status of the euro, and we expect this to hold in the near term.

USD / JPY

USD/JPY weakened yesterday, with a notable 1% decline from 143.6 to 142.1, indicating strong bearish momentum in the market. The technical picture suggests further downside potential, with immediate support at 139.9 becoming a crucial level to watch if current market conditions persist.

The Bank of Japan's cautious stance on additional rate hikes, maintaining rates at 0.5% despite above-target inflation, has been influenced by mounting concerns over US trade policies, particularly the 25% tariff on Japanese auto exports. Recent diplomatic discussions between US Treasury Secretary Bessent and Japanese officials regarding trade and exchange rates have shown promise, though market participants have significantly reduced their expectations for BOJ rate hikes to just 15 basis points for the remainder of 2025.

The yen's 8% appreciation against the dollar in the past quarter appears primarily driven by safe-haven flows and repatriation rather than monetary policy divergence. We expect that even positive trade developments are still going to keep markets on edge and will likely continue to support the yen's safe haven status.

GBP / USD

GBP/USD jumped higher yesterday, breaking above the key 1.34 level to test the September 2024 high of 1.3434. Sterling benefited from signs of UK economic stability and a broadly weakening US dollar, particularly following the Dallas Fed Manufacturing Index's significant decline to -35.8 in April. Moreover, as the upside for EUR/USD starts to slow down, the pound's role as a hedge against the dollar strengthened, prompting a stronger risk-on appetite during the day.

Despite the Bank of England's relatively dovish expectations relative to the ECB, steady foreign inflows into UK assets bolstered the currency's position. The pair's immediate outlook appears bullish. However, the September 2024 high of 1.3434 is crucial to suggest further gains.

Economic Calendar

29042025

Disclaimer

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This report was prepared with the assistance of artificial intelligence.

A large number of views are being generated at all times and these may change quickly. Any valuations or underlying assumptions made are solely based upon the author’s market knowledge and experience.

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