Published: 14/10/2025 By ECAP
GLOBAL RISK AVERSION
The British Pound weakened amid a deteriorating UK labour market, with payroll numbers falling by 93K from August 2024 to August 2025. In fact, HMRC data showed eight consecutive months of job declines, adding pressure on the Bank of England to cut interest rates. Moreover, market sentiment was further weighed by fiscal uncertainty ahead of Chancellor Rachel Reeves’s budget, expected to include significant tax hikes. As a result, GBP lost ground against both the Euro and the Dollar.
The Euro came under pressure at the start of the week due to renewed political instability in France, following President Macron’s controversial reappointment of Sébastien Lecornu as Prime Minister. Markets viewed the move as a short-term fix, leaving the Euro vulnerable to further political disruption. Additionally, investors remained cautious amid a lack of fiscal clarity, particularly in France. While the Euro gained slightly against a weakening Pound, it fell 0.25% against the Dollar.
The U.S. Dollar saw its strongest investor demand of the year, driven by hedge funds and asset managers buying aggressively, especially against the Pound and Euro. In fact, geopolitical tensions, particularly with China, and the ongoing U.S. government shutdown reinforced safe-haven demand. Looking forward, the upcoming speech by Fed Chair Jerome Powell is a key focus, with markets looking for clarity on future rate cuts. Despite political uncertainty, the Dollar remains buoyed by broad investor support and global risk aversion.
Data supplied by GC Partners