Published: 16/10/2025 By ECAP
SHIFTING DYNAMICS
The British Pound faces sustained pressure amid slowing UK economic growth and rising fiscal uncertainty ahead of the November 26 budget. GDP rose just 0.1% in August, and July’s growth was revised downward, confirming a stalling economy. Chancellor Rachel Reeves has acknowledged the UK is in a “doom loop” of rising taxes and weak growth. Moreover, markets anticipate a possible interest rate cut from the Bank of England, further weakening Sterling’s outlook.
The Euro has shown resilience amid easing French political tensions and shifting macroeconomic dynamics. Prime Minister Lecornu's compromise on pension reforms reduced near-term political risk, stabilizing investor sentiment. Despite ongoing industrial contraction in the Eurozone, markets welcomed the pause in French turmoil. Ultimately, analysts see the Euro regaining strength against both the Pound and U.S. Dollar, supported by bullish seasonality and potential positioning opportunities.
The U.S. Dollar weakened following dovish remarks from Federal Reserve Chair Jerome Powell, who signalled openness to interest rate cuts amid labour market concerns. Market sentiment turned risk-on, favouring assets like the Pound and Euro over the safe-haven Dollar. With investors now pricing in two rate cuts by year-end and further easing in 2026, USD has lost momentum. Despite prior gains, a shift in Fed tone has undercut near-term Dollar strength.
Data supplied by GC Partners