Published: 19/09/2025 By ECAP
MARKET RESILIENCE
The British Pound is weakening due to growing expectations of further interest rate cuts by the Bank of England and concerns about upcoming government budget decisions. Despite holding rates steady, the Bank signalled confidence that inflation is easing, which encouraged market bets on more cuts. Combined with high inflation, a cooling labour market, and looming tax hikes, analysts expect continued downside pressure on the currency in the near term.
The Euro strengthened as investors sought safer assets amid global uncertainty and UK fiscal risks. Its recent gains against the pound were driven more by market sentiment than fresh Eurozone data. Despite declining producer prices in Germany, the Euro held firm, supported by expectations that the European Central Bank is nearing the end of its easing cycle. This contrasts with ongoing UK rate cut expectations, favouring Euro resilience ahead.
The U.S. Dollar rebounded after hitting a 3.5-year low, as the Federal Reserve cut interest rates but signalled a slower pace of easing than markets expected. Fed Chair Jerome Powell’s cautious tone emphasized inflation risks and labour market concerns, helping the dollar recover. Despite dovish expectations, the greenback gained as investors adjusted to fewer cuts ahead, pressuring other currencies and limiting broader dollar weakness.
Data supplied by GC Partners