Home Daily Commentaries ECB accepts Bulgaria as 21st sovereign country to adopt the single European currency

ECB accepts Bulgaria as 21st sovereign country to adopt the single European currency

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Friday 6 June, 2025

Daily Currency Update

The ECB cut interest rates for the eighth time in a year yesterday while acknowledging that inflation was under control, but warned that economic activity in Europe is falling amid risks of a trade war with the United States. Yesterday’s cut lowers the rate the ECB pays for bank deposits to 2.0% which is the middle of a range they call “neutral.” This means they are neither curbing nor boosting the Eurozone economy growth. They added that with the exceptional uncertainty overshadowing markets they are continuing a “meeting-by-meeting” approach.

Few British business’s now expect to be directly affected by recent changes in US trade policy, with only 12% naming it as one of their top three sources of uncertainty, down from 22% only one month ago. Echoing this reduced concern, Bank of England Governor, Andrew Bailey, said domestic wage pressures and price increases are significantly more important that US trade policy when they consider future reductions in borrowing costs.

In the US, data released this week showed the US services sector contracted in May for the first time in nearly a year and also showed a slowing labour market, which spurred a rally in US Treasuries and has fundamentally increased the chances of more Fed rate cuts this year. Rising US debt, slowing growth and the implementation of tariffs have led to a 9% drop in the Dollar this year on a trade weighted basis. This trend is likely to continue until the Federal Government set plans to reduce the US fiscal deficit.

Key Movers

European policymakers gave Bulgaria the go-ahead to adopt the Euro currency from the start of 2026 and this will make Bulgaria the 21st country to join the single currency. The commission added that Bulgaria met the formal criteria to join the already 347 million Europeans in 20 countries who use the Euro. Executive board member, Philip lane, said he “wished to congratulate Bulgaria on its tremendous dedication to making the adjustments needed to adopt the single currency.”

The Pound rose 0.2% vs the Dollar yesterday outperforming most of its G10 counterparts and is up at multi-year highs. The Bank of England have stated that they are cautiously neutral on interest rates and are leaning toward unchanged when they next set monetary policy on the 19th June. Governor Bailey added that the council are; “willing to provide additional easing if required.” What has fundamentally strengthened the Pound vs the Dollar is bond yields between the UK and US which have widened considerably since markets have become concerned with spiralling US debt.

Later today US payroll figures will reveal the state of the labour market with analysts expecting fewer jobs to be added. The Trump administration announced a slew of tariffs on April 2nd this year, only to pause some and declare new ones, leading investors to look for alternatives to US assets and there has also been a lack of progress hashing out deals ahead of a July tariff deadline. Trump reiterated his call for the Fed to reduce borrowing costs further stoking worries about the independence of the US central bank which has also directly unsettled investors.

 

Expected Ranges

  • GBP/USD: 1.3525 - 1.3575 ▲
  • GBP/EUR: 1.1820 - 1.1870 ▲
  • GBP/AUD: 2.0830 - 2.0880 ▲
  • EUR/USD: 1.1405 - 1.1455 ▲

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.

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