Home Daily Commentaries FX markets watch closely as President Trump signs over 200 executive orders

FX markets watch closely as President Trump signs over 200 executive orders

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.

| Wednesday 22 January, 2025

Daily Currency Update

President Trump enters office with an ambitious agenda spanning trade, immigration, tax cuts and deregulation which has the potential to boost corporate profits, but it could also fan inflation and force the Federal Reserve into a re-think on interest rate policy. Markets are currently grappling with how will the Trump administration cut costs, reduce inflation and lower interest rates.

The headline German economic sentiment gauge (ZEW) collapsed in January to a low of 10.3 vs a print of 15.7 in December. Adding insult to injury a lack of private household spending and subdued demand in the construction sector continue to stall the German economy. The political landscape in Germany is also worrisome, as coalition building is proving tricky for the Government and this is keeping the single currency on the back foot.

Data released from the UK yesterday were weak, with wage growth firming as the number of jobless increased. There was a 5.6% increase in average weekly earnings but labour growth remains significantly weaker with 35k new jobs being created vs a prior print of 173k which pushed the unemployment rate to 4.4%. The Pound weakened on foot of this economic data as markets increase expectations for the Bank of England to cut rates at their next meeting.

Key Movers

ECB council member, Francois Villeroy de Galhau, said on Tuesday that; "there is plausible consensus that we will act at each meeting to reduce borrowing costs in Europe". He added, that the council remain vigilant on inflation but that they are not concerned and their view is quite assured. Francois also said that if the ECB are decisive with consistent rate cuts there will be clear visibility for the markets which should build confidence. The single currency was surprisingly quiet on foot of these comments suggesting a good degree of negativity is already priced in.

The Pound is likely to remain range-bound as there are no economic data releases today. Markets are now pricing in a 91% chance that the Bank of England will cut interest rates at its next meeting on February 6th. Rates are expected to be cut by 25 basis points to 4.5% and it is expected that borrowing costs will continue to fall as the BoE continue to shore up the UK economy.

US President Trumps plan to impose tariffs on Mexico and Canada allowed safe haven flows dominate the action in financial markets yesterday with the US Dollar gaining strength against its G10 peers. Trump added that he is looking at placing a ten percent tariff on all Chinese goods entering the USA.

Expected Ranges

  • GBP/USD: 1.2300 - 1.2360 ▲
  • GBP/EUR: 1.1805 - 1.1855 ▲
  • GBP/AUD: 1.9635 - 1.9700 ▲
  • EUR/USD: 1.0390 - 1.0440 ▲

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.

View previous day