Home Daily Commentaries Markets await policy directives from the Trump administration

Markets await policy directives from the Trump administration

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.

| Monday 20 January, 2025

Daily Currency Update

President elect, Donald Trump, is expected to issue over 100 executive orders within hours of being sworn in as the 47th President of the US. Aides have said his top priorities are the border, energy and Government spending reform. Markets will keenly watch for any comments on expected tariffs imposed by the new administration and its likely effect on the US Dollar.

In the EU, the ECB council member, Robert Holzmann, said that "a rate cut is absolutely not a foregone conclusion for me". The latest data shows inflation remains well above the ECB's target rate of 2% and the ECB risks ruining it's credibility if it cuts rates while inflation remains elevated. The single currency began the week on a slightly stronger note following these comments, gaining 0.3% this morning.

Weaker than expected UK retail sales and Gross Domestic Product (GDP) released last weak has increased expectations of a rate cut in the UK by February. Markets are now pricing in 75 basis points of interest rate cuts by the Bank of England this year. That said, policymakers are urging caution as rate cuts will be data dependent and conducted meeting by meeting.

 

 

Key Movers

The single currency has dropped over 8% vs the Dollar since September of last year. The interest rate differential is creating challenges for the Euro as rates in Europe are 3.15% vs a lofty 4.5% in the US. The Euro's weakness has been further exacerbated by dovish comments from ECB vice President, Luis de Guindos, who said that the disinflation progress in the Eurozone is progressing favourably in the short term with recent data showing inflation at 2.4%.

The Pound has entered a technical downtrend vs the Euro with upcoming labour market data, due tomorrow, posing fresh risks for the UK currency. Key to the Pound's recent weakness is a slew of economic data which speaks of an economy that has run out of momentum owing to significant taxes placed on business's by the UK Government. Tomorrow's job data will be keenly watched for clues on how many rate cuts can be expected in 2025.

President Trump will be inaugurated later today and markets will be driven by comments and actions taken by the new administration. The US Dollar has started off the week with a slightly softer tone falling 0.3% this morning. Federal Reserve Chairperson, Jerome Powell, has said he expects no interference when they consider fiscal policy irrespective of whether pressure is placed by the Trump administration.

Expected Ranges

  • GBP/USD: 1.2150 - 1.2225 ▲
  • GBP/EUR: 1.1775 - 1.1825 ▲
  • GBP/AUD: 1.9610 - 1.9665 ▲
  • EUR/USD: 1.0280 - 1.0335 ▲

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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