Daily currency update

The European Central Bank (ECB) is widely expected to cut interest rates by 25 basis points on January 30, lowering the policy rate to 2.75%. Despite this adjustment, the ECB’s stance is likely to remain restrictive as inflation gradually moves toward its 2% target.

Markets are now pricing in a series of rate cuts, with expectations of 25 basis points at each of the next four policy meetings, followed by an additional 50 basis points by year-end. If realised, this would bring Eurozone base rates down to 1.5% by December.

This increasingly dovish trajectory is likely to weigh on the euro, amplifying downside risks in the FX market as investors anticipate further monetary easing.

Key movers

Unemployment claims in the US rose to 223k in the week ending January 18, up from the previous week’s 217k. While the increase points to a slight softening in the labour market, it had minimal impact on the US Dollar, which remains firm against its major counterparts.

Market sentiment in the US has turned slightly negative, with concerns mounting over the potential economic impact of upcoming tariffs. However, the marginally negative jobs data was not enough to shift the prevailing demand for the Dollar, which continues to benefit from its safe-haven status amidst global uncertainty.

Expected ranges

GBP/USD: 1.2365 – 1.2465 ↑

GBP/EUR: 1.1775 – 1.1865 ↓

EUR/USD: 1.0475 – 1.0555 ↑

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