Monthly Currency Report Summary – April 2025

Overview: April 2025 was a month marked by heightened global market uncertainty, largely driven by escalating tariff tensions instigated by the Trump administration, shifting central bank narratives, and economic data that pushed and pulled market sentiment on both sides of the Atlantic. Across the GBP/USD, EUR/USD, and GBP/EUR pairs, volatility was elevated, as traders juggled inflation, employment, and political headlines with technical signals like RSI and moving averages. The FX landscape leaned heavily into risk-off sentiment during parts of the month, while sharp rallies in certain sessions hinted at ongoing divergence in investor outlooks.

GBP/USD Performance: The GBP/USD pair, commonly referred to as Cable, experienced a dynamic April, oscillating between a 3-year high and retracements driven by profit-taking and shifting US economic narratives.

• Early April: The month opened with the Cable pressured near 1.2900 as USD confidence picked up ahead of anticipated tariff announcements. Following Trump’s formal implementation of tariffs on UK goods, the pair spiked above 1.3150, reaching the year’s high before experiencing volatility around the US Non-Farm Payroll (NFP) data release and subsequent Fed commentary.
• Mid-April: UK data, including weaker average earnings and steady unemployment, added weight to the GBP, despite improved claimant counts. However, traders shrugged off traditional metrics amid a dovish Fed tone and recession concerns in the US. The Cable touched 1.3200 on the back of growing sentiment around a UK rate cut in May.
• Late April: Following some consolidation around 1.3300, the GBP/USD finally broke higher, reaching a 3-year high of 1.3445 before encountering RSI-driven resistance. While trade deal optimism between the US and China cooled the USD rally, caution set in ahead of key US inflation and jobs data, causing a pullback toward 1.3400.

Key Drivers:

• US tariff policies created market jitters early in the month, lifting the GBP as the USD sold off on economic slowdown fears.
• UK retail and inflation data offered short-term support to the GBP but also fuelled speculation of a BoE rate cut.
• Fed Chair Powell’s dovish rhetoric and soft PPI and CPI data capped USD rallies.

Technical Outlook: The pair tested and briefly breached long-term resistance at 1.3445, though RSI levels above 70 indicated an overbought condition, leading to temporary consolidation. Support was found around 1.3200, with technical momentum now contingent on US employment data and May’s BoE policy meeting.

EUR/USD Performance: EUR/USD saw considerable swings through April, shaped by ECB dovishness, German economic sentiment, and US macro developments.

• Start of the Month: Initially subdued below 1.0800, the pair broke out following the Trump administration’s tariffs on EU goods, reaching highs near 1.1400 amid broad USD weakness and speculation that the Fed might deliver an early rate cut.
• Mid-April: Traders consolidated positions ahead of the ECB’s rate decision, where a cut was expected. Strong EUR/USD rallies were capped near 1.1400 due to RSI overbought signals and cautious sentiment around Eurozone fiscal outlook.
• End of Month: The pair moved sideways around 1.1390. German inflation data and modest USD upticks pushed EUR/USD into a tight range. Despite macro headwinds, the pair closed the month with a stable tone, underpinned by resilient Eurozone sentiment and weaker-than-expected US macro indicators.

Key Drivers:

• ECB’s dovish tone was somewhat offset by optimism around Germany’s fiscal reform and a shift in EU defense spending priorities.
• Traders priced in US weakness as PCE and jobs data disappointed market expectations.
• Risk-off sentiment gave intermittent support to the USD, especially when trade war fears softened.

Technical Outlook: EUR/USD tested a multi-month high of 1.1440 before retracing below 1.1390 as RSI signals cooled bullish enthusiasm. Support stood around 1.1300, with the 200-day moving average serving as a key line in the sand. Bulls are looking toward 1.1500 as the next significant resistance level.

GBP/EUR Performance: The GBP/EUR cross saw back-and-forth action in April, mainly dictated by differing momentum between GBP/USD and EUR/USD.

• Early Month: The pair fell to multi-month lows near 1.1550 as the Euro outpaced the Pound during a period of synchronized USD weakness.
• Mid-Month: A short recovery was sparked by improved UK data and RSI signals suggesting the pair was oversold. However, stronger-than-expected EUR/USD rallies capped gains.
• Late Month: GBP/EUR climbed steadily through the final week, driven by a strong GBP/USD rally and stabilizing Euro performance. The pair ended the month near 1.1770 but failed to sustain a break above 1.1800 due to EUR resilience and cautious GBP outlook ahead of BoE policy updates.

Key Drivers:

• Cross-market flows between GBP/USD and EUR/USD.
• Eurozone strength relative to GBP’s vulnerability amid UK rate cut speculation.
• German inflation and PMI data kept EUR in demand despite broader USD weakness.

Technical Outlook: GBP/EUR tested resistance at 1.1800 multiple times without a clean break, indicating a ceiling. Support was found near 1.1650. RSI hovered in the neutral zone, indicating indecision. A breakout above 1.1800 could open the door toward 1.1900, contingent on May BoE announcements.

Macro Themes and Central Bank Narratives:

• Trade War Developments: Tariff drama played a central role in April’s FX volatility. US-imposed levies on EU and UK goods initially weighed on the USD due to recession concerns. However, mid-month optimism around a US-China trade breakthrough strengthened USD briefly.
• Central Banks:
  • BoE: Traders widely expected an interest rate cut in early May, pricing in a 100% probability toward the end of April. However, stronger retail sales and inflation data moderated some expectations.
  • ECB: The ECB signalled a dovish outlook, though economic indicators such as PMI and inflation hinted at some stabilization.
  • Fed: The Federal Reserve’s tone remained dovish throughout the month. Inflation data remained subdued, with Powell reinforcing the need for cautious optimism amid signs of a possible slowdown.
• Market Sentiment and Risk Appetite: Volatility was shaped by fluctuating investor confidence. Equities rallied mid-month, pushing USD higher, while recession concerns and central bank caution fuelled a return to safe havens by month-end.

Outlook for May 2025:

• GBP/USD: With BoE decisions on deck and NFP data in early May, GBP/USD may retest its recent highs at 1.3445. A dovish surprise from the BoE could see a fall toward 1.3200 or lower.
• EUR/USD: The path to 1.1500 remains open if US data continues to disappoint. However, traders are cautious about further ECB easing, which could reintroduce downside risk.
• GBP/EUR: Direction remains range-bound unless a policy divergence emerges. A dovish BoE vs. stabilizing ECB could push GBP/EUR back to 1.1650.

Conclusion: April delivered significant FX market movement, driven by a complex interplay of geopolitics, economic indicators, and monetary policy positioning. As traders look ahead, central bank actions and evolving trade dynamics will remain the critical catalysts for FX pair volatility. Caution, agility, and macro awareness will continue to define successful positioning in May 2025.