Monthly Currency Report Summary – August 2025
Overview: August 2025 was a month defined by volatility, political interference, and shifting market sentiment across the foreign exchange landscape. The US dollar experienced both moments of safe-haven demand and periods of weakness tied to speculation about the Federal Reserve’s autonomy and future rate decisions. Meanwhile, the British pound faced pressure from domestic fiscal challenges and inconsistent economic data, although it displayed resilience at key support levels. The euro found itself caught between stagnant growth figures and trade-related uncertainty, with traders often reluctant to commit to strong directional bets without clarity from the ECB.
The interplay between these three major currencies created a month of fluctuating ranges, where technical levels such as moving averages and RSI readings often provided the clearest signals in otherwise data-light sessions. Looking ahead, the focus remains on whether the Fed will proceed with a September rate cut, how the Bank of England manages a worsening fiscal outlook, and whether the ECB can provide a clearer framework for its monetary stance into year-end.
GBP/USD:
The pound endured a choppy August, trading in a wide range but failing to establish lasting bullish momentum. The pair often hovered above and below the 1.3500 mark, with traders keenly attuned to developments in US monetary policy and domestic UK fiscal news.
Despite occasional rebounds—particularly after weaker-than-expected US data—the broader narrative leaned bearish. Concerns about the UK government’s spending trajectory and slower-than-expected inflation figures dampened sentiment. Several attempts to rally above 1.3550 met resistance, with upside capped as RSI readings approached overbought levels. Downside pressure intensified whenever strong US labour market or growth figures were published, with the pair slipping towards 1.3400 on multiple occasions.
A notable theme was the recurring tug-of-war between politics and fundamentals. US President Trump’s attacks on the Federal Reserve, particularly his moves to interfere with board members, undermined confidence in the USD at times. However, the pound failed to fully capitalise due to weak UK consumer sentiment and ongoing concerns about public finances. Traders often looked to technical support levels around 1.3400 and resistance at 1.3600, but consolidation phases dominated much of the month.
EUR/USD:
The euro struggled to maintain traction, spending much of August contained between 1.1600 and 1.1700. Despite periodic rallies driven by Greenback weakness, resistance at the monthly trend line repeatedly capped progress. Traders frequently used 1.1700 as a psychological pivot, selling into rallies and buying dips near 1.1600.
ECB policy remained a source of uncertainty. While no immediate cuts were expected for the remainder of 2025, the market has largely priced in that lower rates may be needed in 2026 if growth remains sluggish. Confidence was dented by the EU’s agreement to higher military spending commitments, which added to fiscal concerns at a time of already limited growth momentum.
Technical levels dominated trader behaviour, with RSI metrics suggesting oversold conditions at times but offering little conviction for extended upside. With US inflation and employment data taking centre stage, the EUR often reacted more to Greenback movements than to domestic fundamentals. Looking forward, traders remain wary of the September Fed meeting, with expectations that any signal of easing could push EUR/USD back above 1.1700.
GBP/EUR:
The pound-to-euro cross painted a mixed picture throughout August, often reflecting divergence in each currency’s relative strength against the dollar rather than domestic fundamentals. The pair generally oscillated between 1.1550 and 1.1620, with brief moves beyond those levels proving unsustainable.
At times, the GBP/EUR benefited from the euro’s struggles against the Greenback, allowing the pound to capture modest gains. However, when the euro held firmer ground against the USD, sterling often found itself under pressure. Technical levels such as the 1.1600 marker served as both resistance and support depending on broader market flows, with RSI indicators frequently signalling a lack of momentum in either direction.
Traders often approached the pair cautiously, recognising that while the UK’s fiscal condition raised concerns for the pound, the eurozone’s own weak growth backdrop provided little reason for strong EUR support. This left the cross trading in relatively tight ranges, with volatility often imported from US data releases rather than domestic developments.
Macro Themes
1. US Political Pressure on the Fed
President Trump’s attempts to interfere with the independence of the Federal Reserve—most notably his efforts to remove a board member—raised alarm in global markets. While this periodically weakened the dollar, the effect was limited whenever strong US data supported Greenback resilience. The balance between political noise and economic fundamentals remains a critical factor in market direction.
2. Tariff and Trade Tensions
The month was marked by the imposition of a 50% tariff on certain Indian goods and ongoing uncertainty about US-China and US-EU trade relationships. While these developments occasionally provided safe-haven support for the dollar, they also reinforced expectations of tariff-driven inflation, which could force the Fed’s hand in September.
3. UK Fiscal Outlook
The Labour government’s borrowing commitments and fiscal strategies remained a central concern for investors. Weak consumer sentiment and inflation data reinforced the view that the Bank of England may need to ease policy further, undermining the pound’s attempts at sustainable rallies.
4. ECB Policy Ambiguity
Despite keeping rates steady, the ECB provided little clarity on its longer-term policy outlook. With military spending commitments rising and growth remaining subdued, traders viewed the ECB’s stance as reactive rather than proactive. This left the euro vulnerable to external shocks, particularly from US data releases.
Outlook for September 2025
Looking ahead, the focus is firmly on the Federal Reserve’s September meeting. Markets currently price a high probability of a rate cut, but strong recent GDP and employment data could challenge that consensus. Any deviation from expectations will trigger significant volatility across the majors.
For GBP/USD, the 1.3400 support and 1.3600 resistance levels will remain pivotal. A dovish Fed could lift the pair back above 1.3550, but sustained UK fiscal concerns may cap gains. For EUR/USD, the 1.1600–1.1700 corridor is likely to hold unless the Fed surprises markets, in which case a breakout above 1.1750 could be possible. GBP/EUR is expected to remain rangebound around 1.1550–1.1620, with little domestic impetus to drive a major breakout.
Conclusion
August 2025 reflected the uneasy balance between political interference, economic fundamentals, and technical trading in FX markets. The dollar enjoyed periods of strength but faced persistent questions about the Fed’s autonomy. The pound grappled with fiscal uncertainty, while the euro was constrained by limited growth and policy ambiguity. Traders largely sought stability within established ranges, awaiting clearer signals from September’s data and central bank meetings.
The stage is now set for a potentially pivotal September, with the Fed’s decision likely to dictate the next major directional move across GBP/USD, EUR/USD, and GBP/EUR alike.
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