GBP v EUR fails to build upon yesterday's gains

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waterman
Written by Dan Waterman
August 13th 2025
US interest rate cut chances now at 98% for September..

The Pound has lost most of its gains from yesterday, underlying the frailty of the currency in 2025 so far. Sterling was the second best performing currency in the G10 in both 2023 & 2024, but is the second worst in 2025.

We can't be sure the exact reason for the pullback, but I would hazard a guess that the US inflation report had something to do with it.

The highly anticipated US inflation print yesterday came out as expected, but to the surprise of many. The market responded negatively to the US Dollar with the result (£-$ now at a 5-week high), as it means the impact of tariffs have still not affected inflation.

Therefore it leaves almost no reason for the Fed to not cut by at least 25bp next month as their other job is to protect jobs which is a growing concern. A further 0.25% is now firmly expected by year-end too, the same is predicted for the BoE. But if the US move faster in their cutting cycle, the UK will likely follow.

Current rates stand at 4% in the UK & 4.5% in the US. Over the last 20-years, the BoE tends to be rarely no more than 0.5% away at any moment from the Fed. Something to be aware of. 

Over to the EU & UK GDP results tomorrow..