May 8, 2025 – Written by David Woodsmith

STORY LINK Euro to Dollar Forecast: “Remains Range Bound” Between 1.12-1.15

The Federal Reserve’s refusal to consider any near-term cut in interest rates has supported the dollar in global markets with the Euro to Dollar (EUR/USD) exchange rate trading around 1.1300 from 1.1270 lows.

The dollar is still being hampered by fragile underlying confidence.

ING commented; “We think there will be sustained support around the 1.1250-1.130 area in EUR/USD in the near term.”

According to Scotiabank; “EURUSD remains range bound, and its movement since mid-April has been limited between support in the mid-1.12s and resistance above 1.15.”

The Euro could gain some support if the trumpeted UK-US trade deal is short on content.

On a longer-term view, Natixis has an end-2025 EUR/USD forecast of 1.20; “As we anticipate a technical recession in the US economy, the dollar will resume its decline, given that it remains overvalued in terms of real effective exchange rates.”

The Federal Reserve held interest rates at 4.50% at the May meeting, in line with strong consensus forecasts.

Chair Powell commented that inflation and unemployment are both likely to increase due to the impact of tariffs.

Powell repeated recent commented that the inflation and employment goals are liable to be in tension which will make it difficult for the central bank to set policy.

His key message, however, was that the Fed needed to be patient and wait for the economic data to judge the correct policy response.

Commonwealth Bank of Australia head of international and sustainable economics Joseph Capurso commented; “The FOMC does not want to pre-empt changes in the U.S. economy – it wants to wait for ‘hard’ economic data to guide its policy actions.”

He added; “From here, we expect communication from Chair Powell and other FOMC members to focus on making sure inflation expectations are anchored.”

There has been a sharp shift in market pricing with traders considering that the chance of a June rate cut has dipped to near 20%.

As far as US data is concerned, US initial jobless claims declined to 228,000 from 241,000 the previous week and slightly below consensus forecasts of 230,000 while continuing claims retreated to 1.88mn from 1.91mn.

According to ING; “Another hold from the Federal Reserve with an acknowledgement that uncertainty has increased with more upside risk for both inflation and unemployment. This suggests little inclination to move until they are confident of the direction the data is heading, meaning rate cuts could be delayed, but risk being sharper when they come.”

MUFG took a similar view; “We expect the Fed to resume rate cuts when evidence emerges that the US labour market is loosening in response to trade disruption and heightened policy uncertainty supporting our outlook for further US dollar weakness in the 2H of this year.”

According to the bank; “A delay to Fed rate cuts may help to offer some much needed support for the US dollar in the near-term although the link with short-term yield spreads has broken down recently.”

ING noted that the dollar still trades with a sizeable risk premium.

It added; “In EUR/USD that translates into around 4% overvaluation in our estimates, but the path to make markets comfortable with a substantially smaller risk premium isn’t going to be smooth. A constant flow of positive news on trade risk de-escalation is necessary, but probably not sufficient in the face of the damage markets think tariffs are already inflicting on the US economy.”

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• The euro has rallied quite nicely during the trading session on Wednesday against the Japanese yen as we had bounced from a significant support level.
• The 200 day EMA is sitting right there right along with the 50 day EMA in fact, it looks like they are getting ready to cross and that suggests that we are going to see the golden cross soon.
• This is a market that probably tries to go higher based on this, assuming that we have the overall attitude staying in the market, which looks like it is favoring shorting the Japanese yen with some of the better performing currencies such as the Euro.

A rally from here probably opens up the possibility of a move towards the 165 yen level, which has been like a pretty significant ceiling here for some time. If we can clear that level, then we have the chance of breaking out. Underneath, if we were to break down below the moving averages, then we could move down to the 160 yen level, which is basically the middle of the overall consolidation.

Three Levels I am Watching

You’ll notice on the charts that I have the 155 yen level and the 165 yen level drawn out with the 160 yen level right in the middle, you can see where price has flipped there multiple times. The interest rate differential does favor the euro, although not drastically, but at the end of the day, that is something that matters.

Furthermore, I am starting to see the Japanese yen give up some of its grip on other currencies, so that might translate into higher prices here as well. Keep in mind that the Bank of Japan recently flinched when it came time to tighten monetary policy, and it’s difficult to imagine a scenario where traders forget that. I do favor the upside.

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• Ahead of the Bank of England’s announcement today, Thursday, the GBP/USD currency pair is attempting to maintain its upward rebound gains, which reached the 1.3400 resistance level before the pound/dollar price stabilized around the 1.3285 level at the time of writing this analysis.
• According to Forex market trading, market participants appeared cautious, avoiding any significant moves before the Bank of England’s (BoE) widely anticipated interest rate announcement later this afternoon.
• However, Sterling trading found some support, buoyed by optimism surrounding the UK-India trade agreement, which lifted sentiment regarding the UK’s economic prospects ahead of the central bank’s upcoming decision.

Is the British Pound at Risk of a Rate Cut Today?

Forex market experts anticipate a surprise today, Thursday. The Bank of England’s interest rate meeting is widely expected to result in a 25-basis point cut to 4.25%. However, some analysts see a possibility of a more aggressive move. Moreover, what has caught the attention of Bank of England watchers is the unusual number of Monetary Policy Committee (MPC) members scheduled to deliver speeches in the aftermath of the decision.

Typically, the speaker list is distributed over the following weeks. If the British central bank decides to cut the interest rate by 50 basis points, it will need to convey a strong message and narrative for this move. This is because such a cut would come against a backdrop of elevated inflation, pushing the bank further away from its 2.0% target. Therefore, a 50-basis point rate cut would risk its credibility and require policymakers to do some serious “marketing” of the decision.

Regarding currency prices and the British pound, a 50-basis point rate cut would be surprising and would initially lead to a sharp downward adjustment. The pound might soon recover its losses if financial markets perceive the 50-basis point rate cut as a pre-emptive move that reduces the need for further cuts later. This makes the possibility of a rate cut in June plausible and could explain the flurry of messages from MPC speakers in the following days.

More interest rate cuts, at a faster pace, would negatively impact the British pound.

According to some currency experts, “A more dovish update from the Bank of England could cause a setback after the pound’s recent recovery, although the recent dovish repricing would cushion any sterling sell-off if there is a slight change in guidance.” However, economists warn that the bank risks its reputation by trying to boost growth with rate cuts at the expense of its inflation responsibility.

Trading Tips:

Keep in mind that the British pound still has strong factors, and any pullback could be opportunities for bargain hunters to buy.

For his part, Andrew Sentance, a former member of the Bank of England’s Monetary Policy Committee, believes that now is not the right time to cut interest rates, as he expects inflation to rise to 4-5% in the coming months. Higher national insurance contributions for companies are considered a major driver of costs facing businesses, which are expected to be passed on to consumers. Meanwhile, food prices are expected to start rising again, ending a period of negative food price inflation that recently helped the Bank of England.

On the other hand, the British pound will receive support if the Bank of England continues to signal satisfaction with the pace of its current quarterly interest rate cuts. This comes amid continued declines in financial market volatility, as investors remain optimistic about the prospects for trade deals after “Liberation Day.”

Technical Analysis for the GBP/USD pair today:

According to the performance on the daily timeframe chart, the GBP/USD trading has remained on its path to a bullish shift, and the 1.3400 resistance will remain a catalyst and confirmation of the bulls’ strong control. According to the 14-day Relative Strength Index (RSI) reading around the 60 level, this confirms the upward shift but has not yet reached the overbought zone, and the MACD indicator for the 12.26 closing is still in the overbought zone. Over this time frame, a break of the upward trend will not occur without the bears moving the currency pair to the vicinity of the support levels of 1.3240 and 1.3180, respectively. Caution is advised, as if the pound does not gain momentum today, the GBP/USD pair may be subject to profit-taking selloffs.

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• According to Forex market trading, we observed a decline in the Japanese Yen against other major currencies, ending a three-day upward wave.
• This was driven by news of upcoming US-China trade talks in Switzerland, which eased investor concerns and reduced demand for safe-haven assets.
• Sentiment across Asia was boosted by the People’s Bank of China’s announcement of an interest rate cut aimed at stimulating economic growth.
• The USD/JPY pair gained positive momentum, stabilizing around the resistance level of 144.46 at the time of writing this analysis and before the US event. Through our free trading recommendations page, we recommended buying from the support level of 142.50.

Forex traders also closely monitored the progress in US-Japan trade negotiations, with Tokyo striving to reach a bilateral agreement by June. On the economic front, Japan’s April Services PMI was revised upwards, highlighting the strongest increase in new orders in nearly a year. Meanwhile, the Bank of Japan last week kept its benchmark interest rate at 0.5% and lowered its growth and inflation forecasts, indicating that any future interest rate hikes remain unlikely for the time being.

According to currency market trading, the latest developments between China and the United States represent the latest progress in easing global trade tensions, welcomed by global investors who hope these measures will boost economic growth. The Japanese yen, a safe-haven currency, benefited from the escalation of trade tensions following Donald Trump’s announcement of tariffs on “Liberation Day” on April 2, which proved to be more severe than expected.

Trading Tips:

We still recommend buying the dollar against the Japanese yen at every downward trend without risk and monitoring the factors affecting the currency pair.

The US Federal Reserve Keeps Interest Rates Unchanged

As expected, the US Federal Reserve kept its federal funds rate target range unchanged at 4.25%-4.50% for its third consecutive meeting in May 2025, in line with expectations. Officials are adopting a wait-and-see approach amid concerns that President Trump’s tariffs could lead to higher inflation and slower economic growth. At the same time, policymakers noted increasing uncertainty about the economic outlook and rising risks of higher unemployment and inflation. The US central bank also reported that despite the impact of fluctuations in net exports on the data, recent indicators suggest that economic activity continues to expand at a solid pace. The country’s unemployment rate has stabilized at a low level in recent months, and labor market conditions have remained steady. Inflation remains somewhat elevated.

USD/JPY Technical Analysis and Expectations Today:

According to the performance on the daily timeframe chart, the USD/JPY currency pair is still in the early stages of forming an upward channel and currently lacks sufficient momentum to confirm the upward shift. This could occur if the bulls succeed in breaking towards the resistance levels of 145.60 and 147.00, respectively. The MACD indicator for the 12.26 closing suggests an upward shift but has not yet reached the overbought zone, giving the bulls opportunities for an upward rebound. At the same time, the Relative Strength Index (RSI) remains below the midline, confirming that the bulls need more stimulus before confirming the bullish shift.

On the negative side, the bullish outlook for the USD/JPY will be affected by the bears moving the currency pair towards the support level of 142.30 and lower. So far, we still prefer the strategy of buying the US dollar against the Japanese Yen from every downward level.

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• EUR/USD struggles to stabilize above 1.1300 after closing in the red on Wednesday.
• Technical sellers could take action in case the pair breaks below 1.1270.
• Markets see a diminishing chance of a Fed rate cut in June.

EUR/USD came under bearish pressure in the American session on Wednesday and closed the day deep in negative territory. The pair stays on the back foot early Thursday and trades slightly below 1.1300.

The Federal Reserve (Fed) announced on Wednesday that it left the policy rate, federal funds rate, unchanged at the range of 4.25%-4.5% following the May meeting, as widely anticipated. In the policy statement, the US central bank acknowledged that the uncertainty surrounding the economic outlook has increased further.

While speaking during the post-meeting press conference, Fed Chairman Jerome Powell noted that near-term inflation expectations have moved up because of tariffs and reiterated that they need to wait before adjusting the policy. According to the CME FedWatch Tool, the probability of a 25 basis points (bps) rate cut in June dropped to 20% from about 30% before the Fed event. As a result, the US Dollar (USD) gathered strength against its rivals in the American session, causing EUR/USD to push lower.

The US economic calendar will feature the weekly Initial Jobless Claims data on Thursday. Additionally, the Bureau of Labor Statistics will publish preliminary Unit Labor Costs data for the first quarter. In case there is a noticeable decline in the number of first-time applications for unemployment benefits, with a reading near 200,000, the USD could continue to outperform its rivals. On the other hand, a print above 250,000 could have the opposite impact on the currency’s valuation. Nevertheless, investors could refrain from betting on a significant weakening of the USD following the hawkish Fed event.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 50 and EUR/USD closed the last four 4-hour candles below the 100-period, 50-period and 20-period Simple Moving Averages (SMA), highlighting a bearish tilt in the near-term outlook.

On the downside, 1.1270 (Fibonacci 38.2% retracement of the latest uptrend) aligns as immediate support before 1.1175 (Fibonacci 50% retracement) and 1.1080 (Fibonacci 61.8% retracement). Looking north, resistances could be spotted at 1.1380 (100-period SMA, Fibonacci 23.6% retracement, 1.1430 (static level) and 1.1500 (static level, round level).

The GBPJPY pair announced delaying the bearish trading by its stability above the support of the sideways range at 190.75 level, recording some gains by its stability near 191.70, facing the moving average 55.

We expect providing mixed trading, noting that 192.45 level represents an extra barrier that might assist in renewing the negative attempts, to ease the mission of breaking the current support and begin targeting the negative stations that are located near 189.90 and 189.20.

The expected trading range for today is between 191.00 and 192.40

Trend forecast: Sideways

The EURJPY pair didn’t move anything since yesterday, fluctuating again below the barrier at 163.25, confirming the stability of the suggested negative scenario, gathering the negative momentum is important to ease the mission of pressing on the moving average 55, as its stability near 161.45 represents an obstacle against the negative attack.

Reminding you that the price success to reach below the moving average 55 and holding below it will ease the mission of targeting the negative stations, which might begin at 160.85 and 160.20.

The expected trading range for today is between 161.45 and 163.00

Trend forecast: Bearish

GBP/USD pauses rally as traders eye Fed, BoE’s decisions

The Pound Sterling (GBP) retreated after posting back-to-back days of gains versus the US Dollar (USD). Still, positive news related to a possible de-escalation of the China-US tensions lent a lifeline to the Greenback, which remains firm in early trading. At the time of writing, GBP/USD trades at 1.3360, virtually unchanged.Read More…

May 7, 2025 – Written by Frank Davies

STORY LINK Pound to Euro Forecast: Sterling Losses to 1.15 on Bearish Technicals

The Pound to Euro (GBP/EUR) exchange rate spiked to 1-month highs at 1.1815 after the initial failure before a retreat to just below 1.1750 as markets also focus on the Bank of England policy decision.

German CDU leader Merz failed to be elected as Chancellor in the first Bundestag vote on Tuesday, but did secure a win in the second ballot.

According to ING; “We think EUR/GBP may stabilise around 0.850 for now (1.1765 for GBP/EUR) as a well-telegraphed BoE cut should not trigger major moves.”

CitiGroup, however, expects GBP/EUR losses; “Current levels offer good risk/reward for EURGBP longs, where technicals look bullish and the pair has lagged relative ECB-BoE pricing.”

It sees scope for GBP/EUR losses towards 1.1500.

The German coalition was able to amend procedures and Merz was confirmed in a second ballot with 325 votes, above the threshold of 316.

The vote provided initial Euro relief, but there are concerns that the initial rejection is an indicator of wider difficulties

According to ING, events; “are a painful reminder that it will be hard for the incoming government to fulfil the high expectations regarding investments and reforms. It seems that not everyone in the coalition parties has fully understood the sense of urgency towards the necessity of a functioning government.

It added; “Friedrich Merz and his government now face the monumental challenge of restoring economic strength while keeping everyone in their own parties aligned.”

Commerzbank also expressed concerns; “scepticism is appropriate with regard to the large fiscal package that the new government is planning and therefore also with regard to the euro.”

As far as the UK is concerned, trade remains a key influence.

ING noted that a UK-India trade deal was announced on Tuesday and there is speculation that a US-UK deal could be reached this week.

According to the bank; “It’s unclear whether London will be able to negotiate away the 10% baseline US tariffs, but it might be able to secure reductions in the 25% tariff rate on the car and steel sectors.”

ING also notes the importance of UK-EU relations; “Additionally, we’re still focusing on the 19 May UK-EU summit – the first since Brexit. Warming relations with the EU typically sees sterling rally.”

The Pound has been hampered by expectations of a dovish Bank of England (BoE) policy statement on Thursday.

A 25 basis-point rate cut has been fully priced in, but there is the potential for dovish elements with the US tariffs a key factor for the BoE.

Commerzbank commented; “The BoE may lower its growth and inflation forecasts, while at the same time, as in February, there might be two dissenting votes for a larger move.”

BoE forecasts and guidance will be a key element.

Commerzbank added; “If the BoE does indeed remove the reference to gradual rate cuts from its statement, this would increase the scope for faster (and larger) rate cuts than previously expected – taking away one of the pound’s few remaining supporting arguments.”

According to Citi; “GBP remains vulnerable to a pullback in equities, UK fiscal developments, spillovers from US term-premium concerns, and a dovish pivot from the BoE. While this week’s meeting is unlikely to offer that pivot, Citi Economics maintains the BoE will have to accelerate the pace of cuts in 2H25.”

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May 7, 2025 – Written by Ben Hughes

STORY LINK GBP/USD Forecast: Pound to Trade “Back to 1.3445 High” Over Next Few Days

The Pound to dollar exchange rate (GBP/USD) has again found support below 1.3300 and advanced to 1.3365 in early US trading on Wednesday.

The dollar index (DXY) traded around 99.45.

ING expects the dollar will continue to struggle while it expects that markets are too aggressive over near-term Bank of England rate-cut prospects.

It added; “We therefore have a bias that GBP/USD trades back to the 1.3445 high over the next couple of days.”

UoB sees a 1.3240 – 1.3450 range in the short term.

The Federal Reserve will announce its policy decision after Wednesday’s close.

There are very strong expectations that rates will be held at 4.50% as the central bank remains in wait and see mode.

Deutsche Bank commented; “We expect the Fed to keep rates steady and avoid explicit forward guidance about the policy path ahead. The overall tone of the meeting is likely to echo comments from Chair Powell and his colleagues in recent weeks. In particular, the administration’s policies are likely to push the economy away from the Fed’s dual mandate objectives for a period of time but that monetary policy is “well positioned” to respond to the evolving outlook.”

According to Barclays; “We expect Powell to signal the FOMC is in no rush to cut rates. Our baseline call has two 25bp cuts this year, in July and September.

Dollar sentiment remains fragile. According to IG analyst Tony Sycamore; “I don’t think the theme of U.S. dollar weakness is going to change. There’s also a lot of uncertainty from offshore investors as to whether they want to be overexposed or overweight U.S. equities.”

According to ING; “DXY stalled last week exactly where it should have if we are seeing a weak bear market correction.”

Scotiabank notes the number of rate cuts priced in; “Markets are still pricing several cuts into year-end and could be vulnerable to adjustment if Chair Powell leaned toward a brighter outlook.”

ING admitted the risk of stop-loss dollar buying, but added; “Price action has been poor and a drift back to 99.25 in quiet markets will confirm that the dollar is struggling to shake the risk premium associated with uncertain US policymaking.”

Credit Agricole is more positive on the dollar; “The latest divergence between the USD and US rates therefore signals to us that the currency is looking very cheap and should recover, especially if the Fed fails to live up to the still dovish market expectations on Wednesday.”

The Bank of England (BoE) will announce its latest policy decision on Thursday. There are very strong expectations that there will be a 25 basis-point cut to 4.25%.

According to SocGen; “Key data undershooting expectations and tariff risks tilting towards lower growth and inflation make it an easy decision for the MPC.”

Bank of America commented; “Lower inflation and growth forecasts can open the door for faster cuts in the second half of the year. Still, we think the BoE will retain its careful, gradual and meeting-by-meeting guidance while reiterating the need for policy to remain restrictive, in the midst of uncertainty.

It added; “Having said that risks of a dovish pivot in May cannot be ruled out, especially if inflation forecast downgrades are bigger than we expect, opening the door for faster cuts already.

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TAGS: Currency Predictions Pound Dollar Forecasts