Monthly Currency Report Summary – March 2025

Overview: The foreign exchange (FX) market in March was dominated by geopolitical tensions, global trade wars, economic data releases, and central bank policies. The major currency pairs—GBP/USD, EUR/USD, and GBP/EUR—experienced periods of volatility, influenced by shifting risk sentiment and economic indicators. With the ongoing concerns around US tariffs, inflation, and interest rate policies, traders remained cautious but actively responded to emerging trends.

GBP/USD Performance: The GBP/USD pair, commonly known as the ‘Cable,’ demonstrated resilience throughout March, trading within a broad range around the 1.2900–1.3000 levels.

• Early March: The pair began the month on a cautious note, influenced by limited UK data and escalating geopolitical risks. The US dollar saw mixed sentiment as investors assessed inflationary pressures and potential Federal Reserve policy responses. By mid-March, GBP/USD climbed towards 1.3000, testing resistance levels as traders anticipated monetary policy announcements from the Federal Reserve and the Bank of England.
• Mid-March: A brief corrective decline followed after UK GDP figures showed an unexpected contraction, leading to selling pressure. However, the pair found support due to sustained USD weakness. Market sentiment was driven by concerns over US tariff policies and Middle Eastern tensions, with traders looking for further direction from UK inflation and US employment data. The Bank of England remained steadfast in its cautious approach, with some policymakers hinting at potential rate adjustments if inflationary pressures persisted.
• Late March: The Cable maintained an upward trajectory despite some corrections, holding steady above 1.2900. Retail sales data in the UK surprised to the upside, boosting the pair momentarily. However, the uncertainty around US tariff decisions and their potential inflationary effects prevented further upside gains beyond 1.3000. Meanwhile, speculation about future interest rate cuts by the Federal Reserve added further volatility to the pair.
• End of March: The pair ended the month consolidating below 1.2950, with traders preparing for Q2 data releases. The outlook remained cautiously bullish, with upcoming employment data from the US expected to dictate early Q2 movements. The broader FX landscape suggested continued sensitivity to geopolitical risks, with potential implications for GBP/USD’s trajectory.

EUR/USD Performance: The EUR/USD pair saw significant fluctuations throughout the month, heavily influenced by US economic data, European fiscal policies, and global risk sentiment.

• Early March: The EUR/USD opened the month trading near 1.0800, bolstered by optimism surrounding Germany’s fiscal reforms. However, escalating trade tensions between the US and EU, including a 200% tariff on European alcohol imposed by the Trump administration, led to some bearish pressure. The European Central Bank’s cautious stance further complicated the outlook, with policymakers debating potential rate cuts amid sluggish economic growth.
• Mid-March: The pair briefly climbed above 1.0900, reaching levels not seen since late 2024, supported by a weaker USD and speculation surrounding European monetary policy. Despite positive sentiment, technical indicators suggested the pair was overbought, capping further upside movement. Traders closely monitored German inflation data, which showed marginal improvement but failed to drive significant market movement.
• Late March: The pair remained resilient despite market uncertainties, with German inflation data offering slight support. The ECB’s reluctance to signal an aggressive rate-cutting cycle provided some stability, though concerns over sluggish European growth persisted. However, with limited European economic data releases towards the end of the month, EUR/USD was predominantly guided by US fundamentals, including non-farm payroll data and Federal Reserve statements.
• End of March: Holding above 1.0800, the pair stabilized, albeit with cautious trading ahead of key US economic data. The European Central Bank’s (ECB) stance on monetary policy remained a focal point, with traders anticipating further guidance in the coming weeks. Analysts speculated that a dovish shift from the Federal Reserve could provide additional upside momentum for EUR/USD, particularly if US economic data showed signs of cooling.

GBP/EUR Performance: The GBP/EUR pair experienced a mix of gains and losses throughout the month, with traders reacting to shifting risk sentiment between the UK and the Eurozone.

• Early March: The pair tested multi-year highs, briefly approaching 1.2165, driven by GBP strength and speculation around ECB interest rate decisions. However, resistance levels established in previous months prevented sustained upside momentum. The UK’s economic resilience compared to its European counterparts contributed to the relative strength of the GBP.
• Mid-March: A slight downward correction saw GBP/EUR retreat towards 1.1850 as the EUR gained strength against the USD, causing indirect pressure on the pair. With the UK facing weaker GDP growth and the EUR benefiting from fiscal optimism, the pair moved within a tight range. The Bank of England’s cautious approach to monetary policy kept the GBP supported, but external factors dictated much of the price action.
• Late March: The GBP/EUR reached 1.2025 following strong UK retail sales data but struggled to maintain gains due to limited fundamental catalysts. The pair remained exposed to external factors, including US data and risk sentiment shifts. Traders speculated that upcoming inflation reports from both regions could provide further directional clarity.
• End of March: GBP/EUR ended the month in a vulnerable position, with traders hesitant to establish a directional bias. The lack of major UK and European data releases in the final trading sessions led to consolidation near support levels around 1.1900. With Q2 approaching, the pair remained poised for potential volatility, contingent on central bank policies and economic data.

Key Market Influences in March:

1. US Tariff Policies: Ongoing tariff uncertainty from the Trump administration weighed on global markets. The introduction of tariffs on European goods, including alcohol, created volatility in EUR/USD, while broader trade war concerns affected GBP/USD movements.
2. Economic Data Releases:
   • UK: Better-than-expected retail sales data boosted GBP sentiment mid-month.
   • US: Employment data and inflation figures played a significant role in USD strength and weakness cycles.
   • Germany: Fiscal reforms and inflation data supported EUR stability.
3. Geopolitical Risks:
   • Ongoing US-Russia tensions and conflicts in the Middle East influenced risk sentiment, prompting traders to seek safe-haven assets.
   • The US-Ukraine Summit added an additional layer of uncertainty, affecting USD flows.
4. Central Bank Policies:
   • The Federal Reserve’s narrative around interest rates and inflation management kept markets on edge.
   • The European Central Bank’s monetary policy decisions and potential rate cuts were closely monitored.
   • The Bank of England’s stance on inflation and growth prospects contributed to GBP stability.

Market Outlook for April:

• GBP/USD: Traders will closely watch employment data out of the US and potential updates on US tariffs. If the Federal Reserve hints at a more dovish stance, GBP/USD could see further upside towards 1.3050.
• EUR/USD: With limited European economic data in early April, the pair may continue to be influenced by US fundamentals. A break above 1.0950 could open the door for further gains.
• GBP/EUR: The pair remains in a consolidation phase. A break above 1.2050 would indicate renewed GBP strength, while a drop below 1.1850 could shift sentiment towards the EUR.

Overall, April is expected to be another volatile month, with traders adjusting their strategies based on upcoming economic data and geopolitical developments.