FX weekly forecast: Dovish BoE rate cut to weaken the pound?
Philip McHugh May 6th 2025 - 2 minute read
US trade policy uncertainty continued to infuse volatility into the currency market last week, with trade in the US dollar proving particularly choppy as investors weighed the risks of a US recession and a slight easing of US-China trade tensions.
Pound (GBP)
A 25bps rate cut from the Bank of England (BoE) is expected this week. GBP investors have already priced in the cut, so the bank’s forward guidance will drive any resulting movement in the pound (GBP). A dovish outlook may sink Sterling in the latter half of the week.
Euro (EUR)
Germany’s latest industrial figures will likely be the focus for EUR investors this week. Any signs of weakness in the country’s most important sector could limit demand for the euro (EUR).
US dollar (USD)
The Federal Reserve will deliver its latest interest rate decision this week. No policy changes are expected from the bank this month, but the US dollar (USD) may weaken if the bank raises concerns regarding the recent slump in US GDP.
Australian dollar (AUD)
A stronger mandate for the Labor government following the recent federal election boosted the Australian dollar (AUD) at the start of this week. But the ‘Aussie’ may struggle to consolidate these gains if market risk appetite softens in the latter half of the session.
South African rand (ZAR)
The South African rand (ZAR) is likely to be driven by broader market trends this week in the absence of any notable domestic data. A cautious mood could see ZAR give ground in the coming days.
Canadian dollar (CAD)
The Canadian dollar (CAD) may face headwinds later this week as Canada’s latest jobs report is expected to reveal that unemployment rose to a five-month high in April.
New Zealand dollar (NZD)
New Zealand will also publish its latest jobs report this week, with the New Zealand dollar (NZD) poised to slide if unemployment continued to climb in Q1.
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Written by
Philip McHugh