The Euro (EUR) has joined the Pound Sterling (GBP) in a remarkable turnaround, with both currencies reversing this year’s losses. According to DBS Senior FX Strategist Philip Wee, the EUR/USD appreciated for a third consecutive session by 0.4% to reach 1.1130, marking its best closing level since July 2023.
GBP has been the standout performer this year, with a 2.4% year-to-date gain compared to the EUR’s 0.8% year-to-date increase. Additionally, the Swiss Franc (CHF) has made significant progress in narrowing its losses for the year, reducing from -8.5% at the end of April to -1.4% year-to-date.
Despite the European Central Bank, Bank of England, and Swiss National Bank all cutting rates ahead of the Federal Reserve, they have not provided a clear path for future easing measures. In contrast, the Fed’s June Summary of Economic Projections indicated a plan for 100 basis points of rate cuts in 2025, followed by another 100 basis points reduction in 2026.
Looking ahead, it is predicted that the Canadian Dollar (CAD), known for its stability within the DXY index, will also benefit if the weaker components such as the Japanese Yen (JPY) and Swiss Franc (CHF) continue to recover from their losses earlier in the year.
Analysis and Breakdown
In simple terms, the Euro and Pound Sterling have made significant gains recently, reversing their earlier losses for the year. This is due to various central banks implementing rate cuts, with the Federal Reserve leading the way in projecting future reductions. As a result, currencies like the Swiss Franc and Japanese Yen are also expected to recover from their earlier losses. This shift in currency values can impact international trade, investments, and overall economic stability, making it essential for individuals to stay informed about these market dynamics.