**G10 FX Update: August 2025 Analysis Summary**
*Based on content from ING Think, authored by Chris Turner and Francesco Pesole*
The global forex landscape in August 2025 is shaped by a mix of macroeconomic trends, policy shifts, and market expectations surrounding interest rates. Increased volatility, diverging central bank paths, and changing inflationary dynamics are central to currency movements within the G10 space. This article presents a comprehensive analysis of the background, current position, and forecasts for the major G10 currencies, including the USD, EUR, GBP, JPY, CHF, AUD, NZD, CAD, SEK, and NOK.
**Market Overview**
Foreign exchange markets continue to respond to:
– Interest rate differentials and changing forward guidance from central banks.
– Shifting inflation expectations across developed economies.
– Economic resilience in the US, contrasting with weakening growth in parts of Europe and Asia.
– Market pricing of rate cuts or holds through late 2025 and into 2026.
– Geopolitical tensions that affect safe-haven demand and risk sentiment.
**US Dollar (USD)**
– The dollar remains supported by the relative strength of the US economy compared to other G10 countries.
– Though Fed rate cuts are plausible in 2025, the US displays resilience in jobs data and underlying inflation trends.
– The Greenback retains its carry appeal, especially as other central banks initiate more dovish transitions.
– ING projects moderate USD strength through the rest of the year, underpinned by:
– Outsized US yields.
– Steady net capital inflows.
– A soft demand environment in Europe and Japan.
*Forecast:*
– EUR/USD seen moving gradually lower, pressuring the euro.
– USD/JPY may stay above 140 as the interest rate differential with Japan persists.
– Broad USD Index (DXY) could hold firm above 100 until central banks shift more decisively.
**Euro (EUR)**
– Euro remains subdued against the dollar, lacking upward momentum amid weak economic output.
– The European Central Bank (ECB) is closer to monetary easing than tightening due to sluggish activity and fading inflation.
– ING notes eurozone growth is under pressure from:
– Weak industrial output.
– Contraction in Germany.
– Consumer sentiment tightening across the bloc.
– The ECB may cut rates more swiftly than the Fed, diminishing euro yield appeal.
*Risks to the outlook include:*
– Possible upside surprise in eurozone wage data.
– Repricing of ECB rate expectations if Q4 data improves.
*Forecast:*
– EUR/USD is expected at around 1.05 by year-end.
– Key resistance lies at 1.10, while downside remains vulnerable to US outperformance.
**British Pound (GBP)**
– The pound showcases moderate strength, supported by relative UK economic resilience.
– The Bank of England is seen hesitating to cut rates aggressively despite inflation easing.
– ING points to structurally sticky UK wage growth and services inflation as determinants of policy.
– The market struggles to reconcile BoE’s dovish rhetoric with current data.
*Yet, key headwinds remain:*
– Rising current account deficits.
– Political uncertainty heading into 2026.
– Fragile consumer spending.
*Forecast:*
– GBP/USD may fluctuate in the 1.25–1.30 range.
– EUR/GBP could remain anchored below 0.86 in the short term.
**Japanese Yen (JPY)**
– The yen remains weak despite policy normalization steps from the Bank of Japan (BoJ), which ended negative rates earlier in 2025.
– The USD/JPY pair continues to trade above 140, driven by high US rates and stable carry differentials.
– BoJ is cautious on hiking rates too aggressively to avoid economic drag.
– Forward-looking investors must consider risks of intervention, as Japanese authorities openly monitor “disorderly moves.”
*Market concerns:*
– The risk
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