June 2025 - Monthly Economic Outlook

Gain an overview of the latest developments on the currency market and anticipate fluctuation risks.

A question of budget

Bond yields have been climbing for several weeks now. Long-term Japanese sovereign bond auctions have gone poorly – with unusually weak demand. On the other side of the Pacific, US rates are on an upward trajectory. The 10-year sovereign rate – the bond market's key barometer – is now very close to the sensitive 5% mark. One final point of concern: liquidity is abnormally low. This suggests that the usual buyers are staying away. The issue? Several developed countries are in the midst of 2026 budget discussions yet the sustainability of public debt is in doubt. Is there cause for concern? The spike in rates is certainly short-lived, with minimal direct impact on currencies. But it could force the most indebted states to quickly implement budgetary measures. If this means raising taxes to cope, that's not good news.

EUR/USD

High: 1.1429 Low: 1.1065 Change: -1.07%

The mistrust of dollar assets continues. Since early March, the yield on 30-year US Treasury bonds has climbed 64 basis points to reach 5.09% – its second-highest level since the 2007-08 financial crisis. Over the same period, the dollar index has fallen 8.1%. Proceed with caution.

EUR/GBP

High: 0.8564 Low: 0.8353 Change: -1.21%

Buyers have regained control in recent weeks. But on a monthly basis, the pair is still in negative territory. In the coming months, it should continue to trade between 0.84 and 0.85 against a backdrop of reduced volatility. Monetary policy shouldn't be a differentiating factor for now. The ECB will cut its key rate by 25 basis points this month – this is already priced in by traders. In contrast, the BoE should only lower its key rate once per quarter.

GBP/USD

High: 1.3594 Low: 1.3375 Change: +0.23%

It obviously won't be a straight line. But it's likely that GBP/USD will rally to the 1.40 level by year-end. Sterling's rise is mainly a direct consequence of traders' mistrust of the US dollar.

EUR/CNH

High: 8.3200 Low: 7.9714 Change: -1.94%

To inject liquidity into the economy, China lowered the reserve requirement ratio of banks in May. The cut is only 10 basis points. This might not be enough to reach the 5% GDP target for 2025. However, this rules out any possibility of yuan devaluation, in our view. Remember that many analysts feared this eventuality in response to US tariffs.

EUR/CHF

High: 0.9437 Low: 0.9293 Change: -0.25% 

Objectively, it's difficult to be negative on the Swiss franc. The Swiss currency is benefiting fully from risk aversion and concerns about public debt that we mentioned in the introduction. Admittedly, the Swiss National Bank aims to play with interest rates, potentially pushing them into negative territory to reduce the franc's appeal. But we know this is far from automatic.

EUR/CAD

High: 1.5821 Low: 1.5483 Change: -1.10%

Profit-taking on the euro. But the upward trend remains intact. The Canadian dollar is being penalised by three factors: the collapse in oil prices (-10% over three months for WTI), trade uncertainty that's already having negative employment consequences, and speculators' net short positioning. No sustainable recovery in sight.

EUR/AUD

High: 1.7890 Low: 1.7241 Change: -0.96%

It's perfectly normal to see profit-taking after a rise of more than 5% since the start of the year. But this doesn't challenge the underlying upward trend, in our view. In terms of monetary policy, no surprises. As expected, the RBA lowered its key rate by 25 basis points to 3.85% in May. Monetary easing is far from over.

EUR/JPY

High: 163.96 Low: 161.08 Change: +0.65%

For now, the euro has the upper hand. But perhaps not for long. Based on the CFTC's Commitment of Traders report, net long positions on the yen are at record levels, particularly from institutional investors. They seem to be betting on an imminent rate hike by the Bank of Japan. We doubt they'll act anytime soon. Watch out for renewed volatility on this pair.

EUR/HUF

High: 406.98 Low: 401.44 Change: -0.19%

No surprises from the Hungarian central bank at its May monetary policy meeting. It kept its key rate unchanged at 6.50% and confirmed a hawkish bias due to concerns about inflationary pressures (both in terms of expectations and price dynamics in services). One point of attention: it also mentioned bank liquidity and tightening credit conditions. This is unusual. It's something to watch closely in the short term. The hawkish tone is obviously rather favourable for the forint. Hence the recent, albeit limited, rise against the euro.

USD/HUF

High: 366.81 Low: 353.25 Change: +0.98%

The dollar rebounded against the forint over the past month. This essentially reflects bargain hunting and also the return of foreign investors – mainly retail – to discounted US stocks. This has structurally supported the dollar's rise. However, it's not certain this will last...

EUR/RON

High: 5.1429 Low: 4.9474 Change: +1.42%

At its May conference, the Romanian central bank governor emphasised exchange rate stability as a priority objective. He half-confirmed direct intervention in the foreign exchange market over recent months without revealing the amounts involved. We estimate that the 6 billion euros mentioned by the press is certainly underestimated. Going forward, the central bank should stay the course and refuse high exchange rate volatility. Continued interventions are likely. The central bank has enough ammunition to do so. Our year-end target for EUR/RON is 5.10.

USD/RON

High: 4.6125 Low: 4.3559 Change: +2.53%

Same phenomenon as against the Hungarian forint. This is essentially a technical dollar rebound. It's not certain this will be sustainable.

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