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Will the European FX Majors continue to shine?

EUROPEAN FX MAJORS OUTPERFORM IN 1H 2025

Source: Bloomberg, Macrobond & MUFG GMR

EUR

• ECB policymakers display more concern over EUR strength (6 & 7)
• Scale & pace of recent EUR strength (8 & 9)
• EUR strength reinforcing disinflation in the euro-zone (10)
• ECB rate cuts have become less important headwind for EUR (11)
• US policy uncertainty has boosted relative appeal of EUR (12)
• Portfolio rebalancing & hedging flows contributing to stronger EUR (13)
• Euro-zone basic balance improvement providing more support (14)
• ECB sees opportunity for EUR to play greater international role (15 & 16)
• Opposition to French 2026 budget could weigh on EUR in autumn (17)
• Foreign investors to regain market share in European debt markets? (18)
• EU-US trade policy uncertainty extended into summer (19)

GBP

• Fiscal risks add to headwinds for GBP heading into autumn budget (21)
• OBR describes UK public finances as “relatively vulnerable” (22)
• UK remains reliant on the “kindness of strangers” (23)
• Tax hike speculation could reinforce los of growth momentum in UK (24)
• Sticky inflation continues to favour gradual BoE rate cuts (25)
• Labour market could encourage BoE to speed up pace of rate cuts (26)
• Carry demand for GBP has become less important recently (27)
• UK-US trade deal helps ease downside risks for UK economy & GBP (28)

CHF

• Elevated US policy uncertainty encouraging stronger CHF (30)
• FX reserve holders increase exposure to CHF (31)
• SNB sensitive to CHF strength due to significant inflation undershoot (32)
• What next for SNB policy after rates brought back to zero bound? (33)
• Negative rates & FX intervention would help to dampen CHF strength (34)

MUFG FX Forecasts

• A slower pace of gains for European FX vs. USD (36)
• EUR to outperform GBP & CHF (37)