Intro
The past week mirrors the lacklustre movements of the previous, with the largest being a near 1% swing on CAD/CHF. This reinforces our long-standing bullish sentiment on the Swiss franc, while we remain neutral on CAD.
Look out for the euro interest rate decision this Thursday, which is the main high-impact news event for this week.
Otherwise, my sentiment ratings remain unchanged, but the trouble is in the small print. So, let’s explore!
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
Jobs momentum has faded (+22k in August; jobless 4.3%), and core inflation is easing enough for markets to price a Sept 17 Fed cut, with officials openly discussing a gradual easing path. Near-term rebounds can happen on data beats, but the policy bias now tilts toward cuts and narrower yield support.
Key news to watch: Initial Jobless Claims and Inflation Rate on Thursday
Euro (EUR): Bullish
The ECB held in July with the deposit rate at 2.15%, as euro-area inflation sits at 2.0%, giving Frankfurt room to be patient while the Fed tilts towards easier policy. July’s meeting accounts showed a split but no urgency to cut. This supports the euro on dips if U.S. yields compress first.
There is a 98% chance of an interest rate hold for Thursday’s decision, according to markets.
Key news to watch: interest rate decision on Tuesday.
British Pound (GBP): Neutral
The Bank of England cut the interest rate by 25 bps to 4.00% recently in a razor-thin 5–4 vote. This is, of course, an easing step, but one that still acknowledges sticky service inflation and firm wages.
Hiring has softened, keeping the Bank cautious about the pace of any further cuts. Such a blend caps the topside yet underpins sterling on dips.
Japanese Yen (JPY): Bearish
The Bank of Japan kept policy steady but upgraded its inflation outlook (FY core now 2.7%) and left the door open to resume hikes. If the Fed cuts while the BoJ edges forward, yield differentials should compress—improving the yen’s macro balance from very weak levels.
Australian dollar (AUD): Neutral
The RBA trimmed the cash rate to 3.60% last month and flagged it can ease again as domestic data softens and China-sensitive demand remains uneven. Without a sustained upswing in commodities or China, AUD rallies look tactical rather than trend.
New Zealand dollar (NZD): Neutral
The RBNZ cut 25 bps to 3.00% last week and indicated that more easing is likely as Q2 CPI sits at 2.7% y/y and unemployment rose to 5.2%. With domestic momentum soft and the policy path tilting lower, NZD has a modest downside bias unless global risk sentiment improves.
Canadian dollar (CAD): Neutral
The BoC has held at 2.75%, inflation cooled to 1.7% y/y in July, and the latest labour report showed a sizable job loss with jobless at 7.1%—all of which keep a September cut in play. Oil provides some cushion, but CAD likely chops with USD and data rather than trending hard on its own.
Swiss Franc (CHF): Bullish
The SNB cut to 0% in June, but Swiss inflation is near 0.2% y/y, and safe-haven demand remains supportive; a jump in sight deposits suggests the SNB has been smoothing FX strength, not reversing it. Expect a firm franc with occasional intervention-induced air-pockets.
