Intro
It was another mild week as predicted in our last report. The largest rise was just above 1% for the USD/JPY pair. JPY was the weakest currency, with our latest sentiment reflecting some changes compared to recent reports.
There are two interest rate decisions this week, along with the usual high-impact news events for USD at the start of every month.
Let’s explore our sentiment ratings for each major currency in forex.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
The USD faces pressure due to high federal deficits, rising debt-to-GDP ratios, Trump’s proposed tariffs, a contracting economy, and declining consumer sentiment. Moody’s also downgraded the US credit rating a few days ago.
Also, JP Morgan anticipates continued dollar softness throughout 2025.
Key news to watch: Nonfarm Payrolls and unemployment rate on Friday.
Euro (EUR): Neutral
The European Central Bank (ECB) is expected to cut the interest rate this week, indicating a cautious approach to monetary easing.
Eurozone growth forecasts have been revised downward due to uncertainties stemming from U.S. trade policies and weakness in manufacturing. However, the euro has gained ground against USD amid these.
Key news to watch: interest rate decision on Thursday.
British Pound (GBP): Bullish
UK retail sales have outperformed forecasts, and the pound has reached a three-year high, indicating strong economic momentum.
The pound’s strength is partly attributed to a weakening U.S. dollar, resilient GDP growth, strong wage increases, and favourable trade dynamics.
Japanese Yen (JPY): Neutral
The Japanese yen has shown mixed performance. While it has appreciated against the US dollar earlier in the year, recent developments have led to a more neutral stance.
The Bank of Japan has begun a modest tightening cycle, and the Nikkei share average is projected to rise approximately 5% by the end of 2025, indicating investor confidence . However, ongoing global trade policy ambiguities and past market swings linked to U.S. economic concerns contribute to a cautious outlook.
Australian dollar (AUD): Bearish
The Australian dollar has faced downward pressure due to weak domestic macroeconomic data. Retail sales unexpectedly declined by 0.1% in April, and building permits also fell short of forecasts.
The Reserve Bank of Australia is likely to maintain its dovish monetary stance in response.
New Zealand dollar (NZD): Bearish
The New Zealand dollar has underperformed ahead of the Reserve Bank of New Zealand’s (RBNZ) policy update.
The RBNZ lowered its rate track forecast, indicating further cuts are likely beyond the move in May. This follows a previous 25-basis-point cut in April, with further cuts signalled throughout the year. Additionally, business confidence has softened in the wake of US tariffs.
Canadian dollar (CAD): Neutral
Canada’s economy shows resilience, supported by strong commodity exports, particularly oil. Trade relations with the U.S. remain stable, but global economic uncertainties could impact CAD.
Additionally, the Bank of Canada recently held its interest rate (but is expected to cut this week).
Key news to watch: interest rate decision on Wednesday; unemployment rate on Friday.
Swiss Franc (CHF): Bullish
CHF has surged to a decade-high against the dollar, driven by global trade tensions and investor demand for safe-haven assets. The Swiss National Bank faces pressure to manage the franc’s strength, with speculation about the potential reintroduction of negative interest rates.
