Intro
This past week was quite telling and has led me to alter some of my sentiment ratings. The Aussie and USD were among the strongest currencies, necessitating a re-evaluation of previous biases.
While AUD remains neutral (but technically leaning slightly bullish), it boosts my NZD rating from bearish to neutral. The upcoming interest rate decision for the Australian dollar on Tuesday should have a notable impact.
Although there are a few bearish factors for USD, its recent price performance inclines me to switch to a neutral stance.
Let’s explore these changes and more in our latest sentiment report.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Neutral
Softening U.S. labour and cooler September CPI keep the Fed in easing mode after its September rate cut. Officials and markets are now openly debating another year-end reduction.
Still, the U.S. economy continues to show pockets of resilience, as reflected in the charts over the past few weeks.
Key news to watch: Initial Jobless Claims on Thursday; Nonfarm Payrolls and unemployment rate on Friday
Euro (EUR): Bullish
The ECB has now held the deposit rate at 2.00% for multiple meetings (most recently last Thursday) and is openly describing policy as “appropriate,” not urgent to cut.
Recent projections still see euro area inflation averaging about 2.1% in 2025, with core drifting lower, and growth was actually revised up to roughly 1.2% in 2025 from 0.9%, implying the bloc is stabilising rather than stalling.
British Pound (GBP): Bearish
The UK’s slow economic growth and sticky inflation have been unhelpful for the pound. Fiscally, the backdrop is also challenging with looming tax increases and high debt-servicing costs.
The BoE has signalled a cautious stance by not rushing into deep cuts. This aligns with the expectation of a rate hold on Thursday. While we shouldn’t expect a near-term ‘crash,’ the pound still remains vulnerable or pressured by other underwhelming fundamentals.
Key news to watch: interest rate decision on Thursday
Japanese Yen (JPY): Bearish
While there are pockets of strength (inflation > 2%, export competitiveness), the balance of risks tilts toward yen weakness. We have weak external demand, slow growth, policy ambiguity, and real-income squeeze from import cost inflation.
Unless Japan breaks out of its growth/trade slumber or the BOJ commits to a clear hawkish path (which markets currently doubt), JPY is more likely to underperform rather than rally strongly.
Australian dollar (AUD): Neutral
The RBA has already eased this year, signalling data-dependence rather than a hard dovish run. Australia’s domestic story is mixed: unemployment has drifted higher and activity is cooling, but monthlies show inflation re-flickering around the 3% handle.
On the bright side, a tight labour market, controlled inflation, and a medium-term growth path have supported AUD on the charts.
Key news to watch: interest rate decision on Monday
New Zealand dollar (NZD): Neutral
New Zealand’s central bank surprised markets with a 50-bps cut recently and said more easing is possible, especially given the weak domestic momentum.
However, inflation has reached the top of their target band, which might suggest less urgency to cut policy in the very near term. NZ’s trade-exposed economy offers upside if global commodity demand or China recovery resurfaces.
Canadian dollar (CAD): Neutral
The Bank of Canada cut the interest rate last week from 2.5% to 2.25%, in keeping with its easing trend, which began in 2023. Canada’s economy is under structural pressure, as reflected in growth forecasts and recent GDP data.
Thankfully, CAD has been partially offset by the consistent upside in commodities such as gold. Also, the central bank has hinted at a near-term pause.
Key news to watch: unemployment rate on Thursday
Swiss Franc (CHF): Bullish
The SNB is sitting at 0% after a series of cuts, and Swiss inflation is extremely low (roughly ~0.2% y/y). At the September review, the SNB essentially said: we’ll keep policy easy, but we’re absolutely still willing to lean on FX if needed.
In practice, CHF remains structurally well bid because Switzerland offers ultra-low inflation and safe-haven appeal. The only caveat is that the SNB will smooth violent spikes via sight-deposit/FX operations, so bullish doesn’t mean runaway.
