Intro
It was a fairly modest week in forex, with the largest move being a 1.48% rise in AUD/JPY. The results of the two interest rate decisions for EUR and CAD went ahead as predicted. Despite a cut for the euro, sentiment remains neutral.
Thankfully, it should be another calm week since there are no high-impact economic events. Our overall sentiment ratings remain largely unchanged, with a few nuances to note.
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 recently downgraded the US credit rating.
Additionally, political pressures on the Federal Reserve have raised fears about its independence, further undermining confidence in the dollar. Also, JP Morgan anticipates continued dollar softness throughout 2025.
Key news to watch: inflation rate YoY on Wednesday.
Euro (EUR): Neutral
The European Central Bank (ECB) recently cut the interest rate and is likely to pause in the near term. Eurozone growth forecasts have been revised downward due to uncertainties stemming from U.S. trade policies and weakening manufacturing activity.
However, the euro has gained ground against USD, while structural reforms and rising euro reserves support the currency’s appeal.
British Pound (GBP): Bullish
Economic indicators like retail sales and Gross Domestic Product, while GBP recently reached a multi-year high against USD.
The pound’s strength is partly attributed to a weakening U.S. dollar, resilient GDP growth, strong wage increases, and favourable trade dynamics, especially in light of tariff differentials with the US.
Key news to watch: unemployment rate on Monday.
Japanese Yen (JPY): Neutral
The Bank of Japan (BoJ) held its policy rate at 0.5% in May. Exports are pressured by trade tension, but further BoJ tightening is anticipated. There are also ongoing global trade policy ambiguities linked to the US economy.
However, gradual yen strengthening is forecasted as US yields decline and the BoJ diverges from the Fed. Some pair forecasts suggest USD/JPY easing to ~138 by early 2026.
Australian dollar (AUD): Bearish
The Australian dollar faces pressure from weak Q1 GDP growth (+0.2% Q/Q), soft domestic consumption, and moderating inflation (~2.4% YoY). The Reserve Bank of Australia (RBA) recently cut rates to 3.85% and is expected to cut again in July due to sluggish growth.
External factors, such as a slowing Chinese economy and global trade tensions, add downside risks. However, iron ore exports remain a key support, and recent USD weakness has helped AUD stay above the 0.64 level.
New Zealand dollar (NZD): Bearish
The Reserve Bank of New Zealand (RBNZ) cut rates to 3.25% in May, citing China-linked risks and external economic pressures. They also indicated further cuts are likely 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 for the fourth consecutive time last week.
Swiss Franc (CHF): Neutral
The CHF has surged to a decade high against the dollar, driven by global trade tensions and investor demand for safe-haven assets.
Still, the Swiss National Bank faces pressure to manage the franc’s strength, with speculation about the potential reintroduction of negative interest rates. This may moderately weaken the Swiss franc.
