Intro
While the Aussie and kiwi were fairly strong last week, the tide changed in this one. I’ve leaned back to ‘bearish’ on NZD (from neutral last time), while it’s ‘neutral’ on AUD.
Meanwhile, our ratings on the euro and the British pound continue to prove themselves accurate. There aren’t any high-impact news events this week. So, any action will be driven by the underlying price action and sentiment. Let’s cover the latter for each currency in our latest report.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Neutral
Softening U.S. labor and cooler September CPI keep the Fed in easing mode and narrows the dollar’s yield cushion after last 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 and Inflation Rate YoY on Thursday
Euro (EUR): Bullish
The ECB has now held the deposit rate at 2.00% for multiple meetings 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 the Fed easing first, relative rate support is EUR-positive on dips, barring new trade shocks.
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: unemployment rate on Tuesday
Japanese Yen (JPY): Bearish
While there are pockets of economic strength, 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, JPY is more likely to underperform rather than rally strongly.
Australian dollar (AUD): Neutral
The RBA held at 3.60% last week and warned that the recent inflation spike argues for caution. Economists now see easing slipping into 2026, which removes some downside pressure on AUD even as growth cools and China/commodities remain the swing factor.
New Zealand dollar (NZD): Bearish
The RBNZ surprised with a 50 bp cut to 2.50% in October and kept the door open to more if needed, acknowledging weak domestic momentum; that’s a clear policy headwind even if exports/terms-of-trade offer intermittent support.
Canadian dollar (CAD): Neutral
The BoC cut to 2.25% last month and hinted it may be near the end of its easing cycle. Cooler inflation and softer growth justify the step, but “end-of-cuts” signalling plus any oil resilience can limit CAD downside.
Swiss Franc (CHF): Neutral
The SNB held at 0% in September and is widely expected (poll) to stay there through 2026, with ultra-low Swiss inflation and readiness to smooth FX moves. Safe-haven demand keeps CHF underpinned, but intervention risk can create air pockets.
