Intro
Despite a rate cut, GBP was the strongest of the G8 currencies, eclipsing the likes of CHF, JPY, and CAD.
While the last few weeks have been uneventful, traders should always prepare for the unexpected (although highly unlikely due to the little high-impact news).
Let’s explore our sentiment ratings for this week, which remain largely unchanged.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
Softening U.S. labor data and very public calls from Fed Governor Michelle Bowman for multiple cuts starting next month have flipped the focus from “if” to “how fast” easing comes. The bar for a cut in the next meeting looks lower after a weak jobs print and dovish Fed rhetoric.
Furthermore, fiscal deficits, political uncertainty, and clear signs of global diversification away from USD assets remain at play.
Key news to watch: Inflation Rate YoY on Tuesday
Euro (EUR): Bullish
Although the European Central Bank remains steady at 2% rates and soft inflation provides flexibility, fiscal stimulus in key eurozone economies offers support. While wage pressures are easing, policy can stay steady unless growth sours.
British Pound (GBP): Neutral
The Bank of England trimmed the Bank Rate 25 bps to 4.00% last week in a narrow 5–4 vote. It acknowledged progress in disinflation but still elevated wage growth. That first step toward easing caps upside, yet the Bank’s cautious tone and lingering services inflation keep a floor under sterling.
Key news to watch: unemployment rate on Tuesday
Japanese Yen (JPY): Neutral
The Bank of Japan just signaled it will likely resume hikes, highlighting persistent food-price risks and upgrading inflation risk language. With U.S.–Japan rate differentials likely to narrow if the Fed cuts and BoJ edges up, the yen’s fundamental balance is improving from very weak levels.
Australian dollar (AUD): Neutral
Markets are toggling between a near-term RBA cut risk and hopes for a Fed-led USD dip. Recent Aussie data are mixed (soft labor, patchy demand), and China sensitivity still weighs. Unless commodities or Chinese momentum perk up, AUD’s rallies look more tactical than trend.
Key news to watch: interest rate decision on Tuesday.
New Zealand dollar (NZD): Neutral
The New Zealand dollar has softened as global risk appetite wanes and inflation moderates. Meanwhile, New Zealand’s central bank maintains a steady tone. Export earnings offer some support, but the currency remains vulnerable to broader risk sentiment shifts and protectionist pressures.
Canadian dollar (CAD): Neutral
The Bank of Canada recently kept the interest rate unchanged, but a weak July jobs report (-41k) lifted odds of a September cut. For FX, that’s two-sided: softer policy leans against CAD, yet oil’s cushion and a softer USD backdrop limit downside. This keeps CAD modestly supported on crosses and choppy vs. USD.
Swiss Franc (CHF): Bullish
Even after the SNB cut to 0% in June, safe-haven demand has kept CHF firm. Rising sight deposits revived talk of FX operations, but the risk of intervention mostly smooths out trend strength. With global risks still elevated and Switzerland’s inflation subdued, CHF retains a safe-haven premium.
