Intro
Despite an interest rate cut, the British pound was the strongest currency this past week. The US dollar (whereby the Fed maintained the same rate) also showed decent strength.
This week should be calm and uneventful. However, seeing how the market reacts to GBP and USD with more time in this period will be interesting.
Let’s explore our sentiment ratings for each major currency this week.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (DXY): Bearish
USD is facing pressure over high federal deficits, rising debt-to-GDP ratios, and Trump’s proposed tariffs, a contracting economy, and tanking consumer sentiment, all of which have rattled investors. Also, the Fed remains cautious, keeping the interest rate unchanged for the third time in a row.
Key news to watch: Core Inflation Rate YoY/MoM on Tuesday.
Euro (EUR): Neutral
The Eurozone’s economy shows moderate growth, with inflation rates aligning with the European Central Bank’s (ECB) targets. While the ECB has kept interest rates low for several months, this is to accommodate economic recovery.
There have also been shifts in investment away from U.S. tech giants to European stocks, which can also provide relief for the euro.
British Pound (GBP): Neutral
The UK economy faces challenges, including trade uncertainty and a less expansionary budget. Furthermore, the Bank of England cut the interest rate by 25 basis points as predicted last week.
However, inflation remains above the 2% target, with wage growth at 5.2% and the labour market showing signs of easing.
Japanese Yen (JPY): Bearish
The Bank of Japan revised its growth and inflation forecasts downward, citing uncertainties stemming from President Trump’s unpredictable tariff policies. Last week, it also kept interest rates unchanged, leading to a decline in the yen against the dollar.
Finally, the International Monetary Fund (IMF) recently downgraded Japan’s economic growth forecast for 2025 to 0.6%.
Australian dollar (AUD): Neutral
The Australian economy faces challenges from global trade tensions and a slowdown in China, its major trading partner. Aussie’s performance is also closely tied to commodity prices, which have fluctuated.
Despite this, economic growth is modest, and inflation remains within target. Additionally, the ASX 200 index, which had taken a nosedive a few weeks ago, has recovered notably on the charts. However, the Australian central bank is quite dovish and is expected to cut the interest rate by 0.25% next week.
New Zealand dollar (NZD): Neutral
The Kiwi remains pressured by the RBNZ’s dovish rhetoric and slowing demand from key trading partners.
Like the Reserve Bank of Australia, New Zealand’s central bank needs to support economic growth (by cutting interest rates), considering global trade tensions and commodity price volatility. Also, as with the Aussie, the kiwi has risen significantly of late against major currencies, such as USD and EUR.
Canadian dollar (CAD): Neutral
The suspension of U.S. tariffs on Canadian imports has alleviated some pressure on CAD. However, it remains sensitive to oil prices and U.S. economic policies.
The Bank of Canada recently delivered an expected hold in the interest rate (but is predicted to cut next month). All of this is contributing to a mixed outlook.
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.
