Intro
Last week played out several of my sentiment ratings to varying degrees. The most notable was the weakening of JPY and GBP. Based on recent chart performance, I’ve upgraded AUD from ‘neutral’ to ‘bullish,’ while its counterpart should be reasonably considered ‘neutral’ from ‘bearish.’
Finally, the dollar should be in the bearish category from neutral, especially as November and December aren’t one of its strongest months historically.
Just like last week, there aren’t any high-impact news events this week. So, any action will be driven by the underlying price action and sentiment, which we’ll revisit with their latest updates.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
The Fed delivered its first 2025 cut in September (25 bps to 4.00–4.25%) and signalled a gradual easing cycle as labor momentum cooled. August payrolls rose just +22k with joblessness up to 4.3%. September CPI came in softer than feared (headline 3.0% y/y; core ~3.0%), keeping the policy bias toward easing and narrowing the dollar’s yield cushion.
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 kept the Bank Rate at 4.00% last week in a knife-edge decision, signalling it will move cautiously from here as inflation has moderated but remains above target.
Key news to watch: inflation rate YoY on Wednesday
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): Bullish
The RBA held at 3.60% recently 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): Neutral
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.
Key news to watch: inflation rate YoY on Friday
