Intro
As predicted in our last report, it was a mild week in forex. The greatest drop (in EUR/USD) was 0.73%, while the highest rise was only 0.79% (for USD/CHF).
It will most likely be a similar environment of mild price action for now, with the main high-impact news event being the interest rate decision in Australia.
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): Neutral
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. However, the Fed remains cautious, keeping the interest rate unchanged for the third time in a row.
Euro (EUR): Bearish
The European Central Bank (ECB) has identified a global trade war, high debt levels, and financial market volatility as the primary risks to the Eurozone economy.
Furthermore, political instability in France following the European Parliament elections raises concerns about fiscal stability and the country’s ability to implement reform.
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.
Key news to watch: inflation rate YoY on Wednesday.
Japanese Yen (JPY): Neutral
The Bank of Japan (BOJ) remains optimistic about wage and price growth despite uncertainties posed by U.S. tariff policies. It has also not ruled out resuming rate hikes if inflation continues toward the 2% target.
However, the central bank downgraded Japan’s economic growth outlook partly due to global/US trade risks and policy uncertainty.
Australian dollar (AUD): Neutral
The Australian economy is gradually recovering from previous downturns, supported by strong commodity prices and a rebound in global demand. Also, inflation remains within target.
However, the Australian central bank is dovish and is expected to cut the interest rate by 0.25% (90% probability) next week.
New Zealand dollar (NZD): Bearish
Like the Reserve Bank of Australia, New Zealand’s central bank needs to support economic growth (by cutting interest rates), considering global trade tensions, a weak labour market, and commodity price volatility. Thus, it will very likely drop the interest rate by 0.25% next week and potentially adopt a more aggressive stance down the line.
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 the CAD.
Also, the Bank of Canada recently delivered an expected hold in the interest rate recently (but is predicted to cut next month).
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.
