Intro
Last week was quite uneventful, with the yen managing the highest increase (around 0.6%).
The main impactful news event this week is the ECB interest rate decision. Otherwise, expect a relatively calm FX market, with fundamentals remaining mostly unchanged. Let’s explore our sentiment ratings for each currency this week.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
Despite still being largely bearish, USD has rebounded amid resilient retail sales and slightly improved job numbers. This has softened the market expectations for Fed rate cuts.
However, ongoing geopolitical angst, fiscal challenges, and growing demand for non‑USD assets remain.
Key news to watch: Initial Jobless Claims on Thursday.
Euro (EUR): Bullish
The decline in the US dollar has helped the euro tremendously. However, another bullish factor is the inflation in the Eurozone, which is steadily heading towards the European Central Bank’s 2% target.
Although the ECB recently cut rates, improving economic growth suggests that the easing cycle may be nearing a pause. They are expected to keep the interest rate unchanged this week.
Still, the euro’s upside may be capped by risks in trade, external demand, and imported inflation.
Key news to watch: interest rate decision on Thursday.
British Pound (GBP): Neutral
Pound sterling continues to tread water. While holding up well against the dollar, internal economic challenges persist and continue to weigh on GBP. The UK faces persistent inflationary pressure and sluggish growth.
On the bright side, still-elevated inflation and wage improvement provide some upside potential.
Key news to watch: Retail Sales MoM on Friday.
Japanese Yen (JPY): Neutral
The yen recently strengthened on political uncertainty after Japan’s upper‑house election results. It has also been aided more by the dollar’s weakness than by domestic policy actions. However, it remains vulnerable to U.S. tariff moves ahead of the August 1 deadline.
Global risk-off sentiment will be crucial in supporting the yen’s status as a safe haven.
Australian dollar (AUD): Neutral
The Reserve Bank of Australia delivered a rate hike last week, offering some much-needed bullishness. However, China’s sluggish demand for iron ore and weak trade data pose medium-term risks to the Australian economy. Markets still anticipate at least one rate cut this year.
New Zealand dollar (NZD): Neutral
The New Zealand dollar has been a quieter performer compared to Australia. Inflation is moderating, but growth remains patchy. The Reserve Bank of New Zealand may follow the Australian central bank’s lead with easing later this year
While domestic economic data hasn’t been alarming, the NZD remains vulnerable to broader shifts in risk sentiment, dairy export trends, and China’s economic health.
Canadian dollar (CAD): Bullish
The Canadian dollar has demonstrated greater resilience than many expected, thanks to strong oil prices and performance in commodity exports.
Also, the Bank of Canada’s more hawkish tone compared to the ECB or Fed gives CAD some relative appeal.
While not outright bullish across the board, sentiment around the loonie is less neutral, especially if energy prices remain elevated.
Key news to watch: Inflation Rate YoY on Tuesday.
Swiss Franc (CHF): Bullish
Despite the Swiss National Bank cutting rates into zero territory last month, the franc remains strong. This has been driven by safe-haven inflows, improving Swiss trade data, and Switzerland’s economic stability. CHF is continuously benefiting from its reputation as a safe-haven currency amid the ongoing global economic uncertainty.
