Intro
The past week brought about the unpredictable movements to expect with four interest rate decisions (which concluded as predicted). USD and CAD experienced rate cuts from their respective central banks. However, they were the strongest currencies last week.
Still, this doesn’t change their fundamental picture much. Thankfully, this week should be calmer (though watch for the interest rate decision for the Swiss franc). However, as always, it’s worth re-looking at the market sentiment for each of these currencies.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
The Fed delivered a 25 bp cut to 4.00–4.25% on Sep 17 and signalled more easing in 2025. This pivot is driven by a visibly softer labour market (Aug +22k jobs; 4.3% jobless, a 4-year high). Rate-spread support is fading unless inflation re-accelerates materially.
Key news to watch: Initial Jobless Claims on Thursday.
Euro (EUR): Neutral
Euro-area HICP edged up to 2.1% y/y in Aug, while core eased, keeping the ECB comfortably on hold and patient, especially with the Fed now cutting first. That relative stance offers EUR a modest floor on dips, barring fresh trade shocks.
British Pound (GBP): Neutral
The BoE’s first 25 bp cut to 4.00% (Aug 7, 5–4 vote) meets an economy with stubborn price pressure: UK CPI held 3.8% with services still elevated. Policy can ease only gradually, which caps topside but also cushions sterling on pullbacks.
Japanese Yen (JPY): Bearish
The BoJ kept policy at 0.5% but raised inflation projections and left the door open to resume hikes. If the Fed eases while Tokyo edges forward, yield differentials compress, which is supportive of a measured JPY recovery from weak levels.
Australian dollar (AUD): Neutral
The RBA trimmed the cash rate to 3.60% last month and flagged it can ease again as domestic data softens and China-sensitive demand remains uneven. Without a sustained upswing in commodities or China, AUD rallies look tactical rather than trend.
New Zealand dollar (NZD): Neutral
The RBNZ cut 25 bps to 3.00% last week and indicated that more easing is likely as Q2 CPI sits at 2.7% y/y and unemployment rose to 5.2%. With domestic momentum soft and the policy path tilting lower, NZD has a modest downside bias unless global risk sentiment improves.
Canadian dollar (CAD): Neutral
The BoC cut 25 bp to 2.50% last week after inflation eased and jobs deteriorated. Markets see room for another trim. Oil provides some cushion, and with the Fed easing too, USD/CAD downside has a mild bias (though broader risk tone still rules).
Swiss Franc (CHF): Bullish
Despite the SNB cutting the interest rate to 0% in June (it is expected to remain at zero this week), Swiss inflation is ~0.2% year-over-year, and haven demand persists.
Recent sight-deposit jumps suggest the SNB has been smoothing, not reversing, CHF strength. Expect a firm franc with occasional intervention-induced air-pockets.
Key news to watch: interest rate decision on Thursday
