Intro
Interest rate decisions went as predicted last week, bringing moderate volatility. Unsurprisingly, this led to mild price movements, with the euro and, surprisingly, the dollar among the strongest currencies.
It should be another relaxed week with no high-impact economic events to consider. However, our sentiment ratings have changed for a few currencies. So, let’s explore them further.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Neutral
The Fed kept the interest rate unchanged (as predicted) for the fourth consecutive time. Meanwhile, USD has declined due to several expected future rate cuts, soft economic data, declining consumer sentiment, and high federal deficits, among other factors.
However, it has recovered noticeably on the charts, which may be partly due to the ongoing Israel-Iran conflict and other geopolitical tensions. The dollar is seemingly a safe haven or defensive play during this time
Key news to watch: Initial Jobless Claims on Thursday.
Euro (EUR): Bullish
The euro has stabilized, partly due to the European Central Bank’s dovish stance, which appears to be nearing its limit. Although the ECB has already cut rates, stable inflation and improving economic growth suggest that the easing cycle may be nearing a pause.
Confidence in the eurozone is gradually recovering, and EUR/USD has rebounded strongly above the 1.15 level. Global investors have found the euro more attractive than the dollar.
British Pound (GBP): Neutral
The British pound reflects a mixed macro picture. The UK economy contracted recently, while wage growth has decelerated. Like the Fed, the Bank of England kept the interest rate unchanged last week.
Sterling’s performance has been supported in part by risk-on global sentiment and relative calm in equity markets.
Japanese Yen (JPY): Neutral
A pause in the Fed’s rate hiking cycle and waning expectations for aggressive policy tightening from the Bank of Japan have diminished investor appetite for the yen.
Nonetheless, Japan’s ongoing inflationary pressures and increasing calls for the BoJ to act more decisively could lead to stronger JPY demand. Also, global risk-off sentiment, in response to geopolitical tensions, continues to support its safe haven status, albeit to a lesser extent than in previous years.
Australian dollar (AUD): Bearish
The Australian dollar has been weighed down by sluggish Chinese economic data, which has a direct impact on Australia’s export sector. Domestically, the Reserve Bank of Australia has shifted toward a more dovish tone, with markets anticipating at least one rate cut later this year.
That said, any rebound in global risk appetite or commodity demand could offer temporary relief.
New Zealand dollar (NZD): Bearish
The New Zealand dollar is weighed down by subdued domestic growth and expectations that the Reserve Bank of New Zealand will remain dovish.
While higher commodity prices and global risk sentiment offer some support, the NZD lacks clear bullish drivers. Like AUD, the kiwi is increasingly sensitive to China-related data.
Canadian dollar (CAD): Neutral
The Canadian dollar has quietly strengthened amid improving commodity sentiment and a modest rebound in crude oil prices.
Also, the Bank of Canada’s more hawkish tone compared to the ECB or Fed gives CAD some relative appeal. Still, much of the loonie’s movement hinges on broader risk appetite and the performance of key commodities like oil and metals.
Key news to watch: inflation rate YoY on Tuesday.
Swiss Franc (CHF): Bullish
The Swiss franc continues to benefit from its reputation as a safe-haven currency. Even after the Swiss National Bank’s 25-basis-point rate cut last week, the franc has held firm, supported by its safe-haven characteristics and the region’s economic stability.
USD/CHF remains in a tight range near 0.818, with traders closely watching any shifts in global risk sentiment for directional cues.
