Intro
Despite four interest rate decision events, it was another mild week from a price action perspective. Three central banks delivered a rate hold (as predicted), while the Swiss National Bank/SNB announced an unsurprising cut.
We forecast another uneventful week, with some of our biases leaning towards the neutral side this time around.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (DXY): Bearish
The US dollar has experienced fluctuations due to escalating trade tensions under President Trump’s administration. Concerns over tariff policies have raised fears of an economic slowdown, leading to increased market volatility.
Also, the dollar is under pressure due to the Fed signalling rate cuts (at least two-quarter points) happening sooner than expected this year.
Key news to watch: Initial Jobless Claims on Thursday.
Euro (EUR): Bullish
The Euro has hit excellent heights of late, supported mainly by Germany’s recent announcement of a €500 billion infrastructure fund and a relaxation of borrowing limits.
Other bullish drivers for the euro include strong fiscal spending policies from Germany and France, economic resilience in the Eurozone, lower expectations of rate cuts and a weakening dollar.
British Pound (GBP): Neutral
GBP has remained relatively stable for a few reasons. Language from the Bank of England suggests no rush to cut rates soon due to the persistent inflation in the region. However, concerns remain over slowing UK growth, which has slightly limited further gains. Also, there are ongoing Brexit-related trade inefficiencies.
Japanese Yen (JPY): Bullish
Japan’s inflation rally is fueling rate hike expectations from the Bank of Japan, making the yen more appealing. The safe-haven status of the yen is still drawing in funds amid global uncertainty. Finally, a weakening USD is helping JPY recover against major peers.
In the long term, we should also keep an eye on US Treasury yields – rising yields = lower JPY, while lower yields = higher JPY.
Australian dollar (AUD): Bearish
AUD has faced headwinds due to disappointing employment data and weaker commodity prices. The Reserve Bank of Australia (RBA) is expected to keep rates steady for longer due to fragile domestic economic conditions. Also, China’s weaker economic growth has hurt Australian exports.
New Zealand dollar (NZD): Neutral
NZD has performed decently, supported by improving global risk sentiment and a slightly weaker USD. However, New Zealand’s economic recovery remains sluggish, limiting further gains.
Global risk sentiment has improved, providing mild support to NZD. The Reserve Bank of New Zealand (RBNZ) is still hawkish but may ease later in 2025.
Canadian dollar (CAD): Neutral
The CAD has found some stability after recent weakness, supported by oil prices stabilizing and a softer USD. However, the Bank of Canada (BoC) remains cautious about the economic outlook. They are expected to hold rates steady in the short term before cutting later.
Swiss Franc (CHF): Neutral
The CHF remains a safe-haven currency of choice, holding its value against most major currencies amid global uncertainties. However, the Swiss National Bank (SNB) has eased its stance on monetary policy, which has limited the Swiss franc’s gains.
