Intro
It was a fairly calm week in forex since our last report. While AUD and NZD were among the biggest losers, my sentiment remains unchanged for both. The same goes for USD and GBP (where I’m bearish on both), despite them gaining some ground.
The main high impact news release this week is the New Zealand interest rate. Other than this, the market should flow smoothly, but as always, expect the underlying sentiment to play a significant role in the long term trajectory of each major FX currency. Let’s explore these sentiments again.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
The Fed has already delivered one rate cut and is debating if and when to move again, but the policy path is harder to read after the October CPI release was cancelled due to the US government shutdown, leaving officials without fresh inflation data ahead of the next decision.
September’s jobs report was mixed – job growth slowed while unemployment edged higher – and Reuters notes a divided FOMC with traders paring back the odds of an immediate follow-up cut but still expecting easier policy over 2026.
Key news to watch: Initial Jobless Claims on Wednesday
Euro (EUR): Bullish
The ECB left all three key rates unchanged at its 30 October meeting, judging that inflation is now “close to the 2% medium-term target” and that the economy, while not booming, is still expanding with support from a robust labour market and past cuts.
Updated staff projections point to inflation stabilising just above 2% in 2025 before drifting lower, implying no urgency to ease further. With the Fed already in an easing cycle and the ECB signalling a high bar for further cuts, relative policy still provides the euro with some support on dips.
British Pound (GBP): Bearish
The BoE kept the Bank Rate at 4.00% recently in a knife-edge decision, signalling it will move cautiously from here as inflation has moderated but remains above target. Official data show UK CPI easing to 3.6% y/y in October – the first decline in five months and a four-month low – but still well above target, with food prices and core measures elevated.
Markets now see a high chance of a December cut, yet the BoE’s own forecasts only bring inflation back to 2% by around 2027.
Japanese Yen (JPY): Bearish
While there are pockets of economic strength, the balance of risks tilts toward yen weakness. We have weak external demand, slow growth, policy ambiguity, and real-income squeeze from import cost inflation.
Unless Japan breaks out of its growth/trade slumber or the BOJ commits to a clear hawkish path, JPY is more likely to underperform rather than rally strongly.
Australian dollar (AUD): Bullish
The RBA held at 3.60% recently and warned that the recent inflation spike argues for caution. The November Statement on Monetary Policy actually revised the 2025 GDP growth forecast up to around 2.0%, with similar growth expected across the projection horizon.
However, economists now see easing slipping into 2026, which removes some downside pressure on AUD even as growth cools and China/commodities remain the swing factor.
New Zealand dollar (NZD): Neutral
The RBNZ surprised with a 50 bp cut to 2.50% in October; they’re expected to cut by at least 25 bps this week. They’ve also acknowledged weak domestic momentum.
This clear dovish policy trajectory, even if exports are holding up reasonably well, leaves NZD with a gentle downside skew unless global risk appetite improves markedly.
Key news to watch: interest rate decision on Wednesday
Canadian dollar (CAD): Neutral
On 29 October, the Bank of Canada cut its overnight rate by 25 bps to 2.25%, citing a slowing economy, rising unemployment, and clearer downside effects from US trade actions on growth and inflation.
At the same time, inflation is now much closer to the 2% target, and any stabilisation in oil and US demand tends to support CAD on crosses. In other words, local fundamentals aren’t great, but a softening USD backdrop means CAD can still hold its own.
Swiss Franc (CHF): Neutral
The Swiss National Bank kept its policy rate at 0% at the 25 September assessment and its inflation forecast essentially unchanged, projecting average inflation for 2026 and 2027.
Minutes from that meeting and a recent Reuters poll suggest the SNB sees “no need” to cut further and is likely to hold 0% throughout 2026, preferring FX interventions over negative rates if the franc strengthens too much.
With ultra-low inflation and ongoing safe-haven demand, CHF retains a structurally firm profile, though traders must always factor in the risk of SNB smoothing on sharp spikes.
