Intro
While the dollar was the strongest of the major pairs last week, it took a beating against the likes of the Japanese yen and Swiss franc. Several drivers contributed to this drop.
Despite this volatility (where USD lost just over 2% against JPY and CHF), it should be a relatively mild time. This week’s main notable news event is the interest rate decision for the New Zealand dollar.
Let’s explore our sentiment ratings for each major currency this week, where there are a few interesting changes.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
USD faces pressure over high federal deficits, rising debt-to-GDP ratios, Trump’s proposed tariffs, a contracting economy, and tanking consumer sentiment. Moody’s also downgraded the US credit rating a few days ago.
Inflation remains a concern, limiting the Fed’s ability to stimulate growth through rate cuts.
Euro (EUR): Neutral
The European Central Bank (ECB) is expected to cut the interest rate next month, indicating a cautious approach to monetary easing.
Eurozone growth forecasts have been revised downward due to uncertainties stemming from U.S. trade policies. However, the euro has gained ground against USD amid these uncertainties.
British Pound (GBP): Bullish
UK retail sales have outperformed forecasts, and the pound has reached a three-year high, indicating strong economic momentum.
The pound’s strength is partly attributed to a weakening U.S. dollar, but domestic economic indicators also support a positive outlook.
Japanese Yen (JPY): Bullish
Japan’s core CPI has risen to 3.5%, increasing expectations that the Bank of Japan may raise interest rates sometime this year. However, short-term interest markets indicate a 98% chance of a hold next month. Also, rising Japanese government bond yields may boost the yen.
Australian dollar (AUD): Neutral
The Australian economy is gradually recovering from previous downturns, supported by strong commodity prices and a rebound in global demand. Also, inflation remains within target.
The Reserve Bank of Australia has maintained high interest rates, contrasting with the easing policies of other central banks. Furthermore, the Australian dollar shows resilience amid global uncertainties.
New Zealand dollar (NZD): Neutral
New Zealand’s two-year inflation expectations have risen to 2.29%, the highest in a year. Also, the currency continues to show strength against the U.S. dollar, benefiting from the latter’s weakness.
However, as with the Reserve Bank of Australia, New Zealand’s central bank needs to support economic growth, considering global trade tensions, a weak labour market, and commodity price volatility.
Key news to watch: interest rate decision on Wednesday.
Canadian dollar (CAD): Neutral
Canada’s economy shows resilience, supported by strong commodity exports, particularly oil. Trade relations with the U.S. remain stable, but global economic uncertainties could impact the CAD.
Also, the Bank of Canada recently delivered an expected hold in the interest rate recently (but is predicted to cut next month).
Swiss Franc (CHF): Bullish
CHF has surged to a decade-high against the dollar, driven by global trade tensions and investor demand for safe-haven assets. The Swiss National Bank faces pressure to manage the franc’s strength, with speculation about the potential reintroduction of negative interest rates.
