Intro
Despite being pretty strong last week, USD took the worst beating in this one, losing 2.36% against CHF. Besides the latter, other strong currencies included GBP and EUR.
It should be another calm week, volatility-wise. However, traders will, as always, anticipate the latest NFP and unemployment rate for the US at the start of the new month.
Let’s explore our sentiment ratings for each major currency this week to help with your fundamental analysis.
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
While USD still has a safe-haven reputation during various geopolitical tensions, it is suffering elsewhere. There remains a sense of unease around the Federal Reserve’s direction. However, the central bank will likely deliver at least one rate cut this year.
There is moderate inflation and a softening macro outlook with growth projections between 1.4 and 2%. Finally, the narrative of de-dollarization continues to gain momentum.
Key news to watch: Initial Jobless Claims, Nonfarm Payrolls, and unemployment rate on Thursday.
Euro (EUR): Bullish
The decline in USD has helped the euro tremendously, with investors leaning into de-dollarization. However, another bullish factor is the inflation in the Eurozone, which is steadily heading towards the European Central Bank’s 2% target.
Although the ECB recently cut rates, improving economic growth suggests that the easing cycle may be nearing a pause. Still, the euro’s upside may be capped by lingering risks in trade and external demand.
British Pound (GBP): Bullish
Sterling has impressively climbed on the back of solid UK economic data and a widening yield advantage over America. Also, wages remain robust, while consumer spending has surprised to the upside. Markets have responded with increased demand for the pound, especially as speculation around earlier Fed rate cuts gains traction.
While the Bank of England remains cautious, its firm stance on inflation has helped preserve the pound’s credibility.
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): Neutral
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.
However, strong iron ore demand and broader optimism tied to a Middle East ceasefire have supported the risk-on environment, favouring high-beta currencies like the AUD.
New Zealand dollar (NZD): Neutral
The New Zealand dollar has been a quieter performer compared to Australia. It is trailing somewhat as investors seek clarity on the global growth picture and U.S. rate trajectory.
While domestic economic data hasn’t been alarming, the NZD remains vulnerable to broader shifts in risk sentiment, dairy export trends, and China’s economic health.
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.
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 recently, the Swiss franc has held firm, supported by its safe-haven characteristics and the region’s economic stability.
