Intro
As predicted, New Zealand’s central bank cut its interest rate by 25 basis points on Tuesday. While we had expected a Kiwi drop, it turned out to be the strongest currency among the majors last week.
However, my long-term bias remains neutral for the Kiwi and bullish for the Aussie. My sentiment ratings remain the same for all the other currencies.
Over the past few weeks, I’ve gained access to fantastic seasonality data, which has greatly helped with these reports. Although I’m neutral on GBP and CHF currently, expect some bullishness here and there, as they tend to rise historically in December.
Other than the Initial Jobless Claims and unemployment rate for the US, there are no other high-impact news events. So, 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 Thursday; ; unemployment rate on Friday
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.” 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): Neutral
The BoJ left its short-term rate at 0.5% in October, its highest level since 2008, but its latest Outlook shows inflation risks broadly balanced and economic risks skewed to the downside.
At the same time, Tokyo core inflation stayed well above 2% in November (2.8% y/y), while October retail sales and factory output both rose, and unemployment held at 2.6%, bolstering the case for a near-term hike, according to Reuters.
If the Fed trims while the BoJ even modestly normalises, the yield gap should narrow, giving the yen a medium-term tailwind despite near-term choppiness.
Australian dollar (AUD): Bullish
The RBA’s November Statement on Monetary Policy confirmed that inflation has pushed back above the 2–3% target band. It is expected to stay there for a while, even though unemployment has only “risen a little” and the labour market is still described as healthy.
October CPI surprised to the upside at 3.8% y/y, with the trimmed mean at 3.3%, sharply reducing near-term rate-cut odds and even prompting talk of future hikes if pressures persist. Growth forecasts have been nudged up to around 2% in 2025, keeping the macro story mostly on the upside.
New Zealand dollar (NZD): Neutral
The RBNZ has pivoted decisively to easing, with the most recent cut of 25 bps last week. In barely a year, the Bank has moved from 5.5% to 2.5%, and local media now flag markets expecting further cuts toward 2.0–2.25% if the recovery disappoints.
With domestic growth soft and policy clearly in an easing cycle, even solid export performance can only partially offset the downside pressure on the kiwi.
Still, as I mentioned earlier, my bias is neutral given the historic seasonality (but technically is leaning towards the bearish side).
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.
Key news to watch: unemployment rate on Friday
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.
