Intro
Last week was quite meh in forex, with the largest move being a 1% swing on EURAUD. Here, it was the euro which lost (although this doesn’t change our sentiment).
It’s the beginning of another month, which means the highly anticipated US NFP and employment rates are almost upon us.
Otherwise, my sentiment ratings haven’t changed from the previous, but the details make all the difference. So, let’s dive in!
Market Overview
Here is a brief sentiment report for all major currencies.
US Dollar (USD): Bearish
Powell’s Jackson Hole remarks nudged odds of a September Fed cut higher, and the July data mix keeps that door open: headline CPI 2.7% y/y, core ~3.1%, payrolls up a soft +73k with jobless at 4.2%.
The Fed held in July at 4.50%, and minutes show most members favoured waiting. So, a growth-sensitive, data-dependent pivot is the base case.
Key news to watch: Initial Jobless Claims on Thursday; Nonfarm Payrolls and unemployment rate on Friday.
Euro (EUR): Bullish
The ECB held in July with the deposit rate at 2.15%, as euro-area inflation sits at 2.0%, giving Frankfurt room to be patient while the Fed tilts easier. July meeting accounts showed a split but no urgency to cut. This is supportive of EUR on dips if U.S. yields compress first.
Key news to watch: inflation rate YoY Flash on Tuesday.
British Pound (GBP): Neutral
The Bank of England cut the interest rate by 25 bps to 4.00% recently in a razor-thin 5–4 vote. This is, of course, an easing step, but one that still acknowledges sticky service inflation and firm wages. Hiring has softened, keeping the Bank cautious about the pace of any further cuts. Such a blend caps the topside yet underpins sterling on dips.
Japanese Yen (JPY): Neutral
The BoJ held at 0.5% in late July but upgraded its inflation view and kept the option of resuming hikes alive. Tokyo core inflation and national gauges remain above 2%, and market odds of a 2025 hike are building.
If the Fed cuts while the BoJ edges forward, yield differentials compress, which supports a gradual yen recovery from weak levels.
Australian dollar (AUD): Neutral
The Reserve Bank of Australia cut the interest rate to 3.60% last week and downgraded the growth/productivity outlook. While lobs rebounded slightly in July (from 4.3% to 4.2%), China-sensitive commodity demand still argues for a shallow easing cycle. AUD rallies look tactical unless global growth or metals re-accelerate.
New Zealand dollar (NZD): Bearish
The RBNZ cut 25 bps to 3.00% last week and indicated that more easing is likely as Q2 CPI sits at 2.7% y/y and unemployment rose to 5.2%. With domestic momentum soft and the policy path tilting lower, NZD has a modest downside bias unless global risk sentiment improves.
Canadian dollar (CAD): Neutral
The BoC held the interest rate at 2.75% on Jul 30. July jobs then fell ~40.8k, nudging up odds of a September trim. Oil has no big tailwind, with official projections now seeing Brent sub-$60 in Q4. So, CAD is likely to track the USD and data pulse rather than stage an independent run.
Key news to watch: unemployment rate on Friday.
Swiss Franc (CHF): Bullish
The SNB cut to 0% (Jun 19), but with Swiss inflation ~0.2% y/y and lingering global risks, CHF retains its safe-haven bid. Periodic shifts in sight deposits keep talk of smoothing intervention alive. Strength persists, though spikes can attract SNB resistance.
