Bank FX views in one page, covering the key drivers, clear bias by pair, and the week’s events that move markets.
USD
The US dollar starts June with two competing drivers. The first is support from stronger US data, firm inflation, and safe-haven demand linked to the Middle East conflict. Danske Bank notes that US growth has surprised to the upside, price pressures are building, and the Fed may now hike in December and again in March next year. CBA also notes that the USD rose 0.9% on a trade-weighted basis in May, helped by strong US data and safe-haven flows.
The second driver is softer risk sentiment around a possible US-Iran deal. Marc to Market says the prospect of an extended ceasefire and a reopening of the Strait of Hormuz could weigh on the dollar in coming weeks. But the live news flow shows the deal is still fragile. President Trump has not yet made a final decision on the MoU, Iran says no agreement has been finalised, and Treasury Secretary Bessent says any easing of the blockade would be gradual.
Scotiabank also notes that markets have priced some Fed tightening, but says there is a high bar for the FOMC to pivot strongly toward hikes. Live rate pricing has also softened as oil has eased, which reduces some near-term support for the dollar.
For traders, this leaves USD direction tied to oil, inflation, and US jobs. A firm payrolls print and sticky ISM prices would support the dollar. A confirmed Middle East deal, weaker jobs, or more patient Fed comments would likely weigh on it. If talks break down, safe-haven flows could return quickly.
EURUSD
EURUSD is still stuck between a firmer short-term USD and growing ECB hike risk. Commerzbank expects the dollar to stay stronger in the near term while the Middle East conflict remains unresolved. It says EURUSD has been trading around 1.15 to 1.18, with interest-rate expectations and conflict headlines driving the range.
Danske Bank expects the ECB to hike in June and says a July hike is possible if there is no Middle East deal. Barclays is also hawkish on the ECB, expecting 25bp hikes in June and September as inflation keeps rising. Lloyds says Eurozone CPI is expected to rise again, which should reinforce expectations for a June ECB hike.
The latest live inflation signals are mixed but still broadly supportive of ECB tightening. French inflation picked up in May and Spanish inflation stayed firm, with core inflation still sticky. German state inflation eased slightly, which stops the signal from being one-way.
Marc to Market is more constructive on EURUSD technically, saying the euro appears to have formed a base near 1.1575, but needs to break above the May high near 1.1700 to matter. For traders, EURUSD looks range-bound for now. The near-term risk is lower if US data stays strong, but a confirmed ceasefire or softer US payrolls could push the pair back toward the top of the range.
GBPUSD
GBPUSD remains vulnerable. CBA notes that GBP fell 0.6% on a trade-weighted basis in May and lost ground against most major currencies except JPY. It says political uncertainty became a headwind after the poor local election result raised speculation about Prime Minister Starmer’s leadership.
Marc to Market also flags UK political risk, warning that markets are only beginning to price the uncertainty around Labour leadership and the broader challenge facing UK assets. Lloyds says the UK calendar will focus on PMIs, the BoE Decision Maker Panel survey, and speeches from Governor Bailey and other MPC members. Lloyds notes that Bailey may be more willing to tolerate a near-term inflation overshoot if second-round effects stay contained.
Barclays says UK data so far show limited signs of indirect inflation effects, though it expects these effects to build in coming months. Softer rate pricing also leaves GBP without a clear yield support story.
For traders, GBPUSD needs better UK data or a more hawkish BoE tone to recover. Without that, rallies may remain fragile, especially if the dollar firms on US data or renewed Middle East stress.
USDJPY
USDJPY remains supported by wide yield spreads, but intervention risk is high. Marc to Market says the Bank of Japan intervened twice in recent weeks, selling about JPY11.7 trillion to slow yen weakness. It argues that intervention without a clear policy anchor is only a holding action because the rate gap still gives investors a strong reason to sell yen.
CBA notes that JPY fell 1.3% on a trade-weighted basis in May and weakened against all major currencies it tracks, especially CNH. CBA says softer Japanese CPI and weaker wage data made markets price less BoJ tightening, while rising US yields helped push USDJPY higher.
The latest Tokyo CPI data adds to that caution. Headline, core, and core-core inflation all slowed in May. That does not remove the chance of BoJ tightening, but it makes a near-term hike less certain and leaves the yen more exposed to carry flows.
Nomura expects a gradual fall in USDJPY from 159.80 at the end of FY2025 to 150 by the end of FY2026 and 145 by the end of FY2027, assuming Middle East tensions ease. But Nomura also warns that a domestic demand shock would make it harder for the BoJ to hike.
For traders, USDJPY remains a buy-on-dips market while yield spreads stay wide. But upside is dangerous because intervention risk rises sharply near recent highs.
AUDUSD
AUDUSD has a mixed setup. CBA says AUD fell 0.2% against the USD in May but rose 0.5% on a trade-weighted basis. It notes that AUD was pressured by stronger US data, Middle East risk, and the weak Australian labour report, but recovered late in the month as markets rebuilt RBA hike pricing.
Westpac says Australian headline inflation was softer than expected in April, but underlying inflation remains too high and pass-through from fuel costs is appearing in areas like homebuilding and hospitality. Westpac still expects the RBA to resume hikes in August and September. CBA also says this week is important for Australia, with Q1 GDP, balance of payments, home prices, building approvals, trade data, and RBA speakers all due.
The China link is still important. Barclays says China’s property market stabilisation was short-lived and that consumption weakened in May, while exports remain a bright spot. Softer Chinese demand limits AUD upside.
Live rate pricing has softened as oil has eased, which takes some pressure off the RBA story. That keeps AUD from being a clean bullish trade, even though risk sentiment has improved.
For traders, AUDUSD can rise if risk sentiment improves and markets keep some RBA hike risk in place. But China weakness and a stronger USD cap the move. The pair looks cautiously constructive, not strongly bullish.
NZDUSD
NZDUSD has better rate support than AUDUSD, but activity risks remain. Westpac says the RBNZ held the OCR at 2.25% in May, but the decision was close. The Monetary Policy Committee was split, with external members voting for a hike and internal members voting to hold. Westpac expects hikes in September, October, and December, but says a July start is possible if inflation and wage pressure firm.
CBA says NZD rose 1.9% on a trade-weighted basis in May and gained against all major currencies, especially JPY and CAD. It notes that NZDUSD lifted late in the month as USD eased on US-Iran peace hopes and as ANZ business survey data improved.
The live rate-pricing update supports the NZD relative story. Markets still see the RBNZ as one of the more likely central banks to tighten, while pricing for the Fed, RBA, and BoC has softened.
For traders, NZD has relative rate support because the RBNZ is clearly moving toward hikes. But the currency still depends on risk sentiment, commodity prices, and local activity data. NZDUSD looks mildly bullish while RBNZ hike pricing holds.
USDCAD
USDCAD looks heavy after a sharp reversal lower, but Canada’s weak growth picture stops the CAD story from being clean. Scotiabank says CAD staged an impressive recovery into month-end and completed a bullish outside reversal. It says USDCAD failed above 1.3800, with the 200-day moving average near 1.3811 acting as resistance. Scotiabank sees the 50-day moving average near 1.3756 as a downside target and says the USD remains overvalued versus fair value just below 1.3700.
Commerzbank is more cautious on CAD fundamentals. It notes that Canada’s real economy contracted by 0.1% in Q1, against expectations for growth, while Q4 was revised lower. It says BoC hikes are questionable and that traders looking for lower USDCAD should focus more on a weaker USD than a stronger CAD.
CBA says CAD fell 1.4% on a trade-weighted basis in May, with US-Iran headlines, oil swings, and risk sentiment driving USDCAD. Live rate pricing has also softened for the BoC, which limits CAD’s domestic support.
For traders, the near-term signal favours lower USDCAD after the technical reversal. But weak Canadian data means CAD gains may depend more on the USD leg than on a strong Canada story.
Other Pairs
CNY remains a key global FX theme. Marc to Market says Beijing continues to allow a modest yuan appreciation, with CNY at three-year highs against the dollar. CBA also notes that CNH strengthened strongly in May as the PBoC guided the yuan higher.
CHF remains a better defensive funding currency than JPY. Commerzbank warns that not all carry trades behave the same way. It notes that short JPY and long USD has worked well in recent years, while short CHF and long USD has been a losing trade because CHF strength has more than offset the yield advantage.
Scandinavian FX remains driven by inflation and central bank risk. Danske Bank says Sweden’s headline growth looks weaker than the detail suggests, but inflation pressure is more concerning. It also says Norwegian growth disappointed, lowering the probability of a June Norges Bank hike, though inflation data will be decisive.
Bias Table
| Pair | Bias | Key Drivers |
|---|---|---|
| USD | Neutral to slightly soft | Strong data and inflation support, but fragile ceasefire hopes and softer Fed pricing weigh |
| EURUSD | Neutral | ECB hike risk supports EUR, but US rate premium and range resistance cap upside |
| GBPUSD | Bearish | Political risk, weak activity signals, uncertain BoE path |
| USDJPY | Bullish | Wide yield spreads support USD, softer Tokyo CPI reduces BoJ pressure, intervention risk limits upside |
| AUDUSD | Neutral to mildly bullish | Better risk sentiment and RBA risk help, but China weakness and softer hike pricing cap gains |
| NZDUSD | Mildly bullish | RBNZ moving toward hikes, stronger relative rate support, but activity risks remain |
| USDCAD | Bearish | Technical reversal lower and softer USD risk, but weak Canada data limits CAD strength |
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Key Event Outlook
United States
The main US event is the May labour market report on Friday. Lloyds expects payrolls to rise by around 95k, with unemployment steady at 4.3%. This matters because the Fed is already facing sticky inflation and stronger price pressure from the energy shock. A strong jobs print would support USD and keep Fed hike pricing alive. A weak print would challenge the higher-for-longer story.
ISM manufacturing and services are also important. Danske Bank and Lloyds both highlight the ISM releases as key market movers. Traders should watch the price components closely. If prices paid keep rising, markets may price more Fed tightening, which would support USD and weigh on risk currencies.
The Fed Beige Book is also due. This will give a clearer view of how businesses are handling higher energy costs, labour conditions, and demand.
The live-news risk is the US-Iran deal. Markets have priced some relief, but the deal is not final. A confirmed deal would likely support risk sentiment, lower oil prices, and weigh on USD. A setback would likely lift oil, support USD, and hurt AUD and NZD.
Eurozone
Eurozone flash CPI is the key release. Lloyds expects inflation to rise to around 3.2% from 3.0%, while Danske Bank expects headline inflation around 3.1% and core inflation near 2.3%. A strong print would support the case for an ECB hike in June and keep EUR supported.
The live national inflation signals are mixed. France and Spain still point to firm price pressure, while German state inflation has eased a little. That keeps the ECB in tightening mode, but it also means EUR traders need the full Eurozone print for confirmation.
Final PMIs, retail sales, unemployment and Q1 GDP are also due. The main question is whether the ECB will focus more on inflation or weaker growth. For now, banks broadly expect inflation risk to dominate.
United Kingdom
The UK focus is on final PMIs, the construction PMI, the BoE Decision Maker Panel survey, and BoE speakers. Lloyds says the DMP survey matters because it will show whether firms are passing higher energy costs into prices and whether wage expectations are also moving higher.
Governor Bailey’s testimony and other MPC speeches will be watched for whether the BoE is moving toward another hike or staying patient. A more hawkish tone could help GBP, but weak PMIs or softer pricing data would keep sterling under pressure.
UK political risk also matters. Marc to Market warns that leadership uncertainty is becoming a bigger issue for UK assets. That keeps GBP vulnerable unless data or BoE commentary improves.
Japan
Japan’s key data include labour cash earnings and household spending. Wage data are especially important for the BoJ. Stronger wage growth would help justify a rate hike and support JPY. Softer wages would keep the yen exposed to carry trades and yield spread pressure.
The latest Tokyo CPI slowdown makes the near-term BoJ decision less clear. It does not rule out tightening, but it reduces urgency. That means intervention risk may matter more than rate-hike expectations in the very short term.
Marc to Market says recent intervention slowed yen weakness but did not change the market’s core incentive to sell JPY. Traders should watch whether USDJPY retests levels that draw official action.
Australia
Australia has a busy week. Westpac highlights RBA speeches from Governor Bullock and Deputy Governor Hauser, Q1 GDP, house prices, building approvals, trade, and balance of payments.
Q1 GDP is the main data point. Westpac expects 0.5% q/q growth, while CBA expects a softer 0.2% q/q. A stronger result would support AUD and reinforce RBA hike pricing. A weaker result would make markets question how much tightening the economy can handle.
RBA commentary matters because both Westpac and CBA see the Board watching second-round inflation effects from higher energy costs. Any hawkish signal from the RBA would be AUD supportive. Softer global rate pricing means the RBA tone now matters even more for AUD.
New Zealand
New Zealand’s focus is on building work, terms of trade, confidence data, and any follow-up RBNZ communication. Westpac says the RBNZ is moving toward hikes, with September as its base case but July still possible.
For FX, NZD needs the data to keep RBNZ hike pricing alive. Strong activity or firm inflation expectations would support NZD. Softer confidence, weaker spending, or signs of labour slack would reduce the case for early hikes.
NZD still has better relative rate support than AUD, CAD and GBP. That keeps NZDUSD mildly bullish while global risk sentiment holds.
Canada
Canada’s focus is on PMIs, BoC Deputy Governor Rogers, and Friday’s employment report. Scotiabank says the Canada and US labour reports on Friday are the key events for USDCAD.
A strong Canadian jobs report would support CAD and strengthen the recent technical reversal lower in USDCAD. A weak report would reinforce Commerzbank’s concern that the Canadian real economy is still sending warning signs.
BoC communication also matters ahead of the June 10 policy decision. If officials sound cautious, CAD gains may depend more on broad USD weakness than domestic strength.
Other / Geopolitics
The Middle East remains the main global risk. Danske Bank says markets are optimistic about a US-Iran deal, but the details are difficult and the ceasefire is fragile. Marc to Market also warns that the Strait of Hormuz issue is not fully resolved and that markets may be mistaking calm for resolution.
Live news supports that caution. Trump has not signed off on the deal, Iran says no agreement has been finalised, and Bessent says any easing of the blockade would be slow. That keeps the FX market exposed to sudden swings in oil, rates, and safe-haven demand.
Oil prices are the key transmission channel for FX. Lower oil and a clearer deal would likely reduce inflation fears, lower rate-hike pricing, and weigh on safe-haven USD demand. A breakdown in talks would support USD, lift inflation fears, and hurt risk currencies such as AUD and NZD.
China PMIs also matter for AUD, NZD and broader risk sentiment. Barclays notes that China property and consumption remain weak, even as exports hold up. Any further softness would cap commodity FX upside.
Bank Desk Weekly FX Report
What the banks are saying, the fundamental bias, and key events.
