Weekly FX Report Summary

Bank FX views in one page, covering the key drivers, clear bias by pair, and the week’s events that move markets.

Live levels (approx. 9:30am Adelaide, 13 Oct):
EURUSD 1.1636 | GBPUSD 1.3447 | USDJPY 152.6 | AUDUSD 0.6606 | NZDUSD 0.5781 | USDCAD 1.3949

USD

The main story this week is the renewed US-China tariff fight. On Friday, Donald Trump shocked markets by announcing plans for 100% tariffs on all Chinese imports, triggering a sharp risk-off move across equities, bonds, and currencies. Over the weekend, however, Trump softened his stance, saying the new tariffs would not take effect immediately and that discussions with Beijing were continuing.

Goldman Sachs and Marc to Market both describe this as a partial climb-down, with the standoff likely turning into a “prolonged pause” rather than a full trade war. The dollar’s safe-haven bid remains strong, but the softer tone helped risk assets and high-beta FX stabilize on Monday. Danske Bank expects the Fed to stay cautious and sees a possible rate cut in October if the data remain weak, while Barclays notes that the government shutdown is delaying key releases such as CPI and retail sales. Lloyds adds that USD positioning remains stretched, leaving the dollar vulnerable if sentiment continues to improve.

EURUSD

Barclays says the eurozone economy remains fragile, with weak industrial output and subdued inflation. The ECB minutes leaned dovish, suggesting another small cut could still be justified to support price stability. Danske Bank expects euro-area growth to slow further in late 2025 before recovering next year. The euro recovered late Friday and into Monday as Trump’s softer tone eased demand for the dollar. Overall, EURUSD is likely to stay in a narrow range near 1.16–1.17, with the balance of risks shifting slightly in favour of the euro if global sentiment continues to improve.

GBPUSD

Sterling began the week on steadier footing after last week’s volatility. Barclays and Lloyds both expect softer UK labour and GDP data, reinforcing expectations that the BoE will keep policy on hold. Marc to Market notes that GBP remains highly correlated with the USD, but it gained ground late Friday as traders pared back dollar longs after Trump’s retreat. Lloyds says sterling’s recovery will depend largely on global risk appetite and upcoming UK data, with little sign of independent momentum for now.

USDJPY

Nomura highlights that Japan’s new Prime Minister, Sanae Takaichi, plans to expand fiscal spending and support a more accommodative stance at the Bank of Japan. This has pushed Japanese yields higher but weakened the yen as investors anticipate more stimulus. Marc to Market notes that Japan’s Ministry of Finance is watching USDJPY closely and could intervene if the pair climbs above 155, while Danske Bank says the BoJ is likely to remain cautious despite stronger wage growth. The overall tone remains yen-negative, but traders are alert to the risk of official intervention if the yen weakens too quickly.

AUDUSD

The Australian dollar opened stronger on Monday as Trump’s partial backdown calmed markets. Westpac expects the Aussie to gradually rise toward 0.70–0.71 in 2026 as global growth stabilizes, and CBA’s Carol Kong also sees AUDUSD moving toward 0.72 over the medium term. Goldman Sachs says the trade dispute is now more likely to pause rather than escalate, while Lloyds notes that improved sentiment should help commodities recover. The RBA remains on hold, but the tone of the global risk environment will drive the currency in the near term.

NZDUSD

The New Zealand dollar is also firmer after last week’s RBNZ rate cut. Westpac expects inflation to remain near 3%, driven by temporary factors, and believes the central bank is now at the end of its easing cycle. Danske Bank shares this view, expecting a gradual recovery in 2026 as global growth picks up. The NZD continues to follow broader risk sentiment and the performance of the AUD, with a slightly firmer tone as trade risks fade.

USDCAD

The Canadian dollar remains range-bound. Scotiabank notes that CAD is still undervalued but trapped by weak oil prices and seasonal trends. The bank sees firm resistance near 1.40 and first support around 1.3890. Danske Bank says the Bank of Canada is likely to stay cautious, keeping policy steady while watching external developments. With oil prices easing and the USD losing some safe-haven demand, CAD could slowly firm if risk appetite continues to recover.

Other / Global Overview

Danske Bank highlights a calmer tone globally, with oil prices falling back toward USD 65 and reports of progress toward a Middle East ceasefire. Lloyds says market confidence remains fragile but improved messaging from Washington and Beijing is helping risk assets find a floor. Marc to Market notes that the yuan steadied after China defended its export controls and Trump moderated his comments, easing fears of immediate retaliation. If both sides continue to hold back from escalation, Asia FX and commodity-linked currencies should continue to recover through the week.

Bias Table

Key Event Outlook

United States

The government shutdown continues to delay major data releases, including CPI and retail sales. Fed speakers will be closely watched for hints of a rate cut. Barclays expects CPI to show a slight uptick if released. With limited data, USD moves will depend on risk sentiment and political headlines.

Eurozone

Focus this week is on ZEW sentiment and final HICP. ECB officials remain cautious, and weak data would support the case for another small cut later this year.

United Kingdom

The labour market report and monthly GDP are the main events. Softer readings would confirm the slowdown and keep GBP capped.

Japan

Parliament is expected to confirm PM Takaichi mid-week. Her pro-growth fiscal stance supports loose policy, while BoJ and MoF comments will guide JPY.

Australia

RBA minutes and jobs data are due this week. The RBA is expected to remain on hold, with AUD moves mainly driven by China and global risk sentiment.

New Zealand

Housing and retail card spending data will give fresh insight into domestic demand. Westpac says inflation near 3 percent is temporary and not a policy concern.

Canada

Few local data releases are scheduled. Oil and global risk appetite will continue to drive CAD performance.

Global Politics

Trump’s tariff threat dominated last week but the tone shifted over the weekend. He confirmed that new tariffs are not imminent, and both sides have signalled willingness to keep talking. China defended its export rules but avoided direct retaliation. Goldman Sachs sees the situation evolving into a temporary pause rather than a full escalation, easing pressure on global markets.

Key Bank Takeaways

• Marc to Market (Chandler): Politics is driving FX; Trump’s softer tone eased risk-off pressure.
• Nomura: Takaichi’s fiscal push and BoJ caution keep JPY weak; intervention risk rising.
• Barclays: Shutdown delays data; market moves driven by headlines.
• Danske Bank: Fed may cut again; global sentiment stabilizing.
• Westpac: AUD and NZD steady; watching China and jobs.
• CBA: Medium-term bullish AUD to 0.72.
• Lloyds: USD overbought; GBP capped by weak domestic data.
• Scotiabank: CAD undervalued but limited by weak oil.