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 the week softer after US-Iran peace headlines reduced safe-haven demand and lifted risk sentiment. InvestingLive notes that the USD was marked lower in early Asia trade after the peace news. Commerzbank also says the dollar has weakened only moderately so far because the deal lacks detail and the Fed outlook is still uncertain.
Scotiabank says the main event is Kevin Warsh’s first FOMC meeting as Fed Chair. It expects no rate change, but says communication could become less clear and more market-driven. That matters because markets have already priced out cuts and are now watching whether the Fed hints at hikes.
Marc to Market says the dollar is still mainly being driven by US rates. It notes the Dollar Index has been trending higher since early May, but momentum now looks ready to turn lower. For traders, USD strength looks vulnerable unless the Fed clearly supports the market’s hawkish rate view.
EURUSD
EURUSD has pushed back above 1.16 after the US-Iran deal headlines hit the dollar and boosted risk sentiment. Commerzbank says this move is justified, but also warns that shipping through the Strait of Hormuz will not return to normal overnight.
Lloyds notes that the ECB has already raised rates by 25bp and lifted its inflation forecasts. It says another hike is possible, although lower oil prices may allow the ECB to move more slowly. Danske Bank also sees the ECB in a difficult spot, with inflation rising while growth weakens.
Marc to Market says EURUSD found support near 1.15 and resistance sits around 1.1640 to 1.1655. The trading setup is now mildly constructive, but the pair still depends heavily on whether the Fed sounds hawkish enough to rebuild USD demand.
GBPUSD
GBPUSD is supported by softer USD, but the UK backdrop is mixed. Lloyds says GBPUSD moved above 1.34 as the dollar gave back recent gains and oil prices fell. It also expects the Bank of England to hold rates this week, but with a wider 7-2 vote split as inflation concerns stay alive.
Marc to Market says sterling is sitting near the middle of a one-month 1.33 to 1.35 range. UK CPI, labour data, retail sales and the Makerfield by-election are all important this week. If inflation firms and the BoE sounds hawkish, GBP can hold up. If labour data weakens, upside may stay capped.
For traders, GBPUSD looks range-bound unless UK CPI surprises or the BoE vote split becomes more hawkish than expected.
USDJPY
USDJPY remains stretched above 160, but this week’s BoJ meeting could change the tone. Commerzbank says the market has priced a 25bp BoJ hike to 1% at a 97% probability, so the hike itself may not be enough to support JPY. The guidance matters more.
Scotiabank says the BoJ is expected to hike, but Governor Ueda’s absence may limit the strength of the message. Marc to Market also doubts that one 25bp hike will change USDJPY dynamics, because the pair is still heavily driven by the broad dollar and US rates.
Nomura warns that Japan remains exposed to Middle East supply shocks. It expects a slower recovery, with Japan’s economy vulnerable to higher energy costs, weaker real wages and softer demand. For traders, USDJPY downside needs either softer Fed pricing or clear BoJ guidance that more hikes are coming.
AUDUSD
AUDUSD has benefited from the risk-on move after the US-Iran deal headlines, but the RBA is the key local driver. Westpac expects the RBA to hold this week, but still sees further hikes ahead in August and September because inflation is still too high. Westpac says the RBA will likely treat weak consumer and housing data as part of the necessary effect of tighter policy.
Commerzbank takes the other side. It says the RBA’s pause may become the end of the hiking cycle because inflation has softened, growth has weakened and unemployment is higher than expected. It expects the Aussie to struggle in the coming months as markets begin to price cuts.
Marc to Market says AUDUSD has support around 0.6980 and resistance near 0.7080 to 0.7100. The near-term tone is better after the risk rally, but the pair needs a hawkish RBA or weaker USD to break higher.
NZDUSD
NZDUSD has improved as Middle East risk fades. BNZ says NZDUSD rose 0.6% last week to 0.5830 and opened the new week firmer after confirmation of a US-Iran deal. BNZ sees short-term support near 0.5770 and resistance just below 0.60.
BNZ still expects NZDUSD to reach 0.63 by year-end, but says this assumes the Fed stays on hold. If the Fed hikes, that would offset the expected RBNZ tightening cycle and create downside risk for NZD.
BNZ also says New Zealand’s Q1 GDP should look solid, but more timely PMI and PSI data point to near-zero growth in Q2. For traders, NZD has relief-rally support, but it still needs better local data and a less hawkish Fed to extend gains.
USDCAD
USDCAD remains elevated, but the rally looks stretched. Scotiabank says CAD has underperformed despite higher oil prices and is still being driven more by the broad USD tone than local fundamentals. It sees medium-term value in CAD at current levels, but says near-term risks remain.
Scotiabank’s week-ahead range is 1.3876 to 1.4054. It also notes that USDCAD momentum looks extended and that the last two CAD sell-offs from above 1.39 reversed back toward 1.3500 to 1.3550 within two to three weeks.
For traders, CAD is not yet acting like a strong oil-linked currency. A softer Fed tone could pull USDCAD lower, but sticky US rate pricing may keep dips shallow.
Other Pairs
CHF looks capped by a very low policy rate backdrop. Scotiabank says the SNB is “stuck at the bottom”, while BNZ expects the SNB to hold. That keeps CHF more tied to risk sentiment than rate support.
Scandi FX is focused on central bank tone. Danske Bank expects the Riksbank to hold but give clearer guidance on inflation risks. It also expects Norges Bank to hold unless inflation surprises to the upside.
In EM, Commerzbank says the Turkish lira remains under pressure. It argues that official promises to fight inflation will not be enough while reserves fall and inflation expectations rise. CZK is different, with Commerzbank saying the chance of a Czech rate hike has strengthened.
Bias Table
| Pair | Bias | Key Drivers |
|---|---|---|
| USD | Mild bearish | Peace headlines, softer safe-haven demand, Fed must sound hawkish to support dollar |
| EURUSD | Mild bullish | USD softer, ECB still hawkish, resistance near 1.1640 to 1.1655 |
| GBPUSD | Neutral | BoE likely on hold, UK CPI and jobs data key, 1.33 to 1.35 range |
| USDJPY | Neutral to mildly bearish | BoJ hike priced, intervention risk, Fed tone still key |
| AUDUSD | Neutral | Risk-on support, RBA hold expected, split views on whether hikes are done |
| NZDUSD | Mild bullish | Relief from lower geopolitical risk, support near 0.5770, Fed hike risk caps upside |
| USDCAD | Mild bearish | USD rally stretched, CAD undervalued, range seen near 1.3876 to 1.4054 |
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Key Event Outlook
United States
The FOMC is the biggest event of the week. Scotiabank says this is Warsh’s “grand entrance” and expects no rate change, but a possible shift away from forward guidance and the dot plot. BNZ also expects no move, but says the statement may drop the easing bias.
US retail sales, industrial production, housing data and regional Fed surveys also matter. Strong data would support the idea that the Fed may need to stay hawkish. Softer data would weaken the dollar, especially after the peace headlines have already reduced safe-haven demand.
Eurozone
Final Eurozone HICP, industrial production and ECB commentary are in focus. Lloyds says the ECB has raised rates and lifted its inflation forecasts, but lower oil prices could slow the pace of further tightening.
EUR traders should watch whether ECB speakers lean into another hike or show more caution after oil prices fell.
United Kingdom
UK CPI, labour market data, retail sales, consumer confidence and the BoE decision are all key. Lloyds expects CPI to rise to around 3.0% and sees the BoE holding rates, likely with a more hawkish 7-2 vote split.
GBP could strengthen if inflation is firm and the BoE vote shows more concern about price pressure. Weak jobs data would limit gains.
Japan
The BoJ is expected to hike 25bp to 1%. Commerzbank says this is almost fully priced, so the key question is whether the BoJ signals more hikes. Japan CPI later in the week will show whether inflation pressure is broad enough to justify further tightening.
USDJPY is vulnerable to intervention talk if it stays above 160 and the BoJ does not sound firm.
Australia
The RBA is expected to hold at 4.35%. Westpac still expects further hikes because inflation remains above target. Commerzbank thinks the pause could mark the end of the cycle.
AUD traders should focus on the RBA’s guidance. A firm inflation warning would support AUD. A more balanced tone would keep AUD capped.
New Zealand
NZ Q1 GDP, current account, selected price indexes and trade data are in focus. BNZ expects Q1 GDP to look solid, but says Q2 momentum is much weaker.
NZD needs evidence that growth is holding up and that the RBNZ can still tighten. A hawkish Fed would be the main downside risk.
Canada
Canada releases manufacturing sales, international securities flows and retail sales. Scotiabank expects retail sales to rise 0.6% after a 0.9% gain in March.
CAD is mostly trading off USD tone for now. A softer Fed could help USDCAD reverse lower from stretched levels.
Other / Geopolitics
The US-Iran deal remains the main geopolitical driver. Commerzbank says markets are reacting with relief, but the deal has no released text and the reopening of the Strait of Hormuz is still uncertain. Scotiabank is also cautious, saying a limited MOU may only restart longer talks.
For FX, the first reaction is lower USD, lower oil risk premium and better support for risk currencies. But if the deal stalls or shipping does not normalise, safe-haven demand could return quickly.
Bank Desk Weekly FX Report
What the banks are saying, the fundamental bias, and key events.
