Bank FX views in one page, covering the key drivers, clear bias by pair, and the week’s events that move markets.
USD
The USD starts the week pulled between two forces. Weekend news that a US-Iran deal may be closer has helped risk sentiment, pushed oil below US$100, and triggered a broad USD sell-off in early Asia trade. But the deal is not done. InvestingLive notes that Trump later said there was “no rush” and that the blockade stays until an agreement is signed, certified, and ratified. That keeps Iran and Hormuz as the main short-term market driver.
The broader bank view still leans USD supportive. Danske Bank says “USD debasement has come to an end” and now expects Fed hikes in December 2026 and March 2027, driven by stronger US nominal growth, AI investment demand, and sticky inflation. Marc to Market also says US economic resilience supports the dollar, with Fed hike pricing now seen as more base case than tail risk.
Scotiabank is more cautious on chasing the bond selloff. It argues there is a high bar for the Fed to pivot fully toward hikes, especially if job revisions show weaker payrolls later this year. Still, Scotiabank agrees that inflation risks are high and that the Fed faces a difficult policy mix.
For traders, USD dips linked to Iran relief may be bought if US PCE stays firm and Fed speakers keep a hawkish tone. A real Hormuz reopening deal would weaken the USD near term, but stronger US data keeps the medium-term USD floor intact.
EURUSD
EUR/USD remains under pressure. Danske Bank now expects EUR/USD to fall toward 1.12 over 12 months, saying the relative cycle has turned against the euro as US data improves and euro area data disappoints. It also notes that higher energy prices are a negative terms-of-trade shock for the euro area, while the USD benefits.
Lloyds Bank says the eurozone outlook remains weak, with the May composite PMI falling to 47.5. At the same time, Lloyds notes that the ECB is more focused on inflation risk, with price indicators strengthening the case for rates to move into restrictive territory.
Marc to Market notes EUR/USD has already reached key retracement support near 1.1580 and says the next chart support is around 1.1500 to 1.1525. A move back above 1.1660 would be an early sign that the downside move is losing steam.
For traders, the bias is lower while US data stays firm and eurozone PMIs weaken. A confirmed Iran deal and lower oil could help EUR/USD bounce, but the ECB growth problem limits upside.
GBPUSD
GBP/USD is also under pressure, but the picture is less one-sided than EUR/USD. Lloyds Bank says softer UK data pushed 10-year gilt yields back below 5%, with inflation surprising lower, wage pressure easing, and the flash composite PMI falling back into contraction. That gives the Bank of England room to wait.
Danske Bank expects the BoE to stay on hold through 2026 and 2027. It says the UK economy remains fragile and that GBP is vulnerable when risk appetite weakens because of the UK’s current-account deficit. Its forecast implies GBP/USD falling from 1.34 spot to 1.26 in 12 months.
Westpac also notes UK retail sales fell 1.3% in April, while consumer confidence remains weak. That supports the view that GBP rallies may struggle unless risk sentiment improves sharply.
For traders, GBP/USD remains a sell-on-rallies pair if US yields stay high. A softer US PCE print would give GBP breathing room, but UK data is not strong enough to drive a lasting rally by itself.
USDJPY
USD/JPY remains high, but the medium-term view is turning more mixed. Danske Bank expects USD/JPY to drift lower from around 159 to 155 over 12 months as the BoJ resumes rate hikes and Japan’s wage cycle supports inflation. Still, it warns that high oil prices hurt Japan and that fiscal concerns have pushed JGB yields higher.
Marc to Market says USD/JPY is still being driven mainly by the broad USD and US yield direction. It also notes that the market remains confident the BoJ will hike in June, but the yen has still weakened in nine of the past ten sessions.
Barclays notes that a hawkish shift is underway at the BoJ, while Japan is also considering a small budget focused on energy subsidies. This mix keeps JPY sensitive to both yield spreads and energy prices.
For traders, USD/JPY can stay supported while US yields remain firm, but intervention risk rises near 160. A confirmed Iran deal and lower oil would help Japan’s terms of trade and could support JPY.
AUDUSD
AUD/USD is being driven by two things: Iran risk and RBA pricing. Westpac says early Sydney trade showed a broad USD sell-off, with “riskier” currencies like AUD benefiting from deal optimism. But Westpac also says Australian CPI this week is key because it will show how much higher fuel costs are feeding into broader inflation before the June RBA meeting.
CommBank says there is no rush for an Iran deal and that the US blockade stays, which keeps geopolitical risk alive. CommBank also expects Australian April CPI to be a key driver this week, with underlying inflation still firm despite lower fuel costs.
Danske Bank says AUD has been one of the strongest G10 currencies this year, helped by RBA hikes, relative rates, and better terms of trade. But it now sees upside as close to exhausted if the Fed shifts toward a tightening bias, and forecasts AUD/USD at 0.69 in 12 months.
For traders, AUD can bounce if Iran relief continues and CPI is firm enough to support RBA hike pricing. But if US PCE is hot and Fed hike pricing rises again, AUD/USD may struggle above the low 0.72s.
NZDUSD
NZD/USD is stuck in a range, with the RBNZ the key event this week. BNZ expects the RBNZ to hold the OCR at 2.25%, but to bring forward projected rate hikes because near-term inflation has risen while growth signals have softened. BNZ says the RBNZ will likely want to buy more time before actually raising rates.
Westpac agrees the RBNZ meeting is “live” but expects no change. It says the RBNZ is caught between higher inflation and weaker growth, with the press conference and OCR track likely as important as the headline decision.
BNZ also notes that NZD moves have broadly matched oil price swings, showing how important Middle East news is for the currency. It sees NZD/USD stuck around 0.58 to 0.60 for now, with support near 0.5790 and resistance near 0.60.
For traders, NZD needs a hawkish RBNZ to break higher. If the RBNZ downplays inflation risk, NZD/USD could slip back toward the bottom of the recent range.
USDCAD
USD/CAD is supported by USD strength, but capped by oil. Danske Bank says elevated oil prices should limit near-term topside in USD/CAD, but it still expects a flat-to-upward path over time as BoC hike pricing fades and USMCA uncertainty weighs on CAD. Its forecast has USD/CAD rising toward 1.40 over 12 months.
Marc to Market says USD direction is the biggest driver of CAD right now, more than oil. It notes the pair has moved above its 200-day moving average, with the next technical target near 1.3870. Canada Q1 GDP is the key domestic data point this week, with the market expecting a rebound after Q4 weakness.
Scotiabank expects Canada’s economy to show solid Q1 growth, with domestic demand important for judging how much pressure the BoC is under. It also notes BoC communication will focus on risks.
For traders, USD/CAD remains a buy-on-dips pair if US data stays strong. But a real Iran deal could lower oil and weaken CAD’s terms-of-trade support, which may actually help USD/CAD later even if the USD softens at first.
Other Pairs
USD/CNY remains one of the clearer non-G10 stories. Danske Bank expects USD/CNY to fall to 6.70 over 12 months despite broader USD strength, arguing that China still wants a stronger currency and that the PBoC is guiding the yuan higher.
Marc to Market agrees the PBoC’s campaign to manage gradual yuan appreciation does not appear over. It sees scope toward CNH6.60, stronger than the Bloomberg median forecast.
EUR/GBP is biased higher in Danske Bank’s view, with a 6 to 12 month target near 0.89. The driver is UK fragility, softer BoE pricing, and the UK’s external deficit.
Bias Table
| Pair | Bias | Key Drivers |
|---|---|---|
| USD | Mild bullish | Strong US data, sticky inflation, Fed hike pricing, safe-haven support if Iran risk returns |
| EURUSD | Bearish | Weak eurozone PMIs, energy import shock, stronger US cycle, resistance near 1.1660 |
| GBPUSD | Mild bearish | Softer UK data, BoE likely on hold, weak retail sales, USD yield support |
| USDJPY | Neutral to mildly bullish short term | US yields support upside, BoJ hike risk and intervention risk cap gains |
| AUDUSD | Neutral | Risk sentiment helps, RBA pricing supports, but Fed repricing caps upside |
| NZDUSD | Neutral to mildly bullish if RBNZ hawkish | RBNZ hold expected, higher OCR track needed, 0.58 to 0.60 range |
| USDCAD | Mild bullish | Strong USD, BoC caution, oil caps upside short term, technical target near 1.3870 |
Try MarketMates
Trade with more clarity. Get in-depth trader training, rewards when you trade, prop trading, and low-cost brokerage with no hidden fees.
Key Event Outlook
United States
US PCE inflation is the main event. Lloyds expects headline PCE to rise to 3.9% from 3.5%, with core PCE at 3.3%. Marc to Market also says the data should confirm stronger US growth and headline price pressure. A hot print would support Fed hike pricing and the USD. A soft print would give risk assets more room to rally and could extend the Iran relief USD pullback.
Other US releases include consumer confidence, durable goods, new home sales, initial claims, and the Q1 GDP second estimate. InvestingLive notes Thursday is the key US data day, with PCE, GDP, durable goods, and new home sales all due.
Eurozone
Eurozone national CPI prints from Germany, France, Italy, and Spain will matter for ECB pricing. Lloyds says eurozone inflation is expected to rise further from April’s 3.0%, while the ECB meeting account will show how close policymakers are to a June hike.
For EUR, hotter inflation may support short-term ECB pricing, but weak PMIs mean rate hikes are not clearly EUR-positive. Traders should watch whether higher inflation is seen as a policy support story or a growth damage story.
United Kingdom
The UK calendar is lighter, but the BRC Shop Price Index, CBI retail survey, Lloyds Business Barometer, and BoE speeches are worth watching. Lloyds says the BoE has cover to wait after softer inflation, weaker wage signals, and a composite PMI below 50.
For GBP, weak survey data would reinforce the view that GBP/USD rallies are fragile. BoE speakers matter because markets are still debating whether the next move is a hike or a long hold.
Japan
Tokyo CPI, jobs, retail sales, and industrial output are due Friday. Marc to Market says Tokyo CPI is a useful guide for national inflation and that markets are still confident the BoJ will hike in June.
For JPY, a stronger CPI print could support BoJ hike pricing and pull USD/JPY lower. But if US yields stay high, JPY gains may be limited.
Australia
Australian April CPI is the key local event. Westpac says it will help gauge cost pass-through and underlying inflation pressure before the June RBA meeting. InvestingLive notes the market expects headline CPI to ease to 4.4% year-on-year, but the data will show whether Middle East fuel costs are spreading more broadly.
For AUD, a high trimmed mean print would support RBA hike pricing and help AUD/USD. A soft print would leave AUD more dependent on risk sentiment and Iran headlines.
New Zealand
The RBNZ decision is the main NZ event. BNZ expects no change at 2.25%, but a higher projected OCR track. Westpac also expects a hold, but says the decision is finely balanced because inflation has risen while growth has weakened.
The NZ Budget, ANZ business confidence, and consumer confidence are also due. For NZD, the key is whether the RBNZ signals real rate hikes ahead. A cautious hold with weak guidance would be NZD-negative.
Canada
Canada Q1 GDP is due Friday. Scotiabank expects the data to show whether domestic demand remains solid, while Marc to Market says the economy likely rebounded after a Q4 contraction.
For CAD, strong GDP could support BoC hike pricing and help the currency. But USD/CAD remains mostly driven by the USD and risk sentiment, with oil acting as a secondary driver.
Other / Geopolitics
Iran remains the biggest live risk. InvestingLive says oil dropped below US$100 as US-Iran deal optimism outweighed the continued blockade, while risk assets firmed and the USD weakened. But it also notes the diplomatic picture remains messy, with Trump saying the blockade stays until a deal is formally completed.
For FX, a confirmed deal would likely support AUD, NZD, EUR, and risk-sensitive currencies at first, while weighing on USD safe-haven demand and oil-linked inflation fears. A breakdown in talks would likely reverse that move, lifting USD, oil, and short-end rate expectations.
Bank Desk Weekly FX Report
What the banks are saying, the fundamental bias, and key events.
