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

USD

Banks remain aligned that the Federal Reserve is set to pause this week, but that the easing cycle is not over. Danske Bank expects the Fed to hold rates steady, with no new guidance given the absence of updated projections, and continues to forecast two further cuts later in the first half of the year.

Lloyds also sees the pause as temporary, noting a cooling labour market alongside inflation still above target. Citi and Barclays highlight that political uncertainty around the Fed leadership and tariffs remains a background risk, but has not yet shifted the policy outlook. Overall, the balance of risks still points to lower US yields later in 2026, which limits upside for the dollar beyond short-term event support.

EURUSD

EURUSD remains supported by expectations that US rates will fall earlier and further than Eurozone rates. Danske Bank maintains a constructive view on EURUSD over the course of 2026, arguing that labour market cooling and easing wage pressure give the Fed room to cut, even if January is a pause.

Commerzbank notes that Eurozone core inflation is likely to continue easing and could briefly fall below the ECB’s 2 percent target, but does not expect this to force a change in ECB policy. Lloyds sees Eurozone growth stabilising, helped by domestic demand and fiscal support, though trade risks remain. The pair remains sensitive to US rates rather than European data in the near term.

GBPUSD

UK data has surprised modestly to the upside, but banks still expect a gradual easing path from the Bank of England. Lloyds notes firmer retail sales and PMIs, alongside headline CPI ticking higher, but stresses that labour market cooling and easing wage growth remain in place.

This keeps the BoE on track for measured rate cuts later in the year rather than aggressive easing. GBPUSD is likely to trade more as a function of the dollar leg, with limited scope for sustained outperformance unless UK data continues to surprise consistently.

USDJPY

USDJPY bias has shifted lower as Japanese factors come back into focus. Lloyds highlights renewed pressure on yen assets following Japan’s snap election call and concerns around fiscal policy, even as the Bank of Japan keeps rates unchanged after its recent hike.

Market pricing still points to further BoJ tightening later this year, which limits upside in USDJPY. InvestingLive also notes growing market conviction that USDJPY can move materially lower as US yields peak and Japanese policy normalisation continues. The pair remains volatile, but risks appear skewed to further downside on rallies.

AUDUSD

AUDUSD remains driven by the interaction between domestic inflation and global risk sentiment. Commonwealth Bank expects December trimmed mean CPI to remain firm, reinforcing the case for further RBA tightening in early 2026.

However, the decision remains finely balanced and highly data-dependent. Westpac also notes that geopolitical uncertainty and global growth risks complicate the outlook for risk-sensitive currencies. AUDUSD is likely to struggle to break higher unless China data improves and global risk sentiment stabilises further.

NZDUSD

NZDUSD remains relatively constrained as the market weighs restrictive policy against slowing growth. BNZ highlights that inflation pressures are easing only gradually, keeping the RBNZ cautious about signalling near-term cuts. At the same time, growth momentum remains soft, limiting upside for the currency. NZDUSD continues to trade as a higher-beta USD pair rather than on domestic catalysts, with limited conviction in either direction.

USDCAD

USDCAD is being pulled in opposing directions by oil prices and relative rate expectations. Marc to Market notes that the Bank of Canada is expected to stay on hold, while markets remain focused on whether easing resumes later in the year. Lloyds also points to softer US dollar momentum as a headwind for the pair. Oil price support has helped stabilise CAD, but USDCAD remains sensitive to broader USD moves and risk sentiment rather than domestic data alone.

Gold (XAUUSD)

Gold has moved sharply higher, breaking through USD 5,000 to fresh all-time highs. Commerzbank attributes the move to a combination of safe-haven demand, central bank buying, and expectations that US rates will move lower later this year. Lloyds and Citi both point to political uncertainty and questions around Fed independence as supportive background factors.

InvestingLive notes that momentum remains strong, though positioning looks stretched in the short term. The medium-term bias remains constructive as long as real yields stay contained, but near-term consolidation risks have increased after the recent surge.

Bias Table

Key Event Outlook

United States

The Federal Reserve policy decision is the main event. Banks broadly expect no change in rates, with focus on Chair Powell’s tone and whether he reinforces expectations for further cuts later in the year. Any signal that the pause could extend longer than expected would support the dollar and pressure risk assets.

Eurozone

Flash GDP and survey data will be watched for confirmation that growth is stabilising. Lloyds expects modest upside relative to consensus, but not enough to materially alter ECB policy expectations. EUR reaction is likely to be secondary to US developments.

United Kingdom

UK data is light, with the Lloyds Business Barometer and money and credit figures due. Markets will watch for confirmation that activity remains resilient but not inflationary enough to derail gradual BoE easing.

Japan

Political developments remain in focus following the snap election announcement. While the BoJ is on hold for now, markets continue to price further tightening later in the year, keeping USDJPY sensitive to yield spreads and risk sentiment.

Australia

Attention remains on upcoming CPI data after firm trimmed mean expectations. Any upside surprise would reinforce the case for further RBA tightening and support AUD, while softer outcomes would revive easing expectations.

New Zealand

Domestic data remains limited, leaving NZD largely driven by global factors and US rates rather than local catalysts.

Canada

The Bank of Canada decision is expected to deliver no change. Guidance around future easing will matter more than the decision itself, particularly for USDCAD positioning.

Other / Geopolitics

US political risk, Fed leadership uncertainty, and ongoing geopolitical tensions remain important background drivers. These factors continue to support gold and weigh on risk-sensitive FX when volatility rises.

Sources

• Westpac Banking Corporation – Weekly Economic & FX Research

• Westpac Banking Corporation – Cliff Notes: Global Markets Update

• Lloyds Bank – Market Insights Weekly

• Danske Bank – Weekly Focus: A Week of Politics Moving Markets

• Danske Bank – Fed Preview: Temporary Pause on Rate Cuts

• Commonwealth Bank of Australia – Global Markets Research

• Bank of New Zealand – Markets Outlook and FX Strategy

• Barclays – Weekly Macro and Market Insights

• Citi – Weekly Market Update

• Marc to Market – Week Ahead: Fed and Bank of Canada Outlook

• Commerzbank – Commodities Update: Record After Record

• InvestingLive – Gold Blasts Through 5,000 to All-Time Highs

• InvestingLive – Monday Morning in Tokyo: USDJPY Bias Shifts Lower