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 is being pulled in two directions. Higher oil prices, sticky inflation, and a Fed that is in no hurry to cut are giving the dollar rate support. Danske Bank notes that the Fed is “not quite done yet” and says markets have erased earlier rate cut bets, although Danske still expects two cuts in September and December.
But the growth side is less clean. Scotiabank warns the US labour market is “not as healthy as Chair Powell has tended to portray” and expects only a very small payroll gain this week. Westpac also says payroll risks are skewed to the downside after weaker activity growth.
For traders, the USD is supported by rates but vulnerable if payrolls disappoint. A soft NFP print would likely weaken the USD, especially against currencies where local rate risks are rising.
EURUSD
EUR/USD is still shaped by the ECB and the energy shock. Danske Bank says the ECB is facing “an ocean of uncertainty” but still expects 25bp hikes in both June and July, taking the deposit rate to 2.50%. That gives the euro support if energy prices stay high and inflation expectations keep rising.
Lloyds also sees the ECB as more open than the BoE to a June rate rise if the Middle East stalemate persists. Barclays says higher energy prices have lifted Eurozone headline inflation and that the ECB is unlikely to avoid a tighter stance if inflation pressure keeps building.
The risk is growth. Commerzbank warns that Eurozone GDP growth was weak in Q1 and says high energy prices are weighing on consumption and investment. For traders, EUR/USD can stay firm while ECB hike pricing holds, but the pair may struggle if weak PMIs and tariffs hurt growth confidence.
GBPUSD
GBP is less clearly supported than EUR. Danske Bank says the BoE delivered an “active hold” and that the most likely outcome is no rate change, while accepting that the risk is tilted toward one or two hikes.
Westpac is more hawkish, saying the BoE could hike in June if Brent stays high and the inflation shock starts looking closer to the BoE’s severe scenario. Lloyds is more cautious, saying a de-escalation could still leave rates on hold this year, which is their baseline view.
This leaves GBP sensitive to local political risk and gilt moves. Lloyds says UK local elections may affect sterling risk premia, especially with UK 10-year gilt yields back above 5%. For traders, GBP/USD can hold up if BoE hike pricing rises, but EUR/GBP may remain better supported if the ECB looks more likely to act than the BoE.
USDJPY
USD/JPY remains one of the most headline-driven pairs. Danske Bank says the BoJ likely intervened in FX markets, with money market data pointing to more than USD35bn of action. Danske says this shows Japan’s Ministry of Finance is committed to keeping USD/JPY below 160.
Commerzbank also notes that yen traders are on alert after USD/JPY fell sharply from around 160.70 on suspected BoJ intervention and after strong verbal warnings from Japanese officials.
The bigger picture is mixed. Danske is tactically bullish USD/JPY while energy prices stay high, but strategically expects USD/JPY to fall toward 150 over 12 months as the Iran war de-escalates, the USD weakens, and the BoJ hikes in June. For traders, the 160 area is now a clear intervention zone, while dips may still find buyers if oil stays high and carry remains attractive.
AUDUSD
AUD has one of the clearer rate-support stories this week. Westpac says the “RBA May hike” is locked in and expects a 25bp hike to 4.35%, followed by two more hikes in June and August. Westpac points to high trimmed mean inflation, fuel pass-through, and rising inflation expectations.
CommBank also expects the RBA to lift the cash rate by 25bp to 4.35%, though it notes the decision will be finely balanced because higher fuel costs are also a hit to consumer spending. BNZ says NAB also expects the RBA to hike, with the cash rate path likely peaking near 4.6% in the updated forecasts.
For traders, AUD/USD should stay supported if the RBA hikes and keeps a hawkish tone. But upside still depends on China data, risk appetite, and whether the Iran peace proposal lowers oil and inflation pressure.
NZDUSD
NZD is more neutral and more fragile than AUD. Westpac says NZD/USD has been stuck in a 0.5815 to 0.5930 range and that the next break depends on the Iran war. A de-escalation could lift NZD/USD toward 0.6000 to 0.6100, while escalation could push it below 0.5700 toward 0.5500.
BNZ also describes NZD as being in a “holding pattern” while the US-Iran conflict remains unresolved. BNZ sees near-term resistance around 0.5920 to 0.5930 and support around 0.5790.
The domestic story is mixed. Westpac says RBNZ Governor Breman focused on stable core inflation and second-round risks, which lowered market pricing for a May hike. BNZ still expects the RBNZ to lift rates later this year, but warns the labour market is likely to show more slack. For traders, NZD/USD is range-bound for now, while NZD/AUD remains under pressure from the stronger RBA story.
USDCAD
CAD has a strong near-term story. Scotiabank says “CAD’s April gains can extend” and notes that CAD rose 2.2% against USD in April. It argues positive CAD seasonality can continue into mid-year, while higher energy prices and stronger commodity prices support Canada’s terms of trade.
Scotiabank also says USD/CAD has broken below 1.3625/30, opening room toward 1.3525 and possibly the January low at 1.3482. It says trend dynamics remain “very bearish” for USD and that below 1.3482 there is little major support until 1.30/1.31.
The main risks are Canada jobs data and BoC messaging. Scotiabank expects Canadian jobs to be soft, while also questioning why the BoC is easing in real terms into a commodity shock. For traders, rallies in USD/CAD may still be sold while oil stays high and Canada data do not break down.
Other Pairs
NZD/AUD remains bearish. Westpac says the downtrend is intact after a 13-year low near 0.8174, driven by weak NZ sentiment, less hawkish RBNZ signals, and falling NZ-AU yield spreads. BNZ agrees that tighter Australian policy versus steady RBNZ policy has been a key driver, though BNZ thinks the cross may be close to a turning point later this year.
Asian FX is mixed. Commerzbank notes that AI-related demand is still helping parts of Asia, especially exporters tied to electronics. But oil importers remain exposed to higher energy costs. Barclays also says emerging market central banks are reacting to high market volatility after the Iran conflict, while the first inflation readings affected by the conflict are starting to arrive.
Bias Table
| Pair | Bias | Key Drivers |
|---|---|---|
| USD | Neutral to mildly bullish | Higher rates, sticky inflation, payroll risk |
| EURUSD | Mildly bullish | Rate hike risk, higher inflation, weak growth cap |
| GBPUSD | Neutral | BoE hold bias, hike risk, local political risk |
| USDJPY | Neutral to bearish near 160 | Intervention risk, high oil, carry support |
| AUDUSD | Mildly bullish | RBA hike risk, inflation pressure, China and risk sentiment |
| NZDUSD | Neutral | Range-bound, RBNZ caution, Iran headlines |
| USDCAD | Bearish | Oil support, CAD seasonality, technical breakdown |
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Key Event Outlook
United States
Friday’s payrolls report is the main event. Scotiabank expects only a small April payroll gain and says the US job market is weaker than Powell has suggested. Westpac looks for a better but still moderate number, while Lloyds and Commerzbank cite market consensus near 60k.
This matters because Fed cut pricing has largely disappeared. A strong report keeps USD supported and rate cuts off the table. A weak report would challenge the higher-for-longer view and could trigger USD selling.
Markets will also watch ISM services, JOLTS, ADP jobs, jobless claims, unit labour costs, and University of Michigan sentiment. These will show whether higher energy costs are hurting activity or only lifting inflation.
Eurozone
Eurozone PMIs, retail sales, producer prices, German factory orders, German industrial production, and the ECB wage tracker are the key releases. Lloyds highlights the ECB wage tracker and final PMIs as important for judging whether energy costs are feeding into broader inflation.
Danske Bank expects the ECB to hike in June and July, but says the growth outlook has deteriorated. Traders should watch whether the data support more ECB tightening or whether growth weakness starts to cap EUR upside.
United Kingdom
The UK has a lighter data week, but local elections on 7 May matter for sterling. Lloyds says investors will watch the results for their impact on sterling risk premia, especially as gilt yields have underperformed US Treasuries and German bunds.
BoE speakers are also important. Lloyds notes Governor Bailey speaks at the BoE Agenda for Research conference. Danske Bank says the BoE’s active hold means it will not wait for second-round effects before reacting, but Danske still thinks no change is the most likely path.
Japan
Japan’s wage data and BoJ minutes are in focus. BNZ says BoJ minutes will be closely watched after last week’s 6-3 split, the largest since 2016.
USD/JPY traders will also watch intervention risk. Danske Bank says Japanese authorities appear committed to stopping USD/JPY from trading back toward 160 in the near term. Any fresh intervention could trigger sharp JPY rallies.
Australia
The RBA decision is the key event. Westpac expects a 25bp hike to 4.35% and says the updated forecasts will show how the RBA views the inflation shock from the war. CommBank also expects a 25bp hike but says the vote will be closely watched because higher fuel prices are also hurting household spending.
Australia also has household spending, dwelling approvals, and trade data. Strong RBA guidance would support AUD. A cautious hike or a surprise hold would likely weaken AUD.
New Zealand
New Zealand’s Q1 labour market report and RBNZ Financial Stability Report are the main events. Westpac expects unemployment to hold at 5.4%, while BNZ expects it to edge up to 5.5%. Both see wage growth as subdued.
This matters for NZD because the RBNZ is trying to balance high near-term inflation against weaker growth. Softer labour data would support the RBNZ taking more time and could weigh on NZD, especially against AUD.
Canada
Canada releases trade data, PMIs, Ivey PMI, and jobs data. Scotiabank says the labour market update is the main market mover and also notes BoC Governor Macklem and Senior Deputy Governor Rogers will brief lawmakers early in the week.
CAD remains supported by oil, commodities, and seasonality. But a weak jobs print could slow CAD gains if it reduces BoC hike risk.
Other / Geopolitics
The Iran conflict and Strait of Hormuz remain the biggest cross-market risk. Barclays says the Strait looks set to stay closed for longer, while Commerzbank notes Iran’s peace proposal has lowered oil prices but has not yet removed the risk.
Oil remains the key FX driver. Higher oil supports CAD and NOK, hurts energy importers, keeps inflation risks alive, and raises pressure on central banks to stay hawkish. A real de-escalation would likely lower oil, ease inflation fears, support risk sentiment, and reduce intervention pressure in USD/JPY.
Bank Desk Weekly FX Report
What the banks are saying, the fundamental bias, and key events.
