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

Note: This is a limited report due to light bank research availability around the year-end period.

USD

Banks broadly agree the USD has likely peaked, but near-term downside is still uneven. Marc to Market argues the dollar topped in 2025 and expects an 8 to 10 percent decline over 2026 as Fed cuts resume and global growth stabilises. Danske Bank highlights that US growth momentum remains strong, supported by consumption and wage gains, which limits immediate USD weakness. Scotiabank is more cautious, pointing to falling real house prices and a negative wealth effect that could slow consumption later this year. Near term, the USD remains supported by yield levels, but the balance of risks is turning lower if labour data weakens.

EURUSD

Banks remain constructive on EURUSD, though most expect consolidation after last year’s strong rally. Marc to Market sees scope for EURUSD to move back toward the 1.22 to 1.25 area over 2026 as US-German yield spreads narrow further. Danske Bank stresses that the ECB is firmly on hold, with no rate changes expected this year or next, which reduces downside policy risk for the euro. Scotiabank notes firm Spanish core inflation reinforces expectations of a prolonged ECB hold. Near term, EURUSD may range trade, but banks generally see dips as buying opportunities if USD weakness resumes.

GBPUSD

Sterling views are mixed, but the bias is cautiously positive. Marc to Market notes weak UK growth and sticky inflation, with the BoE already cutting rates and further easing priced for 2026. Danske Bank adds that year-end FX flows favoured cyclical currencies, supporting GBP despite domestic headwinds. Commerzbank highlights that GBP finished 2025 as one of the stronger G10 currencies, largely on USD weakness. Overall, banks see GBPUSD upside as driven more by a softer USD than by UK fundamentals, with resistance near prior cycle highs still important.

USDJPY

Banks remain cautious on USDJPY, with risks skewed lower but timing uncertain. Marc to Market highlights that the yen stayed weak despite a BoJ hike, as policy rates remain very low and further tightening is slow. Danske Bank notes that JPY underperformed as year-end flows favoured cyclical currencies. Scotiabank flags that intervention risk increases if USDJPY remains elevated and disconnected from fundamentals. A sustained break below the mid-154 area is seen by banks as a signal that a broader USDJPY downturn may be starting.

AUDUSD

AUD sentiment has improved across banks. Marc to Market argues the RBA is likely done easing, with markets even pricing some chance of hikes later in 2026. Danske Bank notes that cyclical currencies strengthened into year end as global manufacturing PMIs improved. Commerzbank highlights AUD resilience despite trade tensions, supported by commodities and steady China demand. That said, banks warn AUD looks stretched after a sharp rally, with scope for near-term pullbacks before further upside.

NZDUSD

NZD received less direct coverage this week, but the tone remains mildly constructive. Marc to Market expects New Zealand to be among the economies that could move toward tighter policy later in 2026, which supports the currency over time. Danske Bank’s broader view that cyclical FX strengthened into year end also applies to NZD. Near term, banks see NZD as a secondary beneficiary of USD weakness rather than a standalone outperformer.

USDCAD

Banks are increasingly bearish USDCAD. Marc to Market highlights that the Bank of Canada is likely done easing, with markets pricing a meaningful chance of hikes by late 2026. Scotiabank notes that Canada’s yield outlook is becoming more supportive relative to the US, even as trade uncertainty remains. Danske Bank adds that cyclical currencies strengthened late in the year, helping CAD finish 2025 on a firm footing. Overall, banks see further downside in USDCAD if USD weakness broadens.

Other Pairs

EM FX sentiment improved into year end. Marc to Market highlights strong performances in MXN and CNY, supported by carry, capital inflows, and managed appreciation policies in China. Commerzbank notes that Asian FX benefited from recovering PMIs and improving risk sentiment, while Danske Bank points to easing geopolitical fears in Asia supporting regional currencies. These trends suggest continued medium-term pressure on the USD if global growth holds up.

Bias Table

Key Event Outlook

United States

Scotiabank and Danske Bank both stress that labour data is now the key driver for Fed policy. ISM surveys, ADP, and nonfarm payrolls will shape rate expectations and near-term USD direction. Any downside surprise would likely pressure yields and the USD.

Eurozone

Danske Bank expects no ECB policy changes, so inflation and PMI data mainly matter for rate spreads and EUR positioning rather than policy shifts. Scotiabank highlights firm Spanish core inflation as consistent with a long ECB hold.

United Kingdom

Marc to Market notes the BoE has already started easing and more cuts are priced. UK data can still move GBP, but most banks expect GBPUSD to remain driven by broader USD trends unless there is a sharp surprise.

Japan

Marc to Market and Scotiabank both flag rising intervention risk if USDJPY stays elevated. BoJ messaging and wage developments remain the main catalysts for yen volatility.

Australia

Marc to Market argues the RBA easing cycle may be over, while Commerzbank stresses China-linked momentum and risk sentiment. Confirmation from RBA communication and China data will drive AUD direction.

New Zealand

Limited local catalysts this week. Marc to Market keeps a constructive medium-term view if New Zealand shifts toward tighter policy later in 2026. Near term, NZD tracks global rates and risk appetite.

Canada

Marc to Market sees CAD supported if the BoC stays on hold while the Fed shifts toward cuts. Oil remains relevant, but rate differentials and broader USD direction are the key drivers.

Other / Geopolitics

Commerzbank and Danske Bank both flag geopolitics as a background risk that can trigger short-term USD support. Marc to Market also highlights trade and political uncertainty as ongoing macro themes that can drive bursts of volatility across FX.