The Fed, Bank of England and Bank of Japan take centre stage in a major week for FX markets, alongside Australian inflation, US GDP, PCE inflation and renewed geopolitical risk.
What Matters Most
This is one of the most important central-bank weeks of the year. The Federal Reserve, Bank of England and Bank of Japan are all expected to leave rates unchanged. Australian inflation, US GDP, US PCE inflation and euro-area inflation will add to the risk of large moves.
The central theme is whether higher oil and energy prices will restart inflation. Lloyds Bank warns that markets now face a “triple chokepoint” risk across the Strait of Hormuz, Red Sea and Black Sea. This has pushed oil and bond yields higher and increased expectations that central banks may need to tighten again.
The US dollar should remain supported before the Fed meeting. However, markets are pricing a meaningful chance of a July hike, while the broad bank consensus expects no change. This creates a clear risk of a dollar sell-off if Chair Warsh does not keep a September hike firmly in play.
USD
The broad institutional view is moderately positive on the dollar in the short term, but much less certain beyond the Fed meeting.
Lloyds Bank expects the Fed to leave rates at 3.50%–3.75%. Softer June inflation reduces the need for an immediate hike, but higher energy prices, tariffs and firm growth keep a September move possible. Lloyds expects US GDP growth of 2.3% annualised in the second quarter and core PCE inflation of 3.3%.
Scotiabank also expects the Fed to hold. It believes the dollar could fall after the decision because markets are pricing more than a 30% chance of a hike. A neutral message from Chair Warsh may therefore disappoint dollar buyers.
Westpac is also cautious about the case for further Fed tightening. It argues that headline payroll growth has overstated the strength of the broader US labour market. This creates the risk that markets are too confident about another hike.
Marc Chandler is more positive on the dollar’s immediate direction. Higher oil, firm US yields and demand for safety could push the Dollar Index back toward its 2026 high around 101.80. A break higher would expose 102.00 and 102.70.
The broad conclusion is mildly bullish before the Fed, but with significant reversal risk. The dollar needs either a hike or a clear signal that September remains live to hold its recent gains.
EURUSD
EURUSD remains under pressure from higher US yields, geopolitical risk and Europe’s exposure to rising energy costs.
Commerzbank expects the ECB to raise rates again in September. The bank describes the next hike as “postponed, not cancelled,” pointing to rising core inflation risks, higher household inflation expectations and the ECB’s continued tightening bias.
Lloyds expects euro-area GDP to grow by 0.2% in the second quarter. It also expects headline inflation to remain at 2.8% in July and core inflation to hold at 2.4%. This would keep a September ECB hike possible, although another energy shock could weaken growth while pushing inflation higher.
Marc to Market notes that EURUSD has fallen from around 1.1485 toward 1.1365. Support sits around 1.1325, close to the 2026 low. A clear break below that area could open a deeper move toward 1.1100.
The short-term bias remains bearish while US yields and geopolitical risk support the dollar. However, downside should become harder to sustain if the Fed disappoints markets and the ECB keeps September tightening in play.
GBPUSD
Lloyds Bank expects the BoE to leave Bank Rate unchanged at 3.75%, most likely by a 7–2 vote. Pill and Greene are expected to support a 25-basis-point hike, while Mann is the main risk to a more hawkish 6–3 result.
Lloyds describes the decision as an “active hold.” Inflation has been softer than expected, private-sector wage growth has slowed and the labour market has loosened. At the same time, higher market borrowing costs are already tightening financial conditions without the BoE needing to raise Bank Rate.
The updated Monetary Policy Report will be the main signal for sterling. If the BoE’s forecast only returns inflation to target under a market path that includes future hikes, the Bank may allow those expectations to remain. If inflation undershoots under the same path, markets could reduce hike expectations and GBP may weaken.
Marc to Market identifies 1.3300 as initial support, followed by 1.3150–1.3140. Sterling needs to recover above 1.3400 to improve the short-term technical picture.
The bias is slightly bearish below 1.3400. However, a 6–3 vote or a forecast that keeps a September hike firmly in play could produce a sharp GBP recovery.
USDJPY
USDJPY remains close to multi-decade highs because US yields continue to outweigh expectations of future BoJ tightening.
Marc to Market expects the BoJ to hold this week. Markets expect the next hike later in the year, but this has not been enough to create a lasting yen recovery.
Scotiabank says a hawkish hold could surprise markets. Stronger inflation or growth forecasts would support expectations for a later hike and could produce a meaningful yen rebound. However, there is little clear technical resistance above current USDJPY levels.
Westpac expects the BoJ to continue raising rates gradually, reaching 1.5% by mid-2027. It points to stronger wage growth, more settled inflation expectations and improving productive capacity. However, uncertainty around the neutral rate should keep the pace slow.
The bias remains bullish USDJPY while the BoJ holds and US yields stay elevated. The main risks are stronger BoJ guidance and direct currency intervention by Japan’s Ministry of Finance.
AUDUSD
AUDUSD is holding up relatively well, but Wednesday’s Australian inflation report will be decisive.
Westpac expects the June inflation data to be strong enough to justify two further RBA hikes during 2026. It has increased its conviction that the next move will come in August, although the need for a September follow-up will depend on inflation and the Middle East situation.
Westpac also notes that Australia entered the energy shock with inflation already above the RBA’s 2%–3% target range. This makes the RBA less able to ignore another rise in fuel and transport costs.
Scotiabank notes that AUD recently benefited from stronger PMI data. However, geopolitical uncertainty and higher US yields continue to limit gains.
AUDUSD has struggled to hold above 0.7000, with rising support around 0.6955. The bias is neutral to mildly bullish above that level. A strong CPI result could produce another move toward 0.7000–0.7025.
NZDUSD
The New Zealand dollar continues to receive support from expectations of further RBNZ tightening.
BNZ expects inflation to remain close to 4% through the rest of 2026. Its forecasts remain above the RBNZ’s July projections, increasing the risk that inflation becomes more settled in the economy. BNZ therefore expects the RBNZ to continue removing monetary stimulus.
Westpac also expects further rate hikes following the RBNZ’s July increase. The exact timing will depend on inflation, growth and energy prices.
The domestic economy is showing early signs of recovery, but BNZ warns that employment growth may not be enough to stop unemployment rising. Oil volatility and global risk aversion are also important risks for NZD.
NZDUSD has a mild bullish medium-term bias because New Zealand rates are expected to rise further. However, higher US yields and geopolitical risk may delay the move.
USDCAD
The Canadian dollar is caught between higher oil prices and the US interest-rate advantage.
Scotiabank says these drivers are pulling CAD in opposite directions. Higher oil has improved Canada’s terms of trade, but expectations of Fed tightening have widened short-term rate spreads in favour of the dollar.
Scotiabank estimates fair value near 1.4000 and expects USDCAD to trade within approximately 1.3980–1.4178 this week. It sees moves above 1.4100 as potentially attractive for Canadian companies hedging future US-dollar requirements.
The 50% US tariff threat against Canadian goods remains a major risk. Canada is considering retaliation if an agreement is not reached, which may prevent CAD from fully benefiting from higher oil.
The near-term bias is neutral to mildly bullish USDCAD. However, strong oil prices and a less-hawkish Fed should limit the upside.
XAUUSD
Gold remains supported by geopolitical risk, high government borrowing and continued demand for defensive assets.
Higher bond yields and the risk of a Fed hike are short-term headwinds. A surprisingly hawkish Fed decision could cause an initial fall in gold. However, continued tension around Hormuz, the Red Sea and Iran should keep demand for protection elevated.
The relationship between gold and the dollar will be important. A Fed hold followed by a softer dollar could support another move higher, even if oil prices ease.
The bias is moderately bullish while gold holds above the $3,900 region. The Fed decision is the main short-term volatility risk.
Bias Table
| Pair | Bias | Key Drivers |
|---|---|---|
| USD | Mildly bullish | Higher oil, geopolitical risk and firm yields; downside if the Fed disappoints |
| EURUSD | Bearish short term | US yield advantage and energy risk; September ECB hike limits downside |
| GBPUSD | Slightly bearish | Weak below 1.3400; a hawkish BoE vote is the main upside risk |
| USDJPY | Bullish | BoJ expected to hold and US yields remain high; intervention risk is rising |
| AUDUSD | Neutral to mildly bullish | Australian inflation and RBA hike expectations; global risk caps gains |
| NZDUSD | Mildly bullish | Further RBNZ tightening and high domestic inflation |
| USDCAD | Neutral to mildly bullish | US rate advantage and tariff risks offset stronger oil |
| XAUUSD | Moderately bullish | Geopolitical risk, defensive demand and potential USD weakness |
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Key Event Outlook
United States
The Federal Reserve meets on July 28–29. The broad consensus across Lloyds, Scotiabank and other institutional research is for rates to remain at 3.50%–3.75%.
Markets are pricing a meaningful chance of a hike. A hold without strong guidance about September would likely weaken the dollar. A hawkish statement could support USD and place pressure on gold and equities.
Advance second-quarter GDP and June PCE inflation are due Thursday. Lloyds expects annualised GDP growth of 2.3%, headline PCE inflation of 3.6% and core PCE inflation of 3.3%.
The Q2 Employment Cost Index follows Friday. Wage growth will matter because the Fed is trying to determine whether inflation pressure is spreading beyond energy and tariffs.
Eurozone
Euro-area second-quarter GDP is released Thursday. Lloyds expects growth of 0.2% quarter-on-quarter.
Preliminary July inflation follows Friday. Lloyds expects headline inflation to remain at 2.8% and core inflation at 2.4%.
Commerzbank still expects a September ECB hike. Firm inflation would support that view and could help EUR recover. Weak growth combined with another increase in energy prices would be the more difficult outcome for the currency.
United Kingdom
The Bank of England announces its decision Thursday, July 30. Bank Rate is currently 3.75%.
Lloyds expects a 7–2 vote to hold, with a 6–3 vote representing the hawkish risk. Traders should focus on the voting split, the inflation forecast and whether Governor Bailey pushes back against market expectations for future hikes.
A forecast that keeps September tightening in play would support GBP. A forecast showing inflation below target under the current market rate path would likely weaken sterling.
Japan
The Bank of Japan meets July 30–31 and releases an updated Outlook Report on July 31.
The BoJ is expected to hold. Traders will focus on its inflation forecasts, the timing of the next hike and any warning about excessive yen weakness.
A hawkish hold could produce a sharp USDJPY decline because speculative positions are already heavily against the yen. A cautious BoJ would leave intervention as the main barrier to further USDJPY gains.
Australia
Australia releases June CPI on Wednesday, July 29.
Westpac expects the data to strengthen the case for an August RBA hike. A firm reading should support AUDUSD and Australian yields. A softer result would reduce the chance of an August move and place 0.6955 support under pressure.
New Zealand
New Zealand has no top-tier domestic release this week.
BNZ highlights June filled-jobs data and the ANZ business and consumer confidence surveys. These reports should help show whether the economic recovery is continuing despite higher inflation and volatile oil prices.
NZD will also be sensitive to Australian inflation, China’s activity data and broader risk sentiment.
Canada
The Bank of Canada releases its Summary of Deliberations on Wednesday, followed by May GDP on Friday.
Scotiabank sees short-term US–Canada rate spreads as the main driver of USDCAD. Strong Canadian growth could allow CAD to benefit more clearly from higher oil. Weak GDP would leave the currency vulnerable.
The 50% US tariff threat remains the largest non-data risk for CAD. Any retaliation or progress toward an agreement could produce a large move.
Other / Geopolitics
Middle East developments remain capable of overshadowing the scheduled calendar.
Lloyds Bank highlights the combined risk to the Strait of Hormuz, Red Sea and Black Sea. Commerzbank warns that oil could rise further if the disruption expands to Bab-el-Mandeb, particularly because inventories of some refined products are already low.
Traders should watch for:
- Further US or Iranian military action.
- Changes in shipping through the Strait of Hormuz.
- Houthi attacks on Red Sea energy routes.
- New ceasefire or diplomatic negotiations.
- Canadian retaliation against US tariffs.
- Further details on new US tariffs affecting more than 60 countries.
Escalation would normally support USD, oil and gold while weighing on EUR, GBP, AUD and NZD. De-escalation would likely reverse part of that move.
Bank Desk Weekly FX Report
What the banks are saying, the fundamental bias, and key events.
