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 starts the week with support from renewed fighting between the US and Iran. The US launched fresh strikes against Iranian missile, drone and coastal military targets after another commercial vessel was attacked near the Strait of Hormuz. Iran says the Strait is closed, while the US says shipping remains open and that it will protect the route near Oman.
Commerzbank says oil markets may have been too confident that energy supplies would return to normal. It warns that shipping companies may remain reluctant to use the Strait even where passage is technically possible. Westpac also notes that markets had faded geopolitical risk before the latest strike waves, leaving room for a fresh repricing if traffic slows further.
Lloyds expects US headline CPI to slow from 4.2% to 3.9%, helped by the earlier fall in gasoline prices. Scotiabank also says markets may be pricing too much Fed tightening and argues that softer inflation could reduce support for the USD.
For traders, the dollar has a mild bullish bias while the conflict is escalating. But gains could be limited if CPI is soft and Fed Chair Warsh avoids giving a clear signal that more rate hikes are coming.
EURUSD
EURUSD is caught between stronger ECB rate expectations and safe-haven demand for the US dollar. The pair has held near 1.14, but renewed attacks around the Strait of Hormuz have pushed it back toward the lower end of its recent range.
Lloyds says ECB officials remain divided. Schnabel, Nagel and Panetta have warned that the latest energy shock cannot simply be ignored, while Moulin has argued that policy is already in a good position. Markets are pricing a strong chance of another ECB hike by September.
Danske Bank expects only one more ECB increase and argues that the market may be pricing too much tightening. It also notes that Europe remains weaker than the US in the global industrial cycle and is more exposed to higher oil and gas prices.
For traders, 1.14 is the immediate pivot. A softer US CPI could lift EURUSD, but a serious disruption to Hormuz would probably favour the USD and send the pair lower.
GBPUSD
Sterling faces a mixed domestic and political outlook. Lloyds expects UK GDP to rise 0.1% in May, led by services. That would show the economy is still growing, but it is unlikely to force a major change in Bank of England policy.
The market will also watch speeches from Governor Andrew Bailey and Chief Economist Huw Pill. Their comments matter because higher energy prices could slow the fall in inflation while also weakening household spending.
Lloyds also highlights uncertainty around the UK leadership transition and the future fiscal approach. Concerns about government debt could keep pressure on UK yields, but political uncertainty may prevent sterling from benefiting fully.
For traders, GBPUSD has a neutral to mildly bearish bias. Better GDP data could support sterling, but renewed geopolitical stress and a stronger dollar remain the larger short-term drivers.
USDJPY
The yen strengthened late last week after Japan’s Finance Minister called on pension funds, including the GPIF, to increase investment in domestic assets. Westpac says this helped JGBs rally and pushed USDJPY down from recent highs.
The broader trend still favours a high USDJPY because US yields remain well above Japanese yields. The pair has been trading near 162, leaving it vulnerable to intervention warnings and domestic repatriation flows.
The Middle East conflict has not produced a simple safe-haven rally in the yen. Higher oil prices are negative for Japan because it imports most of its energy. This means risk aversion can support the yen, while higher energy costs can weaken it.
For traders, the near-term bias is neutral. More repatriation headlines or falling US yields could pull USDJPY lower. A strong US CPI or another rise in oil prices could quickly push it higher again.
AUDUSD
The Australian dollar has held close to 0.6950 despite a stronger USD and renewed geopolitical risk. Westpac has become more confident that the RBA will raise rates in August, although its confidence in another immediate follow-up hike has fallen.
The commodity outlook remains supportive over the medium term. Westpac forecasts AUDUSD rising toward 0.72 by September and 0.73 by year-end. It also expects higher oil, LNG, aluminium and gold prices over coming quarters, although iron ore and copper are expected to soften.
China remains the key risk. Q2 GDP, industrial production, retail sales and property data are due this week. BNZ expects Chinese growth to remain subdued because domestic demand is still weak.
For traders, AUDUSD has a mild bullish medium-term bias but remains vulnerable in the short term. A deeper US-Iran escalation would favour the USD and could push AUDUSD back below recent support.
NZDUSD
The New Zealand dollar outperformed last week after the RBNZ raised the cash rate by 25 basis points to 2.50%. BNZ says the central bank kept a tightening bias and signalled that more increases are likely, although the timing will depend on incoming inflation and growth data.
BNZ also sees improving evidence of an economic recovery. Manufacturing and services indicators have strengthened, tourism and migration are supporting activity, and primary-sector exports remain firm.
The main events this week are the NZIER business survey, tourism and migration data, card spending and selected price indicators. BNZ says stronger inflation readings would increase pressure for another RBNZ hike in September.
For traders, NZDUSD has a mild bullish bias. The RBNZ’s tightening path gives the currency support, but the NZD remains exposed to global risk sentiment and higher oil prices.
USDCAD
Views on the Canadian dollar are divided. Scotiabank believes the CAD’s slide through May and June has probably ended. It points to better employment data, improving Canadian data surprises and the possibility that the US-Canada yield gap is close to peaking.
Commerzbank is more cautious. It argues that USDCAD is still being driven by the strong dollar and rate expectations rather than Canadian data. Higher oil can help the CAD, but a sustained fall in USDCAD probably requires less Fed tightening or better US-Canada trade relations.
The Bank of Canada is widely expected to leave rates unchanged at 2.25%. Scotiabank expects the BoC to retain a wait-and-see approach while warning that it will not allow an energy shock to become persistent inflation.
For traders, USDCAD has a neutral to mildly bearish bias. Soft US inflation and a calmer risk backdrop could move it toward 1.4050, while a hawkish Fed message or further geopolitical stress could push it back toward 1.4250.
Other Pairs
Danske Bank says the Norwegian krone remains one of the clearest potential winners from higher energy prices. NOK strengthened as oil rose, reflecting Norway’s position as a major energy exporter.
Commerzbank says the Turkish lira remains under pressure because core inflation has accelerated again, while political limits may prevent the central bank from tightening enough. Higher oil prices add another negative pressure for an energy-importing economy.
Gold has not reacted to the latest escalation in the usual way. Higher yields and dollar strength have offset safe-haven demand. Westpac remains bullish over the medium term and forecasts gold above $4,500 an ounce later this year.
Bias Table
| Pair | Bias | Key Drivers |
|---|---|---|
| USD | Mildly bullish | Geopolitical demand, higher oil and yields, but softer CPI could limit gains |
| EURUSD | Mildly bearish | Europe’s energy exposure, weak growth and stronger USD demand |
| GBPUSD | Neutral to mildly bearish | Modest UK growth, political uncertainty and geopolitical USD support |
| USDJPY | Neutral | Repatriation supports JPY, but the yield gap and oil exposure limit gains |
| AUDUSD | Mildly bullish | RBA hike expectations and commodities, offset by China and risk concerns |
| NZDUSD | Mildly bullish | RBNZ tightening and improving activity, offset by global risk sentiment |
| USDCAD | Neutral to mildly bearish | Improving Canadian data, oil support and a possible peak in rate spreads |
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Key Event Outlook
United States
Tuesday’s US CPI report is the biggest scheduled event. Lloyds expects headline inflation to slow from 4.2% to 3.9%, while core inflation may remain firmer. The complication is that the data cover a period before the latest rise in oil prices.
Fed Chair Warsh testifies before the House on Tuesday and the Senate on Wednesday. Scotiabank argues that another hike could be a policy mistake because underlying inflation is less severe than the headline figures suggest and the economy is slowing.
PPI, the Beige Book, retail sales, jobless claims, industrial production and consumer sentiment will also shape the USD outlook.
Eurozone
Final June inflation is due Friday. BNZ expects headline inflation to remain near 2.8%, with some easing in core and services inflation.
ECB speeches from Schnabel and Nagel will also be watched before the quiet period. The main question is whether officials continue to support a September hike.
For EUR, energy prices may matter more than the data. A further rise in oil and gas would keep pressure on the ECB, while weaker inflation and soft growth would argue for caution.
United Kingdom
Bank of England Governor Andrew Bailey and other senior policymakers are due to speak at Mansion House. Traders will focus on how the BoE sees the balance between higher energy inflation and weaker household demand.
UK GDP, industrial production and trade are due Thursday. Lloyds expects GDP to rise 0.1% in May, led by services, while industrial output is expected to remain weak.
Political developments also remain important as markets assess the likely leadership transition and future fiscal policy.
Japan
Japan has a relatively light data calendar, with final industrial production due. Flows and policy headlines may matter more than the data.
Traders should watch for more calls encouraging Japanese pension funds to bring money home. Further repatriation could support the yen and pressure USDJPY.
Australia
Westpac consumer confidence and NAB business conditions are due Tuesday. These reports will show whether lower fuel prices had started to support households before the latest geopolitical escalation.
The larger AUD driver will probably be China’s data and market expectations for an August RBA hike.
New Zealand
The NZIER Quarterly Survey of Business Opinion and migration data are due Tuesday. The survey will provide information on activity, capacity pressure and firms’ pricing plans.
Card spending follows Wednesday, while selected price indexes are due Friday. BNZ says stronger inflation readings would increase pressure on the RBNZ to tighten again in September.
Canada
The Bank of Canada decision and Monetary Policy Report are due Wednesday. The BoC is expected to hold rates at 2.25%.
Scotiabank expects the BoC to acknowledge that growth is recovering while inflation risks have risen. A more hawkish assessment could strengthen CAD, although the bank is unlikely to commit to a near-term move.
Manufacturing sales, home sales and housing starts are also due, but the BoC will dominate trading.
China
Trade data are due Tuesday, followed by Q2 GDP, retail sales, industrial production and fixed-asset investment on Wednesday.
A clear disappointment would be negative for AUD, NZD and Asian currencies, especially if weak consumption and property investment remain the main story.
Other / Geopolitics
The Strait of Hormuz is the largest unscheduled risk. Iran says the waterway is closed, while the US says it remains open and has carried out further strikes to weaken Iran’s ability to attack commercial shipping.
The key market question is not only whether ships can pass, but whether operators are willing to use the route at normal volumes. A meaningful decline in tanker traffic would push oil higher, support the USD and NOK, and weigh on EUR, JPY, AUD and other currencies linked to energy imports or risk sentiment.
Markets should also watch for any further Iranian attacks on US-linked facilities across the region. A wider conflict would raise the chance of a larger risk-off move.
Bank Desk Weekly FX Report
What the banks are saying, the fundamental bias, and key events.
