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 remains firm, but the story is becoming more mixed. Citi says the Fed has turned more hawkish under Chair Kevin Warsh, with inflation now expected to stay above target for longer. That supports the USD through higher rate expectations.
Geopolitical risk is also still supporting the dollar. Several banks note that the US-Iran ceasefire remains fragile, even though oil prices have fallen back and shipping through the Strait of Hormuz has improved. The key risk is that any fresh attack on ships, US bases, or energy infrastructure could quickly bring back safe-haven demand for USD.
The Strait of Hormuz matters because it is one of the world’s most important oil shipping routes. If traffic slows again, markets would likely price higher oil, higher inflation risk, and more pressure on central banks to stay hawkish. That would usually help the USD, especially against risk-sensitive currencies like AUD and NZD.
Lloyds says the dollar rally now depends on US jobs data and Warsh’s comments at the ECB Sintra Forum. If payrolls stay firm, markets may keep pricing another Fed hike. But if jobs soften, some of the recent USD strength could fade.
Danske Bank expects the Fed to hike in December, but notes that markets see a real chance of an earlier move. Westpac is less convinced and thinks softer inflation and lower energy prices should keep the Fed on hold for the rest of the year.
For traders, this means the USD still has support from Fed pricing and geopolitical risk, but the easy part of the rally may be done. A renewed Hormuz shock would likely lift the dollar, while softer US jobs data would be the clearest trigger for a pullback.
EURUSD
EURUSD remains under pressure, but banks agree this is more about USD strength than euro weakness. Commerzbank says the euro has actually held up well against the G10 basket. The fall in EURUSD is mainly being driven by stronger Fed expectations.
Commerzbank argues that higher EURUSD will be “a marathon, not a sprint.” For the pair to recover, either eurozone data needs to improve, inflation risks need to rise again, or Fed hike pricing needs to be scaled back.
Danske Bank is more cautious on the euro. It says lower oil prices have reduced pressure on the ECB and expects EURUSD to fall toward 1.12 over the next 12 months. Lloyds also says lower energy prices could reduce the need for another ECB hike in July, even though inflation is still above target.
For traders, EURUSD may struggle while the Fed remains priced as more hawkish than the ECB. A softer US labour report would be the clearest trigger for a bounce.
GBPUSD
Sterling is trading with two main risks: Bank of England pricing and UK politics. Lloyds says markets have pushed out the timing of the next BoE hike, possibly into next year. That has reduced support for GBP.
Lloyds also notes that UK politics is now back in focus, with Andy Burnham expected to become Prime Minister if no other Labour leadership contender emerges. Markets will then focus on who becomes Chancellor and whether fiscal policy stays disciplined.
Danske Bank also flags UK political risk. It says current Chancellor Rachel Reeves has been trusted by markets because of her focus on fiscal rules, and any change could matter for UK yields and GBP.
For traders, GBPUSD is still vulnerable while the dollar is strong and UK policy uncertainty is high. A break back above recent levels likely needs either weaker US data or a more stable UK political message.
USDJPY
USDJPY remains very high, trading above 160, and intervention risk is rising again. Lloyds notes that USDJPY above 160 is already fuelling speculation of official action.
Commerzbank’s Asia update shows USDJPY around 161.7, with the pair holding near recent highs. The main driver is still rate spreads, with the Fed seen as hawkish while the BoJ moves slowly.
BNZ says Japan’s Tankan survey is important this week because it is the first major corporate sentiment read since the BoJ’s June hike to 1.00%. If Japanese data improves, it may support further BoJ tightening expectations.
For traders, USDJPY remains a momentum trade, but it is now risky to chase at these levels. The higher it goes, the more intervention risk rises.
AUDUSD
AUDUSD remains under pressure despite firm commodity prices. Westpac says the AUD underperformed both the USD and most major currencies last week, even though base metals and iron ore were firmer.
Westpac says the RBA is still focused on inflation. The bank expects the June quarter CPI release later in July to be the most important domestic update before the August meeting. It also sees the risk of another 25bp hike in August if inflation remains high.
CBA says the RBA minutes this week will be the main Australian event. The June decision was a hold, but the statement kept the door open to more tightening. The issue is that growth is weak, while inflation is still too high.
For traders, AUDUSD has two-way risk. A hawkish RBA can support the AUD, but weak China data and global risk-off pressure from tech stocks can still weigh on the pair.
NZDUSD
The New Zealand dollar has a split message from the banks. Westpac expects the RBNZ to leave the OCR on hold in July, saying lower energy prices have reduced the urgency for another hike. It now sees fewer OCR hikes than before.
BNZ disagrees. It expects the RBNZ to raise the cash rate by 25bp in July and keep a tightening bias. BNZ says the cash rate needs to get back to neutral quickly, and it warns that if the RBNZ does not hike, the NZD could fall further and add to inflation pressure.
This is the biggest policy disagreement in the reports. Westpac sees lower energy prices giving the RBNZ time to wait. BNZ sees the RBNZ needing to defend credibility and support the currency.
For traders, NZDUSD is highly sensitive to RBNZ pricing. A July hold would likely weigh on NZD, while a hike could give the pair a short-term lift.
USDCAD
USDCAD may be close to short-term exhaustion. Scotiabank says the CAD sell-off is showing signs of steadying, helped by narrower US-Canada front-end spreads and some improvement in CAD fair value.
Scotiabank says USDCAD fair value has moved back toward the low 1.41 area. It also says the USD rally looks very stretched, with daily RSI near 89, the highest in at least 20 years. It sees resistance around 1.4250 to 1.4300 and says a modest pullback could take USDCAD toward 1.4075 to 1.4080.
Oil is still important for CAD. Lower oil prices have removed some inflation pressure globally, but they can also reduce support for Canada’s terms of trade. Canada GDP and BoC Governor Macklem’s appearance at Sintra are the key domestic events this week.
For traders, USDCAD still has upside momentum, but risk-reward is less attractive after the sharp move higher. A softer US jobs print could trigger a pullback.
Other Pairs
Commerzbank says CNY has lost momentum after a strong run since April 2025. USD-CNY is now near 6.80. The bank says China’s external position still supports the currency, but markets have started to price more chance of PBoC easing.
Marc to Market says the market enters July with a ceasefire that “nobody quite trusts.” Oil has fallen sharply, but traders now need to watch whether a second supply shock comes from food prices if El Niño disrupts agriculture.
Danske Bank says lower oil prices are reversing the stagflation shock and should help global growth while lowering inflation. But it also says the peace remains fragile and uncertainty over Hormuz has not fully gone away.
Bias Table
| Pair | Bias | Key Drivers |
|---|---|---|
| USD | Mild bullish | Hawkish Fed pricing, firm jobs risk, Hormuz safe-haven demand |
| EURUSD | Bearish / range lower | Strong USD, lower oil, less pressure on ECB |
| GBPUSD | Mild bearish | USD strength, UK politics, BoE hike pricing pushed out |
| USDJPY | Bullish but risky | Wide rate spreads, slow BoJ tightening, intervention risk above 160 |
| AUDUSD | Neutral / mild bearish | RBA hawkish risk, weak risk sentiment, China data |
| NZDUSD | Neutral / volatile | RBNZ disagreement, lower oil, domestic inflation risk |
| USDCAD | Neutral / pullback risk | USD overbought, CAD stabilising, Canada GDP |
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Key Event Outlook
United States
The main event is Thursday’s non-farm payrolls report, released early because of the US holiday. Lloyds expects jobs growth to slow to 130k, while consensus is closer to 115k. Scotiabank also expects unemployment to stay around 4.3%.
This matters because the USD rally is built on Fed hike pricing. A strong payrolls number would support the dollar and keep pressure on EURUSD, GBPUSD and AUDUSD. A weaker report would likely trigger a USD pullback.
Other key US events include JOLTS, ADP employment, ISM manufacturing, consumer confidence and factory orders. Fed Chair Warsh also speaks at the ECB Sintra Forum.
Eurozone
The key eurozone event is June flash CPI. Lloyds expects headline inflation to fall to 3.1% from 3.2%, helped by lower fuel prices. Danske Bank says lower oil prices and weaker price indicators reduce pressure on the ECB.
ECB President Lagarde speaks at Sintra. Traders will watch whether she pushes back against hike pricing or keeps the door open for more tightening.
For EURUSD, the key question is whether the ECB can stay hawkish enough to compete with Fed pricing. Right now, that looks difficult.
United Kingdom
The UK calendar includes final Q1 GDP, mortgage and credit data, PMIs and business surveys. Bank of England Governor Bailey speaks at Sintra.
UK politics may matter just as much as the data. Lloyds and Danske both note that markets are watching the likely transition to Andy Burnham as Prime Minister and, more importantly, who becomes Chancellor.
For GBP, the risk is that political uncertainty and weaker growth keep BoE hike pricing contained.
Japan
Japan has the Q2 Tankan survey, unemployment and industrial production. BNZ says the Tankan is important because it is the first major business survey since the BoJ’s June hike.
USDJPY is already above 160, so the trading risk is not just data. It is also intervention. Strong Japanese data could help JPY, but the pair remains driven mostly by US yields and Fed pricing.
Australia
Australia has RBA minutes, private sector credit, home prices, dwelling approvals and the goods trade balance.
Westpac says the RBA is still more worried about inflation than growth. CBA says the minutes may give more detail on how the Board is balancing inflation risk against signs of weaker demand.
For AUDUSD, a hawkish tone from the minutes may help. But global risk sentiment and China PMIs are still major drivers.
New Zealand
New Zealand has filled jobs, ANZ business confidence, consumer confidence and building permits.
The bigger story is the RBNZ. Westpac expects no hike in July, while BNZ expects a 25bp hike. That makes NZDUSD very sensitive to local data and RBNZ signals.
Business confidence will matter because traders will watch inflation expectations and pricing intentions.
Canada
Canada has April GDP, June manufacturing PMI and BoC Governor Macklem speaking at Sintra. Scotiabank says April GDP may show some improvement after a soft start to the year.
For CAD, the main issue is whether US-Canada rate spreads keep narrowing. If they do, USDCAD could pull back from overbought levels.
Other / Geopolitics
The US-Iran ceasefire remains fragile. Marc to Market says the 60-day de-escalation has helped traffic through Hormuz and pushed oil sharply lower, but trust is still low.
Markets will watch shipping flows, insurance costs and any renewed attacks. If oil spikes again, inflation fears may return and high-beta FX like AUD and NZD could suffer.
Tech sector weakness is also important. Several reports noted a rotation out of AI and semiconductor names. If risk appetite worsens, USD and JPY may benefit, while AUD, NZD and CAD may struggle.
Bank Desk Weekly FX Report
What the banks are saying, the fundamental bias, and key events.
