-

🇺🇸 USD — Weak Bearish

USD remains weak bearish in the near term. The Dollar had a volatile week, initially supported by safe-haven demand, higher Treasury yields and geopolitical uncertainty, but later came under pressure as softer inflation data shifted expectations around the Fed path. Both CPI and PPI surprised to the downside, pushing front-end yields lower and reducing the rate support that previously helped USD.

The main focus remains on whether the softer inflation trend continues. While US activity data stayed resilient, with retail sales, jobless claims and business surveys pointing to a solid economy, it has not been enough to rebuild expectations for a more hawkish Fed. This leaves the Dollar vulnerable if upcoming data fails to show stronger inflation or growth momentum.

Risks remain two-sided. Ongoing Middle East tensions, higher oil prices and weaker risk sentiment could still support USD through safe-haven demand, but that move would likely be sentiment-driven rather than fundamentally supported. Near-term bias remains slightly to the downside, although renewed geopolitical escalation or stronger data could quickly shift the outlook.

Risks to the Trade:

• Geopolitical escalation: A further deterioration in the Middle East situation, especially any disruption to energy flows or broader risk-off moves, could revive safe-haven demand and support USD despite the weaker Fed repricing.
• US unemployment claims: A stronger-than-expected labour market reading would challenge the softer USD view, as signs of continued labour market resilience could delay expectations for easier Fed policy.
• Flash Manufacturing and Services PMI (Friday): Stronger-than-expected business activity data could help rebuild confidence in US growth and potentially push yields higher, providing support for the Dollar. A weak print would likely reinforce the current bearish momentum.

-

🇪🇺 EUR — Weak Bearish

EUR remains weak bearish in the near term. The main driver remains the disconnect between relatively firm ECB pricing and a domestic backdrop that provides limited support for further tightening. Final inflation data confirmed further disinflation, industrial production disappointed and the current account moved into deficit, leaving the Euro reliant more on weaker US rate expectations rather than improving Eurozone fundamentals.

ECB pricing, with around 42bps of tightening expected by year-end, provides some support, but this also creates disappointment risk if policymakers fail to validate the market's expectations at the upcoming meeting. Higher oil prices remain an additional headwind as the Eurozone's energy dependence weighs on growth and the terms of trade, even if policymakers remain cautious around inflation risks.

Near-term bias stays slightly to the downside, although global risk sentiment and geopolitical developments can continue to dominate price action. The ECB meeting and upcoming PMI data will be key in determining whether EUR can stabilise or remains under pressure.

Risks to trade:

• Geopolitical escalation: Further tensions, especially around energy supply, could weigh on EUR through higher oil prices and renewed concerns around Eurozone growth.
• German PPI: A stronger-than-expected inflation print could support the Euro by reinforcing ECB caution, while weaker data would add to the downside pressure on the currency.
• ECB Meeting: A more hawkish-than-expected message could support EUR, but failure to match market pricing could trigger a repricing lower.
• Flash Manufacturing and Services PMI: Stronger activity data would help improve the Eurozone growth outlook, while weaker numbers would reinforce the view that current ECB pricing is too aggressive.

-

🇬🇧 GBP — Weak Bullish

GBP remains weak bullish in the near term. The main driver has been improving confidence around the UK's fiscal outlook, with expectations that the incoming Chancellor will take a relatively conservative approach, reducing the risk of a more disruptive shift in fiscal policy. Domestic data has been mixed, with modest GDP growth and an improving trade balance offset by weak industrial production, softer construction activity and signs of a cooling labour market.

Sterling is still supported by around 37bps of BoE tightening priced by year-end, although that pricing will need to be backed up by next week's labour market and inflation data. Political developments also remain important, as a smooth cabinet transition and commitment to fiscal discipline would continue to support both gilts and GBP. However, any signs of a more expansionary fiscal agenda could quickly reverse the recent optimism.

Near-term bias remains slightly positive, although Sterling is still sensitive to broader market sentiment. The outlook continues to depend more on political credibility and stable front-end yields than on strong domestic growth.

Risks to trade:

• Labour Market Report: A resilient jobs report would reinforce BoE tightening expectations and support GBP, while softer employment data could see rate pricing trimmed.
• CPI: Inflation remains the key release for the BoE. A stronger print would support Sterling through higher rate expectations, while another downside surprise could weigh on the currency.
• Retail Sales: Strong consumer spending would reinforce the resilience of the UK economy, while weak sales would raise concerns about slowing domestic demand.
• Flash Manufacturing & Services PMI: Better-than-expected PMIs would improve confidence in UK growth, while weaker readings could challenge the current bullish bias.

-

🇨🇦 CAD — Weak Bullish

CAD remains weak bullish in the near term. The main driver continues to be crude oil, with ongoing Middle East tensions and disruption risks around key shipping routes supporting energy prices and improving Canada's terms of trade. That has helped the Loonie outperform despite periods of broader risk aversion. The BoC also offered a balanced message by leaving rates unchanged while acknowledging firmer growth and warning that a persistent oil shock could eventually require further tightening.

The focus now shifts to inflation, with Monday's CPI likely to determine whether markets begin pricing a more hawkish BoC path. Elevated energy prices continue to support the inflation outlook, although policy expectations remain relatively stable for now. As long as oil stays supported, CAD should continue to hold up well relative to its peers.

Near-term bias remains slightly positive, although the outlook is still heavily dependent on energy markets. A sharp reversal in crude or improving geopolitical sentiment would likely remove one of CAD's biggest supports.

Risks to trade:

• CPI: A stronger inflation print would reinforce expectations that the BoC may need to stay restrictive for longer, supporting CAD. A softer reading would reduce that support.
• Retail Sales: Strong consumer spending would reinforce the view that domestic demand remains resilient, while weaker sales could weigh on CAD.
• Crude oil: Oil remains the biggest driver. Any further supply disruption or geopolitical escalation would likely support CAD, while a sharp pullback in crude would weaken the outlook.
• Trade headlines: Renewed US-Canada trade tensions or tariffs could quickly offset the support coming from higher oil prices and invalidate the current bullish bias.

-

🇦🇺 AUD — Weak Bullish

AUD remains weak bullish in the near term. The Aussie continues to be driven mainly by global risk sentiment rather than domestic fundamentals. Softer Fed pricing and improving carry conditions supported AUD through the middle of the week, although those gains faded as geopolitical tensions picked up and broader risk appetite deteriorated. Despite that, there has been little to suggest a meaningful deterioration in the Australian outlook itself.

The main focus now is Thursday's labour market report, which will be key for RBA expectations. A resilient jobs report would help reinforce the current policy outlook and give AUD a stronger domestic driver, while a weaker report would leave the currency relying almost entirely on external sentiment. China and commodity demand also remain important for the broader outlook.

Near-term bias remains slightly positive, although it is still a borderline call. AUD needs a stable risk backdrop and supportive domestic data to maintain its recent resilience.

Risks to trade:

• Labour Market Report: Strong employment would support RBA expectations and help AUD regain momentum, while weaker data would likely weigh on the currency.
• Flash Manufacturing & Services PMI: Stronger PMIs would reinforce confidence in global growth and support AUD, while weaker readings would likely pressure the currency.
• Geopolitics: Further escalation in the Middle East or a broader deterioration in risk sentiment would likely hurt AUD given its sensitivity to global markets.
• China and commodities: Softer Chinese demand, weaker industrial metals or a broad pullback across commodities would undermine one of AUD's key sources of support and invalidate the current bullish bias.

-

🇳🇿 NZD — Bullish

NZD remains bullish in the near term. The Kiwi was one of the strongest G10 currencies over the past week, outperforming both defensive and risk-sensitive peers. The move has been driven primarily by continued hawkish repricing of the RBNZ, with markets now pricing around 58bps of additional tightening by year-end. That leaves NZD with one of the strongest front-end yield advantages across G10, particularly as Fed expectations have eased and the RBA remains less hawkish.

The main focus now is Monday's CPI, which will determine whether markets continue to build on current RBNZ expectations. Another firm inflation print would reinforce the case for further tightening and help maintain NZD's relative yield advantage. While the recent rally has already priced in a fair amount of hawkishness, domestic fundamentals continue to justify a constructive outlook.

The bullish bias remains intact, although NZD is still a high-beta currency and vulnerable to shifts in broader market sentiment. Any deterioration in global risk appetite could interrupt the move, even if the domestic story remains supportive.

Risks to trade:

• CPI: A stronger inflation print would reinforce expectations for further RBNZ tightening and support NZD. A softer reading could trigger a pullback as markets scale back rate expectations.
• RBNZ communication: Any signs that policymakers become more cautious about further tightening would challenge the current bullish view.
• Chinese activity: Weaker Chinese growth or demand would weigh on the Kiwi through trade and broader commodity-linked sentiment.
• Geopolitics: Further escalation in the Middle East could trigger a broader risk-off move, weighing on high-beta currencies such as NZD.
• Global equities: A sustained decline in equity markets would likely pressure NZD as investors move away from risk-sensitive assets.

-

🇯🇵 JPY — Bearish

JPY remains bearish in the near term. The Yen continues to struggle under the weight of its persistent yield disadvantage, with the BoJ maintaining a cautious policy stance while rates across most major economies remain significantly higher. Recent comments suggesting there is little need for consecutive rate hikes have reinforced the Yen's role as the preferred funding currency. Even softer US inflation and bouts of risk-off sentiment only produced a limited recovery, highlighting that the weakness remains largely JPY-specific.

The main focus now shifts to Friday's National Core CPI, which will determine whether inflation remains strong enough to shift expectations around the BoJ path. Higher oil prices also remain a headwind for Japan through weaker terms of trade and imported inflation, although markets continue to doubt the BoJ will respond aggressively. Intervention risks remain elevated, but without a meaningful shift in rate expectations, they are more likely to slow the move rather than reverse the broader trend.

Risks to trade:

• Friday – National Core CPI: A stronger inflation print could revive expectations for further BoJ tightening and support the Yen. A softer reading would reinforce the current bearish outlook.
• Friday – Flash Manufacturing PMI: Stronger activity data would improve confidence in the domestic economy, while another weak print would add to pressure on JPY.
• BoJ communication: Any shift towards a more hawkish tone or stronger guidance on further rate hikes would likely trigger a sharp recovery in the Yen.
• Japanese front-end yields: A sustained move higher in domestic yields would reduce the Yen's funding appeal and challenge the current bearish bias.

-

🇨🇭 CHF — Bearish

CHF remains bearish in the near term. The Franc continues to be weighed down by its monetary policy disadvantage, with higher foreign yields and strong carry demand keeping CHF attractive as a funding currency. Softer US inflation briefly helped the Franc recover earlier in the week, but those gains faded as US yields moved back higher, confirming that rate differentials remain the dominant driver.

While CHF did attract some safe-haven demand towards the end of the week, the move wasn't strong enough to change the broader picture. SNB discussions showed a rise in short-term inflation expectations, but markets have not meaningfully repriced the Swiss policy outlook. With no major domestic data due next week, CHF is likely to remain driven by external factors rather than Swiss fundamentals.

The bearish bias remains in place as long as carry demand stays strong and foreign yields remain elevated. Any safe-haven support is likely to be temporary unless geopolitical risks deteriorate significantly.

Risks to trade:

• Geopolitics: A sharp escalation in global tensions could trigger stronger safe-haven demand and support CHF.
• Global risk sentiment: A broader deterioration in equities or credit markets would likely benefit the Franc despite its weak yield profile.
• Foreign yields: A decline in US and global yields would narrow rate differentials and reduce pressure on CHF.
• SNB communication: Any shift towards a more hawkish policy stance or stronger intervention signals could challenge the current bearish outlook.