Supported by steady UK business activity and Bank of England backing, the British pound remains strong against major currencies.

Strait of Hormuz tensions have raised fuel costs and prolonged UK inflation, prompting policymakers to keep interest rates elevated and prepare for potential further hikes.

Disciplined government spending reinforces investor confidence, sustaining long-term support for the pound as other nations accelerate rate cuts.

The Broad Canvas of British Resilience

Balancing Geopolitics and Policy

The United Kingdom is navigating a challenging global environment with notable stability. Escalating tensions across the Strait of Hormuz have pushed wholesale fuel prices higher, directly affecting British consumer prices. August inflation climbed to 3.1% year-on-year, driven by a 23.0% escalation in motor fuels. Rather than bowing to growth concerns, the Bank of England held the Bank Rate at 3.75% on September 17. Three policymakers even voted to raise rates to 4.00%, signaling that the central bank will not hesitate to lean against persistent price pressures.

Economic Realities and Trader Focus

Recent data surprised traders to the upside. July GDP grew by 0.4% in the month, and August retail sales advanced by 0.5%, defying forecasts of a contraction. These prints show that British households and businesses are absorbing higher living expenses better than anticipated. At the same time, Prime Minister Andy Burnham and Chancellor John Healey have pledged strict fiscal restraint, aiming to restore confidence across international bond markets ahead of the October 28 budget.

Navigating the Coming Weeks

In financial markets, 10-year gilt yields hover near 5.2%, close to multi-year peaks, reflecting the reality that interest rates must remain restrictive for longer. GBP/USD has pulled back toward 1.334 following a broader dollar recovery, but underlying demand remains healthy. In the coming weeks, traders should monitor energy developments and evaluate dip-buying opportunities near the 10-day MA (1.345), looking toward the August swing high (1.365) as global risk conditions stabilize.

Resilient Fundamentals

The British economy continues to show solid underlying strength, supported by disciplined government spending and a vigilant central bank. While energy disruptions present ongoing risks, sterling remains well supported. Traders should watch for steady gains in the pound against lower-yielding peers as the United Kingdom maintains a decisive yield advantage.

Fundamental Analysis pages to bookmark…

• NEW ZEALAND, NZD, AND DAIRY

• AUSTRALIA, AUD, COAL, AND IRON ORE

• JAPAN, AND JPY

• SWITZERLAND, CHF, AND GOLD

• EURO AREA, AND EUR

• UNITED KINGDOM, AND GBP

• CANADA, CAD, AND OIL

• UNITED STATES, AND USD

DISCLAIMER: This site is informational only, NOT financial advice. Trading involves risk, and you could lose money.

The U.S. dollar is growing stronger thanks to a resilient economy, steady job growth, and healthy consumer spending. These solid foundation market conditions give the currency a clear advantage on the global stage.

To help keep prices stable, the Federal Reserve is taking action by raising interest rates. This cautious approach makes holding dollars more attractive to investors around the world.

At the same time, government trade policies and energy supply tensions in the Middle East are creating uncertainty. During times like these, many global investors turn to the U.S. dollar as a safe place to store value.

The Macroeconomic Tapestry

Anchoring the Global Economy

The United States operates at the epicenter of global financial momentum, driven by a resilient economy, a hawkish Federal Reserve, and assertive geopolitical positioning. In recent weeks, traders focused intently on the intersection of monetary tightening and geopolitical friction. The September 16, 2026, Federal Reserve rate hike to 3.75%-4.00% fundamentally altered the interest rate landscape, underscoring a commitment to combatting persistent inflation. This maneuver accompanied August’s robust Non-Farm Payrolls print of 162,000 (Actual) against 56,000 (Consensus) on September 4, affirming the labor market’s exceptional durability.

Navigating Trade and Tensions

Looking back, the macro narrative has been significantly shaped by executive actions on trade and Middle East stability. The administration’s rigid tariff impositions on Canadian imports and the enforcement of “Operation Economic Outcast” against Iran have restricted global supply chains, keeping commodity inflation firm. The resulting volatility in crude oil supplies through the Strait of Hormuz has amplified safe-haven demand for the greenback.

Horizons of Volatility

Looking ahead, traders should be focused on the unfolding dynamics between Treasury debt management and monetary policy. With the 10-year Treasury yield trading near 4.95%, market participants are closely monitoring the October 28 FOMC meeting.

A Fortified Greenback

In summary, the confluence of a resolute Federal Reserve, exceptional labor market resilience, and robust safe-haven demand firmly underpins the US dollar. As geopolitical tensions and trade renegotiations evolve, the currency remains well-positioned to maintain steady gains within an environment defined by elevated yields.

Fundamental Analysis pages to bookmark…

• NEW ZEALAND, NZD, AND DAIRY

• AUSTRALIA, AUD, COAL, AND IRON ORE

• JAPAN, AND JPY

• SWITZERLAND, CHF, AND GOLD

• EURO AREA, AND EUR

• UNITED KINGDOM, AND GBP

• CANADA, CAD, AND OIL

• UNITED STATES, AND USD

DISCLAIMER: This site is informational only, NOT financial advice. Trading involves risk, and you could lose money.

The New Zealand dollar holds a quietly positive position despite turbulent global conditions. While high energy import costs from Middle East conflict test local consumers, the country’s economic baseline remains surprisingly solid.

The Reserve Bank of New Zealand is actively stepping in with rate increases to protect against inflation, giving the currency strong underlying support. This firm policy backdrop creates steady gains over time, giving traders a resilient setup in an otherwise nervous market.

MACROECONOMIC PULSE

Navigating Energy Pressures and Local Strengths

Over recent weeks, New Zealand has walked a fine line between domestic stability and global turmoil. The war between the United States and Iran has kept oil flows through the Strait of Hormuz severely disrupted. For New Zealand, which relies on imported fuel, this has driven local transport and everyday costs higher.

Even with these headwinds, the economy has shown genuine grit. On September 16, second-quarter GDP figures revealed 0.2% growth over the quarter, beating the 0.1% consensus, and expanded 2.6% over the year. This resilience gave the Reserve Bank of New Zealand the confidence to raise its policy rate by 25 basis points to 2.75% on September 2, following an earlier increase in July.

Key Developments on the Horizon

Looking ahead, market participants are keeping a close watch on household spending and inflation trends. While the broader economy expanded, second-quarter retail sales on August 23 contracted by 0.5%, reminding everyone that local families feel the pinch of high living costs.

In the coming weeks, attention will center on whether price pressures stick around. Traders are watching for the third-quarter inflation print on October 21, which will guide the central bank’s next decision on October 28.

The New Zealand dollar recently found support around the September 16 low (0.570). Traders can look into evaluating dip-buying opportunities near this support shelf, keeping an eye out for a move back toward the August 21 swing high (0.599) as interest rate advantages work their way through the market.

Grounded Optimism in Uncertain Times

New Zealand’s economic story remains one of calm perseverance. Higher fuel bills and global trade disputes create understandable caution across businesses. Yet, solid overall growth and a proactive central bank willing to raise rates keep the kiwi fundamentally backed, offering constructive and steady trading setups for patient market participants.

Even though the Bank of Japan has raised interest rates to their highest levels in decades, the Japanese yen still faces tough challenges.

Japan relies heavily on imported energy. Recent supply delays in the Strait of Hormuz have pushed up the cost of these imports, making trade more expensive and weakening the currency.

At the same time, high interest rates in the United States mean investors can earn better returns there than in Japan. Combined with government spending plans at home, these factors continue to put downward pressure on the yen.

BALANCING RISING RATES AND IMPORT STRAINS

Recent Rate Hikes and Market Reactions

Over the past month, Japan’s central bank made a major policy change. On September 18, 2026, the Bank of Japan raised its main interest rate to 1.25%, pushing borrowing costs to their highest level in 31 years.

Even with this rate increase, the yen has stayed weak against the US dollar. A big reason for this is Japan’s reliance on foreign energy. Tensions along key shipping routes in the Strait of Hormuz have driven up fuel prices, causing Japan’s trade deficit to widen as oil import costs surged.

What to Watch Next

At the same time, high interest rates in the US continue to attract investors away from the yen. Looking ahead, key events to keep an eye on include the Bank of Japan’s meeting on October 30 and upcoming government discussions about economic support packages.

If energy costs remain high, the yen could face ongoing pressure. However, any cooling in import prices or further signals of rate increases from Japanese officials could help stabilize the currency over time.

Fundamental Analysis pages to bookmark…

• NEW ZEALAND, NZD, AND DAIRY

• AUSTRALIA, AUD, COAL, AND IRON ORE

• JAPAN, AND JPY

• SWITZERLAND, CHF, AND GOLD

• EURO AREA, AND EUR

• UNITED KINGDOM, AND GBP

• CANADA, CAD, AND OIL

• UNITED STATES, AND USD

DISCLAIMER: This site is informational only, NOT financial advice. Trading involves risk, and you could lose money.

The Australian dollar holds a modestly firm posture, supported by dependable trade flows and a vigilant central bank. While global geopolitical friction and fluctuating energy prices present persistent headwinds, Australia’s domestic foundations remain sturdy. Disciplined fiscal policy and resilient commodity exports provide steady balance. Currency traders see an economy where sticky service costs and a tight labor market keep interest rates elevated, offering reliable underlying support for the currency across shifting global market tides.

HORIZONS ACROSS THE SOUTHERN SEAS

Broad Domestic Landscape

Australia presents a balanced picture of political continuity, steady growth, and firm central bank policy. The government maintains a measured fiscal approach, while the Reserve Bank of Australia actively fights sticky inflation. Although global energy disruption and trade disputes create uncertainty, the broader financial system remains robust.

Recent Market Focus

Traders recently responded to key economic releases that highlighted ongoing price pressures. On August 26, the July Trimmed Mean CPI reached 3.6% (Actual) versus 3.5% (Consensus) and 3.6% (Prior). This upside surprise showed persistent underlying inflation, firming the Australian dollar toward the September 7 high (0.7224).

Further support arrived on September 2, when second-quarter GDP expanded 0.4% quarter-on-quarter (Actual) versus 0.3% (Consensus) and 0.3% (Prior), confirming steady domestic momentum that helped the currency hold above the September 16 close (0.709). Additionally, escalating hostilities in the Strait of Hormuz throughout early September lifted energy costs, which pushed the AU 10-year bond yield toward its September 15 peak (5.4%).

Upcoming Focus and Strategy

Looking forward, market participants are concentrating on the September 29 rate decision. The market currently assigns an 86.9% probability to a quarter-point rate hike.

In the coming weeks, traders should evaluate conditional long setups near the September 17 low (0.708) if global risk sentiment stabilizes and commodity demand stays firm. Conversely, watch for signs of resistance near the September 7 high (0.722), keeping position sizes measured against unexpected geopolitical developments.

Balanced Foundations

Australia’s outlook reflects steady domestic demand and disciplined governance, backed by a central bank resolute on price stability. While external conflicts and energy risks require careful monitoring, the nation’s solid terms of trade offer resilience. Traders can expect the currency to remain well-supported against lower-yielding peers as policy decisions approach.

Fundamental Analysis pages to bookmark…

• NEW ZEALAND, NZD, AND DAIRY

• AUSTRALIA, AUD, COAL, AND IRON ORE

• JAPAN, AND JPY

• SWITZERLAND, CHF, AND GOLD

• EURO AREA, AND EUR

• UNITED KINGDOM, AND GBP

• CANADA, CAD, AND OIL

• UNITED STATES, AND USD

DISCLAIMER: This site is informational only, NOT financial advice. Trading involves risk, and you could lose money.

The euro faces deep structural headwinds that keep it under pressure against major trading partners. Expensive imported fuel and Middle East supply threats weigh on performance, while political friction across member states limits fiscal action. Consequently, the currency faces ongoing weakening rather than sustained relief.

Navigating the European Crosscurrents

Rising Strains Across the Union

Over the past several weeks and months, the Euro Area has found itself caught between sluggish local demand and severe external shocks. The conflict in the Middle East has restricted vital maritime corridors, including the Strait of Hormuz and the Bab al-Mandeb strait. Because the continent relies heavily on external fuel supplies, expensive liquefied natural gas and crude oil have eroded the region’s terms of trade, leaving the euro fundamentally under pressure across global markets.

Catalysts Capturing Desk Attention

Recent trading sessions highlighted this strain when the August final headline inflation print was confirmed on September 17, 2026, at 3.2 percent year-over-year against a 3.3 percent consensus. Although annual inflation moderated slightly from earlier flash prints, high input costs remain deeply embedded.

This follows the July Producer Price Index release on September 3, 2026, which printed at 5.8 percent year-over-year versus a 5.45 percent forecast. This dynamic keeps factory margins tight and household purchasing power constrained.

Strategic Focus for the Coming Weeks

In the days ahead, traders should focus on whether cooling economic activity forces a shift in policy tone. With EUR/USD easing from its August 21 swing high (1.171) to trade near the September 17 close (1.147), downward momentum remains dominant. Watch for dip-buying interest toward the September 16 low (1.146) to fail, while evaluating short setups if sustained energy volatility keeps the currency softening toward summer base levels.

Defensive Execution Ahead

In closing, the euro remains constrained by persistent energy inflation, fragile domestic consumption, and mounting political uncertainty. Because these structural vulnerabilities outweigh the benefit of higher interest rates, internal risk managers should favor a cautious approach, tracking short setups and keeping protective stop levels carefully aligned with market structure.

Fundamental Analysis pages to bookmark…

• NEW ZEALAND, NZD, AND DAIRY

• AUSTRALIA, AUD, COAL, AND IRON ORE

• JAPAN, AND JPY

• SWITZERLAND, CHF, AND GOLD

• EURO AREA, AND EUR

• UNITED KINGDOM, AND GBP

• CANADA, CAD, AND OIL

• UNITED STATES, AND USD

DISCLAIMER: This site is informational only, NOT financial advice. Trading involves risk, and you could lose money.

Canada’s economic backdrop is weakening as trade tensions with the United States grow and the job market softens. While higher crude oil prices help ease some strain, persistent trade disputes and cooling domestic demand leave the Canadian dollar under pressure.

Central bank leaders face a tricky balancing act. They must manage energy-driven inflation while watching for signs of slower growth. As a result, traders remain cautious, favoring defensive steps until cross-border trade conditions become clearer.

Overview of the Northern Landscape

Trade Conflicts Cloud the Outlook

Canada’s economy is under pressure as its key trading partnership with the United States faces severe tests. Bilateral talks recently broke down, leading to retaliatory tariffs that weigh heavily on local manufacturing.

At the same time, domestic employment is softening. The economy lost 41.7K jobs in August (released September 4), missing the 15K gain that forecasters expected. This shift points to growing domestic vulnerability despite steady growth earlier in the spring.

Central Bank Stays Patient

The Bank of Canada is moving carefully. At its September 2 meeting, the Governing Council held its policy rate at 2.25%. Bank officials noted that trade friction makes future growth harder to predict.

Meanwhile, annual inflation held at 3.0% in August (released September 14). Disruptions to global oil shipping in the Middle East continue to support fuel prices. These stubborn energy costs make an early rate reduction unlikely.

What Traders Should Watch

Over the coming weeks, market participants should keep a close eye on trade discussions and upcoming retail figures. Elevated trade friction and weak hiring could lead to further currency softening.

Traders can evaluate long USD/CAD setups near the September 14 close (1.390), keeping the 90-day high (1.4248) in mind as a key reference level. Conversely, watch for dip-buying interest toward the September 11 close (1.387) if trade dialogue resumes and energy prices steady.

Balancing Inflation and Growth

Canada’s economic foundation is weakening under the weight of cross-border tariff disputes and sudden job losses. With central bankers held back by high energy costs, the Canadian dollar remains under pressure. Traders should favor a patient, defensive approach until trade relations and employment show clear signs of recovering.

Fundamental Analysis pages to bookmark…

• NEW ZEALAND, NZD, AND DAIRY

• AUSTRALIA, AUD, COAL, AND IRON ORE

• JAPAN, AND JPY

• SWITZERLAND, CHF, AND GOLD

• EURO AREA, AND EUR

• UNITED KINGDOM, AND GBP

• CANADA, CAD, AND OIL

• UNITED STATES, AND USD

DISCLAIMER: This site is informational only, NOT financial advice. Trading involves risk, and you could lose money.

The US dollar continues its firming trajectory, building on solid employment data and trade tensions that keep the Canadian dollar under pressure.

This week, our attention turns to three major central bank decisions and pivotal data releases. With ongoing geopolitical stress in the Middle East keeping risk appetite cautious, divergent policy paths offer clear, tactical opportunities across major currency pairs. We approach this environment with discipline, patience, and clear risk parameters.

Key Developments of Last Week

A Firming Dollar on Resilient Inflation

On September 11, US August consumer prices showed headline inflation holding at 3.4% year-over-year, while the monthly rate advanced 0.4% against the 0.1% prior read. Core consumer prices also firmed 0.3% month-over-month.

This price pressure, combined with August’s addition of 162,000 jobs, lifted the US 10-year Treasury yield by 12.5 basis points over five days to 4.969% on September 14, nearing its 90-day high of 4.986%. This shift strengthened the US dollar, which remains tactically stretched (+5.9% above its 10-day moving average).

European Policy Action and Trade Frictions

In Frankfurt, the European Central Bank raised its deposit facility rate by 25 basis points to 2.50% on September 10. Despite this tightening, EUR/USD softened to 1.1546 by September 14, nearing its 90-day low of 1.1324.

Meanwhile, the Canadian dollar remained under pressure following August’s employment contraction of 41,700 jobs and renewed cross-border tariff disputes. USD/CAD advanced to 1.3889 on September 14, approaching its 90-day high of 1.4248. With Canadian 10-year sovereign yields compressing 3.0 basis points against US Treasuries over five days, the Canadian dollar continues to exhibit front-loaded easing.

Outlook: Navigating Monetary Policy Divergence

The Federal Reserve’s Policy Crossroads

The central event of the week arrives on September 16 with the Federal Open Market Committee meeting. Interest rate futures currently reflect an 86.7% probability of a 25-basis-point rate increase, taking the target rate to 3.75%.

On the same day, US Retail Sales Control Group data will offer insight into consumer spending, with forecasts looking for 0.1% growth against the prior -0.3% reading.

Because the dollar displays front-loaded strength, firm guidance from the Fed could extend its run. Conversely, a less restrictive message may invite profit-taking. Traders can evaluate long dollar setups on shallow pullbacks against lower-yielding peers, keeping in mind the dollar basket’s firm stance (+0.85%) against its 50-day moving average.

Bank of Japan Normalization Path

On September 18, the Bank of Japan meets, with markets pricing a 98.0% probability of a 25-basis-point rate hike to 1.25%. Japanese 10-year government bond yields advanced 11.9 basis points over the past five days to reach 3.0026% on September 14, near their 90-day high of 3.0226%.

Despite this policy step, the yen faces a gradual softening drift due to steep energy import costs and Middle East shipping frictions. USD/JPY trades around 154.48, off its 90-day low of 152.87. Since rate hike expectations are largely reflected in current pricing, traders can watch for opportunities to fade post-decision yen strength near its 10-day moving average baseline (+0.6%).

Sterling’s Consolidation Window

The Bank of England announces its interest rate decision on September 17. Markets price a 77.3% probability that the Bank Rate will remain unchanged at 3.75%.

Before that decision, the September 15 UK unemployment report will provide labor market clarity, with consensus forecasting a slight uptick to 5.0% from 4.9%. UK 10-year gilt yields gained 12.3 basis points over five days, keeping GBP/USD steady in a consolidation range near 1.3489. With sterling holding a modest gain (+0.7%) over its 50-day moving average, traders can explore range-trading opportunities against neutral peers, focusing on technical boundaries rather than anticipating a major directional breakout.

Antipodean Growth Tests and Regional Signals

In the Southern Hemisphere, the New Zealand dollar shows front-loaded strength after a 22.2-basis-point rise in local 10-year yields over five days. The currency faces an important test on September 16 with Q2 GDP data, expected at 0.1% quarter-on-quarter compared to 0.8% previously.

A stronger growth figure would support the tightening case, whereas a negative print could cause an immediate easing in expectations. NZD/USD trades near 0.5772, testing its 10-day moving average (-0.7%).

Meanwhile, the Australian dollar maintains a gradual firming drift ahead of the September 29 Reserve Bank of Australia meeting, where markets price a 76.6% chance of a rate increase. AUD/USD softened to 0.7129 on September 14, placing it in oversold territory (-3.4% versus its 10-day moving average) and below its 90-day high of 0.7277. Desks can look for dip-buying interest as broader risk conditions stabilize.

Conclusion: Maintaining Discipline in Active Markets

As major central banks diverge, steady execution is essential. By respecting established chart boundaries and waiting for data to confirm direction, we can navigate current market swings safely. Protect capital, align position sizes carefully with stop-loss distances, and let opportunities come to you.

The Franc maintains a bullish trajectory. Accelerating domestic growth, record-breaking export surpluses, and persistent geopolitical safe-haven demand provide a firm floor under the currency, despite central bank threats of currency intervention.

Accelerating Growth Meets Global Instability

Strong Economic Growth

Switzerland’s economy is currently outperforming many of its global peers. In the second quarter, economic output grew by 1.5% compared to the previous quarter (excluding sporting events). Overall economic growth reached 1.9% for the quarter and 2.8% compared to last year, marking the country’s fastest expansion in nearly five years.

This growth has been driven by a strong recovery in pharmaceutical exports and a record trade surplus of 8.1 billion Swiss francs in July.

Trade and Inflation Trends

Earlier in the year, a softer currency helped support Swiss exporters. At the same time, a new trade agreement that removed Chinese tariffs on Swiss goods helped boost international orders.

In August, overall annual inflation rose to 0.8%, mainly due to global energy disruptions in the Middle East. However, core inflation remains low at 0.4%. Looking ahead, a planned 4% reduction in domestic electricity prices next year should help keep inflation well within the central bank’s target range of 0% to 2%.

Global Uncertainty and Safe-Haven Demand

Ongoing international conflicts continue to encourage investors to seek safety in Swiss assets. The upcoming drop in domestic power prices in 2027 will also help protect the economy from imported price increases, allowing Switzerland to stay stable even as neighboring countries face economic challenges.

Currency and Market Dynamics

Because the Swiss National Bank has kept interest rates at 0.00%, global traders have frequently borrowed in Swiss francs for international investments. However, Switzerland’s strong trade position and accelerating growth make betting against the currency risky. Any sudden rise in global uncertainty could quickly force traders to buy back the franc, pushing its value higher.

Key Events to Watch

Investors and analysts will be watching closely to see if the central bank steps in directly to prevent the franc from rising too quickly. The next major event to monitor is the central bank’s upcoming policy meeting on September 24.

Fundamental Analysis pages to bookmark…

• NEW ZEALAND, NZD, AND DAIRY

• AUSTRALIA, AUD, COAL, AND IRON ORE

• JAPAN, AND JPY

• SWITZERLAND, CHF, AND GOLD

• EURO AREA, AND EUR

• UNITED KINGDOM, AND GBP

• CANADA, CAD, AND OIL

• UNITED STATES, AND USD

DISCLAIMER: This site is informational only, NOT financial advice. Trading involves risk, and you could lose money.

A surge in US job growth combined with rising trade tensions in North America has strengthened the US dollar. This week, the focus shifts to two critical events that could influence the markets: the ECB’s interest rate decision and new data on US inflation. We will be watching these developments closely for further direction.

The Dollar’s Revival and North American Trade Tensions

A Strong Jobs Report Boosts the Dollar

The US dollar has fundamentally strengthened following an impressive employment report. On Friday, September 4th, the US added 162,000 jobs in August, far exceeding the expected 56,000.

This unexpected surge led to higher 10-year Treasury yields, which rose to 4.79%, and fueled a stronger dollar as expectations for Federal Reserve policy tightened.

The next key moment to watch is the US Consumer Price Index (CPI) release on September 11th. A high inflation reading could push the Federal Reserve closer to a rate hike, keeping the dollar strong.

Trade Tensions Impact the Canadian Dollar

Trade relations in North America are becoming increasingly difficult due to new tariff threats. President Trump has proposed 50% tariffs on Canadian cars and steel by 2027, and Canada has responded with retaliatory tariffs targeting $20 billion in US imports.

At the same time, Canada’s economy is struggling, as shown by a loss of 41,700 jobs in August—a result much worse than the anticipated 15,000 gain. This economic weakness has hit the Canadian dollar (the “Loonie”) hard and made further rate hikes from the Bank of Canada unlikely.

There may be opportunities in USD/CAD to take advantage of these trends.

Eurozone Stagnation Meets Japanese Normalization

The Euro’s Economic Struggles

The Eurozone is currently navigating some tough challenges, particularly as recent economic data clashes with the central bank’s plans.

In July, retail sales fell by 0.6%, coming in lower than expected, while August services data (PMI) also missed the mark at 51.6.

Even with a sluggish economy, the European Central Bank is expected to raise rates on September 10th. These conditions are creating genuine concerns about stagnation and make the Euro a likely choice for funding trades, pointing toward short EUR/USD positions.

The Yen’s Rising Popularity

Meanwhile, the Japanese Yen is gaining strength as nervous investors look for stability and have priced in the Bank of Japan to raise rates on September 18th.

This anticipation is driving increased demand for the Yen and pushing USD/JPY lower.

EUR/JPY shorts are being looked into to take advantage of the growing gap between a weaker European economy and a strengthening Japanese outlook.

Geopolitical Shocks and the Aussie’s Vulnerability

Global Tensions and Safe Havens

The current global climate is unpredictable, which is naturally pushing investors toward safer assets. Recent military exchanges between the US and Iran—specifically targeting US bases in Jordan, Bahrain, and Erbil following earlier actions in the Strait of Hormuz—have added significant tension.

At the same time, while US diplomats are meeting with President Putin to discuss peace, the ongoing situation in Ukraine continues to affect energy supply lines.

Given this instability, EUR/CHF presents a potential trade if market nerves continue to rise.

Challenges for the Australian Dollar

The Australian dollar is facing a tough period due to a mix of domestic and outside pressures. While recent data showed the economy grew by 0.4% in the second quarter—slightly better than the expected 0.3%—this small win wasn’t enough to overcome broader issues.

Investors remain cautious after last month’s sharp drop in employment, and there are simply too many “long” positions in the market right now.

Even though the Reserve Bank of Australia is expected to raise rates later this month, the Australian dollar is still struggling to keep up with the strong momentum of the US dollar.

Conclusion

The US dollar is standing tall right now, helped by a very strong employment report. Meanwhile, the Canadian dollar and the Euro are feeling the pressure. Both are struggling with weak local data and growing concerns about an economic slowdown.

I will be focusing on key pairs like EUR/USD, USD/CAD, and AUD/USD, planning to take advantage of these clear trends as they develop throughout the week. Additionally, keeping a close eye on the Japanese Yen, which is acting as a safe place for investors, and using that to find potential opportunities in EUR/JPY.

Fundamental Analysis pages to bookmark…

• NEW ZEALAND, NZD, AND DAIRY

• AUSTRALIA, AUD, COAL, AND IRON ORE

• JAPAN, AND JPY

• SWITZERLAND, CHF, AND GOLD

• EURO AREA, AND EUR

• UNITED KINGDOM, AND GBP

• CANADA, CAD, AND OIL

• UNITED STATES, AND USD

DISCLAIMER: This site is informational only, NOT financial advice. Trading involves risk, and you could lose money.

Market Highlights from Last Week

The market saw significant changes last week. Fed Chair Warsh signaled a firm stance on interest rates at the Jackson Hole meeting, which caused 10-year Treasury yields to rise to 4.74%. Simultaneously, global tensions increased due to new U.S. sanctions on Iran and potential 50% tariffs on Canadian goods by 2027. As we enter the week of August 31st to September 6th, we are focusing on upcoming U.S. job figures and manufacturing data to understand the Federal Reserve’s next steps.

Tariff Threats and Hawkish Central Banks Take the Lead

The Fed Holds the Line

Fed Chair Kevin Warsh used his platform at Jackson Hole to temper any premature hopes for rate cuts, making it clear that underlying inflation has not meaningfully improved. This straightforward, hawkish message kept US 10-year Treasury yields elevated near 4.74% and gave the US dollar a solid foundation.

As we move through WN36 August 31st to September 6th, upcoming Nonfarm Payrolls and ISM PMI data will be crucial. Closely watch to see if these reports confirm a restrictive economic environment or reveal unexpected cracks in the labor market.

Geopolitics and Trade Risks

Looking ahead over, the broader macroeconomic landscape is being heavily shaped by aggressive US trade and foreign policies. The rollout of “Operation Economic Outcast” against Iran has kept energy markets on edge.

Furthermore, President Trump’s threat of a 50% tariff on Canadian goods by 2027 has put serious strain on North American trade relations. These dynamics naturally encourage safe-haven flows and favor currencies with a yield advantage, keeping our Strategic direction completely on track.

Australia’s Setbacks Create New Divergences

Cracks in the Labor Market

The Australian dollar looks highly vulnerable following a surprising drop of 15,800 jobs in July. Domestically, this essentially erases any runway the Reserve Bank of Australia had for further rate hikes.

Externally, the picture is not much better. China’s industrial profits cooled to 17.6% year-on-year, signaling weaker demand for Australian commodities and putting pressure on export profitability as we head into September.

A Clear Currency Divide

Throughout WN36 August 31st to September 6th and beyond, the Aussie’s fundamental decay makes it an ideal funding currency for trades. The Eurozone’s 0.4% economic expansion in the second quarter and the Bank of Japan’s hawkish posturing provide a stark, highly tradeable contrast.

Conclusion

The trading environment for the coming weeks is defined by widening, undeniable divergences. The US dollar, Euro, and Japanese Yen are all finding support from hawkish central banks and stable growth metrics. Conversely, the Australian dollar is buckling under the weight of a weakening domestic labor market and external trade threats. Remain disciplined, targeting these structural imbalances and waiting for optimal entry levels around the moving averages.

Gavin Pearson has been studying the currency markets as a retail trader for twenty years.

Fundamental Analysis pages to bookmark…

• NEW ZEALAND, NZD, AND DAIRY

• AUSTRALIA, AUD, COAL, AND IRON ORE

• JAPAN, AND JPY

• SWITZERLAND, CHF, AND GOLD

• EURO AREA, AND EUR

• UNITED KINGDOM, AND GBP

• CANADA, CAD, AND OIL

• UNITED STATES, AND USD

DISCLAIMER: This site is informational only, NOT financial advice. Trading involves risk, and you could lose money.

The Dollar’s Continued Decline

The US dollar is still weakening as the domestic economy slows down. Because of this, my August strategy of pairing the dollar against the British pound and Australian dollar isn’t working as expected. UK retail momentum is fading, and Australia has seen a sudden contraction in its labor market, so a re-focus is needed.

The Strategy for WN35

• Priority: Look at a suitable entry to go long NZD/USD.

• Drop the Yen: Close USD/JPY shorts as Japan’s momentum is slowing after a soft GDP report.

• Introducing the Euro: Look for a good long EUR/USD entry to take advantage of the dollar’s weakness against a stronger European economy.

The Dollar’s Structural Retreat Accelerates

Data Prints Erode the Yield Premium

The US dollar is steadily losing its macroeconomic defences. While the August 21st S&P Global Services PMI offered a brief bright spot by printing at 56.8 against a 54.0 consensus, it simply was not enough to reverse the broader narrative of consumer exhaustion.

The August 14th retail sales report delivered a sharp blow, contracting by 0.6% against expectations of a 0.1% gain. Furthermore, the Michigan Consumer Sentiment Index eased to 51.0, underscoring that everyday Americans are feeling the pinch.

Employment Woes Solidify the Shift

These demand-side failures compound the damage from the August 7th nonfarm payrolls print, which revealed a shock contraction of 23,000 jobs. Consequently, the 10-year US Treasury yield, though managing a modest rebound to 4.74%, remains highly vulnerable.

As we look through the focus week, the dollar has transitioned from a high-yield safe haven into a funding currency. Capital is bleeding away from the greenback and flowing toward central banks that are maintaining a decisively hawkish posture.

The Kiwi Assumes the Hawkish Mantle

Yield Divergence Favours Wellington

As the US Federal Reserve faces mounting pressure from a cooling economy, the Reserve Bank of New Zealand (RBNZ) stands out as the most aggressive central bank in the G8. Financial markets are currently pricing a massive 92.9% probability of a rate hike at the upcoming September 2nd RBNZ meeting.

This robust policy path is supported by the 10-year New Zealand government bond yield, which continues to trend higher. This is steadily widening its advantage over US Treasuries.

A Clear Path Forward

While New Zealand’s employment change on August 4th came in at 0.5 against a 0.2 consensus, the currency is primarily being driven by this aggressive rate-path pricing. Through the focus week and into early September, the New Zealand dollar serves as the premier vehicle for exploiting the greenback’s fundamental weakness.

The Euro Steps Up as the European Anchor

Services Resilience Lifts the Single Currency

With the British pound side-lined due to mixed data, the euro has stepped in to capture capital fleeing the US dollar. On August 21st, the Eurozone HCOB Services PMI printed at 51.7, beating the 51.5 consensus and providing a vital signal of European economic resilience.

The single currency rallied to a 14-week high above $1.156 in response. More importantly, European bond markets reflect sustained tightening expectations.

Consistent Central Bank Support

EU 10-year yields remain elevated, narrowing the yield gap with the US. As long as the European Central Bank maintains its hawkish optionality, the euro will systematically benefit from the dollar’s macroeconomic degradation over the coming three weeks.

Australia’s Labour Collapse Forces a Pivot

The End of the Aussie Premium

The Australian dollar’s bull case has been entirely invalidated. On August 20th, Australian employment completely collapsed, shedding 15,800 jobs against a consensus expectation of a 15,000 gain. At the same time, the unemployment rate spiked to 4.5%.

This disastrous print wiped out the Reserve Bank of Australia’s runway for further hawkish posturing. Consequently, the Australian dollar has lost its fundamental premium. This firmly validates the decision made in WN34 to abandon the currency as a long vehicle against the US dollar.

Conclusion

Our core strategy to short the US dollar is still the strongest play on the board right now, but the vehicles we use to get there have changed. Australia’s sudden labour market contraction and the UK’s stalling momentum have disqualified the original Strategic pairs. Instead, capital is rotating aggressively toward the New Zealand dollar—backed by near-certain RBNZ rate hikes—and the euro, which is demonstrating renewed resilience in its services sector.

Gavin Pearson has been studying the currency markets as a retail trader for twenty years.

Fundamental Analysis pages to bookmark…

• NEW ZEALAND, NZD, AND DAIRY

• AUSTRALIA, AUD, COAL, AND IRON ORE

• JAPAN, AND JPY

• SWITZERLAND, CHF, AND GOLD

• EURO AREA, AND EUR

• UNITED KINGDOM, AND GBP

• CANADA, CAD, AND OIL

• UNITED STATES, AND USD

DISCLAIMER: This site is informational only, NOT financial advice. Trading involves risk, and you could lose money.

USD fundamentals gave way completely last week (WN33).

July retail sales sank 0.6% month-over-month, missing expectations by a mile. Consumer sentiment cratered to a bleak 51. Factor in flat producer prices alongside cooling CPI data, and the market stripped away the greenback’s fundamental premium almost overnight.

Cutting AUD, Riding USD/JPY Lower

Last week’s tactical setup called for maintaining long AUD/USD while scaling into short USD/JPY.

That AUD/USD long should be closed with the profits taken as commodity sentiment is turning sour.

Short USD/JPY, on the other hand, is to be maintained as safe-haven capital pours into Tokyo.

Targeting NZD and JPY

As we step into WN34 (August 17–23), watch capital flow fast toward the hawkish New Zealand dollar and a surging Japanese yen. Both offer prime setups to short-circuit a softening US economy.

Yield Advantage Evaporates

Consumers Retreat

America’s growth engine is losing steam fast.

Consumers pulled back hard in July, dragging retail sales down 0.6%—the steepest monthly slide in over a year. That slump confirms what last week’s negative payrolls report already signaled: demand is cracking.

Price pressures are melting away alongside it. With core inflation slowing to an annual 2.5%, the sudden price spikes that propped up government bond yields all summer are running out of runway.

Now, the 10-year Treasury is barely clinging to 4.65%. Investors have completely wiped out their bets on a hawkish September surprise from the Federal Reserve, and the market is recalibrating in real time.

Fed Path Narrows

Next week, the US dollar faces a rough pivot. The greenback is shedding its status as an attractive, high-yielding safe haven and morphing into a funding currency ripe for shorting.

Traders are growing restless. With joblessness ticking up and price pressures cooling into outright deflation, the Federal Reserve’s restrictive 3.75% benchmark rate looks less like prudence and more like a blunder.

Keep an eye on the next three weeks. If the August 26th GDP revisions confirm the economy is losing speed, the bottom could drop out. That would unleash heavy, sustained selling as capital flees into currencies backed by central banks that are still actively tightening.

RBNZ Hawkishness Takes Centre Stage

Kiwi Takes the Lead

With Australia tapping the brakes, New Zealand has taken the crown as the fiercest hawk in the G8.

The Reserve Bank of New Zealand bumped its cash rate to 2.50% in July, fired up by a scorching 4.1% inflation print in the second quarter. Traders took the hint. Right now, markets are pricing in an 89.9% chance of yet another hike when policymakers meet on September 2nd.

Favorable Divergence

Job numbers are showing some wear—unemployment climbed to 5.6%. Even so, Wellington’s aggressive rate path puts a firm floor right under the currency.

As money ditches the US dollar this week, the kiwi is lined up to catch the windfall. Retail sales numbers late in WN34 will be the real trial by fire. Yet the gap between a hawkish RBNZ and a retreating Fed leaves buyers holding a distinct edge for the next three weeks.

Yen Ascends on Yield Convergence

BoJ Policy Creep

The Japanese yen is back in the driver’s seat as the world’s go-to safe haven.

While the Bank of Japan held benchmark rates steady at 1.0% in July, policymakers came out swinging. Officials warned that core inflation could easily blow past their 2% target, sending a clear signal to currency desks. Traders got the message loud and clear—markets are now pricing in a 78.7% chance of a 25-basis-point rate hike at the September 18th meeting.

Funding Trade Unwinds

With US Treasury yields in free fall, the legendary dollar-yen carry trade is unraveling fast.

Japan’s 10-year government bond yield is hovering near a three-decade high of 2.85%. That surge is choking off the fat yield spread that made betting against the yen so profitable for so long.

Over the next couple of weeks, expect the yen to react sharply to any fresh cracks in American economic numbers. If US data continues to roll over, USD/JPY faces heavy, relentless downward pressure.

Conclusion

The Dollar Breaks Down

The macro picture is impossible to ignore. The greenback is cracking under a wave of ugly US economic data.

Consumers are tapping out. Retail spending contracted, the job market is shedding payrolls, and the engine is stalling. In this kind of tape, the playbook is simple: short the dollar against central banks that are still pushing rates higher.

Right now, New Zealand and Japan offer the cleanest divergences on the board.

Exploiting the Split

Both the kiwi and the yen are primed to feast on dollar weakness.

The setups are razor sharp. You have an economy in Washington that is slamming into reverse while Wellington and Tokyo keep tightening the screws. That spread is where the opportunity lives.

Ride the weakness. The runway extends through the rest of August and straight into the September policy meetings.

US Dollar Narrative Shatters

Last week completely tore apart the US dollar’s multi-month rally. On Friday, August 7th, Nonfarm Payrolls delivered a shock contraction of -23k against an expected 80k gain. That confirms the American jobs market is cooling rapidly, driving the 10-year Treasury yield straight down to 4.56%.

Positioning for Week 33

Last week favoured long positions in both AUD/USD and GBP/USD.

I am holding onto the long AUD/USD which was entered at 0.704 as good Australian trade numbers keep that direction firmly intact.

However, the long GBP/USD will be reconsidered as UK retail momentum looks to be stalled.

Opportunities to short USD/JPY will be considered throughout the week. This trade capitalizes on a massive rush into safe-haven assets alongside increasingly hawkish noise from the Bank of Japan.

Over the next three weeks, upcoming US inflation prints and the Reserve Bank of Australia’s rate decision will dictate just how fast the greenback drops.

The US Labour Engine Stalls Out

Negative Payrolls Shift the Fed Narrative

The US dollar took an absolute beating last week. Friday, August 7th brought a brutal reality check when Nonfarm Payrolls clocked in at a dismal -23k—miles below the forecasted 80k gain. That marks a sharp contraction in hiring. Sure, unemployment ticked down to 4.1%, but that was mostly because labour force participation sank to 61.4%, revealing real fragility under the hood. The 10-year Treasury yield cratered to 4.56% almost instantly as traders dumped any remaining bets on a Fed rate hike.

Looking at Week 33 (August 10th to 16th), the greenback is morphing from a high-yield haven into a fragile funding currency. Everyone’s eyes now turn to Wednesday’s CPI report on August 12th. If inflation comes in flat or negative, it strips away the dollar’s final yield defence, opening the floodgates for heavy selling through the rest of the month.

The Yen Resurrects on Policy Shifts

Intervention and Yield Convergence

The Japanese yen has caught a massive tailwind. Between coordinated US-Japan currency interventions and the Bank of Japan dropping hawkish hints, money is racing back into Tokyo. Markets are already heavily pricing in a potential BoJ rate hike come September. Heading through mid-August and into next month, the yen’s safe-haven pull will keep bleeding capital out of the weakening dollar—especially if Japanese growth numbers beat expectations on August 16th and squeeze the yield differential even further.

Aussie Defies Gravity on Commodity Strength

RBA Holds the Line

Even with a broader global deceleration, the Australian dollar is flexing hard thanks to strong commodity exports. Australia’s Trade Balance smashed expectations on Thursday, August 6th, printing at a cool A$1.93 billion against forecasts of a deficit. That keeps buyers firmly in control. The Reserve Bank of Australia looks set to hold its cash rate steady at 4.35% on August 11th. Over the next three weeks, as long as the RBA sticks to its hawkish stance to fight stubborn local inflation, the Aussie stands out as the cleanest vehicle to trade against a damaged greenback.

Macro Realities Force a US Re-pricing

Markets are rapidly pricing in a clear US slowdown. That negative jobs print stripped the greenback of its yield advantage, driving capital straight into currencies backed by hawkish central banks and solid domestic fundamentals. Moving through Week 33 and into late August, selling the dollar on any short-lived pops remains the path of least resistance—with the Aussie’s yield edge and the Yen’s policy tailwinds leading the charge.

The Greenback Takes a Direct Hit

Last week (Week 31) took a sledgehammer to the US dollar’s dominance. That beatdown completely reshaped the market roadmap as trading opens for Week 32 (August 3–9).

First, the Federal Reserve kept its benchmark rate sitting at 3.75% on July 29th. Then came the economic report card a day later. Second-quarter US GDP limped in at just 1.5%, falling way short of the 2.1% consensus.

Dropping the Yen Trades

The energy panic that crushed the yen earlier in the summer has quieted down now that Middle Eastern tanker traffic is moving again. On top of that, the Bank of Japan kept rates steady at 1.0% on July 31st while signaling a firmer path forward for policy.

The Core August Strategy

We are shifting gears.

It is time to drop cross-currency bets entirely and lock in with our broader strategic mandate. The plan now is straightforward: aggressively short a fading greenback against high-yielding, fundamentally sound peers.

US Growth Stalls as the Dollar’s Edge Fades

Hiring Slows Down and Growth Slumps

The US dollar is losing its shine, fast.

That shift became impossible to ignore on July 30th when second-quarter GDP came in at an annualized rate of just 1.5%. Compare that to the 2.1% pace from the first quarter, and the trend line becomes obvious.

This drop-off isn’t a fluke. It lines up right beside the ugly 57k job addition from earlier in July, proving that the American job market is running out of steam.

Now, as trading gets underway for the week of August 3rd to 9th, everyone is watching the exact same spot on the calendar: the August 7th payroll release. If hiring misses the mark two months in a row, any remaining expectations for higher rates will shatter.

The Fed Pauses while Markets Look Ahead

The Federal Reserve chose to hold the benchmark interest rate at 3.75% on July 29th. Three officials actually wanted to raise rates immediately, but bond traders completely brushed off that aggressive posture. Long-term Treasury yields dropped anyway.

Why the quiet market reaction? Simple. The pressure is off.

Oil shipping risks have backed down, inflation is cooling, and central bankers no longer have a reason to rush out more rate increases. Without oil spikes to trigger panic buying, the dollar has lost its main engine. That leaves it sitting wide open to losses against other major currencies all through August.

Sterling Anchored by Hawkish Hold and Fiscal Calm

Threadneedle Street Stands Its Ground

The British pound has turned into one of the cleanest trades on the board for anyone looking to short the greenback.

On July 30th, the Bank of England decided to hold its main rate at 3.75%. But look closer at that 6-3 vote split. Three policymakers actually voted to push rates higher right then and there. Even though headline CPI slipped to 2.6% on July 22nd, sticky service prices are keeping central bankers awake at night. That aggressive tilt puts a firm floor under sterling’s yield, giving it a real structural edge.

Westminster Settles Down

At the same time, political panic has completely drained out of the UK bond market.

Keir Starmer stepped down, but Andy Burnham’s move into 10 Downing Street went off without a hitch. Burnham promised straight away to keep spending tight, and bringing in John Healey as Chancellor gave traders even more peace of mind. That double-act kept 10-year gilt yields locked right around 4.95%.

With quiet back in Parliament and central bankers refusing to back off, the pound sits ready to catch money running away from the US dollar.

Red-Hot Jobs Market Keeps the Aussie Flying High

Labor Muscle Outweighs Cooling Inflation

The Australian dollar isn’t backing down from the greenback, and you can thank a ridiculously strong domestic job market for that.

Everything changed on July 23rd. Australia dropped an employment print that stunned markets—adding 76.3k jobs when forecasters were expecting a tiny 15k trickle. That single release completely redirected where the Reserve Bank of Australia is heading next.

Sure, headline inflation eased off to 3.8% on July 29th, coming in lower than the 4.0% market pick. But the trimmed mean core number stayed stuck at 3.6%.

When you combine a hiring surge with core prices that refuse to budge, the RBA has zero room to play soft at its August 11th policy meeting. Any hope of a dovish turn is pretty much off the table, making the Aussie one of the best tools around to trade against a fading greenback.

Conclusion

Why the US Dollar Lost Its Guardrail

The market landscape just underwent a complete regime shift.

Those geopolitical energy scares that kept a floor under the dollar for months? They’ve completely dried up. At the same time, domestic US data keeps pointing toward a real, inescapable slowdown.

With trans-Tasman plays and yen crosses pushed to the sidelines by these changing fundamentals, the path of least resistance through August and into September is remarkably clear: sell the greenback.

By shifting capital over to sterling and the Aussie dollar, traders can target the massive split opening up between a fading US economy and the sticky, resilient fundamentals keeping the UK and Australia afloat.

Introduction

Shifting Tactics in a Split Market

An energy-driven rift in central bank policy continues to steer the broader market. Yet, currency targets have been tweaked.

Following a massive surprise in Australian employment figures on Thursday, July 23rd, traders shorting the AUD/NZD were forced to quickly re-evaluate their positions. The market’s reaction was immediate as a staggering 76.3k jobs were added, completely obliterating the forecasted consensus of just 15k.

WN31 Strategy and Beyond

For the week of July 27th to August 2nd, the main driver of the market is energy problems in the Middle East.

These energy issues hurt countries that import a lot of fuel, making Japan particularly weak. At the same time, other central banks are feeling more confident because they are dealing with steady inflation.

Because of this, the plan will evolve to betting that the New Zealand dollar and the British pound will go up compared to the Japanese yen (Long NZD/JPY and Long GBP/JPY).

The plan is simple: because the Japanese yen is weak due to high energy costs, we are betting on currencies from countries with stronger economic data.

The Hormuz Blockade and the High-Yield Hunt

What Just Defined It

A relentless campaign of US-Iran airstrikes and Houthi blockades on maritime chokepoints has effectively severed typical energy flows through the Persian Gulf and Red Sea. This escalation lifted Brent crude prices above $100 per barrel last week, creating a massive external tax on global growth and reviving headline inflation fears across major economies.

Why It Leads WN31

This severe energy shock cleanly divides global central banks into two camps. The Bank of Japan remains trapped; despite hiking rates to 1.0%, Japan’s near-total reliance on imported Middle Eastern oil sent the yen plummeting to a 40-year low of 163.99 against the dollar on Thursday, July 23rd. Conversely, central banks like the Bank of England and the Reserve Bank of New Zealand are leaning on high rates to combat sticky price pressures, creating a massive real-yield advantage.

Divergence and Pairs

This macroeconomic divide perfectly aligns with the cross-currency strategy, supporting Long NZD/JPY and Long GBP/JPY. Capital will continuously seek out these high-yielding, hawkish environments while funding trades via the battered yen.

What Would Break the Thesis

The primary risk to this trajectory is a sudden diplomatic breakthrough in the Middle East that swiftly reopens the Strait of Hormuz, collapsing oil prices. Additionally, a surprise hawkish pivot from the Bank of Japan on Friday, July 31st, could trigger aggressive short-covering and erase the yield gap.

The Antipodean Yield Gap Collapses

The RBA Dilemma Shifts

The Strategic call to short AUD/NZD relied on a frozen RBA contrasting with an active RBNZ. That narrative was shattered on Thursday, July 23rd, when Australian Employment Change printed 76.3k against a 15k consensus, alongside a participation rate rising to 67.0% (beating the 66.7% forecast). This blowout jobs report fundamentally alters the RBA’s trajectory, with market-implied odds of an August rate hike jumping above 40%.

Dropping the Trans-Tasman Cross

This labor market resilience abruptly narrows the policy divergence across the Tasman Sea. The Aussie is no longer a viable funding leg against the Kiwi. With both central banks now facing domestic pressures that support higher-for-longer rates, we are stepping to the sidelines on AUD/NZD, rotating capital toward clearer imbalances.

Sterling’s Resilient Retail Boost

UK Data Defies Gravity

The British Pound has emerged as a premier high-yield vehicle after crushing recessionary fears. On Friday, July 24th, UK Retail Sales for June posted a 1.0% month-over-month gain, obliterating the -0.3% consensus. Furthermore, the July 22nd Core Consumer Price Index held uncomfortably sticky at 2.6% year-over-year against a 2.5% forecast.

Capitalizing on the Pound

These consecutive data beats validate the Bank of England’s tight monetary stance ahead of its upcoming policy decision. With domestic consumption robust and core inflation elevated, the BoE is perfectly positioned to maintain elevated yields. This creates an optimal environment for Long GBP/JPY. We expect this trans-continental yield advantage to drive capital flows into Sterling.

June was dominated by a sharp escalation in the Middle East. Missile strikes between the US and Iran effectively shut down the Strait of Hormuz, sending Brent crude soaring. That surge completely overshadowed the Bank of Japan’s rate hike to 1.0% on June 16, pushing the yen down near 40-year lows. Meanwhile, the US dollar lost its usual safe-haven boost after a weak jobs report on July 2 showed Nonfarm Payrolls at just 57k against a 110k forecast.

Looking through July and into October, the main story is an energy-driven split in central bank policy. How central banks respond depends entirely on how well their domestic economies can handle high oil prices. Right now, the two best setups to trade this gap are Long NZD/JPY (+72.0 FSS delta) and Short AUD/NZD (-55.0 FSS delta).

The Strait of Hormuz Shock and Central Bank Divide

The blockade of the Strait of Hormuz is driving global markets right now. US and Iranian missile attacks throughout June and early July forced ships to avoid the Persian Gulf, triggering a massive spike in energy costs. This acts like a heavy tax on global growth and revives headline inflation.

The Bank of Japan tried raising interest rates to 1.0% from 0.75% on June 16. It did not help. The yen plummeted to 163 against the dollar because Japan imports almost all of its energy, leaving it exposed to rising oil.

Higher energy prices are splitting central banks into two groups: those raising rates to protect their currencies, and those stuck on the sidelines due to weak domestic growth.

The Reserve Bank of New Zealand (RBNZ) stepped up on July 8, raising its benchmark rate by 25 basis points to 2.50% to fight sticky inflation. Capital is now flowing into the Kiwi to capture those higher yields. Expect central banks with solid economic backings to keep using rate hikes as a shield against inflation over the next three months.

What Could Break the Energy Shock Thesis

The biggest risk to this setup over the next three months is a sudden peace agreement between the US and Iran.

If the Strait of Hormuz reopens and tankers start moving freely again, oil prices will drop fast. That would immediately lift import pressure off Japan, likely sparking a fast rally in the yen as traders cover short positions.

Soft US Jobs and Cool Inflation Cap the Dollar

The greenback has struggled to keep its momentum despite ongoing Middle East tensions. The main culprit is a weakening US labor market.

On July 2, US Nonfarm Payrolls came in at a weak 57k, missing the 110k estimate and falling well below the previous 129k number. Unemployment dropped slightly to 4.2%, but only because fewer people were actively looking for work. That weak job growth cooled off expectations for Federal Reserve rate hikes.

Inflation data sealed the deal on July 14. US Consumer Price Index (CPI) fell 0.4% month-over-month, surprising analysts who expected a much smaller drop of 0.1%. Annual inflation cooled to 3.5% against a 3.8% forecast.

This rare price drop showed that slowing domestic demand is currently outweighing energy shocks in the US. Federal Reserve Chair Kevin Warsh continues to sound hawkish, but the weak data limits the dollar’s upside. That makes it far more attractive to pair strong currencies against the yen rather than the dollar.

Antipodean Split: RBNZ Tightens While the RBA Holds

A clear gap has opened between Australia and New Zealand’s central banks, creating a strong cross-currency opportunity.

On June 16, the Reserve Bank of Australia (RBA) kept its cash rate unchanged at 4.35%. Even though Australia added a strong 76.3k jobs on July 23 (beating the 15k forecast), an uneven domestic economy is keeping the RBA firmly in neutral mode.

New Zealand is taking the opposite path. Following its July 8 rate hike to 2.50%, consumer prices for Q2 jumped 4.1% year-over-year on July 20, topping the 4.0% forecast.

That hot inflation print practically guarantees another 25-basis-point hike from the RBNZ by September. This difference in policy gives Short AUD/NZD strong fundamental backing through July and into the fall.

Steady Handover in the UK Keeps Sterling Stable

The British Pound has stayed surprisingly steady through a major leadership change.

Following Keir Starmer’s resignation, Andy Burnham took over as Prime Minister on July 20. Concerns about heavy spending eased quickly when John Healey was named Chancellor, stabilizing 10-year UK gilt yields near 5.0%.

The Bank of England held its policy rate at 3.75% on June 18 in a 7-2 vote. UK CPI slowed to 2.6% on July 22, but core services inflation remained sticky at 3.6%.

With a disciplined fiscal policy and a cautious central bank, the pound offers a steady base. It remains far less volatile than either the yen or the kiwi dollar.

Top Currency Focus Pairs

Long NZD/JPY

• The RBNZ is raising rates into rising energy costs, while the yen continues to slide despite the Bank of Japan’s move to 1.0%. Japan’s heavy reliance on oil imports makes it vulnerable to the Hormuz blockade, whereas New Zealand’s higher yields are pulling in capital.

• Base (NZD): FSS +48 (Hawkish RBNZ policy backed by 4.1% inflation).

• Quote (JPY): FSS -24 (Weak energy importer struggling with high crude and slow BoJ policy).

• Signal Tag: Programmatic FSS Divergence: +72.0 delta / LONG bias.

• July Drivers: The RBNZ’s July 8 rate hike and hot Q2 CPI data will keep yield differentials moving in favor of the Kiwi over the yen.

• 3-Month Outlook: The BoJ might hike again late in the summer, but the real-yield advantage still favors New Zealand heading into October.

• Trade Invalidation: A peace deal between the US and Iran that reopens the Strait of Hormuz, driving crude lower and sparking a fast yen recovery.

Short AUD/NZD

• A straight divergence between two neighboring central banks. The RBNZ is actively raising rates to curb inflation, while the RBA stays on hold at 4.35% due to choppy economic performance.

• Base (AUD): FSS -7 (Neutral central bank stance with mixed economic data).

• Quote (NZD): FSS +48 (Active rate hikes backed by 4.1% inflation).

• Signal Tag: Programmatic FSS Divergence: -55.0 delta / SHORT bias.

• July Drivers: Markets will continue moving capital from the Australian Dollar to the New Zealand Dollar to grab higher yields.

• 3-Month Outlook: The RBA will likely hold rates again in August. Unless China rolls out aggressive economic stimulus to boost Australian exports, the Kiwi stays in control.

• Trade Invalidation: A big drop in New Zealand employment data or a massive Chinese stimulus package that boosts demand for Australian commodities.

Sun Jun 21 GBPAUD Fundamental Value Band is 1.894 and 1.903

TRADE PLAN

• Strategy: Utilizing our fundamental analysis showing a neutral-to-positive fundamental score of +6 to capture the medium-term currency_pair_7w_direction pointing to the upside, while managing a short-term currency_pair_7d_direction that favors the downside under a low currency_conviction of 3 out of 10 and a currency_fundamental_strength_7w_forecast of GBP +1 and AUD -4.

• Buy Zone: 1.8750 to 1.8900

• Take Profit Zone: 1.8985 to 1.9030

• Stop-Loss: 1.8550 (exactly 200 pips away from the 1.8750 entry level)

• Abort Conditions: A highly aggressive Australian CPI print on June 24 above 4.3 percent, a severe UK political crisis that weakens gilt yields, or iron ore prices rising back above 110 dollars per tonne.

LONG TRADE UPDATE

• Action: Based on our fundamental analysis yielding a neutral-to-positive fundamental score of +6, we are looking to capitalize on the medium-term currency_pair_7w_direction pointing to the upside, despite the short-term currency_pair_7d_direction showing downside risks.

• Execution details: Given the currency_fundamental_strength_7w_forecast of GBP +1 and AUD -4 and our low currency_conviction of 3 out of 10, we will build long positions slowly within our buy zone.

• Abort Conditions: Abort the long trade immediately if the daily candle closes firmly below 1.8700, or if RBA rate hike expectations escalate rapidly ahead of the August meeting.

SHORT TRADE UPDATE

• Action: Under our fundamental analysis with a neutral-to-positive fundamental score of +6, we stand aside on short positions as the currency_pair_7w_direction points to the upside, making shorting highly risky.

• Rationale: The short-term currency_pair_7d_direction downside risk is highly speculative under our currency_conviction of 3 out of 10, and selling at the bottom against a currency_fundamental_strength_7w_forecast of GBP +1 and AUD -4 offers poor expectancy.

• Abort Conditions: Abort any short trade ideas as the bulk commodity crash and weak Australian economic data structurally support the upside for GBPAUD.

Fri Jun 19 GBPAUD Fundamental Value Band is 1.940 and 1.948

GBPAUD is a Possible Buy as Signals Point to Undervalued

GBP/AUD has been through some choppy trading lately. The pair slipped from recent highs near 1.9100 down to 1.8925, which looks like a straightforward seven-day direction pullback. Step back to the seven-week view, though, and the bias stays firmly bullish. A Total Fundamental Score of +33 backs that call, even if conviction remains moderate for now. The main driver is the widening policy divergence between the Bank of England and the Reserve Bank of Australia.

Looking ahead, that same fundamental divergence in currency strength should keep pushing the pair higher. With solid conviction on the currency side, the seven-week direction appears ready to reassert itself and target 1.940 on the upside. The seven-day move should resolve higher too, helped by those regional headwinds that continue to weigh on the Australian dollar.

A string of upcoming releases could stir decent volatility and hand us a clean entry zone. The S&P Global UK Flash PMIs drop on June 23 and should give a timely gauge of service sector resilience. Then on July 1 comes the scheduled 13% increase in the domestic energy price cap, which ought to keep UK consumer prices sticky.

For Australia, the monthly consumer price index prints on June 24 and the labor force survey follows on the 25th. Both should offer clearer evidence of cooling growth. Softer Australian inflation or unemployment climbing above 4.5% would validate the Reserve Bank of Australia’s pause. A hot UK core CPI on July 15 would reinforce the Bank of England’s hawkish hold. Taken together, these events line up with our positive seven-day and seven-week directions, backed by solid conviction. The volatility around them should create an attractive buy zone before the Bank of England’s rate decision on July 30.

TRADE PLAN

• Directional Bias: Supported by our comprehensive fundamental analysis, the intermediate outlook points to the upside over both the seven-day and seven-week horizons.

• Fundamental Drivers: GBP fundamental strength is forecasted at plus four with a conviction of four, while AUD is forecasted at minus four with a conviction of three.

• Buy Zone: 1.8880 to 1.8950, capitalizing on the pair’s current undervalued status below our lower band.

• Take Profit Zone: 1.9400 to 1.9480, targeting the fair value centerpoint and the structural upper value band.

• Stop-Loss: 1.8725, set exactly 200 pips away from our tactical entry at 1.8925 to shield our capital from short-term market noise.

• Abort Conditions:

  • A surprise dovish shift in Bank of England communication or rate projections.

  • An unexpected spike in Australian CPI on June 24 that forces the RBA to resume interest rate hikes.

  • A sudden, robust recovery in benchmark iron ore prices above 115 USD a tonne.

  • A clean daily candle close below the technical support level of 1.8700.

What Just Shook Up the FX Market: In recent weeks, the naval blockade in the Strait of Hormuz drove oil and gold prices higher as investors piled into safe havens, which gave the US dollar a defensive boost. Then everything changed in a hurry. On June 15, 2026, a diplomatic breakthrough delivered a 60-day peace memorandum of understanding. Energy risk premiums collapsed almost immediately, and safe-haven flows started unwinding aggressively across the G10 majors.

What Comes Next as the Dust Settles: Now that the geopolitical storms are clearing, currency markets face a new set of drivers. Central bank policy differences and upcoming domestic data releases will matter most. The formal signing of the US-Iran peace deal is set for June 19 in Switzerland. Once that’s done, the Strait of Hormuz should reopen, energy supplies get back to normal, and crude oil prices should head lower.

That drop in cost-push energy inflation will start showing up in global consumer price indexes, giving major central banks more breathing room on their terminal rate calls. At the Federal Reserve, new Chair Kevin Warsh has to walk a fine line. The strong May payrolls report still argues for caution, even as those collapsing energy premiums change the inflation outlook. The Fed is holding its restrictive stance steady for the moment.

By contrast, the Reserve Bank of New Zealand is gearing up for a hawkish tightening phase. A July rate hike looks likely if the first-quarter GDP numbers confirm the domestic economy is recovering. That’s a very different picture from the Bank of Canada, which is staying neutral as Canadian growth continues to slow. The Swiss National Bank is keeping rates at zero to stop the franc from getting too strong.

The Bank of England isn’t rushing to cut rates either, with services inflation still sticky, and that’s been supporting sterling. Over at the European Central Bank, the surprise June hike is already bumping into stagnation risks.

As safe-haven demand fades and yield spreads recalibrate in these quieter conditions, speculators are expected to move out of defensive dollar holdings and into pro-cyclical commodity dollars and those G10 currencies that are most sensitive to a recovery.

Gavin Pearson has been studying the currency markets as a retail trader for twenty years.

Fundamental Analysis pages to bookmark…

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