Trade Winds and Central Bank Whispers
Welcome to your weekly Forex outlook. The upcoming seven days promise considerable attention on the United States Dollar as markets digest fresh trade protectionism threats and await crucial PCE inflation data. Safe-haven currencies like the Japanese Yen and Swiss Franc will also be in focus amidst this heightened uncertainty.
Fundamental Strength and Influence Snapshot
Based on the "Looking Ahead Report - Week 22, 2025 (May 26 to May 30)":
Japanese Yen (JPY): Moderately Strong Strength / Bullish Influence.
Swiss Franc (CHF): Moderately Strong Strength / Bullish Influence.
British Pound (GBP): Moderately Strong Strength / Moderately Bullish Influence.
New Zealand Dollar (NZD): Neutral Strength / Moderately Bullish Influence.
Australian Dollar (AUD): Neutral Strength / Moderately Bullish Influence.
Euro (EUR): Neutral Strength / Moderately Bullish Influence.
Canadian Dollar (CAD): Neutral Strength / Moderately Bullish Influence.
United States Dollar (USD): Moderately Weak Strength / Bearish Influence.
Japanese Yen (JPY)
The Yen's quite strong right now and looks set to stay that way, maybe even strengthen more this week. It's been on the up for weeks, mainly because Japan's central bank (BoJ) might tighten policy, the US dollar's weak, and trade tensions make the Yen a safe bet.
Going forward, these trade issues and BoJ moves are key. This week, watch for US trade policy news (esp. Tuesday, May 27). Then, Japan's consumer confidence on Thursday (May 29) is important – a big swing from the 32.8 forecast could shift BoJ views. Friday (May 30) brings key Japanese data like jobs and sales; weak numbers might cool BoJ tightening talk. Plus, US inflation figures that day will really affect the Yen against the dollar.
Swiss Franc (CHF)
The Swiss Franc's been a popular safe bet, mainly due to U.S. trade and money worries, plus rising gold. Fresh U.S. tariff threats gave it another boost. It looks set to stay strong if these global concerns hang around, regardless of what the Swiss bank does. This week, U.S. trade and financial news will really steer the Franc.
Watch for U.S. trade reactions on Tuesday (May 27), though there's Swiss trade data too. Friday (May 30) has Swiss retail numbers, but U.S. inflation figures will likely be the big driver for safe currencies like the Franc.
British Pound (GBP)
The Pound's looking pretty healthy and might nudge up a bit more this week. It's been strong lately, thanks to good UK numbers (like retail sales) and a generally weaker US Dollar. Just last week, it climbed over 1.3541 against the Dollar.
Looking ahead, the Pound's performance depends on how the UK economy handles global issues and what the Bank of England does. A weaker US Dollar could give it a hand this week, along with more UK data. Further out, around June 2025, things could soften a little.
This week, keep an eye on Tuesday's (May 27) UK retail sales survey – a surprise could affect how people see retail. On Friday (May 30), UK house prices are out; a big shock might affect consumer mood, but the real focus will be U.S. inflation (PCE) and its impact on the US Dollar.
New Zealand Dollar (NZD)
The New Zealand Dollar (Kiwi) is pretty neutral right now but could get a small lift this week if the US Dollar stays weak. It's been a bit up and down lately, thanks to RBNZ policy ideas, local data, and China trade concerns. It did get stronger last week to near USD 0.5990, mostly due to a weak US Dollar and good retail sales.
The RBNZ meeting on Wednesday (May 28th) is the main event – a 0.25% rate cut is expected, and what they say next is key. Over the next seven weeks, RBNZ moves, global trade (especially dairy/China), and US Dollar trends will steer the Kiwi, though the longer-term outlook (to June 2025) is a bit more downbeat.
Watch out for: That RBNZ decision on Wednesday – their comments are crucial. Thursday (May 29) has NZ business confidence; a big shift from April's 49.3 would matter.
Australian Dollar (AUD)
The Aussie Dollar is pretty neutral now but might get a slight lift this week if the US Dollar stays weak. It’s been tracking RBA hints, local news, iron ore, and China, helped by a soft US Dollar. Last week, it was up near USD 0.6459 thanks to that weak Dollar and China putting money in, even with iron ore falling. Looking out to June 2025, the outlook is a bit more bearish.
This week, the main things are US Dollar movements, Aussie inflation (CPI), and Chinese business surveys (PMI). Watch Wednesday's (May 28) Aussie Q1 construction and April CPI (forecast +2.10%) – that CPI is key for the RBA. Friday (May 30) has Aussie building permits and retail sales, plus China’s May PMI, crucial for commodity sentiment. U.S. PCE inflation will also really move the Aussie through the US Dollar.
Euro (EUR)
The Euro's pretty neutral right now, though it might get a small lift this week if the US Dollar stays weak. It's been juggling talk of ECB rate cuts, mixed Eurozone news, and US Dollar moves. US tariff threats against the EU are a big cloud, pulling the Euro back to around USD 1.1368 last week, though a weaker Dollar helped a bit.
How these tariffs play out, plus ECB actions and local data, will really shape things over the next seven weeks. If those tariffs bite, the outlook (to June 2025) could turn negative.
This week, watch: Eurozone economic mood on Tuesday (May 27) – a big drop from 93.6 could hurt. Keep an eye on any EU responses to US tariffs.
Canadian Dollar (CAD)
The Canadian Dollar (CAD) is pretty neutral right now, but could get a slight lift this week as the Bank of Canada (BoC) seems less keen on cutting rates and the US Dollar is weak. This follows good Canadian data that pushed the CAD to a 7-month high (USDCAD around 1.3727). Looking further out (to June 2025), trade and oil risks mean a neutral to slightly bearish view.
This week, Canada's Q1 GDP is the main event. Watch the Q1 Current Account (Thurs). Then Friday’s Q1 GDP (forecast +0.60%) is key – a miss could change BoC thinking and hit the CAD. U.S. PCE inflation and oil prices are also big factors.
United States Dollar (USD)
The US Dollar's been having a pretty tough time, mainly due to worries about US trade protectionism and the government's budget. New tariff threats pushed the dollar index (DXY) down to around 99.11 last week.
Looking ahead, U.S. trade moves and the budget will likely keep steering the Dollar, alongside Fed policy and inflation data. This week, any trade talk and Friday's PCE inflation numbers are key.
The Dollar looks set for more selling pressure this week, and the outlook for the next seven weeks is also pretty bearish. Keep an eye on: Tuesday's (May 27) durable goods orders (forecast -8.0%) and May's consumer confidence (forecast 88), as weak figures could boost selling. Wednesday's (May 28) Fed minutes will show their earlier thoughts. Thursday (May 29) brings the second look at Q1 GDP (forecast -0.30%) and jobless claims. Then Friday's (May 30) Core PCE inflation (forecast +0.20%) is crucial – a soft number could add to the selling.
Final Thoughts
Keep an eye on U.S. trade talk and government spending discussions this week – they'll really move the U.S. Dollar and market mood. We'll also see inflation numbers from several big countries, with the U.S. PCE data on Friday being super important for figuring out what central banks might do. Expect some ups and downs.
Here are five big things for the week of May 26 - May 30:
Tuesday: U.S. Consumer Confidence. Shows how U.S. households feel about trade tensions and money, affecting the USD and market risk.
Wednesday: New Zealand's (RBNZ) Interest Rate Decision. A rate cut is likely, but their comments on inflation and growth, especially with trade risks, will be key for the Kiwi.
Thursday: U.S. Q1 GDP (Second Estimate). Confirms if the economy shrank and hints at where it's going, influencing Fed thoughts.
Friday: China's Business Surveys (PMI). A big check-up for China's economy and commodity demand, impacting currencies like the Aussie and Kiwi.
Friday: U.S. Core PCE Inflation. The Fed's favourite inflation measure, so a big one for U.S. policy and the Dollar.