The US dollar ended the week on firmer footing, with safe-haven demand and steady capital inflows outweighing softer nonfarm payrolls and a dovish shift in market rate expectations. Risk aversion boosted the greenback as trade tensions and political uncertainty kept investors cautious, while resilient US data earlier in the week reinforced confidence in the economy’s underlying strength. Although the weaker jobs report led traders to price in a more aggressive Fed easing path, the dollar’s reserve currency status and defensive appeal helped it extend gains. With CPI and the annual payroll benchmark revisions due next, the USD remains poised to react more forcefully to positive surprises than to further disappointments.

The Canadian dollar remains under pressure as USD/CAD holds firmly in its uptrend that began in mid-June and accelerated through August on the back of escalating trade tensions with the US. Although the pair’s earlier overvaluation relative to rate differentials has eased, the loonie still faces headwinds. With most Canadian exports exempt from US tariffs under the USMCA, fundamentals should be more supportive, yet softening domestic data has reinforced expectations of further BoC easing. Economic data in the coming week will be critical, any signs of weakness would cement calls for 25bp cuts and weigh further on the currency. Beyond domestic drivers, US inflation data and global risk sentiment remain key external pressures, while an OPEC+ decision to boost output could undermine oil prices and add another layer of downside risk for the CAD.

Expected weekly trading range:

1.36 - 1.40

The euro faces a pivotal week as political and policy risks converge, with the 8 September French vote of confidence posing the most immediate challenge. With a high probability that the vote leads to either a caretaker government or fresh elections, markets must contend with scenarios that could amplify fiscal uncertainty and erode investor confidence in France, keeping the EUR under pressure. A hung parliament or RN victory would represent the most destabilizing outcomes, while even a Bayrou win offers limited upside. The ECB meeting adds another layer of risk, with policymakers set to update forecasts against the backdrop of aggressive US tariffs on the EU. Given that much of the euro’s recent support has come from narrowing rate differentials with the USD, a dovish ECB message could trigger a sharper downside reaction, especially with investors already pricing in an overly accommodative Fed. With Fitch’s rating review looming on 12 September, the balance of risks skews toward renewed euro weakness in the near term.

Expected weekly trading range:

1.59 - 1.64

Sterling endured a sharp sell-off this week as long-end gilt yields surged to levels unseen since 1998, underscoring market unease over the UK’s fiscal trajectory ahead of the 24 November budget. Despite the government’s record GBP14bn 10-year gilt issuance, investor concerns over the debt–tax–growth spiral continue to weigh on sentiment, leaving the pound as a release valve for fiscal anxiety. While positioning suggests much of the bad news is already reflected in GBP valuations, particularly with EUR/GBP trading well above sovereign credit risk fundamentals, the currency’s broader outlook remains clouded by structural headwinds. Any sustained recovery will hinge on signs of economic stabilisation, with next week’s GDP data likely to be a key test for whether sterling can consolidate its footing or faces renewed downside pressure.

Expected weekly trading range:

1.84 - 1.90

The Japanese yen enters a volatile phase as political uncertainty clouds the outlook for fiscal and monetary policy. The resignation of LDP Secretary General Hiroshi Moriyama has cast doubt on Prime Minister Shigeru Ishiba’s ability to hold power, with a possible LDP presidential election on 8 September emerging as a key risk event. Markets see Sanae Takaichi, a conservative favouring aggressive fiscal expansion, as the frontrunner, though such policies could weigh on the yen by limiting scope for BoJ tightening and raising concerns over debt sustainability, already reflected in a sell-off in 30-year JGBs. Conversely, candidates from centrist or liberal LDP factions, who back monetary normalisation and fiscal consolidation, would likely bolster the yen if they gained momentum in opinion polls. A decision to avoid an internal leadership vote and retain Ishiba would also support the currency, while snap lower house elections would be a JPY negative.

Expected weekly trading range:

104.99 - 108.21

The Swiss franc strengthened modestly last week, with USD/CHF down 0.41% as subdued inflation and resilient demand underpinned the currency. August CPI held at 0.2% year-on-year but slipped 0.1% on the month, fuelling speculation the SNB may lean dovish, even as firmer PMI readings suggest scope for caution on further cuts. Looking ahead, Swiss inflation trends and global risk sentiment will remain pivotal, while softer US labour data has already bolstered Fed rate-cut bets, keeping the balance of risks tilted in favour of additional franc strength in the near term.

Expected weekly trading range:

0.57 - 0.59

The Chinese yuan held firm last week, with USD/CNY trading narrowly around 7.13 and marking its strongest level since late 2024, a move widely seen as a policy-driven show of confidence from Beijing. The PBOC’s firmer daily fixings, alongside a resilient trade surplus and steady capital inflows, have underpinned demand and reinforced the impression of strategic yuan appreciation. While domestic drivers remain supportive, global factors will be critical in the coming week: softer US labour data and dovish Fed expectations could weigh further on the dollar, amplifying the policy-backed momentum behind the CNY and keeping the exchange rate biased toward additional yuan strength.

Expected weekly trading range:

5.08 - 5.24

The Indian rupee ended last week under pressure but managed to avoid deeper losses thanks to RBI intervention, even as USD/INR briefly dipped below 88.00 before closing near 88.16–88.17. Concerns over US tariffs on Indian goods kept sentiment fragile, with the pair hovering close to record highs despite softer US labour data that fuelled Fed rate-cut expectations and weighed on the dollar. Looking ahead, the rupee’s stability will depend on a delicate balance between continued RBI support and external drivers: dovish Fed signals could provide short-term relief, but tariff risks and weak equity inflows remain key headwinds, leaving USD/INR biased toward consolidation rather than a sustained recovery.

Expected weekly trading range:

62.83 - 64.75

The Australian dollar has shown resilience through the recent risk-off environment, with its relative insulation from the global bond sell-off offering underlying support. Stronger-than-expected GDP and firmer inflation data have prompted markets to scale back expectations for aggressive RBA easing, while Governor Michele Bullock’s remarks underscored that a more sustained revival in consumption could limit the need for cuts. With business confidence and consumer sentiment surveys due next week, investors will be watching for evidence that private demand can offset declining public investment. Still, the bigger drivers remain offshore, with US labour and CPI data, alongside Chinese trade figures, likely to dictate whether the AUD can extend its steady tone or faces renewed volatility.

Expected weekly trading range:

0.90 - 0.92

The New Zealand dollar has also held up relatively well in the latest bout of global risk aversion, benefiting from the country’s comparatively low debt burden that offers some protection from the bond market rout. Domestically, the focus in the coming week will fall on manufacturing PMI and credit card spending, which will provide a read on whether private sector demand can sustain momentum in New Zealand’s economic recovery. While these data will be important, external forces are likely to dominate. A softer US data print reinforcing Fed rate cut expectations, or stronger Chinese trade figures, could provide the NZD with additional tailwinds, while persistent weakness in global bond markets would act as a cap on gains.

Expected weekly trading range:

0.81 - 0.83

The Mexican peso ended last week modestly stronger, with USD/MXN easing to around 18.69 as resilience in the currency coincided with Banxico’s upgraded 2025 growth and inflation forecasts. While the central bank now sees slightly firmer expansion and elevated price pressures, the outlook remains fragile, with upcoming GDP data expected to confirm sluggish momentum. In the week ahead, peso direction will hinge on both domestic and external forces: Banxico’s policy tone and INEGI growth figures could provide local catalysts, while global drivers—including US dollar moves, Fed rate-cut expectations, and uncertainty around US–Mexico trade relations will shape broader market sentiment.

Expected weekly trading range:

13.33 - 13.73