The US dollar has come under renewed selling pressure after briefly regaining strength during the Israel–Iran conflict, as markets pivot back to weighing the Trump administration’s trade stance, fiscal uncertainty, and growing speculation about Fed policy changes. Investors are increasingly pricing in aggressive rate cuts, spurred by softer inflation signals and anxiety over Trump potentially replacing Fed Chair Powell with a dovish 'shadow' successor next year. The upside surprise in May's core PCE data also failed to lift the greenback. However, with plenty of negative news already baked into the dollar’s price, any signs of resilience in next week’s Non-Farm Payrolls and ISMs could spark a stronger USD rebound than markets currently anticipate. Near-term dollar moves will hinge on how these data points shape expectations around Fed timing and the broader US economic outlook.

USD/CAD remains capped near resistance around 1.37, though even at these levels, the pair appears undervalued given lingering safe-haven demand for the USD amid choppy oil markets. The loonie has been grappling with mixed domestic signals: the flash estimate for May retail sales suggested a sharp decline, while core inflation cooled modestly, pointing to potential economic softness. Should Canada’s GDP data deteriorate more significantly, markets could push the odds of a Bank of Canada rate cut in July. Meanwhile, Friday's trade data remains distorted by US tariff policies, and further clarity on domestic conditions will have to wait for the June labour report. All told, barring major surprises, USD/CAD looks set to trade closer to its May highs around 1.40 rather than revisiting June’s lows near 1.35 through the summer months, as both external and domestic crosscurrents keep the pair supported.

Expected weekly trading range:

1.35 - 1.39

The euro remains well bid as investors increasingly view it as a credible alternative to the dollar, buoyed by superior eurozone market liquidity and relatively predictable policy signals from the ECB. Hopes for economic resilience in Europe and a likely end to the ECB’s easing cycle contrast with growing expectations of Fed rate cuts, which could lend the euro further support. However, it’s important to note that short- and long-term fair value models suggest EUR/USD is already significantly overvalued, indicating that much of the good news may be priced in. Looking to next week, the focus will be on the eurozone’s June HICP print, where analysts expect a slight rebound in headline and core inflation, alongside the final PMIs and the ECB’s Sintra forum. While these events may keep the euro supported, its elevated valuation is likely to cap any significant further gains in the near term.

Expected weekly trading range:

1.58 - 1.62

The GBP clawed back some gains against the USD following the Israel–Iran ceasefire, but it continues to lag the euro, pressured by the widening EUR–GBP rate spread reflecting the ECB’s more neutral stance versus the BoE’s lingering dovish tone. Comments from BoE Governor Bailey and colleagues at next week’s ECB forum in Sintra will be closely watched for policy clues. While EUR/GBP appears overvalued on fair value metrics, leaving scope for near-term downside in the cross, especially if global risk sentiment improves, persistent dovish signals from the BoE remain a key risk that could cap sterling’s recovery. Upcoming UK data, including final June PMIs and Q1 GDP, may provide further direction.

Expected weekly trading range:

1.85 - 1.91

The Japanese yen has regained some safe-haven appeal following the Israel–Iran ceasefire and softer oil prices, though its outlook hinges on upcoming trade and economic developments. While a lack of major trade deals historically favours the yen as a stagflation hedge, reports hinting at a series of US trade agreements post–July 4 and progress on Trump’s Big Beautiful Bill could weigh on the currency by lifting risk appetite and USD sentiment. The next two weeks will be pivotal for the yen as deadlines approach for US tariff decisions and as key data releases, including US ISM PMI, non-farm payrolls, and Japan’s Tankan survey, shape investor views on relative rate paths and global growth prospects.

Expected weekly trading range:

104.14 - 107.32

The Swiss franc remains the G10 outperformer this quarter, with USD/CHF probing decade-lows below 0.80, although the tentative Israel–Iran truce and falling oil prices have eased some safe-haven demand. Domestically, Swiss news flow has been quiet, with trade talks with the US dragging on and reciprocal tariffs still in place. Markets are watching Monday’s SNB intervention data, expected to show limited FX activity, and Thursday’s CPI release for signs whether Swiss inflation will stabilize after May’s negative print. Persistent deflation risks could reignite speculation about a return to negative rates, though for now, the franc’s rate gap remains wide enough to keep it attractive as a funding currency.

Expected weekly trading range:

0.57 - 0.59

The yuan saw modest strength this week, with the PBoC setting a firmer-than-expected daily fixing, underscoring its resolve to keep the currency stable despite external pressures. While the PBoC signalled at its June 27 meeting that faster and stronger policy easing may be on the table to tackle deflation and weak demand, China still faces significant economic headwinds, including soft industrial profits and concerns over US tariffs and global growth. Global diversification away from the dollar continues to lend mild support to the yuan, with growing central bank interest in yuan assets and China’s push for digital currency internationalization. Looking ahead, markets will watch for potential RRR or MLF cuts, further shifts in the daily fixing, and key macro data to gauge how aggressively policymakers will act to stabilize growth and support the currency.

Expected weekly trading range:

5.16 - 5.32

The rupee logged its strongest weekly gain since January 2023, rallying roughly 1.3%, buoyed by a softer dollar amid growing bets on Fed rate cuts and a sharp drop in oil prices following the Middle East ceasefire. Dollar inflows tied to the HDB Financial IPO also provided support, lifting forward premiums and cushioning the impact of modest foreign equity outflows. While the RBI maintained a neutral policy stance after June’s rate cuts, it remains vigilant, prepared to intervene to curb volatility, especially if oil prices spike anew. Looking ahead, the rupee’s trajectory will hinge on US macro data, Fed commentary, and further IPO-related inflows, with oil prices and regional FX dynamics adding potential twists to the path forward.

Expected weekly trading range:

61.55 - 63.43

The ceasefire between Israel and Iran has eased oil prices and revived risk sentiment, helping AUD/USD challenge the top of its 0.6350–0.6550 range. However, the outlook remains data-dependent. Attention now turns to Australian May retail sales, which will serve as a crucial gauge of whether April’s RBA rate cut is finally lifting household spending after February’s modest impact. Soft inflation data this week keeps markets leaning toward another RBA cut in July unless retail sales or global risk sentiment surprise to the upside. Trade developments also remain pivotal; should President Trump secure major trade deals and pass his fiscal package after 4 July, it could bolster risk appetite and benefit the Aussie, though a potential resurgence in US asset appeal may limit AUD’s upside against the dollar.

Expected weekly trading range:

0.88 - 0.90

NZD/USD has rebounded toward the upper end of its 0.5900–0.6100 range on improved global risk sentiment following the Israel-Iran ceasefire. Near-term direction hinges on domestic business confidence and activity data, which have been drifting lower but still reflect relatively solid economic conditions. It would take a more pronounced decline in these indicators to revive expectations for a rate cut from the RBNZ in July. Additionally, China’s upcoming PMI data will be closely watched given New Zealand’s export ties; stronger Chinese production ahead of potential new US tariffs in August would be a tailwind for the kiwi. Nonetheless, any robust US economic data or revived investor interest in US assets could cap gains in NZD/USD despite generally supportive global sentiment.

Expected weekly trading range:

0.82 - 0.84

Banxico cut rates by 50 bps to 8.0% last week, the lowest since 2022, though the decision wasn’t unanimous as Deputy Governor Heath warned that inflation remains above target at 4.5%. Despite the easing, the peso held firm. Support came from softer US dollar sentiment, improved risk appetite, and stable oil prices. Looking ahead, markets will watch Banxico’s next steps closely, as officials have paused strong signals about further large cuts. Key drivers in the coming week will include fresh inflation prints, oil market dynamics, and any progress in US–Mexico trade talks. A pickup in oil prices or global volatility could cap peso gains, while stable external conditions and controlled inflation would support further MXN resilience.

Expected weekly trading range:

13.54 - 13.97