Weekly Recap and Outlook for the Week Ahead 28/7 - 1/8

 

DXY – Outlook and Analysis

Outlook: We maintain a bearish bias on the U.S. dollar, driven by rising geopolitical risks, the upcoming August 1 tariff deadline, widening fiscal deficits, potential tariff-induced inflation, and broader macroeconomic instability. Unless there is clearer guidance on fiscal and trade policy, the dollar’s position as a global reserve currency will likely remain under sustained pressure.

Near-term volatility in the USD is expected to remain high as the widely anticipated tariff deadline approaches. However, a major development occurred earlier today, as the U.S. and European Union reached a trade agreement, easing tensions between two of the world’s largest economies. This breakthrough supported a rebound in the DXY and lifted broader equity markets, as global economic sentiment improved. Meanwhile, Canada remains under pressure, as Trump stated that talks with Ottawa remain "rough", with substantial negotiations still required to finalize any deal.

On Thursday, President Trump visited the Federal Reserve headquarters regarding the ongoing renovation project, which has exceeded $2 billion in cost. Fed Chair Jerome Powell defended the expense, citing the need to modernize the aging facility to meet safety and accessibility standards. Despite long-standing tensions, Trump struck a more conciliatory tone, stating that there is "no tension" with Powell and that replacing him would be a "big move"—offering a temporary reprieve to a central bank increasingly under pressure to cut rates.

Looking ahead to the upcoming FOMC, we expect the Fed to hold rates steady. Although part of the tariff-related inflation has started to show, price pressures are likely to remain elevated in the short term. Cutting rates now could risk exacerbating inflation, even if it may provide temporary support to the economy—putting the Fed in a difficult balancing act.

As of this writing, the DXY is trading at 98.172. Bullish momentum appears to be fading, with the RSI slipping back to 50. Resistance levels are seen at 98.647 and 99.166, while support is located at 97.551 and 97.270.

The week ahead is critical, featuring key economic releases including: ADP Non-Farm Employment Change (July 30), FOMC rate decision (July 31), Non-Farm Payrolls (NFP) (August 1).

These data points will provide important insight into the Fed’s policy stance, potentially setting the direction for the U.S. dollar in the weeks ahead.

GBP/USD 

Outlook: We maintain a slightly bullish stance on GBP/USD. While recent data has been unfavourable for the pound, there remains a possibility of two additional BoE rate cuts by year-end, depending on incoming economic data and the anticipated slowdown in the second half of 2025. Nonetheless, persistent U.S. economic challenges—including rising business costs, fiscal imbalances, and ongoing global trade tensions—alongside the inflationary impact of Trump’s tariffs, may help cushion downside risks for the pound in the near term.

The UK CPI rose to 3.6%, exceeding the forecast of 3.4%, primarily driven by higher prices in alcohol and tobacco, clothing and footwear, and transport, though partially offset by declines in household services. The persistent price pressure complicates the BoE’s policy path, as subdued economic growth may warrant a rate cut to spur activity, yet doing so could risk further inflation.

The labour market also weakened, with employment falling by 135,000 and the unemployment rate rising to 4.7%, up from 4.6%. Additionally, job vacancies dropped by 56,000 to 727,000, indicating that employers are hesitant to hire or replace departing staff, potentially reinforcing the case for rate cuts to support employment.

As of this writing, GBP/USD trades at 1.34364, showing bearish momentum as the RSI dips below 50. Resistance is seen at 1.35028 and 1.35716, while support levels are at 1.33916 and 1.33413.

Looking ahead, the key events to watch include: M4 Money Supply m/m (July 29), OPEC Meetings (August 3).

These may impact risk sentiment and broader market positioning for GBP in the short term.

USD/JPY 

Outlook: We maintain a bearish bias on USD/JPY, reflecting our view that the yen retains upside potential, particularly if Japanese inflation continues to surprise to the upside. The BoJ now has further justification to continue rate hikes following the recent trade agreement with the U.S., which may lead to stabilization or upward pressure on Japanese yields, thereby offering support to the yen.

The Tokyo Core CPI came in at 2.9%, just below the forecast of 3.0%, indicating that inflationary pressures remain persistent. However, more time is needed to fully assess the impact of the 15% U.S. tariffs on Japanese goods, which are still in place.

On July 23, President Trump secured a trade deal with Japan, under which Japan agreed to invest $550 billion into the U.S. This development briefly strengthened the yen, as the deal reduced uncertainty around trade and improved economic sentiment, giving the BoJ more confidence to consider further rate hikes later this year.

Additionally, on July 20, Japanese Prime Minister Shigeru Ishiba lost his majority in the upper house. While members of his own party have pressured him to step down, Ishiba has insisted on staying in office, bringing a degree of stability to the political landscape as there is currently no clear successor. This has helped calm market nerves in the near term.

As of this writing, USD/JPY is trading at 147.650, with bullish momentum still intact, as the RSI has rebounded above the 50 level. Key resistance levels are at 148.103 and 148.792, while support lies at 145.884 and 145.195.

Looking ahead, markets will closely watch: The BoJ Policy Rate decision and The Outlook Report (July 31).

These releases are expected to provide further insights into Japan’s monetary policy stance, and could significantly influence the direction of the yen in the sessions ahead.

Forecasts

Currency Pair	Jul 30	Aug 30	Sep 30
GBP/USD	1.36070	1.36070	1.37454
USD/JPY	145.823	145.823	143.191

Weekly Recap and Outlook for the Week Ahead 7/7 - 11/7

DXY – Outlook and Analysis

Outlook: We maintain a bearish bias on the U.S. dollar, driven by mounting geopolitical risks, the July 9 tariff deadline, rising fiscal deficits, potential tariff-induced inflation, and broader macroeconomic instability. Unless there is clearer guidance on fiscal and trade policy, the dollar's role as a global reserve currency will likely remain under pressure.

On Monday, Trump threatened that any country aligning themselves with the Anti-American policies of BRICS will be charged additional 10% tariff with no exceptions to this policy.

The USD has regained some strength after touching a low of 96.390, likely supported by recent U.S. economic data and ongoing trade negotiations. While Trump has secured trade framework agreements with China, the UK, and Vietnam, other negotiations remain in progress. 

On Thursday, Pichai Chunhavajira and U.S. trade representatives held a positive meeting, aiming to pursue a mutually beneficial trade deal. However, discussions with countries like India, the EU, Canada, and Japan remain in flux, as all parties rush to reach at least a framework agreement before the July 9 deadline, or face the high tariff set on April 2, with new dateline given till August 1.

Despite Trump stating that the tariff deadline will not be extended, he clarified that countries failing to reach a deal may continue negotiations, though tariffs will be reinstated. In parallel, Trump has also publicly criticized Fed Chair Jerome Powell, suggesting he should resign and be replaced with someone who would cut rates. Such statements threaten the independence of the Federal Reserve, potentially undermining investor confidence in the USD.

On the economic front, Non-Farm Payrolls (NFP) rose by 147,000, beating expectations, while the unemployment rate declined to 4.1% from 4.3%. The participation rate slipped to 62.3% from 62.4%, driven by a 329,000 increase in the number of people not in the labor force. Meanwhile, average hourly earnings rose by $0.08 (0.2%) to $36.30. These figures reaffirm the resilience of the U.S. labor market, reducing the likelihood of a rate cut in July, though September remains a possibility.

Additionally, Trump’s “Big, Beautiful Bill” officially passed the House with a narrow 218–214 vote. The bill is projected to add over $3 trillion to the national debt over the next decade, pushing it well beyond the current $36 trillion to possible $40 trillion and was enabled by a $5 trillion increase in the debt ceiling. 

This surge in borrowing could trigger a spike in yields over the medium to long term, as the issuance of more bonds may lead to oversupply and rising borrowing costs. If investor confidence weakens, the U.S. risks another credit rating downgrade, further undermining its economic standing and safe haven status.

As of this writing, DXY is trading at 96.946. On the 4-hour chart, a bearish flag pattern is forming, and the RSI has rejected the 50 level, suggesting further downside momentum. Resistance is seen at 97.271 and 97.473, while support is at 96.762 and 96.477.

Looking ahead, key events this week include the 10-year Bond Auction and FOMC Meeting Minutes on July 10, followed by the 30-year Bond Auction on July 11. 

These releases will offer additional insights into monetary policy direction and investor appetite for U.S. debt, both of which will influence the dollar’s trajectory.

GBP/USD 

Outlook: We maintain a slightly bullish stance on GBP/USD. While the UK’s latest domestic data continues to reflect economic softness, particularly in the slowing labour market, which supports the case for two potential rate cuts by year-end, the pound may still find support from broader U.S. dollar weakness. The U.S. remains challenged by rising business costs, fiscal imbalances, and heightened trade tensions, with Trump’s tariffs potentially reigniting inflationary pressures in the months ahead.

Recent signs of weakness in the pound can be attributed to several factors. These include the resilient U.S. labour market—which has reduced expectations of near-term Fed rate cuts—and domestic developments such as the UK government’s reversal of its welfare bill, creating a $5 billion gap in the Chancellor’s fiscal plan. 

This reversal is significant not only because it may increase the UK’s fiscal deficit and push borrowing costs higher in the medium term, but also because it risks violating Chancellor Rachel Reeves' own fiscal rule, which states that public debt as a share of GDP must fall by FY2029–30. Should no alternative measures be taken, the UK could face a credibility challenge on fiscal discipline.

As of this writing, GBP/USD has pulled back from a recent peak of 1.37884 to 1.36381. The Relative Strength Index (RSI) remains hovering above 50, indicating bullish momentum is still intact. Key resistance levels are at 1.36732 and 1.37463, while support lies at 1.36059 and 1.34952.

Looking ahead, the upcoming week features important releases including the UK 10-Year Bond Auction on July 9 and monthly GDP data on July 11. 

These events will provide further insight into the UK’s economic activity, particularly in light of ongoing trade uncertainty and tariff developments linked to U.S. policy.

USD/JPY 

Outlook: We maintain a bearish bias on USD/JPY, reflecting our view that the Japanese yen retains upside potential, particularly if domestic inflation continues to exceed expectations. While the Bank of Japan (BoJ) remains divided—some policymakers signalling a readiness to respond to U.S. tariff-induced inflation with rate hikes, while others advocate a more cautious, data-driven approach—any stabilization or rise in Japanese bond yields could strengthen the yen. This would be supported by renewed safe-haven demand and capital repatriation amid global uncertainty.

Geopolitical tensions also add complexity to the outlook. Trump recently labelled Japan “spoiled” and threatened to impose unilateral tariffs if Japan does not increase imports from the U.S., particularly in areas such as rice and automobiles. These comments appear aimed at exploiting Japan’s current inflationary challenges, especially the spike in domestic rice prices, which could keep consumer inflation elevated and further pressure the BoJ.

In response, Japanese Prime Minister Shigeru Ishiba has stated that Japan will not concede easily, and the country is preparing for a wide range of scenarios. During a recent policy debate, Yoshimura emphasized the importance of pursuing a "win-win" trade solution while warning that Trump's tariff threats represent a significant country risk for Japan. He also suggested Japan should diversify trade relationships to reduce dependency on the U.S. These developments may further complicate trade negotiations between the two countries and increase market volatility.

As of this writing, USD/JPY is trading at 145.428, with the RSI trending above 50 on the daily chart, indicating that bullish momentum remains in place. Key resistance levels are located at 145.852 and 147.943, while support is seen at 144.361 and 143.357.

Looking ahead, the calendar features several key Japanese data releases: PPI y/y (July 10), Industrial Production m/m and Industrial Activity m/m (July 14)

These indicators will be closely watched for additional signs of price and production pressures, which could influence BoJ policy expectations and JPY direction.

Forecasts

Currency Pair	Jul 30	Aug 30
GBP/USD	1.36070	1.34787
USD/JPY	142.166	140.853

Weekly Recap and Outlook for the Week Ahead 16/6 - 20/6

DXY - Weekly Outlook and Analysis

The U.S. Dollar Index (DXY) surged approximately 0.7% to 98.566 following reports that Israel launched attacks on Iran’s nuclear facilities and missile sites. The escalating conflict triggered a flight to safety, prompting investors to move into traditional safe haven assets such as the Japanese yen and Swiss franc. The geopolitical tension also pushed oil prices up by nearly 11%, reaching $74.573 per barrel, amid fears that Tehran could choke off the Strait of Hormuz, a critical global oil shipping lane. With neither side showing signs of backing down, the risk of prolonged economic disruption has intensified.

Domestically, U.S. consumer sentiment showed a marked improvement, rising to 60.5, its highest level in six months and well above expectations of 53.5. Additionally, year-ahead inflation expectations declined to 5.1% from 6.1%, reflecting easing trade tensions between the U.S. and China. This optimism, however, was quickly overshadowed by the escalating Middle East conflict, tempering broader risk appetite.

On the inflation front, May’s Core CPI (m/m) came in at 0.1%, below forecasts of 0.3% and softer than April’s 0.2%, while headline CPI (y/y) rose slightly to 2.4%, exceeding the expected 2.3%. This uptick was largely driven by increases in food prices (+0.3%) and shelter costs (+0.3%). The data suggests that the inflationary effects of Trump’s tariffs have yet to fully materialize, reinforcing the likelihood that the Federal Reserve will keep interest rates on hold at its June 19 meeting, as policymakers continue to assess the evolving impact of trade policy and price pressures.

Producer inflation data also pointed to a mixed picture. May PPI rose 0.1%, missing the 0.2% forecast, lifting the annual rate to 2.6%. Similarly, Core PPI rose 0.1%, falling short of the 0.3% expectation, while the annual rate dropped to 2.7% from 2.9%. Though these readings reflect softer producer inflation compared to previous months, it may be due to wholesalers absorbing costs rather than passing them to consumers. However, cost pressures persist, and producers may eventually raise prices if margins continue to narrow, albeit cautiously to avoid losing market share to competitors.

As of June 8, the DXY is trading at 97.962, having retreated from recent highs. The Relative Strength Index (RSI) remains below 50, indicating continued bearish momentum. Resistance is observed at 98.711 and 96.372, with support levels at 97.631 and 97.283.

Looking ahead, key U.S. data releases this week include Core Retail Sales (June 17), Unemployment Claims (June 18), and the highly anticipated FOMC statement on June 19. The Fed’s policy guidance—particularly any signals from Chair Jerome Powell—will likely set the tone for the dollar’s next move.

Outlook: We maintain a bearish bias on the U.S. dollar. While geopolitical risks, such as the Israel–Iran conflict, may temporarily support the dollar’s safe haven appeal, the broader outlook remains clouded by rising fiscal deficits, lingering U.S.–EU trade tensions, potential tariff-driven inflation, and mounting macroeconomic instability. Unless clearer direction emerges from fiscal and trade policy, the dollar’s status as a global reserve currency may continue to face downward pressure.

GBP/USD

The UK labour market continued to show signs of weakness, with payrolls decreasing by 109,000 in May, following a 55,000 decline between March and April 2025. Additionally, the number of available job vacancies fell by 63,000 on a quarterly basis to 736,000 for the period of March to May 2025, while the unemployment rate edged up to 4.6% from 4.5% in the previous month. These figures suggest that firms are refraining from hiring or replacing departing workers, raising market expectations for Bank of England (BoE) rate cuts in the near future.

Adding to the downside, UK GDP (m/m) contracted by -0.3% in April, following a 0.2% increase in March. The biggest drag came from the services sector, which saw output fall by -0.4% in April, reversing from a 0.4% gain the previous month. These developments indicate a slowing economic backdrop, putting additional pressure on the BoE to consider policy easing.

Despite the weak economic data, the BoE is still expected to keep interest rates unchanged at its June 19 meeting, maintaining its "gradual and cautious" approach to monetary easing. Future decisions will remain data-dependent, particularly as the outlook continues to be shaped by broader global economic and trade dynamics.

As of June 14, GBP/USD is trading at 1.35684, with the Relative Strength Index (RSI) remaining above 50, indicating bullish momentum is still intact. Key resistance levels are located at 1.36182 and 1.36814, while support is found at 1.35422 and 1.34913.

Looking ahead, the week will feature several key releases, including: UK CPI y/y (June 18), BoE Bank Rate Decision (June 19), Retail Sales m/m (June 20). These releases will be critical in assessing the near-term economic health of the UK and gauging the likelihood and pace of future BoE rate cuts.

Outlook: We maintain a slightly bullish stance on GBP/USD. While the latest domestic data points to economic softness and supports the case for two potential rate cuts by year-end, the pound may find support from broader USD weakness. The U.S. continues to grapple with rising business costs, fiscal imbalances, and heightened trade tensions, while inflationary pressures from Trump’s tariffs may resurface. These factors could help cushion downside risks for GBP in the near term.

USD/CAD

The recent escalation in the Middle East—specifically Israel’s attack on Iran’s nuclear facilities and missile sites—has sent oil prices surging nearly 11% to $74.573 per barrel. This price spike is particularly significant for the Canadian dollar (CAD), given Canada’s status as a major oil exporter, especially to the United States. Higher oil prices typically translate into increased export revenues for Canada, thereby supporting the CAD. While heightened geopolitical risks have also prompted a flight to safety, benefiting traditional haven currencies such as the USD, CHF, and JPY, the impact on the CAD is being offset by the strength in oil markets.

Against this backdrop, the Bank of Canada (BoC) has signaled a cautious approach, indicating that it will await greater clarity on U.S. trade policy before adjusting interest rates. The continued rally in oil prices—should the conflict persist—could strengthen the BoC’s resolve to keep rates on hold or delay potential rate cuts, thereby providing additional near-term support for the loonie.

In reference to last week’s data, May’s employment report showed a net gain of 8,800 jobs, beating expectations for an 11,900-job decline. The unemployment rate rose to 7.0%, matching forecasts, while average hourly wages increased by 3.4% year-over-year to $36.14. This reinforces the view that labour market resilience and wage growth support the BoC’s decision to maintain its current policy stance.

As of June 14, USD/CAD is trading at 1.35773. The Relative Strength Index (RSI) is below 50, signaling bearish momentum. Key resistance levels are observed at 1.36473 and 1.37236, while support lies at 1.34922 and 1.34221.

Looking ahead, the week will feature important releases that could further shape sentiment on CAD: Housing Starts (June 16), BoC Governor Macklem’s Speech (June 18), Core Retail Sales m/m (June 20). These events will provide further insight into Canada’s economic health and potential monetary policy direction.

Outlook: We maintain a slightly bullish bias on the Canadian dollar in the near term. Robust GDP growth, firm inflation, resilient employment data, and rising wages support the BoC’s case for keeping rates steady. Additionally, geopolitical tensions—including the U.S.–EU trade dispute, and conflict risks in Ukraine, Israel, and Iran—are likely to sustain upward pressure on oil prices, while weighing on the U.S. dollar, thus reinforcing CAD’s upside potential.

Forecasts for the near term

Currency Pair	Jun 30	Jul 30
GBP/USD	1.36070	1.34787
USD/JPY	142.166	140.853
USD/CAD	1.36130	1.35703

Weekly Recap and Outlook for the Week Ahead 9/6 - 13/6

DXY - Weekly Outlook and Analysis

Yields on the U.S. 10-year Treasury rose following the latest Non-Farm Payrolls (NFP) report, which showed 139,000 jobs added, exceeding expectations of 126,000 but down from 177,000 in the previous month—indicating a moderation in job growth. However, wage growth accelerated to 0.4% month-over-month, up from 0.2% in April, while the unemployment rate remained steady at 4.2%. This combination of slowing employment and rising wages is likely to reinforce the Federal Reserve’s case for maintaining current interest rates. Revisions to March and April employment data also revealed a combined downward adjustment of 95,000 jobs, adding to signs of underlying labor market weakness.

The ISM Services PMI fell into contraction territory at 49.9, compared to 51.6 in the previous month. Notably, the price index component surged to 68.7, up from 65.1 in April—marking the largest two-month increase since 2021. This sharp rise suggests that tariff-related cost pressures may be prompting service providers to pass higher costs onto consumers.

In geopolitical developments, Trump announced a new round of trade talks with China, scheduled for June 9 in London, focusing on critical minerals. The talks aim to resolve ongoing disputes between the world’s two largest economies, each accusing the other of violating prior agreements to reduce tariffs. Both sides are under pressure to de-escalate amid mounting economic costs and trade disruptions.

The OECD also revised its U.S. growth forecast sharply downward, projecting 1.6% growth in 2025 and 1.5% in 2026, compared to a prior estimate of 2.2%. The downgrade reflects frequent shifts in U.S. trade policy, broader economic uncertainty, and a smaller federal workforce. In addition, the OECD expects inflation to rise to 3.2%, possibly nearing 4% by the end of 2025, as tariff effects feed into consumer prices.

As of June 8, the DXY is trading at 99.202, having recovered significantly after testing support at 98.370. The Relative Strength Index (RSI) remains below 50, indicating continued bearish momentum on the daily chart. Resistance levels are noted at 99.590 and 100.000, while support lies at 98.930 and 98.677.

Looking ahead, the week brings several key data releases: CPI on June 11, Core PPI on June 12, and Consumer Sentiment on June 13. These reports could provide important insights into the impact of tariffs and the overall health of the U.S. economy, potentially shaping the near-term direction of the dollar.

Outlook: We maintain a bearish bias on the U.S. dollar. Contributing factors include rising fiscal deficits, unresolved U.S.–EU and U.S.–China trade tensions, potential inflationary effects from tariffs, and broader macroeconomic instability. Until clearer guidance on fiscal and trade policy emerges, the dollar’s status as a global reserve currency will likely remain under pressure.

GBP/USD

The British pound continues to draw support from a combination of resilient UK economic data and favourable trade developments. The UK’s exemption from the U.S. 50% steel and aluminium tariffs—secured through a trade agreement signed in May—has helped maintain investor confidence, even as the existing 25% tariffs remain in place. Additionally, upbeat data releases including GDP, retail sales, and services output, coupled with rising U.S.–China trade tensions, have contributed to positive sentiment surrounding the pound.

Bank of England Governor Andrew Bailey recently commented that he was not surprised by the recent uptick in inflation, but reaffirmed the BoE's commitment to a “gradual and careful” approach to monetary policy. With UK economic indicators holding firm, market expectations now lean toward the BoE holding interest rates steady in the near term, adopting a wait-and-see stance amid ongoing global trade uncertainties.

Meanwhile, the OECD has revised the UK’s growth forecast lower, citing the impact of Trump’s evolving tariff policies and persistent inflationary pressures. UK GDP growth is now projected at 1.3% in 2025, down from 1.4%, and 1.0% in 2026, down from 1.2%.

As of June 8, GBP/USD is trading at 1.35245, after briefly peaking at 1.36150 before paring gains. The Relative Strength Index (RSI) remains above 50, indicating bullish momentum is still in place. Key resistance levels are noted at 1.35456 and 1.35738, while support lies at 1.35160 and 1.34545.

The upcoming week includes key releases such as the Claimant Count Change (June 10) and monthly GDP (June 12), which will offer more clarity on how Trump’s tariff policies are impacting UK economic performance.

Outlook: We maintain a slightly bullish stance on GBP/USD. Recent data suggests a modestly improving economic outlook, and expectations for the BoE to remain on hold lend near-term support to the pound. However, risks remain—rising business costs, lingering uncertainty over U.S. trade policy, and slower growth anticipated in the second half of 2025. Still, ongoing softness in the U.S. dollar, driven by fiscal imbalances and global trade tensions, may help cushion downside risks for sterling in the near term.

USD/JPY

The U.S. Treasury has recently urged Japan to align its monetary policy more closely with its economic fundamentals, encouraging the Bank of Japan (BoJ) to continue policy normalization in an effort to stabilize the yen’s persistent weakness against the U.S. dollar. Despite this external pressure, most economists now expect the BoJ to hold interest rates steady through September, with only a modest probability of a rate hike by year-end. Governor Kazuo Ueda reaffirmed that any rate increases will only occur when the economy is deemed sufficiently resilient.

Meanwhile, the latest 30-year Japanese Government Bond (JGB) auction showed signs of waning investor demand, with the bid-to-cover ratio falling to 2.9, down from 3.1 in the previous month. Despite the drop in demand, yields on the JP30Y declined, suggesting concerns over potential oversupply. This comes amid speculation that the Ministry of Finance (MoF) may reduce long-term bond issuance as the BoJ conducts a policy review during its upcoming meeting on June 16–17. Markets are also eyeing the potential for bond tapering to begin in fiscal year 2026. Ueda has emphasized that BoJ’s bond purchases are strictly aimed at meeting its inflation target and not to finance public debt, reaffirming the central bank’s independence from fiscal policy pressures.

As of June 8, USD/JPY is trading at 144.813, recovering some of its earlier losses. The Relative Strength Index (RSI) is beginning to cross above 50, signaling a potential shift toward bullish momentum. Key resistance levels are observed at 146.032 and 148.155, while support lies at 144.111 and 142.563.

The upcoming week is relatively quiet for the yen, with notable data releases including the M2 Money Stock y/y on June 10 and the BSI Manufacturing Index on June 12. These indicators may provide further insight into domestic liquidity conditions and corporate sentiment.

Outlook: We maintain a bearish bias on USD/JPY, reflecting our view that the yen retains upside potential, particularly if Japanese inflation continues to surprise to the upside. While there are mixed signals from BoJ officials—some hinting at readiness to respond to U.S. tariff-induced inflation with rate hikes, others advocating a cautious, data-dependent approach—the stabilization or increase in Japanese yields could lend support to the yen through safe-haven demand and capital repatriation.

USD/CAD

The Bank of Canada (BoC) held its policy rate steady at 2.75%, citing ongoing trade uncertainty and core inflation remaining elevated at 3.1%. Governor Tiff Macklem emphasized that the central bank is closely monitoring inflation expectations, particularly those influenced by tariff-related price pressures. He also noted that the BoC prefers to gather more clarity on U.S. trade policy developments and their economic impact before making decisions on potential rate cuts. Meanwhile, May’s employment data showed a net gain of 8,800 jobs, surpassing expectations of an 11,900 job decline. The unemployment rate rose to 7.0%, in line with forecasts, while average hourly wages climbed 3.4% year-over-year to $36.14, reinforcing the case for the BoC to maintain its current policy stance. However, there is concern that Q2 economic growth may soften, partly due to inventory accumulation in Q1, as firms advanced exports ahead of anticipated trade risks.

On the energy front, OPEC+ confirmed another output increase of 411,000 barrels per day for July, aimed at regaining market share and penalizing over-producing members. Despite the production hike, oil prices rose, driven by renewed fears of escalation in the Ukraine conflict. Prices remain near $64 per barrel, lending additional support to the Canadian dollar, which is closely tied to oil market performance.

In trade diplomacy, Trump has entered direct discussions with former BoC Governor Mark Carney, as the two sides work toward a potential bilateral agreement. Although details remain scarce, further developments may emerge in the coming weeks, influencing investor sentiment and USD/CAD positioning.

As of June 8, USD/CAD is trading at 1.36880. The Relative Strength Index (RSI) is below 50, signalling a bearish technical bias. Key resistance levels are noted at 1.37000 and 1.38135, while support lies at 1.36445 and 1.36070.

The upcoming week is relatively quiet for Canada, with Manufacturing Sales (m/m) due on June 13 and Housing Starts on June 16, both of which could provide further insight into economic momentum.

Outlook: We maintain a slightly bullish bias on the Canadian dollar in the near term. Strong GDP and inflation figures continue to justify the BoC’s current policy stance, supporting the loonie. Moreover, rising geopolitical tensions, particularly the escalating U.S.–EU trade dispute and renewed conflict risks in Ukraine, are likely to support oil prices and exert downward pressure on the U.S. dollar, reinforcing upside potential for CAD.

Forecasts for the near term

Currency Pair	Jun 30	Jul 30
GBP/USD	1.36070	1.34787
USD/JPY	142.166	140.853
USD/CAD	1.36130	1.35703

Weekly Recap and Outlook for the Week Ahead 2/6 - 6/6

DXY – Weekly Outlook and Analysis

On Wednesday, the U.S. Court of International Trade blocked Trump’s proposed tariffs, ruling that the International Emergency Economic Powers Act (IEEPA) does not grant a president the authority to impose blanket duties on imports. However, the Trump administration promptly appealed the decision and was granted a temporary stay, allowing the tariffs to remain in effect for now. Despite the legal challenge, Trump’s advisors have reaffirmed their commitment to protectionist policies, stating that if current tariffs are struck down, alternative measures will be pursued to "make America trade fair again."

European Commission President Ursula von der Leyen expressed readiness to advance U.S.–EU trade talks, but emphasized the need for time until July 9 to finalize a potential agreement. While a comprehensive deal may not be concluded within the 6-week window before tariffs are scheduled to take effect, both sides aim to establish a framework agreement, potentially similar to the recent U.S.–UK deal. However, market volatility is expected as both parties face political and economic pressure, with neither willing to easily concede ground.

On the macro front, the U.S. economy contracted by 0.2% on an annualized basis—its first decline in three years. The slowdown was largely attributed to front-loaded imports ahead of anticipated tariffs and a pullback in government spending, partially offset by gains in private investment, consumer spending, and exports. Meanwhile, Core PCE—the Fed’s preferred inflation measure—rose 2.5% YoY in April, down from 2.7% in March, and increased just 0.1% MoM, indicating subdued inflationary pressures. There is growing concern that the full inflationary impact of tariffs has yet to be felt and may emerge over the coming months.

As of June 2, the U.S. Dollar Index (DXY) is trading at 98.709, with the Relative Strength Index (RSI) below 50, signalling a bearish technical bias. Key resistance levels are located at: 99.550 (0.50 Fibonacci retracement) and 100.000 (psychological barrier). Support levels are seen at: 98.736 (100-month SMA) and 98.370.

The upcoming week is packed with high-impact U.S. economic data that could shape the dollar’s near-term direction: Fed Chair Powell speaks (June 3),  ADP Non-Farm Payrolls (June 4) and NFP & Average Hourly Earnings m/m (June 6). These releases will be closely monitored for signs of labor market health, wage inflation, and potential shifts in Fed policy guidance.

Outlook: We maintain a bearish bias on the U.S. dollar in the medium term. Factors contributing to this outlook include: Rising fiscal deficits, Uncertainty around U.S.–EU tariff negotiations, Potential inflationary effects from trade policy and Growing macroeconomic instability. Until a clearer fiscal and trade policy direction emerges, the USD’s role as a global reserve currency remains under pressure.

GBP/USD – Weekly Outlook and Analysis

The British pound continues to find support amid stronger-than-expected inflation and retail sales data, alongside a delay in Trump’s proposed EU tariffs until July 9, which has boosted market sentiment and investor confidence in the UK economy. The combination of positive domestic data and easing global trade risks has underpinned GBP strength in recent sessions.

As of July 2, GBP/USD is trading at 1.35500. The Relative Strength Index (RSI) remains above 50, indicating bullish momentum is intact. Key resistance levels are located at 1.35800 and 1.36000, while support is seen at 1.34860 and 1.34510.

The upcoming week is relatively quiet for the pound, with attention focused on: Monetary Policy Report Hearings (June 3) and Construction PMI (June 5). These events may offer further insight into the BoE’s policy direction and the health of the UK construction sector.

Outlook: We maintain a neutral stance on GBP/USD. While recent data reflects a modestly improved economic outlook, several persistent headwinds remain: Rising business costs, Lingering trade uncertainties related to U.S. tariffs and Slowing economic momentum expected in H2 2025. However, continued U.S. dollar softness—driven by fiscal risks, rate cut expectations, and trade-related uncertainty—could help support the pound in the near term and cushion downside risks.

USD/JPY – Weekly Outlook and Analysis

Japan’s Tokyo Core CPI (y/y) rose to 3.6%, marking a two-year high and exceeding both the previous reading of 3.4% and the forecast of 3.5%. This stronger-than-expected inflation data adds pressure on the Bank of Japan (BoJ) to consider tightening monetary policy. Analysts now expect the BoJ to raise rates by at least 25 basis points in July, though the fragile nature of Japan’s economic recovery—combined with external risks such as Trump’s proposed tariffs—could complicate the central bank’s path forward.

On May 27, reports emerged that Japan may cut issuance of super-long bonds, following a sharp rise in yields. The 30-year Japanese Government Bond (JGB) yield fell by 12.5 basis points to 2.90% after the announcement. The drop in yields temporarily weighed on the yen, making Japanese assets less attractive, while boosting the dollar. However, Trump’s decision to delay EU tariffs, alongside the firm CPI print, helped restore yen strength later in the week.

As of June 6, USD/JPY is trading at 143.113. The Relative Strength Index (RSI) remains below 50, indicating a bearish technical outlook. Resistance levels are located at 143.900 and 145.802, while support lies at 143.300 and 140.510.

Key events to watch this week include: BoJ Governor Ueda speaks (June 3), 30-year JGB Auction (June 5) and Household Spending y/y (June 6).  These events could offer more clarity on the BoJ’s policy stance and broader economic conditions.

Outlook: We maintain a bearish bias on USD/JPY. The yen retains upside potential, especially as inflation continues to surprise to the upside, raising the likelihood of BoJ rate hikes in July. Meanwhile, expectations of Fed easing and softening U.S. yields may further weaken the dollar. If Japanese yields stabilize or rise again, this could support the yen through safe-haven demand and capital appreciation.

USD/CAD – Weekly Outlook and Analysis

Markets are closely watching the upcoming OPEC+ meeting on Saturday, where members will decide whether to increase oil output for July beyond the 411,000 barrels per day hikes implemented for May and June. The move is aimed at disciplining overproducing members and regaining global market share, a decision that could have direct implications for oil-sensitive currencies like the Canadian dollar.

On the domestic front, Canada’s economy showed resilience, with Q1 2025 GDP expanding at an annualized pace of 2.2%, exceeding both the previous quarter’s 2.1% and the market forecast of 1.7%. The growth was primarily driven by strong exports, as U.S. companies increased purchases of Canadian goods—likely in anticipation of impending trade tensions. In response to the upbeat data, interest rate swap markets have largely priced in a BoC rate pause, as the central bank weighs inflation concerns against growth momentum.

As of June 3, USD/CAD is trading at 1.37418. The Relative Strength Index (RSI) remains below 50, indicating a bearish bias. Resistance levels are located at 1.38451 and 1.39852, while support is found at 1.36101.

Key upcoming data releases that could drive market sentiment include: BoC Overnight Rate and Rate Statement (June 4) and Employment Change & Unemployment Rate (June 6). These will provide further insight into the Canadian economic outlook and how the BoC may respond to both domestic strength and global trade risks, including the ongoing tariff tensions.

Outlook: We maintain a slightly bullish bias on the Canadian dollar in the near term. Robust GDP and inflation data may give the Bank of Canada reason to hold rates steady, supporting the loonie. Additionally, heightened U.S.–EU trade tensions could further weigh on the U.S. dollar and bolster the CAD, particularly if oil prices find support after the OPEC+ meeting.

Forecasts for the near term

Currency Pair	Jun 30	Jul 30
GBP/USD	1.33900	1.34500
USD/JPY	144.050	143.120
USD/CAD	1.38930	1.38390

Weekly Recap and Outlook for the Week Ahead 26/5 - 30/5

DXY – Macro Outlook and Analysis

Tensions between the U.S. and the European Union have escalated following Trump’s latest proposal to impose a 50% tariff on all EU imports starting in July. Trump expressed dissatisfaction with the pace of ongoing negotiations covering taxation, regulatory frameworks, and trade policy, dramatically raising both economic and diplomatic stakes.

A core issue remains the trade imbalance—in 2024, the EU exported over $600 billion in goods to the U.S. while importing only $370 billion worth, according to U.S. government data. This protectionist move now threatens to undermine the recent global equity rally, which was driven by trade de-escalation progress with other key partners such as the UK and China. While EU officials have signalled a willingness to engage in dialogue, they emphasize that talks must be grounded in mutual respect, not threats. Brussels has also begun preparing for a more distant transatlantic economic relationship, if needed.

Meanwhile, Trump’s "One Big Beautiful Bill" narrowly passed the House of Representatives and is headed to the Senate. The bill combines elements of the 2017 Tax Cuts and Jobs Act, border security funding, Medicaid adjustments, and more. However, it is projected to add $3.8 trillion to the federal deficit over the next decade, exacerbating the existing $37 trillion U.S. national debt. If passed, this could prompt increased Treasury issuance, and a decline in investor confidence could lead to rising yields. As of May 25, the U.S. 30-year Treasury yield stands at 5.035%, its highest since October 2023.

In a separate development, Harvard’s international student population is facing policy uncertainty under the Trump administration, with approximately 6,800 students and $34 billion in economic value at stake. Although a federal judge has temporarily blocked the policy, the uncertainty could deter future international enrolment, benefiting universities in China and East Asia, and weakening the U.S.’s appeal as a top educational destination and foreign investment hub.

On the economic data front, Flash Manufacturing and Services PMIs both came in strong at 52.3, exceeding expectations. These readings reflect improved business sentiment, bolstered by the pause in further tariff escalation and marginal easing in trade tensions.

As of May 25, the DXY is trading at 99.104, having failed to sustain momentum above the RSI 50 mark—now falling to 38.88, indicating bearish pressure. Key resistance levels are seen at:100.000 (psychological barrier), 99.950 (200-day SMA), 100.510 (0.50 Fibonacci retracement). Support is found at: 98.736 (100-month SMA) and 98.370.

Looking ahead, market attention will turn to several high-impact releases: Preliminary GDP q/q (May 29), Unemployment Claims (May 29), Core PCE Price Index m/m (May 30). These releases will offer insight into consumer spending trends and whether tariffs are beginning to filter through to broader economic activity. 

Outlook: We maintain a bearish bias on the U.S. dollar in the medium term. Rising fiscal deficits, the risk of new tariffs with the EU, inflationary effects from trade policies, and persistent macro uncertainty continue to undermine investor confidence. Until clearer direction emerges regarding fiscal and trade strategies, the USD’s position as a reserve currency remains vulnerable.

GBP/USD – Weekly Outlook and Analysis

The latest UK inflation data surprised to the upside, with headline CPI rising to 3.5% in April, above the forecasted 3.3%, primarily due to a spike in household energy bills. Core CPI also came in strong at 3.8%, underscoring persistent underlying inflationary pressures. In response, the Bank of England (BoE) reaffirmed its stance that any future interest rate cuts will be “gradual and careful,” reflecting its cautious approach in the face of sticky inflation.

Adding to the positive sentiment, UK retail sales rose 1.2% month-on-month, beating expectations. While part of the rise may be attributed to favourable weather conditions, when combined with the strong CPI print, the data reinforces investor confidence in the resilience of the UK economy.

As of May 25, GBP/USD is trading at 1.35374, continuing its upward trend. On the technical front, the RSI remains above 50 and is approaching overbought territory near 70, suggesting bullish momentum may be nearing exhaustion. Resistance levels are seen at 1.36320 and 1.37340, while support lies at 1.34860 and 1.34548.

The week ahead is relatively quiet for the pound, with the main event being BoE Governor Bailey’s speech on May 30, which may provide additional insights into the BoE’s economic outlook and policy trajectory.

Outlook: We maintain a neutral stance on GBP/USD. While recent economic data reflects a modestly improved UK outlook, several risks persist—including rising business costs, the impact of U.S. trade policy, and slowing economic momentum in the second half of 2025. Nonetheless, continued softness in the U.S. dollar may help offset these headwinds and support the pound in the near term.

USD/JPY – Weekly Outlook and Analysis

Japan’s latest inflation data surprised to the upside, with headline CPI rising to 3.5%, the highest level in over two years. A significant portion of this increase was driven by a 98.6% surge in rice prices, highlighting the persistent impact of food inflation. This presents a growing challenge for the Bank of Japan (BoJ), which must balance imported inflation pressures—exacerbated by Trump’s tariff threats—with broader economic uncertainties.

Despite previous signals from the BoJ that it is prepared to raise interest rates further, analysts now expect the central bank to hold rates steady through September, with only a modest chance of a hike by year-end. Sticky inflation and fragile domestic growth continue to delay policy normalization, even as inflation remains above the BoJ’s 2% target.

Meanwhile, the 30-year Japanese Government Bond (JGB) yield has risen steadily, reaching 3.074% as of May 25. This climb is narrowing the yield differential with the U.S. 30-year Treasury, thereby increasing demand for the yen. The rise in domestic yields could also trigger unwinding of the yen carry trade, as Japanese investors repatriate funds, reducing exposure to foreign assets like U.S. Treasuries and equities.

Additionally, the U.S. proposal to impose a 50% tariff on EU imports has added to global risk aversion, further supporting the yen’s safe-haven appeal.

As of this writing, USD/JPY is trading at 142.548. On the technical front, the RSI is below 50, indicating a bearish bias. Key resistance levels are located at 144.000 and 145.240, while support can be found at 140.480 and 138.900.

The week ahead is relatively quiet for the yen, with the main focus on Tokyo CPI y/y (May 30). This data release will help gauge the extent to which tariffs and cost pressures are continuing to influence Japan’s consumer prices.

Outlook: We maintain a bearish bias on USD/JPY. The yen retains upside potential due to the BoJ’s scope for further gradual tightening, particularly if inflation continues to surprise to the upside. Meanwhile, expectations of Fed easing and declining U.S. yields may continue to place downward pressure on the dollar. Rising Japanese bond yields and broader risk aversion could reinforce demand for the yen in the near term.

USD/CAD – Weekly Outlook and Analysis

Canada's latest inflation data came in hotter than expected, with median CPI at 3.2% and trimmed mean CPI at 3.1%, both well above the Bank of Canada's (BoC) 2% target. In response, markets have reduced the probability of a June rate cut to 28%, down from 65%. This places the BoC in a difficult position, as it must balance inflation control with supporting economic growth amid ongoing global trade uncertainties.

Adding to the hawkish case, retail sales rose by 0.8%, surpassing expectations, primarily driven by strong performance in motor vehicles and parts dealers. Core retail sales also increased by 0.2%. This robust consumer spending data may reinforce the likelihood that the BoC will hold interest rates steady in the near term.

As of May 25, USD/CAD is trading at 1.37242. The Relative Strength Index (RSI) is currently below 50, indicating a bearish momentum, and approaching oversold territory. Key resistance is located at 1.37334, while support is found at 1.36120.

Looking ahead, the key economic release this week will be Canada’s monthly GDP (May 30), which will provide important insights into the country’s economic resilience amid trade tensions and inflationary pressure.

Outlook: We maintain a slightly bullish bias on the Canadian dollar in the near term. Stronger-than-expected inflation and retail sales figures may encourage the BoC to maintain its current policy stance into the June meeting. Additionally, escalating U.S.–EU trade tensions could further weaken the USD, providing additional support for the loonie and putting downward pressure on the USD/CAD pair.

Forecasts for the near term

Currency Pair	Jun 30	Jul 30
GBP/USD	1.33900	1.34500
USD/JPY	144.050	143.120
USD/CAD	1.38930	1.38390