Key takeaways
- We look for a steady USD, with discussions around the Fed remaining a key focus
- The JPY is likely to strengthen in the weeks ahead, potentially helped by a hawkish BoJ
- A stagflation narrative may weigh on the GBP, and we see mostly sideways moves in others
Our tactical view
Table of tactical views where a currency pair is referenced (e.g. USD/JPY):An up (⬆) / down (⬇) / sideways (➡) arrow indicates that the first currency quotedin the pair is expected by HSBC Global Research to appreciate/depreciate/track sideways against the second currency quoted over the coming weeks. For example, an up arrow against EUR/USD means that the EUR is expected to appreciate against the USD over the coming weeks. The arrows under the “current” represent our current views, while those under “previous” represent our views in the last month’s report.
USD
We look for the USD to track sideways over the coming weeks, but a lot of moving parts are in play including trade policy, geopolitics and issues around the Federal Reserve (Fed) that will push and pull the USD. Recent trade deals have reduced but not removed policy uncertainties, with details being worked through. Higher US tariffs would likely support the USD. That said, the USD still has an uncertain “safe haven” allure when it comes to geopolitics and risk aversion. The US Senate will return from recess in early September and the nomination process for Stephen Miran (who authored the ‘Mar-a-Lago Accord’ which laid out a framework to weaken the USD) to join the Federal Open Market Committee (FOMC) will likely move quickly ahead, perhaps in time for the 16-17 September FOMC meeting. Markets price in a c73% likelihood of a 25bp cut (Bloomberg, 21 August 2025) and will likely react more to any hawkish surprise than to a dovish one when coming to US non-farm payroll report (5 September) and CPI data (11 September).
Short-term direction : DXY^
Current
▶ Track Sideways
Previous
▶ Track Sideways
EUR
EUR-USD is likely to move largely sideways over the coming weeks, with some modest upside from the prospects of a ceasefire or peace between Russia and Ukraine which have been elusive to date. The European Central Bank’s (ECB) inaction is almost fully priced in at its 11 September meeting. Given the Fed is likely to cut rates in September, the balance of risks might point to some modest EUR-USD upside, even if this divergence is well anticipated. That said, French political risk ahead of the next round of budget negotiations in September could weigh on the EUR, as might any talk of secondary tariffs.
Short-term direction : EUR-USD
Current
▶ Track Sideways
Previous
▶ Track Sideways
Short-term direction : EUR-GBP
Current
▲ Appreciate
Previous
▶ Track Sideways
GBP
Interest rate differentials may return to drive the GBP, as trade tensions recede and stagflation fears mount. In the UK, persistent inflation (with the CPI data for August to be released on 17 September) will probably suggest that another 25bp cut by the Bank of England (BoE) this year seems finely balanced, despite weak economic fundamentals. Markets expect the BoE to keep rates steady at its 18 September meeting (Bloomberg, 21 August 2025). With uncertainty clouding both monetary and fiscal policies, on top of mounting stagflation fears, downside risks to the GBP look set to build over the coming weeks.
Short-term direction : GBP-USD
Current
▼ Depreciate
Previous
▶ Track Sideways
JPY
There is scope for the JPY to strengthen somewhat over the coming weeks. Rate differentials are becoming more important in the FX market, which could point to some USD-JPY downside, especially if the Bank of Japan (BoJ) is more hawkish in the 18-19 September meeting when the Fed will likely resume its easing in September. Converging US-Japan rates would also reduce hedging costs and perhaps encourage domestic investors to increase their hedge ratios, supporting the JPY. The FX market is no longer so worried about political uncertainty in Japan and what the knock-on impact may be for fiscal policy.
Short-term direction : USD-JPY
Current
▼ Depreciate
Previous
▲ Appreciate
Short-term direction : EUR-JPY
Current
▼ Depreciate
Previous
▲ Appreciate
CHF
Tariff concerns have weighed on the CHF over the recent weeks. In particular, tariffs on pharmaceuticals (which represent c11% of total Swiss exports) could weigh on Switzerland’s current account. The Swiss National Bank (SNB) has appeared cautious about implementing negative rates, and market probability for a 25bp cut could rise from below c20% currently for the 25 September meeting, providing another headwind for the CHF. All in all, EUR-CHF and USD-CHF are likely to be higher in the weeks ahead.
Short-term direction : USD-CHF
Current
▲ Appreciate
Previous
▼ Depreciate
Short-term direction : EUR-CHF
Current
▲ Appreciate
Previous
▼ Depreciate
CAD
The main driver for USD-CAD remains movements in the broad US Dollar Index (that excludes the CAD), which we look for consolidation. However, the risks are skewed to the upside from Canada-specific factors. Rates market is fully priced for one more Bank of Canada (BoC) cut by year-end but attaches a one-third likelihood to a cut at its 17 September meeting, and a 60% likelihood to a move in October (Bloomberg, 21 August 2025). The more critical determinants are likely to be the June (and Q2) GDP data on 29 August, followed by the August employment report on 5 September.
Short-term direction : USD-CAD
Current
▶ Track Sideways
Previous
▶ Track Sideways
AUD
External factors have turned less favourable, like lacklustre emerging Asian currency performance and waning influence of risk sentiment on the AUD, pausing the AUD-USD rise. We stay cautious on AUD-USD over the near term, but we think monetary and fiscal easing globally should provide a cushion for downside growth risks which could support the AUD over the medium term. Australia’s resilient macro story could be reflected in a higher AUD-NZD in the weeks ahead.
Short-term direction : AUD-USD
Current
▶ Track Sideways
Previous
▲ Appreciate
Short-term direction : AUD-NZD
Current
▲ Appreciate
Previous
▶ Track Sideways
NZD
We turn cautious over the near-term outlook for NZD-USD. The Reserve Bank of New Zealand (RBNZ) lowered its policy rate by 25bp to 3% on 20 August, with a 50bp discussed and a downward revision to its official policy rate projection for 1Q26 to 2.55% (previously 2.85%). This has weighed on the NZD. Ultimately, the broad USD direction and emerging Asian currency performance should return as the dominant drivers for NZD-USD. But for now, a consolidation in NZD-USD seems likely in the weeks ahead.
Short-term direction : NZD-USD
Current
▶ Track Sideways
Previous
▲ Appreciate
Note: ^DXY = US Dollar Index, is an index (or measure) of the value of the USD against major global currencies, including the EUR, JPY, GBP, CAD, SEK and CHF. Source: HSBC
FX Data Snapshot
(from close on 23 July to 22 August*)
FX |
Spot |
200 dma |
1-month % change* |
Support |
Resistance |
|---|---|---|---|---|---|
| DXY | 98.72 | 102.81 | 1.36% | 97.50 | 99.50 |
| EUR-USD |
1.1602 | 1.1005 | -1.29% | 1.1380 | 1.1750 |
| EUR-GBP | 0.8647 | 0.8449 | 0.44% | 0.8575 | 0.8740 |
| GBP-USD | 1.3418 | 1.3022 | -0.85% | 1.3140 | 1.3600 |
| USD-JPY |
148.65 | 149.13 | -1.36% | 145.70 | 150.00 |
| EUR-JPY | 172.47 | 163.93 | -0.06% | 170.00 | 174.00 |
| USD-CHF |
0.8092 | 0.855 | -2.09% | 0.8000 | 0.8200 |
| EUR-CHF | 0.9389 | 0.9388 | -0.81% | 0.9300 | 0.9460 |
| USD-CAD | 1.3912 | 1.4037 | -2.21% | 1.3720 | 1.4037 |
| AUD-USD |
0.6424 | 0.6383 | -2.01% | 0.6384 | 0.6570 |
| AUD-NZD | 1.1060 | 1.0946 | -1.25% | 1.1000 | 1.1120 |
| NZD-USD |
0.581 | 0.5833 | -3.23% | 0.5650 | 0.5950 |
Note: * as at 17:42 HKT on 22 August 2025
Source: HSBC, Bloomberg
Explanation of terms
Spot: Spot refers to the current market price of a currency pair that is important for immediate transactions.
200 dma: 200-day simple moving average numberrepresents the average price of an index or a currency pair over the past 200 days.
Support (S), Resistance (R):Support and resistance are significant previous lows and highs plus retracement levels, based on historical price patterns of anindex or a currency pair. Support is a historical price level where a downtrend of a currency pair paused due to demand for the first currency quoted in the pair increasing, while resistance is a historical price level where an uptrend of a currency pair reversed amid demand for the second currency quoted in the pair increasing.
HSBC Positioning Indices
Note: Priced as of market close 21 August 2025
Source: HSBC, Bloomberg
The indicators have been devised to track the net position of momentum traders, looking at hundreds of strategies, operating over many different time horizons. It considers time horizons of 5 days up to 260 days. An indicator level of +10 would indicate that the hundreds of different strategies have all lined up and gone long (i.e., buy the first currency quoted in the pair). Similarly, an indicator level of -10 indicates that all strategies are short (i.e., sell the first currency quoted in the pair).
Glossary
Dovish
Dovish refers to an economic outlook which generally supports low interest rates as a means of encouraging growth within the economy.
Hawkish
Hawkish is typically used to describe monetary policy which favours higher interest rates, and tighter monetary controls to keep inflation in check.
MoM / YoY
Month on month / Year on year
PMI
Purchasing Managers Index (PMI) is an indicator of economic health of the manufacturing sector (>50 represents expansion vs. the previous month).
IMM data
International Monetary Market (IMM) is a division of the Chicago Mercantile Exchange (CME) that deals with the trading of currencies and interest rate futures and options and the IMM data is part of the Commitments of Traders (COT) reports published by the U.S. Commodity Futures Trading Commission (CFTC). The IMM data provides a breakdown of each Tuesday’s open futures positions on the IMM. Speculative positions are a trader’s non-commercial positions (i.e. not for hedging purposes).
G10
G10 refers to the most heavily traded, liquid currencies in the world: USD, EUR, JPY, GBP, CHF, AUD, NZD, CAD, NOK, and SEK.
Fed / FOMC
Federal Reserve System (US’s Central Bank)/Federal Open Market Committee.
ECB
European Central Bank (Eurozone’sCentral Bank).
BOE
Bank of England (UK’s Central Bank).
BOJ
Bank of Japan (Japan’s Central Bank).
BOC
Bank of Canada (Canada’s Central Bank).
RBA
Reserve Bank of Australia (Australia’s Central Bank).
RBNZ
Reserve Bank of New Zealand (New Zealand’s Central Bank).
SNB
Swiss National Bank (Switzerland’s Central Bank).
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