Key takeaways
- With geopolitical risks receding for now, markets will refocus on US trade and fiscal and monetary policy over the coming few weeks.
- We look for consolidation in the US Dollar Index, but with downside risks.
- The JPY is likely to strengthen, while the GBP may weaken in the weeks ahead.
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
Geopolitical risks have receded for now but could still prompt occasional USD support if the situation changes. Markets will refocus on a 9 July deadline on the tariff pause, the final push to pass a budget through the US Congress, and the run-up to a 29-30 July Federal Open Market Committee (FOMC) meeting. Clarity on where US trade policy will ultimately land is likely to remain elusive. US officials said the US and China finalised a trade understanding reached in May, and added that the White House has imminent plans to reach agreements with 10 major trading partners (Bloomberg, 27 June 2025). Structural USD concerns could ease if Congress can deliver a budget that does not point to a blowout deficit; but time is running out to meet the administration’s goal to have an agreed budget in place by 4 July. All this should keep the Federal Reserve (Fed) on the sidelines, despite recent openness from some members to a July cut. Without fresh catalysts, the USD is likely to grind, albeit with downside risks, in the weeks ahead.
Short-term direction : DXY^
Current
▶ Track Sideways
Previous
▶ Track Sideways
EUR
Barring a resurgence in geopolitical risks, it is hard to see the EUR weakening materially over the coming weeks. However, with trade risks looming ahead of a 9 July deadline (where tariffs could spike to 50%), a significant premium relative to rates, and a more dovish European Central Bank (ECB), further EUR gains may be difficult. Markets expect the ECB to keep rates steady at its 24 July meeting, while there is a 50-50 chance to cut rates by 25bp in September (Bloomberg, 26 June 2025). Any EUR weakness is likely to be short-lived, suggesting a range-trading environment, with risks to an upside breakout in the weeks ahead.
Short-term direction : EUR-USD
Current
▶ Track Sideways
Previous
▶ Track Sideways
Short-term direction : EUR-GBP
Current
▲ Appreciate
Previous
▶ Track Sideways
GBP
Growth and inflation back in focus after the Middle East ceasefire, posing a near-term challenge to further GBP-USD upside. A cooling labour market in the UK could drag on the GBP as the 7 August Bank of England (BoE) meeting approaches. Markets see an c80% chance of a cut at this meeting (Bloomberg, 26 June 2025), but the focus should be on whether guidance beyond August will turn more dovish. If UK data stay soft, the BoE will have to deliver more cuts. With the ECB navigating towards a neutral stance, EUR-GBP may go higher in the weeks ahead.
Short-term direction : GBP-USD
Current
▶ Track Sideways
Previous
▶ Track Sideways
JPY
When risk aversion is associated with rising oil prices, as it was during the recent Israel-Iran conflict, Japan’s reliance on oil imports left the currency vulnerable. This suggests reduced geopolitical tensions and lower oil prices could see the JPY rally. Besides, the JPY would capitalise on any renewed angst around trade. Finally, relative rates are getting some traction for USD-JPY again. Markets expect the Bank of Japan (BoJ) to keep rates steady at its 31 July meeting. Our economists expect the next BoJ hike to come in October, whereas markets only attach a 40% likelihood for now (Bloomberg, 26 June 2025).
Short-term direction : USD-JPY
Current
▼ Depreciate
Previous
▶ Track Sideways
Short-term direction : EUR-JPY
Current
▼ Depreciate
Previous
▶ Track Sideways
CHF
Geopolitical gyrations have highlighted the ‘safe haven’ allure of the CHF, but this complicates policy for the Swiss National Bank (SNB). The SNB remains willing to be active in the FX market with the next policy meeting not until 25 September. The potential intervention may cap CHF strength, especially against the EUR, where consolidation seems likely, while USD-CHF may follow broader USD developments for now.
Short-term direction : USD-CHF
Current
▼ Depreciate
Previous
▲ Appreciate
Short-term direction : EUR-CHF
Current
▶ Track Sideways
Previous
▲ Appreciate
CAD
USD-CAD is likely to largely keep tracking the broader USD developments, with domestic drivers continuing to be kept quiet. The 9 July tariff ultimatum may pose upside risks to USD-CAD. If the US were to impose additional tariffs on Canada, it could exponentially worsen Canada’s growth and inflation issues, possibly forcing the Bank of Canada (BoC) to abandon its policy rate pause and start cutting rates again. Markets are pricing a c40% chance of a BoC cut at the 30 July meeting (Bloomberg, 26 June 2025).
Short-term direction : USD-CAD
Current
▶ Track Sideways
Previous
▲ Appreciate
AUD
We are cautiously optimistic on the UAD. A lack of escalation in trade tensions is positive for the AUD, while any major re-escalation could see AUD underperforming the EUR and JPY. The recent dovish shift by some Fed members may prevent rate differentials from becoming a major headwind even when markets almost fully price in a 25bp cut by the Reserve Bank of Australia at its 8 July meeting (Bloomberg, 26 July 2025). China’s Politburo meeting at the end of July is worth monitoring, but unless fiscal stimulus is larger than expected or commodityintensive, its impact on the AUD should be rather limited.
Short-term direction : AUD-USD
Current
▲ Appreciate
Previous
▲ Appreciate
Short-term direction : AUD-NZD
Current
▼ Depreciate
Previous
▲ Appreciate
NZD
Like the AUD, the NZD faces a similar external picture, but China’s potential stimulus is still consumer-focused, which should lend more support to New Zealand’s export prices than Australia’s, thereby the NZD. What differentiates the NZD from the AUD is the recent divergence in monetary expectations, built upon stronger data in New Zealand where the central bank is likely to keep rates on hold at its 9 July meeting.
Short-term direction : NZD-USD
Current
▲ Appreciate
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 16 April to 16 May*)
FX |
Spot |
200 dma |
1-month % change* |
Support |
Resistance |
|---|---|---|---|---|---|
| DXY | 97.18 | 103.82 | -2.35% | 97.00 | 99.42 |
| EUR-USD |
1.1714 | 1.0850 | 3.41% | 1.1630 | 1.1850 |
| EUR-GBP | 0.8522 | 0.8388 | -1.59% | 0.8500 | 0.8575 |
| GBP-USD | 1.3745 | 1.2935 | 1.76% | 1.3630 | 1.3750 |
| USD-JPY |
144.35 | 149.69 | -0.01% | 142.10 | 148.00 |
| EUR-JPY | 169.09 | 162.24 | -3.28% | 165.00 | 170.00 |
| USD-CHF |
0.7982 | 0.8672 | 3.65% | 0.7900 | 0.8220 |
| EUR-CHF | 0.9350 | 0.9397 | 0.26% | 0.9300 | 0.9430 |
| USD-CAD | 1.3641 | 1.4044 | 1.24% | 1.3600 | 1.4000 |
| AUD-USD |
0.6553 | 0.6418 | 1.71% | 0.6419 | 0.6600 |
| AUD-NZD | 1.0790 | 1.0962 | 0.38% | 1.0740 | 1.0840 |
| NZD-USD |
0.6073 | 0.5855 | 2.08% | 0.5850 | 0.6100 |
Note: * as at 16:55 HKT on 27 June 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 26 June 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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