Key takeaways
- The USD will probably struggle to rally in the weeks ahead, with the Fed likely to extend its easing cycle, a US government shutdown, and US-China trade talks.
- The CAD could gain by tracking the broad USD, while the EUR, GBP, and CHF hold range.
- The JPY may strengthen, with fiscal fears overblown and upside risks around BoJ policy.
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 grind weaker in the coming weeks even though the likely easing by the Federal Reserve (Fed) is already priced into markets. Markets expect the Fed to deliver a 25bp cut at its 28-29 October meeting. It will be difficult for the USD to rally when the Fed is easing and most other G10 central banks are on hold or potentially tightening. Uncertainty remains elevated, on a number of fronts but not all point in the same direction for the USD. US trade policy will be a focus with ongoing US-China trade talks, and oral arguments at the Supreme Court on the legality of many of President Trump’s emergency tariffs set to be held on 6 November. Fed independence may also feature as the succession process for Chair Powell moves forward, but Fed easing seems to have curtailed the level of criticism directed at the Fed by the Trump administration. We think all this leans towards USD weakness, rather than strength.
Short-term direction : DXY^
Current
▼ Depreciate
Previous
▶ Track Sideways
EUR
We think it is too early for “fine tuning” arguments at the European Central Bank (ECB) to drive the EUR weaker, but they may cap the upside. Markets expect the ECB to keep rates steady at its 30 October meeting. In France, a new government has been formed, which removes one downside risk for the EUR, namely the uncertainty of a possible fresh election, but the risk of slippage on fiscal austerity targets could weigh on the EUR. Overall, we look for a rangebound EUR-USD and EUR-GBP in the weeks ahead.
Short-term direction : EUR-USD
Current
▶ Track Sideways
Previous
▶ Track Sideways
Short-term direction : EUR-GBP
Current
▶ Track Sideways
Previous
▲ Appreciate
GBP
UK CPI surprise raises the chance of a rate cut by the Bank of England (BoE) at its 18 December meeting to c70% (Bloomberg, 22 October), which could weigh on the GBP. We expect the GBP to hold above the key support level of 1.32 until greater fiscal clarity emerges. In other words, the GBP is likely to hover in a holding pattern ahead of the Autumn Budget on 26 November. The extent of fiscal tightening and the allocation of taxation has the potential to significantly impact economic growth and inflation in the UK. With little space to manoeuvre, political uncertainty fattens the GBP’s tail risks.
Short-term direction : GBP-USD
Current
▶ Track Sideways
Previous
▶ Track Sideways
JPY
We do not expect a possible shift in Japanese fiscal policy to unnerve the currency, as Japan’s new finance minister, Satsuki Katayama, has advocated a responsible approach to fiscal expansion. Some fiscal loosening might help the JPY on the cyclical front if it encourages a more upbeat growth outlook. Markets remain unconvinced that the Bank of Japan (BoJ) could hike on 30 October. Even if the BoJ chooses not to hike immediately, it is possible they would signal greater openness to an 18 December tightening than is currently priced by markets, probably creating upside risks for the JPY. We still see grounds for JPY strength in the weeks and months ahead.
Short-term direction : USD-JPY
Current
▼ Depreciate
Previous
▼ Depreciate
Short-term direction : EUR-JPY
Current
▼ Depreciate
Previous
▼ Depreciate
CHF
The external environment remains an important driver for the CHF, given the Swiss National Bank (SNB) does not meet again until 11 December. A persistent risk-on tone could lead to some pressure on the CHF, but if trade tensions do not fully de-escalate, the CHF is likely to see some safe-haven appeal. As such, we believe the CHF will move sideways over the coming weeks.
Short-term direction : USD-CHF
Current
▶ Track Sideways
Previous
▶ Track Sideways
Short-term direction : EUR-CHF
Current
▶ Track Sideways
Previous
▶ Track Sideways
CAD
For the Bank of Canada’s (BoC) meeting on 29 October, a cut is likely to be accompanied by a hawkish tone, signalling that it is perhaps the last cut in the cycle. If policy is left on hold, the BoC is likely to leave the door wide open to a cut in December. The net result is likely to have limited lasting impact on the CAD, beyond the knee-jerk reaction. With local factors unlikely to get traction, broader USD weakness is likely to see USD-CAD drifting lower in the weeks ahead.
Short-term direction : USD-CAD
Current
▼ Depreciate
Previous
▶ Track Sideways
AUD
A rate cut by the Reserve Bank of Australia (RBA) on 4 November may see the AUD dip briefly, as markets only price in a c65% chance of this happening (Bloomberg, 23 October). However, a weaker USD, alongside a “risk on” mood, should provide an offset. Together, the AUD may stick in a range for now.
Short-term direction : AUD-USD
Current
▶ Track Sideways
Previous
▲ Appreciate
Short-term direction : AUD-NZD
Current
▶ Track Sideways
Previous
▲ Appreciate
NZD
The NZD is the worst performing G10 currency so far in 2H25, losing c6% (Bloomberg, 23 October). After the 50bp easing by the Reserve Bank of New Zealand (RBNZ) on 8 October, markets are fully priced for a further 25bp cut by the RBNZ on 26 November (Bloomberg, 23 October). With a lot in the price, in addition to the help from rising risk appetite, if we are correct to look for broader USD weakness, the NZD looks set to consolidate in the weeks ahead.
Short-term direction : NZD-USD
Current
▶ Track Sideways
Previous
▶ Track Sideways
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 September to 23 October*)
FX |
Spot |
200 dma |
1-month % change* |
Support |
Resistance |
|---|---|---|---|---|---|
| DXY | 99.01 | 100.74 | 1.80% | 98.00 | 100.00 |
| EUR-USD |
1.1601 | 1.1282 | -1.81% | 1.1500 | 1.1780 |
| EUR-GBP | 0.8695 | 0.8531 | 0.48% | 0.8630 | 0.8770 |
| GBP-USD | 1.3342 | 1.3222 | -1.36% | 1.3216 | 1.3500 |
| USD-JPY |
152.38 | 147.83 | -3.11% | 150.00 | 155.00 |
| EUR-JPY | 176.77 | 166.70 | -1.31% | 175.00 | 180.00 |
| USD-CHF |
0.7968 | 0.8334 | -0.68% | 0.7873 | 0.8076 |
| EUR-CHF | 0.9244 | 0.9383 | 1.13% | 0.9200 | 0.9300 |
| USD-CAD | 1.3995 | 1.3961 | -1.14% | 1.3890 | 1.4150 |
| AUD-USD |
0.6488 | 0.6434 | -1.68% | 0.6400 | 0.6550 |
| AUD-NZD | 1.1310 | 1.0990 | -0.40% | 1.1190 | 1.1418 |
| NZD-USD |
0.574 | 0.5856 | -2.07% | 0.5650 | 0.5800 |
Note: *As at 09:52 HKT on 23 October 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 22 October 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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