Key takeaways
- USD sentiment is the key driver of exchange rates across G10 currently…
- …reducing the relevance of local developments.
- With the USD likely moving sideways, more excitement could be found in non-USD crosses.
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
Our current house view is that the Federal Reserve (Fed) will keep policy on hold at its 28-29 Oct meeting. The two key pinch points are the September non-farm payroll report (3 Oct) for which the early consensus is for an unchanged unemployment rate of 4.3%, and the September inflation report (15 Oct). With 23bp of cuts priced (Bloomberg, 24 Sep), it may be hard for the data to out-dove the market, so the risks are skewed to a bigger USD bullish reaction if the numbers land hawkishly. However, cyclical support for the USD may be countered by continued questions over Fed independence, amid the administration’s legal cases, including one related to Fed Governor Cook’s possible dismissal and another about the scope of executive power to remove officials ‘for cause’ (Reuters, 23 Sep). The USD could also be challenged by the upbeat tone in equity markets, vice versa. Overall, we look for the USD to track sideways in the weeks ahead.
Short-term direction : DXY^
Current
▶ Track Sideways
Previous
▶ Track Sideways
EUR
The European Central Bank’s (ECB) “on hold” guidance is unlikely to change in the coming weeks, and markets expect the ECB to keep rates steady at its 30 Oct meeting (Bloomberg, 24 Sep). With the ECB justifiably on the sidelines, the path of EUR-USD is mostly dependent on the near-term outlook for Fed policy or more broadly the USD sentiment. French political uncertainty and the associated widening of French bond spreads over Germany have not garnered much traction in FX and this may continue to be the case. The EUR could gain on risk appetite but would be curtained by positioning which remains long (see the HSBC positioning index chart overleaf). All in all, EUR-USD is likely to move sideways in the near term.
Short-term direction : EUR-USD
Current
▶ Track Sideways
Previous
▶ Track Sideways
Short-term direction : EUR-GBP
Current
▲ Appreciate
Previous
▲ Appreciate
GBP
The long wait to the Autumn Budget (26 Nov) fuels speculation around UK fiscal credibility, leaving the GBP exposed, in our view. Although GBP positioning is already net short (against the EUR), a rebound is unlikely until policy uncertainty clears in November. With the Bank of England likely maintaining a status quo at its 6 Nov meeting (Bloomberg, 24 Sep), GBP-USD is likely to be dominated by US factors, which a consolidation around the current levels seems appropriate in the weeks ahead.
Short-term direction : GBP-USD
Current
▶ Track Sideways
Previous
▼ Depreciate
JPY
While USD sentiment is still the key driver for USD-JPY, Japanese factors may gain more traction in the coming weeks. The outcome of the leadership election for Japan’s ruling Liberal Democratic Party (LDP) on 4 Oct is likely to have an impact on the JPY, but we suspect USD-JPY upside will be constrained by domestic concerns over the cost of living and potential scrutiny from the US Treasury. Our economists expect the Bank of Japan (BoJ) to hike rates at its 30 Oct meeting, while markets price in 13bp of BoJ hikes (Bloomberg, 24 Sep). All this suggests room for some greater JPY enthusiasm, particularly if the outcome of the LDP leadership election and the BoJ meeting prove favourable.
Short-term direction : USD-JPY
Current
▼ Depreciate
Previous
▼ Depreciate
Short-term direction : EUR-JPY
Current
▼ Depreciate
Previous
▼ Depreciate
CHF
With the Swiss National Bank keeping its policy rate unchanged on 25 Sep (as widely expected), the CHF is likely to undergo a period of consolidation in the weeks ahead, after the recent rally. Risks are skewed positively as the Swiss government remains in talks with the US and has also begun to offer concessions to expedite negotiations, but a new deal does not seem imminent (FT, 22 Sep).
Short-term direction : USD-CHF
Current
▶ Track Sideways
Previous
▲ Appreciate
Short-term direction : EUR-CHF
Current
▶ Track Sideways
Previous
▲ Appreciate
CAD
We believe USD-CAD will track broader USD sentiment and we do not expect this dynamic to change in the coming 5-6 weeks in the run-up to the central bank meetings at the Federal and the Bank of Canada (BoC). As such, even if US-Canada rate differential moves in favour of the CAD, it is possible that USDCAD would not react much. Currently, markets are pricing in a c50% chance of a BoC cut at it 29 Oct meeting (Bloomberg, 24 Sep), and our economists expect one more BoC cut by the end of the year.
Short-term direction : USD-CAD
Current
▶ Track Sideways
Previous
▶ Track Sideways
AUD
The AUD has gained c6.5% against USD year-to-date and c0.8% month-to-date (Bloomberg, 25 Sep), but both the external and domestic backdrops continue to be supportive for the AUD. For example, positive data momentum in Australia has reinforced a slower rate cut trajectory and even a higher terminal rate for the Reserve Bank of Australia (RBA), and markets expect the RBA to keep rates steady at its 30 Sep meeting (24 Sep, Bloomberg).
Short-term direction : AUD-USD
Current
▲ Appreciate
Previous
▶ Track Sideways
Short-term direction : AUD-NZD
Current
▲ Appreciate
Previous
▲ Appreciate
NZD
External backdrop remains favourable for NZD-USD; however, domestic challenges (reflected in a notable downside surprise in the recent GDP print and deterioration in New Zealand’s terms of trade, for example) are substantial. Markets are pricing in a c20% chance of a 50bp cut by the Reserve Bank of New Zealand at its 8 Oct meeting, with a 25bp cut fully priced in (24 Sep, Bloomberg). Overall, NZD-USD is likely to move sideways in the weeks ahead, while AUD-NZD would probably go higher.
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 26 August to 25 September*)
FX |
Spot |
200 dma |
1-month % change* |
Support |
Resistance |
|---|---|---|---|---|---|
| DXY | 97.80 | 101.75 | -0.65% | 96.20 | 100.00 |
| EUR-USD |
1.1742 | 1.1151 | 1.07% | 1.1680 | 1.1919 |
| EUR-GBP | 0.8724 | 0.8493 | -1.01% | 0.8700 | 0.8880 |
| GBP-USD | 1.3459 | 1.3124 | 0.03% | 1.3333 | 1.3726 |
| USD-JPY |
148.67 | 148.51 | -0.59% | 145.50 | 150.00 |
| EUR-JPY | 174.57 | 165.44 | -1.64% | 171.10 | 175.43 |
| USD-CHF |
0.7952 | 0.8443 | 1.36% | 0.7829 | 0.8171 |
| EUR-CHF | 0.9337 | 0.9391 | 0.30% | 0.9260 | 0.9460 |
| USD-CAD | 1.3896 | 1.4000 | -0.26% | 1.3720 | 1.4037 |
| AUD-USD |
0.6591 | 0.6402 | 1.68% | 0.6484 | 0.6707 |
| AUD-NZD | 1.1325 | 1.0961 | -2.13% | 1.1190 | 1.1491 |
| NZD-USD |
0.5820 | 0.5841 | -0.48% | 0.5600 | 0.6000 |
Note: * as at 15:48 HKT on 25 September 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 24 September 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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