The below key drivers are likely to impact investor risk sentiment and FX markets in July:
- Strong US economic data, interest rate expectations and Fed commentary are keeping the US dollar well supported and shaping how investors are positioning in FX markets this month.
- Different central bank approaches, especially between the Fed, ECB and Bank of Japan, are creating more market uncertainty and driving sharper moves in currency markets.
EUR | Euro
The euro weakened against the USD as US economic data improved and interest rate expectations diverged. Markets are now watching for signs of the EU’s economic recovery and further guidance from the ECB and Fed.
The euro fell against the USD throughout June, largely due to better-than-expected US economic data and growing concerns that Eurozone growth may be slowing. Starting June around US$1.1670, the EURUSD touched a 1-year low of US$1.1324 on June 24. This drop was likely caused by expectations of a divergence in policy between the US Federal Reserve (Fed) and European Central Bank (ECB). With falling inflation in the Eurozone, markets are not expecting the ECB to hike interest rates this year. By contrast, the Fed is expected to hike interest rates 1-2 times, hitting 4.2% year-on-year.
The June European Union (EU) Purchasing Managers’ Index numbers hovered around the 50 level, which is the divide for economic contraction vs expansion; and the most recent inflation data released on July 1 saw a faster than expected drop from 3.2% to 2.8%.
Looking ahead, the next European Central Bank interest rate decision is scheduled for July 23 with markets expecting a pause. Markets are also watching ongoing developments in the Middle East, along with the latest EU PMI numbers due July 24, which many are hopeful will show a rebound in confidence after the drop in the price of oil – though this is far from assured.
Expected ranges:
- EURUSD 1.1200–1.1620
- EURGBP 0.8510–0.8730
GBP | Sterling
The pound fell against a stronger US dollar, as solid US economic data boosted demand for the USD. It later recovered as UK political uncertainty eased and markets looked ahead to key policy decisions.
The GBPUSD trended lower throughout June with the pair touching US$1.3140 on June 24, its lowest level since November 2025. This change is largely due to the USD benefiting from stronger than expected growth from the US, as well as better-than-forecast jobs data, and higher inflation.
Domestically, the big news has been the resignation of UK Prime Minister, Keir Starmer. His decision leaves the door open for the newly elected MP for Makerfield, Andy Burnham, to return to Westminster, where he is expected to take over from Starmer by July 17. While the political uncertainty over Starmer’s departure had been weighing on the pound, the lingering prospect of a messy leadership battle continues to add pressure. However, there appears to be very little pushback from Labour MPs, making Mr Burnham’s promotion to PM likely uncontested. This united front has seen GBPUSD push back up towards US$1.33 as we start July, and GBPEUR reaching a 1-year high of US$1.1660 on July 1.
Looking ahead, the main event in the UK is anticipated to be the inauguration of Andy Burnham as PM on July 17. Following that, the Bank of England (BoE) interest rate decision on July 30 isn’t expected to bring a policy change. With the price of Brent Crude oil falling back to around $72 a barrel amid a fragile truce between the US and Iran, comments from BoE policymakers about the future path of inflation will likely be an important area of focus.
Expected ranges:
- GBPUSD 1.31–1.3515
- GBPEUR 1.1455–1.1750
AUD | Australian dollar
The AUD fell against the USD in June, but improved commodity prices and investor confidence helped to support the AUD against other currencies. Experts will be focused on interest rates and commodity markets for direction.
The Australian dollar showed mixed performance in June, finishing the month slightly weaker against the USD, but relatively resilient on a broader trade-weighted basis. The Reserve Bank of Australia’s (RBA) Trade Weighted Index (TWI) – which measures the AUD against the currencies of key trading partners – remained near multi-month highs, showing the AUD largely held its value despite a volatile global backdrop.
Against the US dollar, the AUD declined over the month as uncertainty around the global growth outlook and the timing of further US Federal Reserve (Fed) interest rate cuts impacted investor confidence. Despite this, the AUD was supported by commodity prices remaining elevated, and strong performance from gold and metallurgical coal, helping to underpin Australia’s export revenues. Investors continued to view Australian yields as relatively attractive, helping to offset some of the pressure from a stronger US dollar. The AUD also benefited from improving global risk sentiment and continued demand from Asian trading partners.
Looking ahead, the Australian dollar is likely to remain sensitive to developments in China’s economy, commodity markets and the outlook for global interest rates.
Expected ranges:
- AUDEUR 0.6036–0.6082
- AUDGBP 0.51648–0.52194
- AUDUSD 0.6883–0.6960
- AUDNZD 1.2132–1.2213
NZD New Zealand dollar
The New Zealand dollar weakened in June as stronger US data, lower commodity prices and global economic uncertainty created pressure. Markets are now watching interest rates, commodity prices and global growth for direction.
In June, the New Zealand dollar weakened against the US dollar, euro, pound and several Asian currencies as investors gravitated towards the perceived safety of the USD amid shifting global interest rate expectations. Stronger-than-expected US economic data helped fuel the weakness in the New Zealand dollar, along with higher US yields – largely caused by the Federal Reserve holding interest rates, and increasing demand for the USD as a safe haven currency.
Markets pared back expectations for aggressive interest rate moves from the Reserve Bank of New Zealand (RBNZ), reducing some of the yield support that had previously benefited the NZD. Commodity markets also played a role, with falling prices across several key commodities reducing support for both the NZD and AUD. Additionally, concerns over lean global economic growth, and China’s sluggish economic outlook tempered investor appetite for risk assets, adding further pressure to the NZD.
Despite the weaker month, the NZD remains supported by New Zealand’s relatively stable economic backdrop and the prospect of inflation remaining above target. These factors continue to influence expectations for monetary policy and could provide support for the NZD should global risk sentiment improve.
Looking ahead, the New Zealand dollar’s direction is likely to remain closely linked to developments in US interest rates, global growth prospects and commodity prices. While June was a challenging month, the longer-term outlook will likely depend on whether investors regain confidence in global risk assets and the New Zealand economic story.
Expected ranges:
- NZDEUR 0.4964–0.4998
- NZDGBP 0.4248–0.4289
- NZDUSD 0.5658–0.5727
- NZDAUD 0.8188–0.8243
USD | United States dollar
The US dollar strengthened in June as confidence in the US economy and interest rate expectations rose, outperforming many other currencies. Recent weaker jobs data has cooled momentum, with markets now watching upcoming policy signals.
The US dollar has climbed to its highest level in over a year since President Trump’s liberation day tariffs, supported by rising expectations for higher interest rates and growing optimism about the US economy.
The US Dollar Index (DXY) began June at 98.595 before peaking at 101.568 on June 24, closing the month at around 100.917. The USD outperformed all other major currencies, showing the strongest performances against Scandinavian currencies and the Australian and New Zealand dollars, which fell between 4.7% and 7%. However, US employment data released on July 2 curbed US dollar strength, with the data stating only 57,000 new jobs were created in the period, significantly less than the anticipated amount of 114,000. As a result, the DXY fell by 0.55%.
Looking ahead, the US dollar’s renewed success will likely centre on optimism around the US economy remaining stable, and recently appointed Federal Reserve (Fed) Chair Kevin Warsh’s interest rate decision at the end of July. Mr Warsh’s unexpectedly tough stance on inflation and interest rates as Chair has reshaped market expectations for rates this year. However, J.P. Morgan Global Research still expects the Fed to keep interest rates unchanged for the rest of the year. Assuming the Fed holds rates, economic data remains positive and the AI-driven rally in US equities is sustained, the US dollar could continue climbing.
Expected range:
- DXY 100.300-101.200
JPY | Japanese yen
The Japanese yen weakened throughout June as expectations of higher US interest rates continued to attract investors. Markets are now watching Japan’s central bank and any signs of action to support the currency.
The Japanese yen remained under pressure throughout June, falling to its weakest level against the USD in nearly 40 years, reaching 162.77 – a level not seen since December 1986. While the Bank of Japan (BoJ) raised its policy rate to 1.%, the highest since 1995, the move was largely anticipated by markets and provided only temporary support for the yen. Instead, investors focused on the widening interest rate differentials between JPY and USD, which continued to favour the USD. The BoJ maintained its gradual approach to policy normalisation, acknowledging that inflation is above target, and highlighting risks from slowing global growth and geopolitical tensions.
Meanwhile, speculation around potential intervention by Japan’s Ministry of Finance increased as USDJPY approached levels where authorities have previously stepped in. Although intervention concerns limited the pace of yen weakness, they didn’t reverse the broader trend, with higher US yields continuing to attract capital into the US dollar.
Looking ahead, markets will be closely watching the BoJ’s July 30–31 policy meeting for any signals of further tightening. Attention will also remain on US data, which will shape expectations for Federal Reserve policy. If US yields remain elevated while the BoJ continues its cautious approach, USDJPY could remain biased higher. Conversely, any stronger hawkish guidance from the BoJ or official currency intervention could provide renewed support for the yen.
Expected range:
- USDJPY ¥158–¥164
CAD | Canadian dollar
The Canadian dollar weakened in June as a stronger US dollar and lower oil prices weighed on the currency. Markets are now watching economic data and BoC signals for signs of recovery.
The Canadian dollar declined further in June, hitting lows against the US dollar not seen since April 2025. CADUSD started June at US$0.7247 and closed out June at US$0.7044, a 2.8% decrease across the month. The decline in the Canadian dollar was primarily driven by a surge in the US dollar, which has regained its safe haven status during the current Middle East conflict. Additionally, falling crude oil prices have impacted the country’s resource-heavy economy. As oil is one of Canada’s main exports, cheaper crude oil prices have resulted in fewer US dollars flowing across the border, driving down the demand for the Canadian dollar. The CAD received a brief respite after domestic inflation increased from 2.8% to 3.2%, well above the expected 3%.
Looking forward, the Canadian dollar could see a recovery, if positive signals emerge from the July 10 employment data and July 15 Bank of Canada (BoC) interest rate decision. While the expectation is for the BoC to hold rates at 2.25%, any hint that they might need to raise rates to fight sticky inflation could potentially spark a summer rally.
Expected range:
- CADUSD 0.7000-0.7350
SGD | Singapore dollar
The Singapore dollar weakened as broad US dollar strength and higher US interest rate expectations drove demand for the greenback. Markets expect the US dollar to remain well supported in the near term.
Throughout June, USDSGD broke out of its tight trading range, rallying from around 1.2761 to roughly 1.2994. The main driver was a resounding return of US macro exceptionalism, which reignited aggressive broad-based US dollar strength and put pressure on the Singapore dollar.
The Singapore Department of Statistics reported that May headline CPI held steady at 1.8% year-on-year. While the full-year GDP growth forecast was maintained at 2% to 4%, this was lower than expected, considering the strong Q1 growth of 6%. Despite a global decrease in energy prices, markets were surprised at the June FOMC meeting, as the Federal Reserve signalled a prolonged pause into 2026, pushing US Treasury yields higher. This widened yield differentials against the steady domestic monetary policy stance, overshadowing the cooling energy market.
Market research indicates that the outlook suggests potential for sustained near-term USD dominance. While the initial post-FOMC volatility might stabilise, and lower energy prices could provide some relief, major local institutions expect USDSGD to likely test the 1.295–1.300 resistance range over the coming month.
Expected range:
- USDSGD 1.2850–1.3020
HKD | Hong Kong dollar
The HKD remained stable despite increased market volatility, with a stronger USD and higher US interest rates continuing to influence currency movements. Markets expect these conditions to persist in the near term.
The USDHKD pair experienced heightened intraday volatility over the past month but remained locked within its strict 7.75–7.85 peg band. A strong USD, fuelled by resilient US growth and safe haven flows, acted as a primary anchor for the pair despite a noticeable cooling in global energy costs.
Domestically, the May composite Consumer Pricing Index (CPI) – a measure for inflation – climbed to a 13-month high of 2% year-on-year, driven by rising transport and utility costs, while Q1 real GDP growth was confirmed at a robust 5.9%. Meanwhile, the Hong Kong Monetary Authority (HKMA) matched the Federal Reserve’s pause of interest rates, leaving the base rate unchanged at 4%. This triggered substantial volatility and elevated US Treasury yields.
The HKD is impacted by conflicting factors: local investment into Hong Kong stocks are helping to add support, but high US interest rates are making the US dollar more attractive. Because of this, investors are borrowing HKD to invest in higher-yielding US assets, which tends to push the exchange rate higher. Over the coming month, USDHKD is anticipated to gravitate toward the upper half of its trading band.
Expected range:
- USDHKD 7.8250-7.8500
The pound’s biggest driver isn’t UK politics. Read the article.
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