Central banks took heart stage this week, delivering a fast lesson on how shifting coverage divergence can ship foreign money merchants scrambling to regulate positions.
The Federal Reserve’s Wednesday fee minimize turned the week’s defining second—not only for the quarter-point discount itself, however for Chair Powell’s surprisingly characterization of inflation as primarily tariff-driven and transitory. That messaging triggered broad greenback weak spot that endured by means of Friday, whilst some Fed officers pushed again with hawkish commentary.
In the meantime, European Central Financial institution members made waves by suggesting charges have reached a ground, the Reserve Financial institution of Australia hinted at potential February tightening, and the Swiss Nationwide Financial institution firmly rejected detrimental charges regardless of weak inflation. The outcome? Every week the place the Swiss franc rallied to the highest of the leaderboard whereas the yen—regardless of an imminent BOJ hike—completed useless final, highlighting how absolutely priced expectations can undermine even hawkish positioning.
Let’s break down how every main foreign money navigated this turbulent stretch and what catalysts drove the motion.
Desk of Contents
USD Pairs
Overlay of USD vs. Main Currencies Chart by TradingView
The greenback kicked off the week on strong footing, shaking off early Asian weak spot to mount a sustained rally forward of the London open by means of Monday’s European session. This power arrived with out apparent catalysts, suggesting merchants had been positioning defensively forward of Wednesday’s Federal Reserve determination, with the dollar discovering help alongside weaker danger sentiment and rising bond yields.
That cautious positioning proved prescient because the greenback’s uneven Tuesday session—bouncing on stronger-than-expected JOLTS information earlier than fading into the afternoon—gave approach to Wednesday’s decisive breakdown. The Federal Reserve delivered its extensively anticipated quarter-point minimize in the course of the US afternoon, however Chair Powell’s dovish framing triggered the dollar’s sharpest losses of the week. His characterization that “tariffs are inflicting a lot of the inflation overshoot” and expectation that their affect would “fade subsequent 12 months” with items inflation peaking in Q1 undermined the hawkish case for holding charges regular, even because the FOMC’s unprecedented three dissents highlighted inner divisions.
The greenback’s post-FOMC weak spot accelerated by means of Thursday’s Asian and London classes regardless of a quick technical bounce in a single day. The Swiss Nationwide Financial institution’s anticipated maintain at 0% offered minimal help, with USD/CHF declining 0.73% as broad greenback weak spot dominated. The dollar prolonged losses in the course of the US morning session following weekly jobless claims surging to 236,000 versus 205,000 anticipated—reinforcing Powell’s Wednesday emphasis on labor market issues and market expectations for extra 2026 fee cuts past the Fed’s projected single transfer.
Friday introduced modest stabilization because the greenback recovered from Thursday’s close to eight-week low, helped by hawkish Fed commentary in the course of the US session. Cleveland Fed’s Hammack advocated for “barely extra restrictive” coverage given elevated inflation, whereas dissenter Schmid reiterated worth stress issues. Thirty-year Treasury yields climbed to three-month highs, offering late-week help. Nonetheless, the injury was achieved—the greenback closed because the second-worst performing main foreign money for the week, with the post-FOMC dovish repricing clearly outweighing Friday’s hawkish pushback.
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EUR Pairs
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The euro spent the week consolidating early earlier than capitalizing on dovish Fed messaging and rising coverage divergence with the ECB.
By Wednesday’s U.S. session, EUR traded blended and sideways regardless of Monday’s stronger-than-expected German industrial manufacturing (1.8% versus 0.4% forecast), and Tuesday’s strong commerce stability information offering no help earlier than relative central financial institution positioning weighed on the one foreign money.
The narrative shifted Wednesday in the course of the London session as ECB officers Simkus and Villeroy signaled charges may stay regular, with President Lagarde suggesting December progress projections could be revised larger. This hawkish tilt seemingly supported EUR by means of noon earlier than Wednesday’s U.S. session introduced the decisive catalyst—Chair Powell’s dovish characterization of tariff-driven inflation as transitory triggered broad greenback weak spot that lifted EUR/USD, although the euro declined in opposition to conventional secure havens as danger urge for food surged.
EUR prolonged beneficial properties Thursday as greenback weak spot endured, with weaker U.S. jobless claims in the course of the U.S. session reinforcing USD weak spot. Friday’s U.S. session noticed EUR rebound on web to complete because the week’s second-best performer, seemingly supported by rising coverage divergence expectations between the Fed and the ECB.
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GBP Pairs
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Sterling spent a lot of the week treading water as merchants positioned cautiously forward of main central financial institution selections, solely to stumble onerous on the end line on disappointing UK progress information.
The pound opened the week caught in uneven ranges by means of Monday’s Asian and London classes, seemingly weighed down when BOE MPC member Taylor’s remark about holding their “foot on the brake a bit of bit nonetheless” reminded markets that UK policymakers weren’t in any rush to ease additional. That defensive tone carried into Tuesday, the place weaker-than-expected UK BRC retail gross sales (1.2% y/y vs 1.5% prior) seemingly bolstered issues about shopper momentum, capping GBP rapidly and certain contributing to the late Tuesday pullback.
Wednesday’s Fed determination marked a turning level in the course of the U.S. session, as Chair Powell’s dovish characterization of tariff-driven inflation as transitory lifted rate-sensitive currencies like sterling. Thursday introduced comparatively muted exercise by means of London hours, although BOE Governor Andrew Bailey’s feedback about persevering with to scale back the central financial institution’s stability sheet presumably offered modest technical help—whilst GBP closed blended, larger in opposition to USD and commodity currencies however decrease in opposition to defensive majors.
Friday’s London session delivered the week’s most decisive transfer decrease, as October GDP contracted 0.1% month-over-month for a second consecutive decline, with companies output falling 0.3%—seemingly reflecting persistent price range uncertainty. Markets instantly priced in elevated easing expectations for the December 18 BOE assembly, positioning sterling because the day’s worst performer.
Bullish Headline Arguments
- BOE members favor a measured method to additional fee cuts
- BOE member Ramsden thinks “gradual removing of coverage restraint” stays acceptable
- BOE Deputy Gov. Lombardelli careworn the “upside dangers to inflation” whereas arguing for a cautious method to additional fee cuts
- BOE member Dhingra stated disinflation is on observe, doesn’t see “a selected should be so restrictive.”
- BOE member Mann is skeptical that headline CPI will decelerate to focus on by mid-2027
- RICS U.Okay. Home Value Steadiness for November 2025: -16.0% (-20.0% forecast; -19.0% earlier)
- U.Okay. Manufacturing Manufacturing for October 2025: 0.5% m/m (0.5% m/m forecast; -1.7% m/m earlier); -0.8% y/y (-1.2% y/y forecast; -2.2% y/y earlier)
Bearish Headline Arguments
- BOE member Taylor expects inflation to fall to focus on ‘within the close to time period’
- UK BRC retail gross sales for November: 1.2% y/y (2.5% forecast, 1.5% earlier)
- Monetary Instances reported that the U.Okay. pledged further $2 billion NHS spend to avert Trump tariffs
- U.Okay. GDP for October 2025: -0.1% m/m (0.0% m/m forecast; -0.1% m/m earlier); 1.1% y/y (0.9% y/y forecast; 1.1% y/y earlier)
- U.Okay. NIESR Month-to-month GDP Tracker for November 2025: -0.1% (0.1% forecast; 0.0% earlier)
CHF Pairs
Overlay of CHF vs. Main Currencies Chart by TradingView
The Swiss franc emerged because the week’s strongest main foreign money, rallying steadily from Monday’s U.S. session by means of Thursday earlier than sustaining beneficial properties into Friday’s shut.
The franc began with blended Monday buying and selling, gaining in opposition to commodity currencies and yen whereas weakening versus euro, sterling, and greenback as markets positioned defensively forward of the Fed determination. Swiss shopper confidence matching expectations at -34.0 didn’t present a lot help, characterised by CHF’s transfer decrease by means of the U.S. afternoon as Treasury yields climbed.
Tuesday’s session noticed momentum shift decisively, with the franc advancing in opposition to almost all majors as pre-FOMC warning intensified safe-haven demand. The rally accelerated sharply Wednesday in the course of the U.S. session following the Fed’s 25-basis-point minimize and Chair Powell’s dovish press convention, which triggered broad greenback weak spot that seemingly lifted CHF to session highs throughout the board.
Thursday’s SNB determination bolstered the bullish tone—whereas policymakers held charges at zero as anticipated, Governor Schlegel’s emphatic rejection of detrimental rates of interest regardless of downgraded inflation forecasts appeared to dampen easing expectations. The franc prolonged beneficial properties by means of the U.S. session as preliminary jobless claims weak spot sparked USD weak spot, probably including some movement to the franc.
Friday’s uneven session finally closed web constructive, seemingly benefiting from risk-off flows as tech shares tumbled and safe-haven positioning intensified.
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CAD Pairs
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The Loonie kicked off the week on shaky floor, giving again Friday’s employment-driven beneficial properties as falling oil costs and cautious positioning forward of central financial institution conferences seemingly pressured the commodity foreign money by means of the Monday London and U.S. classes. WTI’s tumble and rising greenback demand on larger yields seemingly intensified CAD’s decline into the weekly open shut.
Pre-Fed and BOC jitters saved the Loonie uneven by means of Tuesday and into Wednesday, although CAD briefly discovered help from a constructive JOLTS report in the course of the Tuesday U.S. afternoon earlier than fading. The Financial institution of Canada’s anticipated maintain at 2.25% Wednesday afternoon turned the week’s pivotal second—not for the choice itself, however for Governor Macklem’s characterization of charges on the “decrease finish of the impartial vary” and refusal to rule out future cuts, which appeared to undermine the foreign money even because the Fed delivered dovish commentary hours later.
Thursday’s U.S. session marked a turning level when weaker-than-expected jobless claims (236K versus 205K forecast) triggered broad greenback weak spot, presumably contributing to CAD’s rebound, significantly in opposition to its commodity foreign money friends after Australia’s disappointing employment report. The Loonie maintained this relative power into Friday’s shut regardless of uneven intraday motion, ending the week blended with an arguably bullish lean as recovering commodity costs—particularly copper’s document rally—and protracted USD softness seemingly offered late-week help that overshadowed home information misses in wholesale gross sales and capability utilization.
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AUD Pairs
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The Aussie opened the week in cautious territory, buying and selling blended by means of Monday’s Asian and London classes as gold steadied and markets squared positions forward of main central financial institution conferences. China’s document commerce surplus above $1 trillion could have offered momentary help, although defensive positioning saved beneficial properties contained earlier than renewed U.S. promoting stress emerged.
Tuesday’s Asian session delivered a shot of volatility for the Aussie when the RBA held charges at 3.60% as anticipated, initially triggering temporary promoting earlier than Governor Bullock’s hawkish commentary sparked a pointy reversal to the upside. Her emphasis on upside inflation dangers and alerts that February could possibly be a stay assembly for potential tightening drove the Aussie sharply larger throughout the board, making it Tuesday’s strongest main foreign money.
That momentum proved short-lived. Wednesday’s Asian session introduced China’s disappointing inflation information—month-to-month CPI at -0.1% versus +0.1% forecast and deeper PPI deflation—which appeared to undermine the comdoll heading into the Fed determination. Thursday delivered an excellent sharper blow in the course of the Asian session when November employment plunged 21,300 versus expectations for a 5,000 achieve, with the participation fee dropping to 66.7% from 67.0%, making the Aussie the day’s weakest main regardless of surging gold costs.
The week closed with Friday’s whipsaw—early Asian power pale dramatically in the course of the U.S. morning session, seemingly monitoring tech’s collapse and hawkish Fed commentary that pushed yields larger.
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NZD Pairs
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The kiwi entered the week with first rate momentum, posting beneficial properties by means of Tuesday’s U.S. session, seemingly on China’s sturdy commerce surplus throughout Monday’s Asian hours and the RBNZ’s comparatively much less dovish stance in comparison with world friends seemingly offered foundational help. The foreign money rode alongside the Aussie’s Tuesday Asian rally following RBA Governor Bullock’s hawkish February inflation warning, earlier than consolidating by means of London.
Wednesday’s Asian session introduced stress as softer Chinese language inflation information—headline CPI at -0.1% month-to-month versus 0.1% anticipated—weighed on the growth-sensitive foreign money, although NZD recovered approaching the FOMC determination. Powell’s dovish characterization of tariff-driven inflation sparked a late-session rally that lifted NZD in opposition to USD and commodity currencies, although it underperformed European majors.
The ultimate two classes turned decisively bearish. Thursday’s U.S. hours noticed observable NZD losses correlating with Australia’s disappointing employment report. Friday’s Asian power from strong home retail information rapidly reversed as AI fairness issues and hawkish Fed dissenter commentary drove broad risk-off flows by means of the London and New York classes.
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JPY Pairs
Overlay of JPY vs. Main Currencies Chart by TradingView
The yen’s week began with a puzzling contradiction—regardless of Finance Minister Katayama’s renewed complaints about “one-sided, fast strikes,” JPY weakened by means of Monday’s Asia session and continued sliding into Tuesday’s U.S. commerce. The selloff appeared to stem from a timing downside: markets had already priced within the anticipated BOJ fee hike for the next week, leaving little room for hawkish repricing, whereas different main central banks had been concurrently hanging extra hawkish tones.
Governor Ueda’s Tuesday feedback about “considerably fast” fee rises and potential bond shopping for intervention seemingly bolstered perceptions that the BOJ would stay cautious with tightening, presumably amplifying JPY weak spot by means of London hours. The foreign money discovered its footing throughout Wednesday’s Asian session as Chinese language deflation information sparked safe-haven flows, although the reversal proved short-term as FOMC positioning changes took maintain throughout London commerce.
Thursday’s U.S. open introduced JPY’s strongest rally of the week when disappointing jobless claims information dragged Treasury yields decrease, although fairness power rapidly unwound these safe-haven beneficial properties by the afternoon shut. The foreign money resumed its decline by means of Friday’s Asian and London classes as vast fee differentials reasserted dominance, with solely a quick spike throughout U.S. fairness hours—coinciding with tech sector weak spot—offering short-term reduction. JPY completed because the week’s worst-performing main foreign money, underscoring the problem of hawkish expectations that had been already absolutely priced in.
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