Monday morning shows thin market liquidity, which is expected to stabilise as more Asian markets start trading. As a result, foreign exchange prices might exhibit volatility during this period.
Current currency rates compared to late Friday are fairly stable, with the yen slightly stronger. Some of the Monday open levels are as follows: EUR/USD at 1.1645, USD/JPY at 147.57, and GBP/USD at 1.3439.
Currency Pairs Overview
The USD/CHF stands at 0.8080, USD/CAD at 1.3755, AUD/USD at 0.6521, and NZD/USD at 0.5946. These figures offer a snapshot of the current FX landscape as the week commences.
In related developments, Fed Board Governor Bowman has suggested a rate cut in September, with an additional two cuts by the end of the year. Additionally, China’s July data reveals a flat year-on-year consumer price inflation, but a higher than expected month-on-month increase.
With the market now digesting Fed Governor Bowman’s comments, we believe the path of least resistance for the US dollar is lower. The call for a September rate cut aligns with recent economic data, which showed US job growth in July 2025 slowing more than anticipated and core inflation easing to 2.8%. This gives the Federal Reserve a clear runway to begin easing policy.
For derivative traders, this suggests a strategy of buying call options on currencies poised to gain against the dollar, like the Euro. The European Central Bank has been more hesitant to signal cuts, with recent Eurozone data showing sticky services inflation, creating a policy divergence that favors a higher EUR/USD. The current level of 1.1645 could be a starting point for a larger move upward.
Analysis of Market Trends
We saw a similar setup in late 2023 when the market began pricing in Fed rate cuts for the following year, leading to a multi-month decline in the Dollar Index. History shows that these initial signals of a policy pivot can mark the start of a significant trend. We should be positioned for a repeat of that pattern, with dollar weakness likely to persist through the end of the year.
The situation with the Australian dollar at 0.6521, however, warrants a more cautious approach. The flat year-over-year consumer inflation in China, coupled with recent reports showing factory gate prices (PPI) have been in deflationary territory for nearly a year, points to persistent economic weakness. These headwinds from China, Australia’s largest trading partner, could limit the Aussie’s upside potential even as the US dollar broadly weakens.
Therefore, focusing on long GBP/USD and EUR/USD exposure seems more prudent. The Bank of England has also maintained a relatively hawkish stance compared to the Fed, making the pound at 1.3439 an attractive position. We can expect volatility to rise as the September Fed meeting gets closer, which may increase the cost of options but also the potential for profit.
