Monday morning shows thin liquidity in the market, but this is likely to improve as more Asian markets open. Consequently, foreign exchange prices may experience some volatility during this time. Current currency rates are relatively stable compared to late Friday, with the yen showing slight strength. Here are some opening levels for Monday: EUR/USD at 1.1645, USD/JPY at 147.57, and GBP/USD at 1.3439.

Currency Pairs Overview

– USD/CHF: 0.8080 – USD/CAD: 1.3755 – AUD/USD: 0.6521 – NZD/USD: 0.5946 These numbers provide a quick look at the current FX market as we start the week. In related news, Fed Board Governor Bowman has indicated a possible rate cut in September, along with two additional cuts by the end of the year. Meanwhile, China’s July data shows year-on-year consumer price inflation remains flat, but the month-on-month increase was higher than expected. With the market reacting to Fed Governor Bowman’s statements, we think the most likely movement for the US dollar is downward. The expectation for a September rate cut aligns with recent economic data. This data showed that US job growth slowed more than expected in July 2025, and core inflation decreased to 2.8%. This sets the stage for the Federal Reserve to start easing policy. For traders dealing in derivatives, this points to a strategy of buying call options on currencies likely to strengthen against the dollar, such as the Euro. The European Central Bank has been cautious about signaling cuts, while Eurozone data indicates stubborn service inflation, creating a favorable divergence for a rising EUR/USD. The current level of 1.1645 could be the starting point for a significant upward movement.

Analysis of Market Trends

We witnessed a similar scenario in late 2023 when the market began to factor in Fed rate cuts for the following year, resulting in a multi-month decline in the Dollar Index. Historical patterns suggest that these early signs of a policy shift can signal the beginning of a bigger trend. We should prepare for a potential repeat of this cycle, with ongoing dollar weakness expected through year-end. However, the situation with the Australian dollar at 0.6521 calls for caution. The flat year-over-year consumer inflation in China, combined with reports indicating factory gate prices (PPI) have been in a deflationary phase for nearly a year, signals ongoing economic challenges. These difficulties from China, Australia’s largest trading partner, may restrict the Aussie’s upside potential even as the US dollar weakens overall. Focusing on long positions in GBP/USD and EUR/USD appears to be a more prudent approach. The Bank of England has maintained a relatively hawkish position compared to the Fed, making the pound at 1.3439 a favorable option. As the September Fed meeting approaches, we can expect increased volatility, which may raise option costs but also enhance profit potential. Create your live VT Markets account and start trading now.

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