The European Central Bank maintained its key interest rates, keeping the deposit rate at 2%, reflecting a cautious approach as inflation remains stable and the euro zone economy shows resilience. ECB policymakers are adopting a data-driven, meeting-by-meeting strategy, with no further rate cuts expected soon, and some analysts predict a potential rate hike by mid-2026. Austrian Central Bank Governor Martin Kocher noted the rate cycle may be nearing its end, while ECB member Joachim Nagel warned that further rate cuts could threaten the 2% inflation target, emphasizing fiscal discipline. Key upcoming data, including Germany’s ZEW Survey and Eurozone CPI, may influence the EURUSD, which is expected to trend upward.

The Bank of Japan is likely to keep its benchmark interest rate at 0.5% this Friday, awaiting clarity on new leadership following Ishiba’s resignation, which has weakened investor confidence and introduced a yen-negative premium. Despite political uncertainty, economic growth, rising wages, and reduced trade risks support a potential rate hike by October or December, with a Bloomberg survey favoring October. While markets remain skeptical about near-term tightening, a hawkish signal from Governor Ueda on September 19 could strengthen the yen, especially as the U.S. Federal Reserve continues its rate cuts.

Recent U.S. economic data supports expectations for a 25bps Federal Reserve rate cut, with further cuts anticipated in October and December. In Australia, strong economic indicators have reduced the likelihood of a November RBA rate cut to 81%, as inflation remains stable and household spending rises for the sixth consecutive month, signaling a consumer recovery. However, robust consumer spending could delay further RBA rate cuts if it drives inflation. The Australian dollar is gaining strength, supported by a dovish Fed outlook, a stronger Chinese yuan, and bullish bets from hedge funds, with Australia’s August labor data due this week.