Markets expect the Federal Reserve to cut rates at least three times by Q1 2026, while the ECB is likely to hold rates steady in September, awaiting updated projections. Some analysts suggest the ECB might hike rates later, driven by Germany’s fiscal stimulus, contrasting with the Fed’s easing path, which could boost the euro against the dollar. Key upcoming data, including Eurozone PMI and US PMI figures, along with the Jackson Hole symposium, will influence EURUSD movements. Two major US banks are bullish on the euro, targeting $1.20 by year-end and $1.22 by mid-2026, citing US inflation risks and growth moderation. Geopolitical developments, particularly from the Trump-Putin summit and follow-up talks with European leaders, could impact the dollar’s strength, with potential peace deals favoring the euro unless significant Ukrainian territorial losses raise long-term concerns.

Japan’s strong Q2 GDP growth supports the Bank of Japan’s cautious move toward gradual rate hikes, likely in October, if inflation remains high, with July’s CPI expected to stay elevated at 3.1%-3.3%. Prime Minister Ishiba, despite political setbacks, aims to leverage the positive economic outlook to stabilize his leadership. The narrowing yield spread between US and Japanese bonds, along with US Treasury Secretary Bessent’s comments urging Japan to manage inflation, supports the yen, though concerns linger about potential market volatility from rapid BOJ policy shifts. Additionally, Japan’s approval of a yen-backed stablecoin is expected to boost demand for government bonds and strengthen the yen’s role in the digital economy.

Recent strong Australian labor data suggests the Reserve Bank of Australia will continue a cautious, gradual rate-cutting cycle, with the big four banks predicting the Official Cash Rate will drop to 3.35% by the end of 2025, likely starting in November. The RBA’s moves depend on inflation staying within 2%-3% and unemployment between 4.3%-4.5%, while markets expect a more aggressive U.S. Federal Reserve cutting 55 basis points compared to 37 for the RBA, potentially supporting AUDUSD strength. China’s slowing economy, with weaker-than-expected industrial output, retail sales, and rising joblessness, may accelerate its consumer subsidy program, potentially boosting the Australian dollar through economic spillovers. Key upcoming Australian data, including consumer confidence, PMIs, and inflation expectations, alongside Fed Chair Powell’s Jackson Hole speech and U.S. PMI data, could significantly influence AUDUSD trends and RBA policy expectations.