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US dollar strength and diverging central bank policies set to drive global currency market volatility

OFX

Currency markets are set for another volatile month as resilient US economic data, diverging central bank policies and geopolitical uncertainty continue to weigh on investor confidence, according to OFX's latest Monthly Currency Outlook.

The report highlights renewed US dollar strength and central banks each exploring different policy options as the key themes shaping foreign exchange markets, with investors closely monitoring economic data and monetary policy signals for further direction.

OFX Director, Luke Czirok, said currency markets are likely to remain highly sensitive to interest rate expectations and economic data.

“While inflation has eased in many economies, central banks are taking very different approaches to monetary policy, creating ongoing volatility across major currency pairs.

"The key challenge for businesses and individuals is navigating uncertainty. Currency markets can move quickly when expectations around interest rates or economic growth change, which is why staying informed and having a strategy in place can be critical when managing international payments,” he said.

The OFX Monthly Currency Outlook reports the US dollar remains well supported after stronger-than-expected economic data reinforced expectations that US interest rates will remain higher for longer. This has strengthened demand for the greenback while placing pressure on many major currencies, including the euro, Australian dollar, New Zealand dollar and Japanese yen.

At the same time, differing approaches from the world's major central banks - particularly the US Federal Reserve, European Central Bank, Bank of Japan and Bank of England - are creating greater uncertainty for investors and businesses exposed to international markets.

The euro weakened throughout June as markets increasingly anticipated the European Central Bank (ECB) would leave interest rates unchanged while the US Federal Reserve maintained a more hawkish outlook. Investors will closely watch the ECB's July meeting, along with fresh Eurozone economic data, for signs of improving growth.

In the United Kingdom, political developments are also expected to remain in focus following the appointment of Andy Burnham's as Prime Minister and the formation of his cabinet, including the appointment of John Healey as Chancellor. While uncertainty initially weighed on sterling, expectations of a smooth leadership transition have helped the pound recover some recent losses.

The Australian dollar recorded mixed performance in June, weakening against the US dollar while remaining resilient against several trading partners thanks to stronger commodity prices and improving global risk sentiment. China's economic outlook, commodity markets and global interest rate expectations are expected to remain the key drivers for the currency.

Similarly, the New Zealand dollar came under pressure from broad US dollar strength, softer commodity prices and reduced expectations for further domestic interest rate increases.

Meanwhile, the Japanese yen remains near multi-decade lows against the US dollar as investors continue to favour higher-yielding US assets despite the Bank of Japan's gradual policy normalisation. Markets are watching closely for any signs of further policy tightening or potential government intervention to support the currency.

The Canadian dollar, Singapore dollar and Hong Kong dollar also remain heavily influenced by US dollar strength, with investors closely monitoring upcoming central bank decisions and economic data releases for further direction.

With central banks entering another critical policy period and global economic uncertainty persisting, OFX expects foreign exchange markets to remain highly responsive to incoming economic data throughout July.

 

For further information and access to the full OFX Currency Outlook see https://www.ofx.com/en-au/blog/currency-outlook/

 

Notes to editors:

OFX expected trading ranges, July 2026

• EUR/USD: 1.1200–1.1620
• EURGBP 0.8510–0.8730
• GBP/USD: 1.3100–1.3515
• GBPEUR 1.1455–1.1750
• AUDEUR 0.6036–0.6082
• AUDGBP 0.51648–0.52194
• AUDNZD 1.2132–1.2213
• AUD/USD: 0.6883–0.6960
• NZDEUR 0.4964–0.4998
• NZDGBP 0.4248–0.4289
• NZDAUD 0.8188–0.8243
• NZD/USD: 0.5658–0.5727
• USD/JPY: ¥158–¥164
• DXY: 100.300–101.200
• CADUSD 0.7000-0.7350
• USDSGD 1.2850–1.3020 
• USDHKD 7.8350–7.8480

About us:

About OFX:

OFX is a leading financial operations company providing businesses and accounting firms with real-time financial control and visibility to do business anywhere in the world. With an innovative platform and 24/7 human support, OFX automates and simplifies doing business across borders, reducing risk and eliminating routine operational tasks. Offering global business accounts, payments to 180 countries in 30+ currencies and currency risk management solutions to simplify global payments. OFX further enhances business operations by providing corporate cards with spend management, bill payments, vendor management, and integrations with popular accounting and HRIS software, to help achieve better business solutions so accounting firms and businesses thrive. 

Headquartered in Sydney, Australia, with offices globally, in the United States, Canada, United Kingdom, Ireland, New Zealand, Singapore and Hong Kong. ISO/IEC 27001:2022 certified globally, 700+ employees, listed on the ASX since 2013, licensed in 50 jurisdictions and regulated by over 50 regulators globally. OFX has been a trusted innovator in global money movement for over 25 years.

For more information about OFX and its financial automation solutions, visit www.ofx.com

 

Contact details:

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