Forex News

• US PPI tops forecasts annually, lifting September Fed hike odds.
• Oil above $100 keeps inflation pressure firmly on traders’ radar.
• UK GDP and CPI data may test BoE patience.

The Pound Sterling loses traction against the US Dollar after the latest producer inflation report, which exceeded estimates, prompting investors to price in a more hawkish Federal Reserve. The GBP/USD trades at 1.3525, down 0.17%.

GBP/USD slips as hot PPI and $100 Oil revive Fed risks

The US Producer Price Index (PPI) in August was in line with estimates of 0.4% MoM, but exceeded forecasts on an annual basis at 5.4%, above the 5.3% projected. Core figures were mostly aligned with economists' estimates, though the monthly figure was 0.2% below estimates of 0.3%, in line with projections of 4.6% YoY.

Following the data release, traders seem more confident that the Fed will raise interest rates at the September meeting. The CME FedWatch Tool shows a nearly 70% chance of a 25-basis-point rate increase.

Worth noting that energy prices continued to trend higher, with Brent and West Texas Intermediate prices surpassing the $100 per barrel barrier once again as the Middle East conflict enters its seventh month of hostilities.

Other data showed that the labour market remains solid, with jobless claims at 206K, above forecasts of 205K but below the previous week's print.

Given the backdrop, traders' focus shifts to the US Consumer Price Index (CPI) report on Friday.

In the UK, Bank of England (BoE) officials remained split, yet its expected to keep interest rates unchanged at the September 17 meeting, with Governor Bailey pushing back against expectations for further tightening.

Also, traders are waiting for GDP data on Friday, which is expected to stall at 0%, down from 0.3% MoM in June. Besides this, investors are waiting for British inflation and wage growth data next week.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3528. The pair holds a mild bullish bias as it sits above the clustered simple moving averages around 1.3476 and has reclaimed several former trend-line barriers, turning them into underlying support. The Relative Strength Index (14) hovers just above the 50 line, hinting that upside momentum is tentative rather than impulsive, but still favors further gains while the price action remains supported by these reclaimed structural levels.

On the downside, initial support is seen at the nearby moving-average cluster around 1.3476, reinforced by the broken downward and upward trend lines at 1.3467 and 1.3448. A deeper pullback would expose the former resistance trend-line break at 1.3362 as a more distant floor. On the topside, the next notable resistance comes in at the upward trend-line break near 1.3675, where bulls would likely face a more meaningful test of the emerging uptrend.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Scotiabank strategists Shaun Osborne and Eric Theoret note GBP/USD is little changed as it extends its recovery from last week’s lows, with risk set to rise on upcoming United Kingdom (UK) trade and industrial data. They expect a hawkish hold from the Bank of England (BoE) next week, with markets already pricing tightening by November. Technically, Sterling is capped in the mid-1.35s but supported in the upper-1.34s within an ascending channel.

Pound steady as BoE risks build

"he domestic release and event calendar has been relatively empty this week, however risk picks up on Friday as markets assess the latest trade and industrial production data."

"Next week’s jobs and CPI figures offer additional risk into Thursday’s BoE, where policymakers are widely expected to deliver a hawkish hold. Next week’s BoE is a nonMPR (forecast) meeting, leaving the November 5th rate decision as the next likely meeting for a 25bpt rate hike—with short-term rates markets already pricing ~19bpts of tightening for the decision."

"Fiscal concerns remain front and center in terms of sentiment, as we continue to highlight the importance of the budget scheduled for late October—the trend in sentiment remains constructive for the GBP. "

"Support has been observed in the upper-1.34s. As such, we await a break of the tight short-term range but continue to feel that medium-term risks lean bullish given the clear ascending trend channel from late June."

"Neutral—the RSI remains close to neutral and is hovering just above the 50 threshold. This week’s price action has revealed a clear struggle to extend much above resistance in the mid-1.35s, limiting the near-term risk of a push back toward the local high around 1.3650."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

TD Securities economists Eli Nir and Oscar Munoz raise their August core PCE forecast after stronger PCE-relevant components in the August PPI report. They now expect core PCE at 0.24% m/m and 3.3% y/y, with headline PCE at 0.33% m/m and 3.8% y/y. They highlight BEA methodology changes and anticipate downward revisions to year-on-year inflation but slightly stronger near-term monthly profiles.

TD revises core PCE projections

"PCE-relevant components of August PPI were slightly stronger than we were anticipating, leading to a higher core PCE forecast ahead of CPI. We now look for 0.24% m/m for August core PCE (3.3% y/y) with a stronger 0.33% for the headline (3.8% y/y)."

"Our market-based core PCE forecast is a more subdued 0.18% m/m and would reflect a slight pickup from July."

"Our PCE forecast, and the Fed's September decision, hinges on tomorrow's CPI report."

"Portfolio management no longer comes from PPI, and there is still uncertainty around the BEA's new calculations for it. It will likely be revised lower, but the market may be overselling the magnitude of the negative revisions."

"Overall, we expect a downward revision to y/y inflation, with more positive near-term revisions to the m/m profile."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• AUD/USD pulls back after touching its highest level since mid-May, cooling a strong run off the June low.
• China's $54 billion financial sector stimulus and a hawkish Australian central bank powered the rally.
• A firmer US Dollar is now capping the pair as traders bet on a September Fed hike and await further US inflation data.

The Australian Dollar eased against the US Dollar on Thursday, slipping back below the 0.7200 mark after touching its highest level since mid-May earlier in the week. AUD/USD trades in the 0.7160 area, lower on the day, as a firmer US Dollar pulls the pair away from a recent peak around 0.7220.

Beijing is reportedly preparing a $54 billion stimulus package aimed at propping up its banking and wider financial sector. Any lift to Chinese growth tends to help Australia, its largest trading partner, and the news gave the AUD a clear boost. From the June trough, the pair had climbed sharply before this week's pullback.

Support has also come from the RBA. A run of hawkish comments from RBA officials, together with Oil holding near $100 a barrel, has pushed traders to price in a rate rise later this month. Higher Australian rates relative to other major central banks tend to support the currency, and short-dated yields have firmed as expectations shift.

Investors increasingly think the Federal Reserve (Fed) may have to raise rates in September, as the Producer Price Index (PPI) rose 5.4% in the year to August, a hot reading. With the escalation of the Middle East conflict and soaring Oil prices keeping inflation sticky, the Greenback has firmed and taken some air out of the Aussie's advance.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.7167, keeping a bearish near-term tone as it holds beneath both the 100-period Simple Moving Average (SMA) at 0.7174 and the 20-period SMA at 0.7215. The latest Relative Strength Index (RSI) reading near 29 sits in oversold territory, suggesting downside pressure persists even as the pair approaches a nearby support area.

On the downside, immediate support is aligned with the horizontal floor at 0.7157, where a break would expose lower levels and extend the current corrective phase. On the topside, initial resistance emerges at the 100-period SMA around 0.7174, followed by the horizontal cap at 0.7193, with additional barriers at 0.7213 and the 20-period SMA near 0.7215 before the higher resistance at 0.7223 comes into play.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• Gold trades under pressure as rising yields and Fed rate-hike bets favour the US Dollar.
• US CPI takes centre stage after producer inflation offers little relief.
• The daily chart points to neutral momentum, while XAU/USD remains capped below its 200-day SMA.

Gold (XAU/USD) trades with a downside bias on Thursday as a steady US Dollar (USD), rising US Treasury yields and Federal Reserve (Fed) rate-hike expectations weigh on the precious metal, while traders also assess the latest US Producer Price Index (PPI) data. At the time of writing, XAU/USD trades around $4,368 after reaching an intraday high of $4,324, down 0.75% on the day.

US PPI rose 0.4% MoM in August, matching market expectations and accelerating from the 0.1% increase recorded in July. Annual producer inflation climbed to 5.4%, slightly above the 5.3% forecast and up from 4.8%.

Core PPI, which excludes food and energy prices, offered a softer reading. The index rose 0.2% MoM, below the 0.3% forecast and the previous 0.3% increase. On an annual basis, core producer inflation increased to 4.6% from 4.3%, in line with expectations.

The figures kept the possibility of a Fed rate hike firmly on the table. At the same time, rising Oil prices due to tensions in the Middle East add to inflation concerns and strengthen the case for tighter policy. Attention now turns to Friday’s US Consumer Price Index (CPI) data, which could settle the debate over whether policymakers move ahead with a hike.

According to the CME FedWatch Tool, traders price in around a 64% probability of a rate hike next week. However, most economists surveyed by Reuters expect the central bank to keep interest rates unchanged through the end of the year. As a non-yielding asset, Gold tends to benefit when interest rates are low, as this reduces the opportunity cost of holding the precious metal.

Strategists at DBS caution that an "energy-driven squeeze represents a harder choice, potentially requiring the Fed to contain inflation expectations while adding pressure on growth," but add that "a credible Fed response could support the USD and ease longer-term inflation concerns."

The US Dollar Index (DXY), which tracks the Greenback against six major currencies, trades around 98.96 after briefly rising above 99, while staying above its intraday low of 98.71. Meanwhile, the benchmark 10-year yield trades around 4.92%, its highest level since November 2023, after the Treasury’s larger bond buyback plan failed to impress markets.

In the near term, Gold remains vulnerable to rising Fed rate-hike expectations and elevated Treasury yields, while tensions in the Middle East are offering little direct support.

Technical analysis: Bears retain control below 200-day SMA

On the daily chart, XAU/USD holds above the 50-day and 100-day Simple Moving Averages (SMAs), suggesting underlying trend support, yet it remains below the 200-day SMA near $4,538, which caps the broader topside.

The Relative Strength Index (RSI) around 47 points to neutral momentum, while the Moving Average Convergence Divergence (MACD) indicator stays below zero with a negative reading and subdued histogram, hinting that rallies could still face selling pressure despite the constructive underlying structure.

On the topside, initial resistance is seen at the 200-day SMA around $4,538, with a break there exposing the next key barrier at the horizontal resistance level near $4,700. On the downside, immediate support emerges from the nearby price pivot zone around the latest close, followed by the 100-day SMA at about $4,339 and the 50-day SMA near $4,266. A deeper slide would bring the major horizontal floor at $4,000 into view as the next significant demand area.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Nordea analysts Jan von Gerich and Tuuli Koivu note that the European Central Bank (ECB) delivered a 25bp rate hike and signalled a bias toward further tightening as its projections show Eurozone inflation above target through 2028. They expect additional 25bp hikes in December and March 2027, while acknowledging upside risks from Middle East tensions and energy prices and downside risks to growth.

Nordea sees more ECB tightening ahead

"The ECB raised rates by 25bp, in line with expectations. While the policy-related paragraph in the press release was left unchanged, emphasizing the ECB’s data-dependent, meeting-by-meeting approach and no pre-commitments to a particular rate path, baseline forecasts showing inflation above target throughout 2026, 2027 and 2028 clearly signal a bias towards further rate hikes."

"We expect to see 25bp rate increases at the December meeting and in March 2027, but there are risks in both directions to this view, given the uncertainty created in particular by elevated geopolitical risks."

"We maintain our baseline of two further 25bp rate hikes at quarterly intervals, with the next one in December and the second in March 2027."

"However, given the limited signs of broader inflationary pressures so far and a weakening in inflation momentum, we still think the ECB has time to monitor how the situation evolves before raising rates again."

"Financial market pricing has recently shifted towards faster and more numerous rate hikes, and those moves continued today."

"As we still think the December meeting is the more likely timing for the next hike, we see some room for these expectations to correct lower, though a lot naturally hinges on the development in energy prices."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• The Euro edges higher against the British Pound after the ECB monetary policy announcement.
• The ECB lifts its deposit rate to 2.50% as Middle East tensions keep inflation elevated.
• The BoE is expected to hold next week, although markets see scope for tightening later this year.

EUR/GBP trades with a modest positive bias on Thursday but stays within the narrow range that has been in place for more than a week. The European Central Bank’s (ECB) widely expected interest-rate increase offers only limited support to the Euro (EUR), as the move was already priced in and fails to trigger a breakout. At the time of writing, the cross trades around 0.8595.

The ECB raised its three key interest rates by 25 basis points, marking its second increase this year and lifting the deposit facility rate to 2.50%. The central bank said the war in the Middle East continues to generate inflation pressures and that inflation is likely to stay well above its 2% target for an extended period. Updated projections show headline inflation averaging 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028.

Speaking after the decision, ECB President Christine Lagarde said the Eurozone economy is proving resilient and most measures of underlying inflation are broadly stable. However, she noted that shorter-term inflation expectations are still elevated and that higher energy costs will gradually feed into core and food prices.

Lagarde expects headline inflation to return to the ECB’s target toward the end of 2027. She added that most longer-term inflation expectations remain close to 2%. On the future policy path, Lagarde said the ECB “did not debate the future rate path” and is “not taking a view on which direction to go at the next meeting.”

On the UK side, the Bank of England (BoE) is widely expected to keep its policy rate unchanged at 3.75% on September 17. All 65 economists surveyed by Reuters between September 4 and 8 expect the Monetary Policy Committee to keep rates on hold next week, while 57 expect no change through the end of the year. However, rising Oil prices keep inflation risks tilted to the upside, with traders pricing a possible hike in November.

Strategists at Scotiabank highlight that “the short-term rates market is still pricing very little chance of a policy adjustment at next Thursday’s meeting, but pricing about 17bpts of tightening for November 5th and a cumulative 32bpts by December 17th,” underscoring expectations for a gradual BoE tightening path into year-end. Scotiabank also cautions that “fiscal risk remains elevated as market participants look to the release of the UK budget in late October,” while, on the data side, they “continue to note the absence of any material releases ahead of Friday’s trade and industrial production figures.”

Scotiabank strategists Shaun Osborne and Eric Theoret note USD/CAD is holding a tight sideways range near 1.38 with no domestic data, leaving the Canadian Dollar (CAD) driven by external factors and technicals. Their fair value model points to a stronger CAD around 1.3700, with spot showing its largest valuation gap in a month. They see limited scope for further CAD drift without new catalysts.

Fair value signals stronger Canadian Dollar

"The CAD has drifted in a tight, sideways range overnight, sticking to yesterday’s close. With no domestic data to focus on this week, the CAD has effectively reverted to being a slave to external developments and technicals."

"Spreads have held relatively steady but could turn a little more volatile in the next few days are markets react to US inflation data. Strengthening crude (and firmer commodities in general) do provide some additional lift to Canadian terms of trade which are not perhaps fully reflected in the CAD currently."

"While spot has drifted sideways, our fair value model has continued to indicate a stronger CAD, settling at 1.3700 today. Spot has been sticking close to the modeled equilibrium but is showing a more significant deviation this morning—reflecting the largest valuation gap in close to a month. That should mean limited potential for the CAD drift to extend, absent new drivers."

"Trend momentum remains USD-bearish across short-, medium-, and long-term studies, meaning that moderate USD gains are likely to draw selling interest. USD support is 1.3715/35 ahead of the decline back to the 1.3500/50 region."

"Neutral/bearish—A firmer USD and a somewhat constructive close yesterday tilts short-term risks a little higher for funds perhaps but broader technical dynamics remain USD-bearish. We spot moderate resistance in the mid/upper 1.38s and firmer resistance in the low/mid 1.39 zone."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Brown Brothers Harriman's (BBH) Elias Haddad reports that the recent USD/JPY decline has stalled despite hawkish comments from Bank of Japan (BoJ) member Kazuyuki Masu, with markets already pricing a 25 bps hike to 1.25% on September 18. He sees a 50 bps move as possible given inflation near target and an economy above capacity, and outlines scenarios where risks are tilted toward a stronger Japanese Yen.

Fed and BoJ decisions drive Yen path

"USD/JPY decline has stalled. Hawkish remarks from BoJ member Kazuyuki Masu barely moved Japan rate expectations or JPY."

"Masu said “to complete the normalization of monetary policy in Japan, I am convinced that the Bank needs to raise the policy interest rate (currently 1.00%) further, so that it falls solidly within the estimated range of the neutral interest rate (1.10% and 2.50%)”"

"Markets have virtually fully priced in a 25bps BoJ rate hike to 1.25% on September 18 for several days now. In our view, a 50bps move cannot be ruled out given underlying inflation is very close to the 2% target and Japan’s economy is running slightly above capacity."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• USD/JPY gains 0.40% on Thursday, supported by renewed US Dollar strength following US economic data.
• US producer prices accelerate in August, while Initial Jobless Claims decline to 206K.
• Markets now turn their attention to US inflation data due on Friday.

USD/JPY advances to around 154.15 on Thursday at the time of writing, up 0.40% on the day. The pair benefits from a rebound in the US Dollar (USD), supported by US data showing accelerating producer price pressures and a still-resilient labor market.

The United States (US) Producer Price Index (PPI) rose 5.4% YoY in August, above the 5.3% expected and accelerating from the previous 4.8% increase after revision. The core PPI, which excludes volatile food and energy components, increased 4.6% YoY, matching expectations and up from a revised 4.3% rise in July. On a monthly basis, headline PPI increased 0.4%, while the core index rose 0.2%.

Meanwhile, Initial Jobless Claims declined to 206K in the week ending September 5, compared with 207K in the previous week and slightly above expectations of 205K. Continuing Jobless Claims also edged lower to 1.774M, reinforcing the view that the US labor market remains relatively resilient.

The PPI data further strengthen expectations of a Federal Reserve (Fed) interest-rate hike in September. According to the CME FedWatch tool, markets now price in nearly a 70% chance of a rate increase, up from around 61% before the data were released.

On the Japanese side, the Japanese Yen (JPY) pauses after its recent rebound fueled by more hawkish expectations surrounding the Bank of Japan (BoJ). Markets fully price in a 25-basis-point rate hike at the September meeting, while recent comments from several central bank officials have reinforced expectations of further monetary policy normalization. This dynamic could, however, limit the extent of the USD/JPY advance.

Market attention now turns to the US Consumer Price Index (CPI) data due on Friday. The inflation report is likely to play an important role in shaping expectations for the Fed's interest-rate path. A stronger-than-expected inflation reading could support the US Dollar, while a sharper slowdown in price pressures could weigh on the Greenback, and in turn on USD/JPY.