Forex News

ING’s Senior Economist Min Joo Kang notes that the Bank of Korea kept its policy rate at 2.5% and stressed a data-dependent stance as inflation pressures rise and GDP growth projections weaken. The report argues overall policy direction is still tilted hawkish, with supply shocks and weaker KRW raising inflation risks, and suggests the next move in rates should be a hike, potentially in July.

BoK holds but leans toward future hikes

"In its meeting statement, the Bank of Korea highlighted the challenge of balancing support for economic growth and curbing inflation. The BoK observed that price pressures have risen significantly since early March, with annual consumer price index growth likely to exceed February’s forecast of 2.2%. GDP growth, meanwhile, is now projected to fall below the earlier 2.0% forecast."

"BoK Governor Rhee has consistently adhered to a principle: temporary external shocks do not warrant monetary policy responses. However, if such shocks start to raise inflation expectations and cause secondary effects, the BoK will adjust its policy accordingly."

"The BoK now projects that both headline and core inflation will likely rise more than previously forecasted. The emphasis on high inflation sensitivity and upside risks to core inflation signals that the BoK is leaning towards a more hawkish policy stance, in our assessment."

"If we’re right about supply constraints, which would have a larger impact on inflation than growth, the BoK is likely to respond with rate hikes. It could happen as early as July."

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

Commerzbank’s Bernd Weidensteiner notes that U.S. inflation jumped to 3.3% in March, driven mainly by higher gasoline prices linked to the war in Iran, while core inflation remains moderate. The bank expects headline inflation to approach 4% by May before easing in the second half of 2026, with the Federal Reserve likely keeping interest rates unchanged until late 2026.

Energy shock lifts prices and risks

"U.S. inflation jumped to 3.3% in March, up from 2.4% in February. The main reason is the rise in gasoline prices due to the war in Iran."

"Excluding energy and food (the “core rate”), price pressure was actually slightly lower than expected at 0.2% month-on-month in March."

"For other goods and services, the energy price shock will not become apparent until the coming months."

"We expect the overall inflation rate to rise to nearly 4% by May."

"Assuming that the situation in the Middle East then eases and the oil price falls back to $80, inflation should ease again in the second half of the year, but not fall below 3% until spring 2027."

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

UBS economist Paul Donovan discusses how visible Oil prices at fuel stations interact with changing consumer behavior in major economies. He notes that US gasoline prices above USD 4 per gallon are framed as a crisis, yet demand trends in the United Kingdom (UK), United States (US), Germany and France show flat or lower motor fuel use versus 2015 and pre-pandemic levels. Donovan also highlights political choices around subsidizing fuel instead of using prices to encourage behavioral change.

Motor fuel demand and policy choices

"One of the most visible oil prices is that of motor fuels. In almost every country, the price is predominantly displayed by the side of the road. In the US, the rise above USD 4 per US gallon in the average price of gasoline is presented as a national crisis."

"In the UK, demand for motor fuel is around the same level as in 2015—down 3.5% from its pre-pandemic level. Some of this is fuel efficiency and electric vehicles, but Britons are also driving about 0.8% less than in 2019."

"In the US, motor fuel volumes are the equivalent of pre-pandemic levels and below those of 2015. It is a similar story in Germany and France."

"Changing behavior means that consumers can cut back on motor fuel consumption. Pricing is one factor that can feed into that process."

"The political desire to subsidize fuel, rather than allowing prices to push people to change their behavior (with governments offsetting hardship in other ways), needs to be considered in this context."

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

Kevin Hassett, Director of the National Economic Council, told FOX Business on Friday that the Federal Reserve (Fed) outlook for having room to cut rates will be very solid. He also claimed the Hormuz Strait can be reopened within two months, saying they have backup plans to reopen it.

Key takeaways:

The outlook for the Fed having room to cut rates is going to be very solid.

Hormuz can be opened within two months, we have backup plans for opening Hormuz.

We expect a rapid reduction in energy prices once the Strait of Hormuz opens.

10% pace of boats going through Hormuz vs normal."

Royal Bank of Canada’s (RBC) Nathan Janzen notes that Canadian labour market conditions steadied in March, with a modest employment gain and an unemployment rate holding at 6.7%. He highlights that softer labour force growth, driven by stalled population growth and aging demographics, is helping unemployment drift lower. RBC remains cautiously optimistic that per-person economic growth and labour conditions will gradually improve through 2026.

Labour force dynamics support lower unemployment

"The first increase in employment of the year in Canada in March (+14k) retraced little of the cumulative 109k drop over January and February."

"But per-worker labour market conditions showed further signs of stabilization with the unemployment rate holding at 6.7% -- still above the 6.5% rate in January but below the 6.8% level in December and the recent peak 7.1% rate in September 2025."

"The (gradual and choppy) drift lower in the unemployment rate since September has been, mechanically, tied as much to softer labour force growth as to stronger hiring -- Canada's labour force has declined by 39k workers over the last 6 months compared to an 42k increase in employment."

"But that labour market decline has more to do with stalled population growth and an aging population rather than a 'distortion' like discouraged workers giving up their job searches."

"Looking ahead, the economic growth backdrop still faces headwinds."

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