Forex News

• Gold attracts some dip-buyers near $4,300, though the upside potential seems limited.
• The US PPI report lifted Fed hike bets and underpins the USD, capping the commodity.
• Geopolitical risks further benefit the safe-haven USD ahead of the crucial US CPI report.

Gold (XAU/USD) builds on its modest intraday recovery from the $4,300 neighborhood, or a one-and-a-half-week low, touched earlier this Friday, and climbs above $4,350 heading into the European session. The upside potential, however, seems limited as traders opt to wait for the release of US consumer inflation figures before placing directional bets. Meanwhile, the US Producer Price Index (PPI) report, released on Thursday, lifted Federal Reserve (Fed) rate-hike bets. This could continue to act as a tailwind for the US Dollar (USD) and cap the upside for the non-yielding bullion.

US CPI seen as key swing factor for next week’s Fed decision

Commerzbank’s Michael Pfister stresses that markets “have little time to catch their breath,” with today’s US CPI release “potentially tipping the scale for next week’s Fed meeting.” He argues that the inflation print will be pivotal not only for the immediate policy decision but also for the Dollar, given that investors are already pricing roughly 80 basis points of additional Fed tightening by mid-2027 on the back of higher Oil prices and expectations for a 0.4% monthly rise in headline CPI, even as core inflation remains more moderate and uncertainty around the new Fed Chair’s reaction function lingers.

The US Bureau of Labor Statistics (BLS) reported on Thursday that the headline PPI accelerated to a 5.4% YoY rate in August, compared to the previous month's upwardly revised print of 4.8% and estimates of 5.3%. Stripping out food and energy, the core gauge matched forecasts and rose 4.6% YoY from 4.3% in July. This comes on top of inflation risks stemming from elevated energy prices and reaffirms expectations that the US central bank will raise borrowing costs next week.

In fact, crude oil prices shot to the highest level since May 21 amid further escalation of tensions between the US and Iran. The US Treasury plans to sanction a large, undisclosed bank on Monday as part of its ongoing economic pressure campaign against Iran. Moreover, Iran-backed Houthis in Yemen seized the crucial Red Sea city of Mocha, expanding control over the strategic Bab al-Mandeb Strait and adding to growing market concerns about a prolonged disruption to oil supplies.

Meanwhile, US President Donald Trump said that the Iran war will likely continue until after the November midterm elections. This keeps the geopolitical risk premium in play, which might continue to support crude oil prices and the safe-haven Greenback. Hence, a strong US CPI number would push the USD higher, warranting some caution before placing bullish bets on gold. Nevertheless, the commodity remains on track to register weekly losses and depreciate further.

XAU/USD daily chart

Technical Analysis

The precious metal trades marginally above the 50% retracement at $4,320 and the 200-day Exponential Moving Average (EMA) at $4,313, keeping price supported by key medium-term trend references. However, momentum indicators are softening, with the Moving Average Convergence Divergence (MACD) in negative territory and the Relative Strength Index (RSI) hovering just below the 50 line, hinting at a waning bullish impulse rather than an outright reversal.

On the topside, initial resistance is aligned at the 38.2% Fibonacci retracement at $4,409, followed by a stronger barrier at the 23.6% retracement of $4,519. On the downside, immediate support is seen at the 50% retracement at $4,320, reinforced by the 200-day EMA at $4,313. A break below this area would expose the 61.8% retracement at $4,231 and then the 78.6% level at $4,104, with the prior cycle low around $3,943 acting as a more distant floor.

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

Commerzbank’s Tatha Ghose expects the Russian central bank to keep its key rate at 14.0%, arguing inflation fundamentals do not justify further easing despite weak growth. He notes analysts’ inflation forecasts have risen, fuel and currency pressures persist, and President Putin now frames the high rate as a stability tool, suggesting political signals also favour a pause while RUB trades beyond Commerzbank’s year-end targets.

Policy pause likely with sticky RUB

"The Russian central bank (CBR) will announce its rate decision later today: market consensus is divided between an unchanged key rate of 14.0% and another “token” 25bp rate cut. We lean towards unchanged, which is also the median consensus result. In our view, a further cut would be difficult to justify because inflation fundamentals do not allow for more easing, and we are confident that CBR thinks so too."

"The latest CBR survey showed analysts raising their end-2026 inflation forecast to 6.6% from 6.2% in July and 5.3% in June. Inflation expectations are running much faster near the c.14% mark."

"A supportive argument for lower rates would be the weaker GDP growth numbers in latest readings and also falling survey expectations. But that still does not make it a benign combination: gasoline prices were up by nearly 1%w/w in its latest reading, while the weaker ruble adds another channel of inflation pressure. CBR’s own rhetoric has turned more hawkish too, highlighting secondary effects from higher fuel price, the weaker ruble, and fiscal risks."

"The political angle has also shifted. President Vladimir Putin remarked that the high key rate remains a deliberate tool for macroeconomic stability. This matters because, ahead of at least the previous two meetings, Putin had indicated that rate cuts would be desirable in Russia’s prevailing macroeconomic context."

"RUB has already depreciated past our year-end targets. Given its recent historical pattern, this valuation is likely to prove sticky for some months regardless of today’s rate decision, while the artificial USD/RUB and EUR/RUB exchange rates will not react meaningfully to a 25bp difference either way."

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

• The Indian Rupee falls further against the US Dollar.
• An increase in hawkish Fed bets due to a hot US PPI report becomes a new concern for the Indian currency.
• Investors await the CPI data from both the US and India.

The Indian Rupee (INR) extends its downward spiral against the US Dollar (USD) for the fourth trading day on Friday, with the USD/INR pair rising to near 95.80 in the opening session. A weak opening was already anticipated for the Indian currency against the US Dollar as the latter attracted significant gains overnight after the release of the stronger-than-projected United States (US) Producer Price Index (PPI) data for August, which lifted Federal Reserve (Fed) interest rate hike expectations.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades firmly near Thursday’s high at around 99.20.

Strong US PPI data boosts hawkish Fed bets

The US PPI report on Thursday showed that headline producer inflation arrived higher at 5.4% Year-on-Year (YoY) vs. 5.3% estimates and the July reading of 4.8%. The core PPI - which excludes volatile food and energy items – also grew at a faster pace, arriving at 4.6% YoY, as expected, compared to the previous reading of 4.3%.

Hot US PPI figures lifted Fed interest rate hike expectations. According to the CME FedWatch tool, the odds of the Fed raising interest rates at the policy meeting next week have increased to 72.4% from 61.2% seen before the data release.

Theoretically, a fresh increase in hawkish Fed expectations boosts US Treasury Yields, which ultimately diminish the appeal of riskier assets. As of writing, 10-year US Treasury Yields hit record highs at 4.98%, the highest level seen since November 2023.

Meanwhile, the Reserve Bank of India (RBI) ​likely intervened in the foreign exchange ‌market on Friday to limit the INR's fall as a run-up in oil prices and U.S. ​bond yields pressured the currency, Reuters reported.

US inflation risks seen skewed higher as core eases modestly

After the US PPI data, investors are awaiting the Consumer Price Index (CPI) report for August, which will be published at 12:30 GMT.

According to economists at TD Securities, US price pressures likely moderated only slightly in August. They “project that core CPI rose 2.3% on a y/y basis, down 10 bps vs July, while headline inflation likely stayed unchanged at 3.4% y/y.” However, they caution that “we see the risks to our forecasts as skewed to the upside given that we're assuming a number of large price declines in tariff-exposed goods categories,” suggesting the outturn could surprise higher if those assumed declines fail to materialize.

India’s CPI data to be key trigger for INR

On the domestic front, India’s retail CPI data for August scheduled for Monday could be the key trigger for the Indian Rupee.

Economists at Societe Generale expect India’s inflation backdrop to turn less comfortable in the near term, projecting that "India's CPI inflation [will] rise to around 4.8% yoy in August 2026, up from 4.4% in July, marking the highest reading under the newly launched CPI series." They note that, if realized, "this would represent the third consecutive month of inflation above the RBI's 4.0% target, further reinforcing the view that inflationary pressures are no longer confined to a few volatile categories but are gradually becoming more broad-based."

Regarding the drivers, Societe Generale highlights that "food inflation is likely to have exceeded 6.0% yoy in August and should remain the single largest contributor to headline CPI," with available price trends pointing to "continued pressure from categories such as sugar, cereals, milk, eggs, edible oils and selected vegetables." A "second source of upward pressure is likely to come from fuel inflation," as "elevated global energy prices, coupled with the lagged effects of earlier domestic fuel price adjustments, suggest that the fuel basket should continue to exert upward pressure on headline inflation." The bank also points out that "with input price pressures remaining elevated and little evidence of relief from global commodity markets, the risk of broader pass-through into consumer prices appears to be rising," while survey-based measures "point toward firmer fuel inflation in August relative to July."

Taken together, Societe Generale argues that "the August CPI print is likely to signal that India's inflation dynamics are becoming less benign. Food inflation remains elevated, fuel inflation continues to firm, and early signs of broader cost pass-through are beginning to emerge." In their view, "a print around 4.8% yoy would not only mark a new high under the revised CPI series but would also reinforce concerns that inflationary pressures are gradually broadening beyond a narrow set of categories."

USD/INR Technical Analysis: Likely revisit all-time high near 97.10

In the daily chart, USD/INR trades at 95.80, holding a constructive bullish bias as it remains above the 20-day exponential moving average (EMA) at 95.22. The pair has rebounded firmly from late-August lows and now trades comfortably over its short-term trend proxy, while the Relative Strength Index (14) near 60 suggests positive but not yet overbought momentum supporting further upside attempts.

On the downside, initial support is located at the 20-day EMA at 95.22, where buyers are likely to re-emerge on dips to defend the nascent uptrend. Looking up, the pair could extend its advance toward the all-time high near 97.10.

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

• UK Gross Domestic Product grew by 0.4% month-over-month in July, beating expectations of flat growth.
• UK Manufacturing production increased by 0.9% in July, boosting broader economic output data alongside industrial production.
• Japanese Yen gains support from Bank of Japan tightening expectations despite escalating oil price risks.

GBP/JPY depreciates after registering gains in the previous day, trading around 208.30 during Asian hours on Friday. The currency cross loses ground as the British Pound (GBP) remains subdued against the Japanese Yen (JPY) following the release of key economic data from the United Kingdom (UK).

The UK Office for National Statistics (ONS) reported on Friday that the UK Gross Domestic Product (GDP) grew by 0.4% month-over-month in July, outperforming market expectations for a flat 0% growth and building upon the 0.3% expansion recorded in June. In addition to the strong GDP figures, broader economic output data showed positive momentum, with monthly Industrial Production rising by 0.2% and Manufacturing Production increasing by 0.9% over the same period.

Meanwhile, the Japanese Yen (JPY) continues to draw support from growing expectations of more aggressive policy tightening by the Bank of Japan (BoJ), alongside the ongoing unwinding of carry trades and increased capital repatriation. However, the currency's upside potential remains constrained. Surging oil prices, fueled by persistent conflict between the US and Iran with no signs of de-escalation, are keeping global inflation risks elevated and weighing on broader market sentiment.

BoJ seen lifting rates again as ING flags persistent price pressures

Economists at ING expect the Bank of Japan to press ahead with further policy normalisation this week, forecasting that the BoJ will “raise its policy rate by 25bp to 1.25% on Friday amid persistent price pressures.” They argue that ongoing inflation dynamics justify another step away from ultra-loose settings, reinforcing expectations that Japan’s rate cycle is gradually shifting onto a more conventional tightening path.

• NZD/USD gains momentum to near 0.5835 in Friday’s early European session. 
• Traders raised the odds for a quarter-percentage-point increase to more than 70% following hotter PPI data. 
• Dovish signals from the RBNZ might cap the upside for the New Zealand Dollar. 

The NZD/USD pair rises to around 0.5835, snapping the four-day losing streak during the early European trading hours on Friday. However, the potential upside for the pair might be limited as markets turn cautious ahead of the key US Consumer Price Index (CPI) inflation data later on Friday. 

Markets pushed the probability for a US rate increase to 70% following a report showing increasing Producer Price Index (PPI) in August, according to the CME FedWatch tool. 

Traders will take more cues from the US CPI data later in the day. This report will be the last piece of the inflation puzzle the Federal Reserve (Fed) will get before making its decision on interest rates next week. The headline CPI is expected to show a rise of 3.4% in August, while the core CPI is projected to show an increase of 2.4% during the same period.

The Reserve Bank of New Zealand (RBNZ) delivered a dovish rate hike, raising the Official Cash Rate (OCR) by 25 basis points (bps) to 2.75%. The New Zealand central bank said that the current rate remains accommodative, and the bank is focused on a "gradual removal of monetary stimulus". 

Economists widely expect at least one more rate hike before the end of the year, likely in December. The RBNZ’s cautious tone and forward guidance have dampened market expectations for an aggressive tightening cycle, which could weigh on the Kiwi. 

Technical Analysis: NZD/USD remains capped below the 100-day SMA

In the daily chart, NZD/USD holds a bearish near-term bias as spot remains capped beneath the 100-day simple moving average (SMA) and the Bollinger mid-line. The Relative Strength Index (14) around 43 leans toward weak downside momentum rather than oversold conditions, suggesting sellers still have the upper hand unless price can reclaim the nearby moving average resistance.

On the downside, initial support is aligned with the lower Bollinger band at 0.5800; a clear break below this zone would open the door to a deeper slide toward prior lows beyond the current dataset. On the topside, immediate resistance is located at the 100-day SMA at 0.5842, followed by the Bollinger mid-line near 0.5900, with the upper band around 0.6000 acting as a more distant barrier that would need to give way to neutralize the prevailing bearish tone.

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

• The Australian Dollar bounces back to near 0.7175 against the US Dollar.
• Hot US PPI report for August has boosted hawkish Fed bets.
• The RBA is expected to deliver more interest rate hikes this year.

The Australian Dollar (AUD) is up 0.22% at around 0.7175 against the US Dollar (USD) during the European trading session on Friday. The Aussie pair recovers strongly after a significant fall the previous day, driven by a significant jump in the US Dollar, following strong United States (US) Producer Price Index (PPI) data for August.

The data showed on Thursday that headline producer inflation accelerated at a faster-than-expected pace to 5.3% Year-on-Year (YoY). The core PPI – which excludes volatile food and energy items – grew by 4.6%, as expected.

A hot US PPI report prompted hawkish Fed expectations ahead of the Consumer Price Index (CPI) data for August, releasing at 12:30 GMT.

On the Aussie front, financial markets seem confident that the Reserve Bank of Australia (RBA) will raise interest rates again this year, following warnings of upside inflation risks from Deputy Governor Andrew Hauser on Tuesday.

Analysts at Rabobank highlight that the RBA’s policy tone has shifted after “Hauser [gave] a hawkish speech, which has markets thinking of hikes this month and in November.”

AUD/USD Technical Analysis

AUD/USD trades at 0.7174, holding a constructive bullish tone as it remains above the 20-day exponential moving average (EMA) at 0.7159.

The formation of a positive divergence between the price and the Relative Strength Index (RSI) has set a strong recovery.

On the downside, immediate support is seen at the 20-day EMA around 0.7160, followed by 0.7100. Looking up, the pair aims to revisit the four-year high near 0.7280.

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

Danske Research Team notes that global equities fell around 0.5% despite a hawkish European Central Bank message and sharp yield curve moves. The bank attributes the relatively mild reaction to exceptional underlying economic strength and a market view that a full stagflation shock is not being priced, with only marginal defensive outperformance and Asian equities softer while European and US futures trade slightly higher.

Stagflation fears not fully priced

"A remarkably contained equity response. Equities fell yesterday but given the relatively hawkish ECB message and the sharp moves at both the front and long end of the yield curve, the selloff could easily have been much more severe."

"The only reason global equities declined by merely around 0.5% was the exceptional strength of the underlying economy."

"The session had two dominant drivers: the ECB communication and another 6% rise in oil prices to the highest level since mid-May. The two are difficult to separate, as the ECB message was itself a direct consequence of the oil shock. Investor behaviour and sector rotations therefore largely reflected the same underlying driver."

"Crucially, investors are not pricing a full stagflation shock. Had they been, we would have seen much stronger performance from energy and materials, as well as a considerably deeper defensive rotation. Instead, defensives only marginally outperformed cyclicals, while the broader drawdown remained contained despite the two major shocks."

"Asian equities are lower this morning, but both European and US futures are marginally in the green."

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

The European Central Bank (ECB) Governing Council member Joachim Nagel said on Friday that its’ too early to speculate on rate hikes.

Key quotes

Too early to speculate on rate hikes.

Policy moves are dependent on energy prices.

I would not exclude we would need to go into mildly restrictive territoryI would not exclude we would need to go into mildly restrictive territory.

Market reaction

At the time of writing, the EUR/USD pair is down 0.01% on the day at 1.1610.

Nagel leans mildly hawkish as restrictive bias lifts Euro

Nagel’s 7.1/10 FXS Speechtracker score sits a full point above the 6.1/10 historic average, signaling a more hawkish tilt than usual. The warning that it is “too early to speculate on rate hikes” tempers expectations for an imminent policy reversal, keeping Euro rate-cut bets in check.

By stressing that policy moves are dependent on energy prices but not excluding a move into “mildly restrictive territory,” Nagel reinforces a bias toward tighter policy if inflation risks re-emerge. This combination of conditionality and openness to further restriction is likely to underpin the Euro on dips, especially against lower-yielding peers.

ING analysts Warren Patterson and Ewa Manthey note that Brent and WTI have rallied sharply as Middle East tensions escalate and Saudi Arabia reports a steep drop in output. They highlight rising risks to Saudi energy infrastructure and Red Sea exports, alongside stronger Chinese crude buying and tight US inventories, suggesting Oil markets are increasingly focused on supply vulnerabilities.

Middle East risks and Chinese demand

"Oil prices surged, with ICE Brent settling more than 6% higher. In early morning trading today, prices neared $110/bbl. Oil’s resilience reflects a market now repricing both the duration and severity of the conflict, along with a clearer recognition of the mounting threat to regional supply."

"And while meaningful volumes are still moving through the Strait of Hormuz, flows remain well below pre‑war levels, underscoring how fragile the situation has become. Saudi energy infrastructure and crude oil exports from the Red Sea are increasingly at risk, with the Houthis in Yemen targeting Saudi Arabia. As the Houthis have taken control of the Red Sea port of Mokha in Yemen, recent events increase the threat to shipping around the Bab al-Mandeb Strait."

"Another market concern will be the August production numbers Saudi Arabia reported to OPEC. The latest monthly report shows Saudi Arabia produced 6.24m b/d, the lowest level since the 90’s. Saudi Arabia did supply more to the market than it produced."

"These renewed supply concerns coincide with stronger Chinese buying in the physical market. Independent refineries in China have been steadily increasing run rates after bottoming in July. Data from JLC shows independent refiners running at almost 63%, up from 45% in July."

"The latest EIA inventory data show US commercial crude oil inventories fell by just 391k barrels last week. After accounting for SPR releases, total US crude oil inventories declined by 1.64m barrels. In a sign of relief to refined product markets, gasoline and distillate stocks increased by 1.27m barrels and 2.09m barrels, respectively."

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

• EUR/GBP eases below 0.8590 from session highs just below the 0.8600 line.
• Strong UK GDP and Industrial Production data have provided a fresh boost to the Pound.
• The euro appreciated moderately on Thursday following the ECB's interest rate hike.

UK data released on Friday showed that Gross Domestic Product (GDP) rose 0.4% in July, above expectations of a flat reading and following a 0.3% rise in June. These figures reflect a 0.2% increase in Industrial Production, reversing June's 0.2% decline, and a 0.9% jump in Manufacturing Production, its strongest growth in the last four months, beating expectations of a more moderate 0.2% advance after June's 0.5% decline.

In addition, the UK Index of Services, which measures output volume and value-added growth in the UK services industry, rose 0.6% in the three months to July, above the 0.5% expected, while the Goods Trade Balance deficit narrowed to GBP 20.96 billion, from GBP 23.00 billion in June, also beating expectations of a GBP 22.3 billion shortfall.

ECB hikes rates and hints at further tightening

In the Eurozone, the European Central Bank (ECB) met markets’ expectations on Thursday and raised its benchmark Rate on the Deposit Facility by 25 basis points to 2.5% for the second consecutive time, amid rising consumer price pressures stemming from higher energy prices.

Beyond that, President Christine Lagarde warned the energy shock triggered by the Middle East conflict is expected to extend “well into 2027”, and that consumer inflation will only return to the 2% level by the end of next year. These comments suggest that the central bank will be forced to hike rates at least once more in the next 12 months, which provided some support for the Ruro.

The Bank of England (BoE), on the other hand, will, highly likely, stand pat on rates after next week¡s monetary policy meeting. Analysts at Rabobank highlight that “although the voting pattern of the July 30 policy meeting was more hawkish than expected,” there remains “a high bar for the doves on the committee to vote for a tightening in policy.” This suggests that, despite the more assertive stance of a minority on the committee, Rabobank still sees the core majority as reluctant to endorse near-term rate hikes.