Forex News

• The Dow Jones Industrial Average tumbled to start the week, sliding more than 1K points off Friday's intraday peak as a fresh round of US-Iran hostilities rattled risk sentiment.
• A drone strike on a petroleum site in the United Arab Emirates and the country's first missile alert since the April ceasefire reignited fears over the Strait of Hormuz.
• Oil prices surged, with WTI crude pushing back above $105 per barrel and Brent crossing above $114 as the US military's "Project Freedom" maritime escort operation got underway.
• Cruise operators and airlines led decliners while energy and defense names outperformed in a textbook geopolitical risk-off rotation.

US equities slumped on Monday as a series of escalating reports out of the Persian Gulf revived concerns that the fragile US-Iran ceasefire is fraying. The Dow Jones Industrial Average shed roughly 0.9%, slipping back toward 49,000 after an intraday low below that level. The S&P 500 fell around 0.4% from Friday's record close above 7,200, while the Nasdaq Composite eased a similar 0.4% off its own all-time high. Cumulatively, the DJIA has now dropped more than 1K points from Friday's session peak near 49,900, putting a sizeable dent in last week's record-setting tape.

Iran tensions flare again

The selling kicked off in earnest after the United Arab Emirates said its air defenses had engaged a salvo of cruise missiles and drones launched from Iran. The UAE Ministry of Defense reported four cruise missiles inbound, three intercepted over territorial waters and a fourth falling into the sea. A separate drone struck the Fujairah Petroleum Industries Zone, sparking a fire and lightly injuring three workers. It was the first time the UAE's missile alert system had been activated since the US-Iran ceasefire took hold in early April, and Emirati authorities reported a second wave of incoming projectiles within the hour. Notably, Fujairah sits on the Gulf of Oman, outside the Strait of Hormuz, making it one of the few Gulf export hubs that doesn't require transit through the contested chokepoint.

Strait of Hormuz back in focus

Energy prices were already grinding higher into the US session after Iranian state media claimed two missiles had hit a US warship near Jask Island in the Strait of Hormuz, allegedly after the vessel ignored warnings. A separate dispatch from Iran's Navy said it had turned back what it called American and Israeli warships from entering the zone. US Central Command rejected the reports outright, saying no US Navy ships had been struck and that two US-flagged merchant vessels had successfully transited the strait under Project Freedom, the maritime escort plan President Donald Trump unveiled Sunday. With both sides repeatedly contradicting each other and neither offering much in the way of independent verification, traders are increasingly treating Gulf headlines as signal-poor noise to be hedged against rather than parsed.

Oil surges, diplomatic backdrop sours

The reaction in Oil was sharper than the move in stocks. WTI crude rose roughly 3% to push above $105 per barrel, while Brent jumped over 5% to break above $114. Both benchmarks have now spent the better part of two weeks above $100, with ExxonMobil (XOM) CEO Darren Woods warning Friday that the market still hasn't priced in the full impact of the Hormuz blockade. Adding to the tension, an unconfirmed CNN source flagged expectations of further US or Israeli strikes on Iran within the next 24 hours. That follows Friday's news that Iran had sent an updated peace proposal through Pakistani mediators, an offer Trump publicly dismissed, suggesting Tehran was only at the table because its military capabilities had been depleted, a line that sits awkwardly against today's drone and missile barrage.

Risk-off rotation hits travel, lifts defense

Sector performance broke along familiar wartime lines. Cruise operators were among the day's hardest-hit names, with Norwegian Cruise Line (NCLH) sliding after the company missed first-quarter revenue estimates and trimmed its full-year outlook, citing Middle East-related itinerary disruptions. Airlines and hotel chains also leaned lower on the Oil spike. On the other side, energy majors and defense contractors caught a bid as investors rotated into the obvious geopolitical beneficiaries. Coinbase (COIN) bucked the broader tape, climbing on news that lawmakers had reached a deal on a key provision in pending crypto legislation, while Palantir (PLTR) ticked higher into its post-close earnings release. Advanced Micro Devices (AMD) eased ahead of its own results later this week after HSBC trimmed the chipmaker to a hold rating.

Week ahead: labor data and Big Tech earnings

Factory orders for March, released Monday morning, jumped 1.5% MoM, well above the 0.5% consensus and the strongest reading since November, helped by AI-driven demand for electronic components. The bigger event for rate watchers is the labor docket: Job Openings and Labor Turnover Survey (JOLTS) data, ADP private payrolls, weekly jobless claims, and Challenger job cuts are all on tap this week. Several Federal Reserve (Fed) speakers are also scheduled following last week's Federal Open Market Committee (FOMC) hold, with markets currently pricing in zero further moves through year-end. On the corporate side, AMD and Arm Holdings (ARM) report alongside Palantir and Paramount Skydance (PSKY), giving traders a meaningful read on AI capex momentum and consumer-facing tech demand.

Dow Jones 15-minute chart

• NZD/USD weakens amid a tense geopolitical backdrop in the Middle East.
• The US Dollar remains supported by expectations of a restrictive monetary policy stance.
• New Zealand’s central bank adopts a cautious tone in response to supply shocks.

NZD/USD trades around 0.5868 on Monday at the time of writing, down 0.52% on the day. The pair remains under pressure amid an environment marked by heightened geopolitical uncertainty, which typically supports safe-haven assets and the US Dollar (USD).

Tensions between the United States (US) and Iran continue to fuel risk aversion. Tehran warns it will respond forcefully to any US intervention in the Strait of Hormuz, a strategic chokepoint for global Oil transport. Recent incidents, including drone attacks and reported missile strikes, according to some sources, have intensified fears of military escalation, although Washington denies any direct hit on its vessels. In this context, potential disruptions to energy supply are keeping Oil prices elevated, reinforcing global inflation risks.

This dynamic is also supporting US Treasury yields and strengthening the US Dollar, driven by expectations of a tighter monetary policy stance. Markets are increasingly pricing in the possibility that the Federal Reserve (Fed) will keep interest rates higher for longer, or even raise them further if inflationary pressures persist. According to the CME FedWatch tool, the chance of a rate hike early next year has risen notably in recent days.

On the New Zealand side, the Reserve Bank of New Zealand (RBNZ) maintains a cautious stance. Monetary Policy Committee member Prasanna Gai emphasizes that supply shocks linked to the Strait of Hormuz do not automatically justify monetary tightening. He favors a conventional “look-through” approach to temporary disruptions, noting that the conditions required for pre-emptive tightening are not currently in place. This accommodative stance contrasts with that of other central banks and weighs on the New Zealand Dollar (NZD).

Analysts at BNY echo this view, highlighting that the RBNZ remains mindful of the fragility of the domestic economy following a series of aggressive rate cuts in 2025. While the neutral rate is seen as higher, the priority remains supporting economic activity rather than responding immediately to inflationary pressures deemed temporary.

Overall, the combination of a resilient US Dollar and a cautious New Zealand central bank continues to exert downward pressure on NZD/USD.

BNP Paribas economists project Eurozone Gross Domestic Product (GDP) growth to slow from 1.5% in 2025 to 1.0% in 2026, with inflation rebounding to 3.0% in 2026 and 3.3% in 2027. Activity is expected to withstand energy shocks, supported by investment in defence, AI (Artificial intelligence) and electrification, while the European Central Bank (ECB) is seen delivering two 25 bps hikes in 2026, lifting the deposit rate to 2.5%.

Growth slows as inflation rebounds

"Eurozone growth would slow due to spillovers from the Middle East conflict."

"GDP growth, which reached 1.5% in 2025, would slow down to 1.0% in 2026 and 1.3% in 2027, while inflation would rebound to 3.0% in 2026 and 3.3% in 2027 (compared to 2.1% in 2025)."

"Activity would nevertheless withstand the energy shock, supported by investment in defence, AI, and electrification, which should continue to boost intra-EU trade."

"As inflation rebounds, two 25-basis-point hikes in the ECB’s policy rate would take place in 2026 – with the first hike expected in June – pushing the deposit facility rate to 2.5%."

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

• Katayama doubles down on Yen defense as 157.00 emerges as the new Tokyo line

Japan's Finance Minister Satsuki Katayama returned to the verbal channel on Monday, signaling Tokyo's readiness to take decisive action against speculative foreign exchange moves under last September's bilateral agreement with the US, just two trading days after the Ministry of Finance (MoF) and Bank of Japan (BoJ) confirmed Yen-buying intervention on April 30. The fresh warning landed as USD/JPY drifted around 157.00, having recovered roughly half of the intervention-driven decline from the 160.73 high but stalling repeatedly in the 157.00-157.50 zone since Friday.

Supply chains enter the rhetoric

Katayama also flagged risks to Japan's vast Asian supply chains, a notable expansion of how Tokyo is framing Yen weakness. The message effectively links currency policy to industrial policy, recasting intervention as a defense of Japanese manufacturing competitiveness rather than narrow exchange rate management. With Iran-driven Oil prices keeping import costs elevated and the Strait of Hormuz blockade still active, the supply chain framing gives Tokyo broader political cover to keep spending, particularly through this week's thin Golden Week liquidity that Katayama herself flagged Thursday as a potential follow-up window.

The 157.00 question

Price action since Thursday tells its own story. USD/JPY clawed back nearly half of the intervention move within 24 hours but has been turned away from the 157.50 area on every attempt, with sporadic intraday spikes lower into the 155.50 zone hinting that authorities remain active beneath the surface. With Katayama leaning back into decisive action language so soon after Thursday's headline strike, the question now is whether 157.50 has quietly replaced 162.00 as Tokyo's line in the sand, and how quickly speculators will test it.

Katayama highlights:

Japan will take decisive action against speculative FX moves, based on agreement with US last year.
Japan has vast supply chains in Asia, which are facing disruption fears.

USD/JPY 15-minute chart

• Gold remains under pressure as hawkish interest rate expectations weigh on the non-yielding metal.
• Tensions in the Strait of Hormuz rise as US-Iran diplomatic efforts fail to produce a breakthrough.
• XAU/USD holds near the lower edge of the Bollinger Band on the 4-hour chart.

Gold (XAU/USDS) kicks off the week under pressure, hovering near one-month lows as hawkish interest rate expectations continue to weigh on the non-yielding metal amid ongoing tensions in the Middle East. At the time of writing, XAU/USD is trading around $4,520 during the American session, down nearly 2.0% on the day.

Strait of Hormuz tensions keep markets on edge

Market sentiment remains fragile amid uncertainty over the future of US-Iran peace talks, with tensions escalating. A fire broke out at a petroleum industrial site in Fujairah, UAE, following a drone attack reportedly launched from Iran.

Earlier in the day, Iran’s Fars news agency reported that two missiles struck a US naval vessel near the island of Jask after it allegedly ignored warnings from the Islamic Revolutionary Guard Corps (IRGC) to halt.

The incident follows US President Donald Trump’s announcement of a naval initiative dubbed “Project Freedom,” aimed at escorting stranded commercial vessels through the Strait of Hormuz. In response, Tehran warned it would attack US forces if they attempted to approach or enter the waterway. However, a US official denied that any American vessel had been hit, according to Axios.

Meanwhile, diplomatic efforts remain stalled. Washington has rejected Iran’s revised 14-point proposal and presented a counteroffer, now under review in Tehran, with nuclear disagreements still unresolved.

Hawkish Fed bets pressure Gold

While a ceasefire appears to be holding, the conflict drags on with no clear end in sight. Ongoing supply disruptions in the Strait of Hormuz are keeping Oil prices elevated, sustaining global inflation risks.

The resulting energy shock is adding pressure on central banks, particularly the Federal Reserve (Fed), to keep borrowing costs higher for longer, or even tighten policy if inflationary pressures intensify. This is pushing US Treasury yields higher, weighing on the non-yielding metal.

The CME FedWatch Tool shows the Fed is expected to hold rates through this year, while markets are now pricing in rate hikes next year, with the probability of a January 2027 rate hike rising to 22% from near 0% a week ago.

At the same time, persistent geopolitical tensions and growing hawkish Fed expectations are supporting the US Dollar (USD), adding further pressure on dollar-denominated XAU/USD.

Looking ahead, traders will continue to monitor US-Iran developments alongside upcoming US economic data for fresh clues on the Fed’s monetary policy path, with Fed officials also scheduled to speak throughout the week.

The US economic calendar features ISM Services Purchasing Managers Index (PMI) and JOLTS Job Openings on Tuesday, followed by ADP Employment Change on Wednesday, weekly Jobless Claims on Thursday, and the Employment report on Friday, which includes Nonfarm Payrolls (NFP) data.

Technical Analysis: XAU/USD hovers near support as momentum softens

In the 4-hour chart, XAU/USD remains under clear bearish pressure as price holds beneath the Bollinger Bands’ 20-period Simple Moving Average (SMA) near $4,590.71 and even trades just below the lower band around $4,519.06, highlighting persistent downside pressure. The Relative Strength Index (14) sits near 33, hovering close to oversold territory, which hints at stretched bearish momentum but does not yet signal a confirmed reversal.

On the topside, immediate resistance is located at the lower Bollinger Band around $4,519.06, followed by the Bollinger Bands’ mid-line at $4,590.71 and the upper band near $4,662.35, with a stronger cap emerging at the horizontal resistance level of $4,850.00. On the downside, the next notable cushion is the previously drawn horizontal support zone at $4,400, where sellers could hesitate if the current decline extends.

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

• EUR/GBP ticks higher as geopolitical tensions drive volatility.
• Energy shock risks from Strait of Hormuz disruptions continue to weigh on the Euro.
• Political uncertainty ahead of the UK local elections adds another layer of focus for traders.

EUR/GBP edges higher on Monday as ongoing tensions in the Middle East keep market volatility elevated, while political uncertainty in the UK adds modest pressure on the British Pound (GBP). At the time of writing, the cross is trading around 0.8645, recovering from an intraday low of 0.8629.

A fire was reported at a petroleum site in Fujairah, UAE, after a drone attack from Iran earlier in the day. In a separate development, Iran’s Fars news agency reported that two missiles struck a US naval vessel near the island of Jask after it allegedly ignored warnings from the Islamic Revolutionary Guard Corps (IRGC) to halt. However, a US official denied that any American vessel had been hit, according to Axios.

However, the cross remains under steady downside pressure since the onset of the US-Iran war and the resulting disruption of flows through the Strait of Hormuz, a key chokepoint that carries around 20% of global Oil supply. While both the UK and the Eurozone rely heavily on imported energy, the UK is relatively less dependent than the Eurozone, leaving the Pound less exposed to the impact of rising energy prices.

Meanwhile, traders are also favoring the Pound over the Euro (EUR) on expectations that interest rate differentials between the Bank of England (BoE) and the European Central Bank (ECB) could widen further. Rising Oil-driven inflation risks are adding to this divergence. The UK continues to grapple with persistent inflation, which remains well above the BoE’s 2% target, while recent data show that price pressure is also picking up in the Eurozone, though it remains relatively more contained than in the UK.

This suggests the BoE may be forced to tighten policy if the inflation outlook deteriorates, whereas the ECB is likely to remain more cautious. The Eurozone’s higher exposure to energy shocks could weigh on growth, limiting the central bank’s ability to raise rates aggressively. Markets are currently pricing in at least two rate hikes from both central banks, though the path ahead remains highly dependent on incoming data and energy price dynamics.

Against this backdrop, EUR/GBP is likely to maintain a downside bias in the near term, with markets continuing to monitor developments in the US–Iran conflict, particularly any signs of a reopening of the Strait of Hormuz.

Attention is also turning to the UK’s local elections on Thursday, with polls pointing to potential losses for Prime Minister Keir Starmer’s Labour Party. A leadership contest can be triggered if the leader resigns or if a challenger secures the backing of at least 20% of Labour MPs.

ING’s Chief Economist for Turkey, Muhammet Mercan, notes that April inflation rose more than expected, with annual Consumer Price Index (CPI) reaching 32.4%, well above the Central Bank of Turkey’s 16% target. Food, housing and transportation led the upside surprise, while core and services inflation remain elevated. ING highlights that higher Oil prices, dollarisation risks and moderating growth prospects limit scope for Central Bank rate cuts.

ING flags narrowing room for rate cuts

"Turkey's monthly inflation in April stood at 4.1%, above the market consensus of 3.2% (and our call of 2.9%), while annual inflation recorded a marked increase to 32.4% from 30.9% a month earlier – above the Central Bank of Turkey's 16% target and forecast range of between 15-21% detailed in its latest inflation report."

"Preliminary seasonally adjusted data, published by TurkStat and closely monitored by the CBT, indicates that the underlying inflation trend in three-month moving average terms recorded across the board increased in the headline, core and services, implying challenges to disinflation in the current environment."

"Overall, April's inflation spike confirmed both the challenging road ahead and an increase in the annual figure."

"Global commodity prices – particularly oil prices – in the current geopolitical backdrop will remain the key risk factors for the PPI trend in the near term."

"The current environment – which poses significant challenges to the Bank given rising energy prices, moderating growth prospects, and dollarisation risks – narrows the room for rate cuts."

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

• GBP/USD drops as Iran-related headlines boost Oil prices, supporting the US Dollar.
• Strong US Factory Orders reinforced the Greenback’s early-week recovery.
• UK holiday-thinned trading left Sterling vulnerable to geopolitical swings.

GBP/USD falls on Monday as tensions in the Middle East remain high, as Iran threatens the US Navy not to enter the Strait of Hormuz, amid growing speculation that Tehran launched missiles at a US warship. At the time of writing, the pair trades at 1.3531, slightly down 0.34%.

Sterling softens as Iran headlines revive haven demand for USD

Iranian media reported that the regime targeted a US ship, yet Axios, citing a US senior official, denied the attack. President Donald Trump’s comments over the weekend that the US could restart strikes on Iran if “they misbehave” put the ceasefire into question.

As of writing, Iranian media revealed footage of “warning shots” against US Navy destroyers entering the Strait of Hormuz.

Data-wise, US Factory Orders exceeded estimates of a 0.5% increase in March, rising 1.5% MoM from 0.3% in February.

The US Dollar Index (DXY), which tracks the buck’s value against six currencies, is up 0.19% to 98.39, a headwind for Sterling, which is also feeling the pain of UK markets being closed for a public holiday.

The Greenback is extending its gains as the United Arab Emirates (UAE) revealed that fire broke out at petroleum facilities after an Iranian drone attack, pushing Oil prices higher, particularly WTI.

The correlation between Western Texas Intermediate (WTI) and the Greenback remains positive, meaning that if the US crude oil benchmark rises, the US Dollar would follow suit.

Ahead of the US economic docket, the New York Fed President John Williams will deliver a speech, followed by Tuesday’s release of the ISM Services PMI. Across the pond, the schedule is absent for the first two days of the week.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3532, maintaining a constructive bullish bias as spot holds above the clustered simple moving averages around 1.3413 and within the broader rising support structure. The upward-sloping trend line drawn from the 1.3035 area continues to underpin the advance, while the latest bounce away from the prior downtrend resistance line hints that sellers are losing control at lower levels, even as broader sentiment remains sensitive to shifts in the Fed-related backdrop reflected in the Fed Sentiment Index.

On the topside, immediate resistance is seen near the former uptrend break area around 1.3920, with the descending resistance line anchored at 1.3869 reinforcing a wider supply band should bulls extend the move. On the downside, initial support is expected on shallow pullbacks towards the triple simple moving average cluster near 1.3413, ahead of deeper structural demand at the rising trend-line region derived from the 1.3035 origin and, further below, the 1.2885 zone tied to the prior downtrend break price.

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

• AUD/USD fell near 0.7190 as markets remain cautious ahead of the RBA decision.
• RBA expected to hike 25 bps to 4.35%, supporting the Australian Dollar but limiting gains pending forward guidance.
• Geopolitical uncertainty rises after alleged Iranian attack on US boats, boosting safe-haven USD demand.

The AUD/USD pair is trading with a cautious tone, hovering near the 0.7190 price zone as investors position ahead of the Reserve Bank of Australia (RBA) monetary policy decision due later on Monday.

The RBA is widely expected to deliver a 25-basis-point (bps) rate hike, marking the third consecutive increase. If confirmed, the Official Cash Rate (OCR) would rise to 4.35% from 4.10%, reinforcing the central bank’s commitment to tackling persistent inflation pressures.

Expectations of tighter policy are providing some underlying support to the Australian Dollar (AUD), although gains remain limited as traders await officials' comments to see where they are headed.

At the same time, risk appetite remains fragile as headlines suggesting that Iran allegedly attacked United States (US) military boats despite denials from the US. This has contributed to a cautious market mood. The lack of clarity is keeping safe-haven demand alive, offering intermittent support to the US Dollar (USD) and capping upside attempts in risk-sensitive currencies like the Aussie.

Short-term technical analysis:

On the four-hour chart, AUD/USD trades at 0.7175. The pair sits directly on the 20-period Simple Moving Average (SMA) near 0.7175, leaving a neutral near-term bias while it consolidates just above the 100-period SMA at 0.7151. The Relative Strength Index (RSI) around 48 underscores the lack of clear directional momentum, suggesting the market is pausing after recent swings rather than trending decisively.

On the topside, initial resistance is aligned at 0.7195, with a break exposing the next cap at 0.7200. On the downside, immediate support is derived from the 20-period SMA pivot around 0.7175, followed by nearby horizontal support at 0.7174 and 0.7168. A deeper slide would bring the 100-period SMA at 0.7151 into focus as the next key floor.

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

• USD/JPY stabilizes after a spike in volatility linked to a likely intervention by Japanese authorities.
• Geopolitical tensions in the Middle East support demand for the US Dollar.
• Markets remain cautious ahead of a data-heavy week in the United States.

USD/JPY trades around 157.00 on Monday, virtually unchanged on the day, after a sharp move during the Asian session briefly sent the pair down to 155.71 before a swift rebound.

This sudden move, without any clear fundamental catalyst, is fueling speculation of another intervention by Japanese authorities in the foreign exchange market. The Ministry of Finance has not confirmed any action, as usual, but the synchronized moves across all Japanese Yen (JPY) crosses reinforce this view. According to Reuters, Japanese authorities may have already spent around 5.48 trillion JPY last week to support the currency, while Finance Minister Satsuki Katayama reiterated that Japan stands ready to take decisive action against speculative moves.

Japan’s Finance Minister Satsuki Katayama repeated on Monday that Japanese authorities stand ready to take decisive action against speculative moves in the foreign exchange market. Speaking after the Asian Development Bank’s annual meeting in Uzbekistan, she stressed that such measures are in line with an agreement reached last year with the United States (US), while refraining from providing further details on any potential ongoing intervention, Reuters reports.

Meanwhile, several financial institutions, including MUFG and OCBC, believe that Japanese interventions could continue in the near term, especially if the pair remains close to the sensitive 160.00 threshold. However, they emphasize that the Japanese Yen’s longer-term trajectory will depend primarily on the Bank of Japan (BoJ) monetary policy path and potential rate hikes later this year.

Despite this temporary support, the Japanese Yen remains constrained by external factors. Persistent tensions in the Middle East, particularly around the Strait of Hormuz, are driving risk aversion and supporting the US Dollar (USD), which benefits from safe-haven flows. Uncertainty surrounding an incident involving US and Iranian forces, despite conflicting reports, is keeping investors on edge.

In this context, the US Dollar Index (DXY), which tracks the Greenback against a basket of major currencies, is holding around 98.25, slightly extending its recent rebound.

On the macroeconomic front, the week ahead is expected to be decisive for Federal Reserve (Fed) policy expectations. Markets are awaiting a series of key indicators, including Factory Orders, the ISM Services Purchasing Managers Index (PMI), and most importantly, Friday’s Nonfarm Payrolls (NFP) report.

Overall, USD/JPY remains caught between the risk of Japanese intervention limiting its upside and a fragile global environment that continues to support the US Dollar.