Forex News

DBS economist Radhika Rao reports that India and US are close to formalising an interim trade agreement under a new framework first agreed in February. She notes India’s push for tariff advantages versus regional peers, evolving US tariff structures, ambitious purchase commitments, and India’s aim to secure better terms to boost bilateral trade and investment.

Interim agreement nears under new framework

"The India–US trade framework, initially agreed upon in February, is now in the final stages of being formalized through an interim trade agreement."

"The government has pushed for comparative tariff advantages vs regional manufacturing peers and sought assurances that the US administration will not levy higher duties once the deal is sealed."

"There has been notable change in the tariff backdrop after the court overruled the IEEPA tariffs earlier in the year, which was replaced by a 10% blanket rate until 24-July, while Section 301 investigations point to 10-12.5% tariff on selected product groups."

"US Trade Representative Jamieson Greer will reportedly be in India on June 23-24 to close discussions, with India’s authorities likely to emphasise on better terms than February to get a larger bite in bilateral trade and investment commitments."

"US officials had previously suggested that India had committed to buy $500bn worth of US products in the future, implying a ~9x increase vs FY26 run rate that seems to be a tall order."

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

Scotiabank strategists Shaun Osborne and Eric Theoret report the Japanese Yen (JPY) is slightly firmer, outperforming G10 peers despite broad US Dollar (USD) strength, as stronger PMIs signal improving growth. They see signs of exhaustion in USD/JPY’s advance with yield spreads stabilizing. Near term, they flag limited resistance before 162 and now expect initial support around 160, implying a more balanced risk profile after the recent surge.

Gains stall near 162 resistance

"The yen is entering Tuesday’s NA session with a fractional 0.1% gain as it outperforms all of the G10 currencies in an environment of broad-based USD strength."

"Japan’s latest preliminary PMI’s offered a continued improvement in the pace of growth, with both manufacturing and services improving on the month."

"The Services PMI climbed into marginal expansion territory while the manufacturing PMI pushed into the mid-50s, suggesting robust levels of growth."

"USD/JPY’s gains are showing signs of exhaustion and yield spreads appear to have stabilized."

"Technical resistance is limited ahead of 162 and near-term support is now expected at 160."

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

• WTI falls toward $73.00 as markets price in lower geopolitical risk in the Middle East.
• US-Iran diplomatic progress fuels expectations of a gradual return of Iranian supply to the market.
• Investors await the weekly API report for fresh clues on US Crude Oil demand.

West Texas Intermediate (WTI) US Oil declines by more than 1% on Tuesday and trades around $73.00 at the time of writing, pressured as traders continue to assess diplomatic developments between the United States (US) and Iran. Improving sentiment regarding a potential regional de-escalation is reducing the geopolitical risk premium embedded in Oil prices, pushing the Crude Oil toward its lowest levels in nearly four months.

Markets reacted to signs of progress in talks between Washington and Tehran, although statements from both sides remain contradictory. US Vice President JD Vance said that Iran could allow the return of international nuclear inspections following what he described as a constructive first day of negotiations. However, Tehran denied making any new commitments regarding its nuclear program.

At the same time, the United States granted a temporary 60-day waiver allowing Iranian Oil exports to resume. The decision has fueled expectations of a gradual increase in global supply. According to market reports, more than 30 million barrels of Iranian Crude have already left the country over the past week, reinforcing expectations of easing supply constraints.

Analysts at ING believe that the pace of normalization in energy flows through the Strait of Hormuz will be the key factor for price action in the coming weeks. Meanwhile, Rabobank has sharply lowered its Brent and WTI forecasts, arguing that a sustained reopening of the strait would support a bearish medium-term outlook for Oil prices.

Commerzbank takes a more cautious stance, noting that shipping traffic through the Strait of Hormuz remains well below levels seen before recent disruptions. The bank therefore believes that further downside in Oil prices may be limited if the normalization of flows proves slower than markets currently expect.

Investors are now turning their attention to the weekly American Petroleum Institute (API) Crude inventory report. A larger-than-expected draw in US crude stockpiles would signal stronger demand and could provide support for WTI prices, while a surprise inventory build would reinforce concerns about excess supply and could add further pressure on the Oil market.

• EUR/GBP steadies after Monday's sharp decline sparked by UK Prime Minister Keir Starmer's resignation.
• Weak UK PMI data contrasts with stronger-than-expected Eurozone business activity figures.
• Markets eye UK political developments and central bank signals for a fresh direction.

EUR/GBP trades little changed on Tuesday after a sharp slide the previous day, triggered by UK Prime Minister Keir Starmer's resignation, which lifted the British Pound (GBP) across the board. At the time of writing, the cross trades around 0.8624 after hitting an intraday low of 0.8615, its lowest level since March 20.

The subdued price action comes as traders digest weaker UK economic data. Preliminary S&P Global Purchasing Managers Index (PMI) readings released on Tuesday missed expectations across the board.

The Composite PMI slipped to 49.4 from 49.7, the Services PMI fell to 48.7 from 49.3, and the Manufacturing PMI eased to 53.1 from 53.9.

In contrast, preliminary HCOB PMI data from the Eurozone came in above expectations, offering some support to the Euro (EUR). The Composite PMI rose to 49.5 from 48.5, the Services PMI improved to 48.9 from 47.7, while the Manufacturing PMI edged down to 51.3 from 51.6.

Meanwhile, traders also parsed comments from Bank of England (BoE) and European Central Bank (ECB) officials. BoE policymaker Alan Taylor said that "the UK has a weak economy and already restrictive policy" and added that the Bank Rate is "75 bps above my estimate of neutral." He warned that if more slack opens up, policymakers "may end up having to cut quickly" and could even see Bank Rate "below neutral for a while."

ECB Governing Council member Boris Vujčić said on Tuesday that "Eurozone growth has proven more resilient in the face of supply shocks than people expected." ECB Chief Economist Philip Lane said the central bank "has to remain attentive to risks on both sides of the outlook" and warned that higher energy prices are expected to keep inflation "well above target into the first half of 2027."

Looking ahead, traders will keep a close eye on political developments in the UK, with Andy Burnham now seen as the leading candidate to replace Starmer. Commerzbank analyst Michael Pfister said Burnham "will endeavour not to unsettle the markets too much" and noted that "if he succeeds in maintaining the status quo, the pound will react positively."

However, Pfister warned that "if he calls the fiscal rules into question, the pound is likely to depreciate significantly." Given these political risks, he said Commerzbank remains sceptical about Sterling for the time being and expects EUR/GBP to target higher levels in the coming weeks if the BoE leaves interest rates unchanged while the ECB delivers another rate increase in September.

• USD/JPY remains subdued as investors assess the latest US PMI figures.
• The preliminary June S&P Global PMI rose to 55.7, above the expected 54.8 figure, although softer employment details limited the bullish impact on the US Dollar.
• Geopolitical risk remains in focus after the US granted Iran a 60-day Oil sanctions waiver, while conflicting comments over nuclear inspections kept markets cautious.

The USD/JPY pair is trading in a neutral zone on Tuesday as investors digest the latest United States (US) Purchasing Managers Index (PMI) figures and recent ADP employment data, awaiting a stronger catalyst from Federal Reserve (Fed) commentary.

The latest S&P Global US PMIs showed that business activity continued to expand, with the release at 55.7, higher than the expected 54.8 in June, offering some support to the US Dollar. However, softer employment details inside the survey limited the bullish impact as traders remain cautious over whether the US labor market is starting to lose momentum.

Monday's ADP Employment Change 4-Week Average data showed that US private payrolls rose by 30.75K, improving from the previous 26.5K reading. The figure suggested that hiring remained resilient and strong enough to significantly alter expectations for the Fed’s policy path.

Meanwhile, the latest US-Iran developments kept geopolitical risk in focus. The US granted Iran a 60-day Oil sanctions waiver following initial peace talks, while President Donald Trump claimed that Tehran had agreed to nuclear inspections “into infinity,” a statement Iran later denied.

Short-term technical analysis:

On the 4-hour chart, USD/JPY trades at 161.52, maintaining a bullish bias as it holds above both the 20-period Simple Moving Average (SMA) at 161.44 and the 100-period SMA at 160.40. The cluster of nearby supports suggests dips are being bought, while the Relative Strength Index (RSI) around 61 stays in positive territory, hinting that upside momentum remains constructive but shy of overbought extremes.

On the topside, immediate resistance is aligned at 161.74, where a clear break would expose further gains toward the recent all-time highs. On the downside, initial support is seen at the 20-period SMA near 161.44, reinforced by horizontal levels at 161.42, 161.35 and 161.27, with the 100-period SMA at 160.40 underpinning the broader bullish structure on deeper pullbacks.

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

• Burnham succession concerns keep UK Gilt markets cautiously priced.
• US PMIs beat forecasts, reinforcing the US Dollar exceptionalism narrative.
• BoE’s Taylor backs unchanged rates as neutral-rate debate grows.

The Pound Sterling (GBP) dives over 0.40% on Tuesday as risk appetite shifts sour, as the recently sworn-in MP Andy Burnham prepares to succeed Prime Minister Keir Starmer, who lasted two years at the job. At the time of writing, GBP/USD trades at 1.3195, after reaching a daily high of 1.3257.

GBP/USD drops as UK political risk meets US exceptionalism

The US Dollar (USD) continued to edge higher throughout the day, hitting a new yearly high in the US Dollar Index (DXY). The DXY, which measures the performance of the buck’s value against a basket of six currencies, is up 0.34% at 101.34.

On Monday, the UK Prime Minister Keir Starmer resigned, paving the way for an orderly succession. Meanwhile, UK Gilts’ yields remain subdued, an indication of caution amongst investors, who are concerned that Burnham’s government will pursue further spending, exerting pressure on fiscal policy.

In the US, President Donald Trump said that Iran agreed to nuclear inspections, though Tehran denied those claims. Iran’s ambassador to the UN, Ali Bahreini, said there has been “good progress” in the talks, but warned that five parts of the initial deal must be fulfilled before discussions begin on the nuclear program and the International Atomic Energy Agency's (IAEA) role in it.

US exceptionalism continues to underpin the Greenback amid expanding business activity, according to S&P Global. The Manufacturing PMI rose from 55.1 to 55.7 in June, crushing estimates of 54.8, while the Services PMI rose from 50.7 to 51.3, exceeding forecasts of 51.

Fed funds futures indicate there's an over 85% probability of a quarter-point rate increase by September.

Across the pond, Bank of England (BoE) MPC member Alan Taylor said it is appropriate to keep rates unchanged, as the Bank Rate is 75 basis points above his estimate of neutral.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3198 with a bearish near-term tone, holding below a dense cluster of the 50-, 100- and 200-day Simple Moving Averages (SMAs) grouped around 1.3451, which now act as a cap on rebounds. The pair also remains contained beneath the broader downward resistance trend line derived from the 1.3869 area, while the Relative Strength Index (14) at roughly 33 drifts toward oversold territory, suggesting persistent but not yet extreme selling pressure.

On the downside, initial support is seen near the rising structural trend line originating around 1.3159, where previous pullbacks have found demand. On the topside, any recovery would first need to challenge the SMA cluster around 1.3451, and only a sustained break higher would open the way toward the broader descending trend resistance linked to the 1.3869 region.

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

• Gold weakens as a stronger US Dollar and rising Fed rate hike bets weigh on sentiment.
• Traders price in a 70% chance of a September Fed rate hike as focus shifts to the US PCE inflation report.
• XAU/USD's technical outlook remains bearish, with price action gravitating toward lower Bollinger Band support near $4,044.

Gold (XAU/USD) trades on the back foot on Tuesday, pressured by a stronger US Dollar (USD) and rising expectations that the Federal Reserve (Fed) could raise interest rates later this year.

At the time of writing, XAU/USD is trading around $4,130 after briefly slipping below the $4,100 mark earlier in the day.

Gold bulls remain on the sidelines as prospects of higher interest rates in the US are driving demand for the US Dollar and Treasury yields, following last week's hawkish Fed meeting, where Chair Kevin Warsh reiterated the central bank's commitment to returning inflation to its 2% target.

The Fed's hawkish stance provided fresh support for the Greenback, even as easing tensions in the Middle East pushed Oil prices lower and reduced fears of a sustained inflationary shock.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is hovering around 101.35, its highest level since May 2025.

The combination of a firmer US Dollar and higher Treasury yields is keeping the precious metal in a correction phase after a remarkable two-year rally fueled by geopolitical tensions, central bank buying and Fed rate cuts. XAU/USD is now down nearly 25% from the all-time high near $5,600 reached in January.

What's next for Gold?

Attention now turns to this week's US Personal Consumption Expenditures (PCE) inflation data and the final estimate of first-quarter Gross Domestic Product (GDP), which could provide fresh guidance on the Fed's policy path.

Preliminary Purchasing Managers Index (PMI) data pointed to continued resilience in the US economy in June. The S&P Global Services PMI rose to 51.3 from 50.7 in May, while the Manufacturing PMI accelerated to 55.7 from 55.1, with both readings beating expectations.

Unless the Fed's hawkish stance shifts meaningfully, higher-for-longer interest rate expectations are likely to remain a headwind for Gold, which tends to perform best in a low-interest-rate environment. The CME FedWatch Tool shows traders are pricing in a 70% chance of a rate hike at the September meeting.

According to the World Gold Council's Weekly Markets Monitor, if the US Dollar Index (DXY) sustains its rally above the 100 mark, it could signal an extension of Gold's downtrend below the $4,000 psychological level.

The council said, "Support would then be seen next at US$3,887/oz-US$3,857/oz, which includes the 38.2% retracement of the entire rise in Gold from the 2015 low where we would look for fresh signs of a potential floor here. Should weakness extend, we would see next major support at the October 2025 high at US$3,500/oz."

Traders are also closely monitoring ongoing US-Iran negotiations after both sides signed a 60-day Memorandum of Understanding (MoU) last week. Talks appear to be progressing, with Washington temporarily easing sanctions on Iranian oil exports during the negotiating period. However, major sticking points remain, including Iran's nuclear program and regional security issues involving Israel and Lebanon.

Technical Analysis:

XAU/USD retains a bearish near-term tone as it sits beneath the 20-day Bollinger Simple Moving Average around $4,318.64.

Price action is gravitating toward the lower band support near $4,043.85, while the Relative Strength Index (RSI) on the daily chart lingers in the mid-30s, hinting at persistent downside pressure rather than a decisive oversold capitulation. A rising Average Directional Index (ACX) near 38 suggests the prevailing downtrend remains relatively strong.

On the topside, initial resistance is now aligned with the 20-day Bollinger SMA at roughly $4,318.82, with the upper band near $4,593.10 offering a more distant cap should a corrective bounce develop.

On the downside, the lower Bollinger band around $4,044.54 acts as the first notable floor, ahead of the more psychological and structural horizontal support at $4,000.00, where sellers could be tempted to lock in profits and trigger a short-term pause in the decline.

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

TD Securities strategist Prashant Newnaha notes that softer S&P Australia Flash Composite PMI data, including weaker new orders and moderating price pressures, supports the Reserve Bank of Australia keeping its cash rate unchanged at 4.35% in August. Slowing domestic demand and easing output price inflation are seen as giving the RBA space to assess data before any policy shift.

PMI signals space for policy pause

"The drop in new orders and slowing in inflation pressures in S&P's Australia Flash Composite PMI for June adds support to the RBA keeping the cash rate on hold at its August meeting."

"More broadly the details support the RBA likely keeping the cash rate on hold at its August meeting."

"The slowing in orders implies a slowing in domestic demand."

"Sure prices are elevated, but the m/m Flash Output Prices outcome for June lowers the odds of an upside beat to the RBA's Q2 trimmed mean forecast of around 1% q/q."

"We expect an on-hold decision at the RBA's August meeting, the target cash rate remaining at 4.35%."

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

• USD/CAD advances toward 1.4190 on Tuesday and reaches its highest level since April 7, supported by broad US Dollar strength.
• Expectations for another Federal Reserve rate hike continue to increase following resilient US economic data.
• The Canadian Dollar remains under pressure as lower Oil prices weigh on the commodity-linked currency.

USD/CAD trades around 1.4190 on Tuesday at the time of writing, up 0.25% on the day and extending a four-day winning streak to its highest level since April 7. The pair is benefiting from renewed demand for the US Dollar (USD) as investors strengthen their expectations for additional monetary tightening by the Federal Reserve (Fed).

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, rises toward 101.35, its highest level in more than a year. According to the CME FedWatch tool, markets now see nearly an 86% chance of at least one Fed rate hike this year.

These expectations have been supported by the resilience of the US economy and persistent underlying inflationary pressures. Preliminary S&P Global data showed that private-sector activity remained solid in June. The Composite Purchasing Managers Index  (PMI) came in at 52.2, up from 51.5 previously, while the Manufacturing PMI accelerated to 55.7 and the Services PMI improved to 51.3, with both readings beating market expectations.

In Canada, investors continue to assess a more challenging economic backdrop. Data released by Statistics Canada on Monday showed that the headline Consumer Price Index (CPI) accelerated to 3.2% YoY in May, up from 2.8% previously and above forecasts of 3%. Despite the upside surprise, concerns about slowing economic growth have fueled fears of a stagflationary environment.

Last week, Bank of Canada (BoC) Governor Tiff Macklem acknowledged that the Canadian economy remains weak, although it is not in recession. On Tuesday, he also warned that growing global imbalances could increase financial stability risks. According to Macklem, the continued attractiveness of US assets has helped sustain these imbalances and direct capital flows toward the United States (US).

Scotiabank analysts argue that the Canadian Dollar (CAD) retains a bearish bias despite the rebound triggered by the inflation data. The bank notes that a meaningful reversal in US-Canada yield differentials appears unlikely in the near term, which should continue to favor USD/CAD. Scotiabank also suggests that a sustained move above the 1.41 area could pave the way for further gains toward 1.43 and potentially 1.45.

The Canadian Dollar is also being pressured by weaker Oil prices, a key driver of Canada’s economy. ING analysts note that Crude prices declined after the US granted a temporary waiver allowing Iranian Oil exports to continue, while markets increasingly expect a gradual normalization of energy flows through the Strait of Hormuz.

Investors are now turning their attention to the upcoming US Personal Consumption Expenditures (PCE) Price Index and the final estimate of first-quarter Gross Domestic Product (GDP). These releases could provide fresh clues about the future path of monetary policy and determine whether the US Dollar can extend its recent outperformance against the Canadian Dollar.