Forex News

• USD/JPY edges higher to around 163.50 in Thursday’s Asian session. 
• Fed voted 9–3 to leave its benchmark interest rate unchanged at a target range of 3.50% to 3.75% at its July meeting. 
• The BoJ is set to keep interest rates steady on Friday. 

The USD/JPY pair posts modest gains near 163.50 during the Asian trading hours on Thursday. The US Dollar (USD) strengthens against the Japanese Yen (JPY) on a hawkish hold from the US Federal Reserve (Fed). The Bank of Japan (BoJ) will announce its interest rate decision later on Friday, with no change in rates expected. 

As widely expected, the Fed held the interest rates steady at 3.50%–3.75% at its July policy meeting on Wednesday,  while hinting at a hawkish shift driven by persistent inflation and rising energy costs. The decision has three dissents voting for a rate increase, likely boosting odds of a September hike.

Fed Chairman Kevin Warsh said during the press conference that while the Fed won’t provide hints on where rate policy is heading, it will take necessary steps to meet its 2% inflation target.

Meanwhile, rising tensions in the Middle East could boost the Greenback against the JPY. The Guardian reported that the US military began launching strikes against Iran late Wednesday, retaliating against Iranian missile attacks on American forces in the region. Iranian media said the US military hit the south-western Iranian city of Abadan as well as Qeshm Island.

Traders await the BoJ interest rate decision later on Friday. The Japanese central bank is likely to keep rates steady at 1.0% at its July meeting but leave scope for further hikes with hawkish communication. 

"The BOJ is likely to maintain its view that risks to the price outlook are skewed to the upside," said analysts at Mitsubishi UFJ Morgan Stanley Securities. "The timing could be pushed forward to September or October if the BOJ heightens alarm over an inflation overshoot or if relentless yen falls lead the administration to judge a rate hike is inevitable," they said.

Yen risks build as BoJ hawkish hold could amplify tightening expectations

Scotiabank strategists caution that the balance of risks around the end of the week remains skewed toward further Yen strength, highlighting the policy backdrop as a key driver. They “see considerable risk into the end of the week, and note the potential for domestically-driven strength if BoJ policymakers deliver a hawkish hold and seek to build on the 25bpts of tightening (by December) currently priced into the short-term rates market,” underscoring how even a non‑move accompanied by firmer guidance could reinforce existing rate expectations and support JPY.

The US Central Command (CENTCOM) began launching strikes against Iran late Wednesday, retaliating against Iranian missile attacks on American forces in the region, the Guardian reported.

Iranian media said the US military hit the south-western Iranian city of Abadan as well as Qeshm Island. This action came hours after US President Trump said the US would "be hitting them very hard" in response to new attacks by Iran targeting US forces in the Middle East.

The Wall Street Journal reported that US President Donald Trump is considering whether to launch a renewed military campaign against Iran, with the US military preparing plans for an intensive 2-week air operation targeting Iran’s missile capabilities. 

Market reaction

At the time of writing, the West Texas Intermediate (WTI) is down 1.34% on the day at $82.47.

Japan's Finance Minister Satsuki Katayama said that officials proposed no ceiling on next year’s budget requests. Katayama  added that the government needs to do year-on-year comparisons in budget size, as the initial budget could be larger than previous years, and the market could overreact to that. 

Key quotes

So far no need to surpass reserves in current budget after Kumamoto earthquake. 

Ministry of finance official proposed no ceiling on next year’s budget requests. 

Crucial to fully explain fiscal policy to markets. 

Need to do year-on-year comparisons in budget size as initial budget could be larger than previous years, market could overreact to that. 

Market reaction

At the time of writing, the USD/JPY pair is up 0.03% on the day to trade at 163.47.

• NZD/USD rises as New Zealand's July ANZ Business Outlook Index surged to 56.1, its highest since February.
• Markets widely anticipate a 25-basis-point RBNZ interest rate hike at the September meeting.
• The US Dollar could find support as three policy members dissented in favor of a rate hike.

NZD/USD extends its gains for the third consecutive day, trading around 0.5810 during the Asian hours on Thursday. The currency pair climbs higher as the New Zealand Dollar (NZD) receives support from a sharp rise in domestic business confidence.

New Zealand's ANZ Business Outlook Index jumped to 56.1 in July, up significantly from 36.6 in the previous month to reach its highest level since February. This uptick was largely driven by easing international oil prices as geopolitical tensions in the Middle East began to subside.

Further underpinning the NZD's strength are hawkish expectations surrounding the Reserve Bank of New Zealand (RBNZ). Following last week's hot inflation report, markets are widely anticipating a 25-basis-point interest rate increase at the September meeting. Futures markets now price in rates reaching at least 3.0% by the end of the year, with a projected peak of 3.5% around mid-2027.

However, TD Securities stated that the recent escalation in regional tensions is increasingly disrupting critical energy shipping routes. Strategists highlight that “the return of Iranian-US strikes after a multi-day pause, along with continued Houthi risks for Saudi energy infrastructure, are keeping flows in both the Strait of Hormuz and Bab el-Mandeb heavily constrained,” underscoring the growing strain on global oil supply channels.

The upside for the NZD/USD pair could be limited, as the US Dollar (USD) may gain strength following a hawkish pause in interest rates by the Federal Reserve (Fed). Although the Fed kept rates steady in the 3.5%–3.75% range at its July policy meeting, an outcome widely anticipated by the markets, the decision revealed underlying hawkish sentiment.

Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack, and Minneapolis Fed chief Neel Kashkari all dissented, advocating instead for a 25 basis point rate hike. Reinforcing this stance during the post-meeting press conference, Fed Chairman Kevin Warsh stated that while the central bank will not offer forward guidance on future rate paths, it remains committed to taking all necessary actions to achieve its 2% inflation target.

Fed holds rates but hawkish tone keeps Dollar supported

The Fed Monetary Policy Statement scores 7.4/10 on the FXS Speechtracker, a notably more hawkish tone relative to the historical average of 4.9/10. By holding the key overnight rate at 3.50-3.75% while stressing elevated inflation, solid economic activity, and strong productivity and investment, the Fed signals confidence in growth and a firm commitment to price stability, reinforced by the 9-3 vote where three regional presidents favored a hike. The emphasis on ample reserves and steady labor markets underlines a bias toward further tightening if inflation fails to converge convincingly toward the 2% goal, a backdrop that tends to underpin the Dollar.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated 128.64, confirming that the overall policy stance remains firmly in hawkish territory. The combination of a high index level and a stronger-than-baseline speech score suggests that, despite no immediate rate move, the Fed continues to lean toward restrictive policy, a configuration that should keep Dollar bulls engaged while limiting upside for Euro and Yen in the near term.

• USD./CAD struggles to gain any meaningful traction amid a combination of diverging forces.
• The USD recovers a part of the post-FOMC losses and acts as a tailwind for the currency pair.
• Supply worries support oil prices, underpinning the Loonie and capping gains for spot prices.

The USD/CAD pair is seen consolidating below mid-1.4000s during the Asian session on Thursday, though it remains close to an over one-week trough touched the previous day. However, a mixed fundamental backdrop warrants some caution before placing directional bets as the focus shifts to important US macro releases.

Thursday's US economic docket features the Advance Q2 GDP report and the Personal Consumption Expenditures (PCE) Price Index. The data will be looked for more cues about the US Federal Reserve's (Fed) policy path, which, in turn, will play a key role in influencing the US Dollar (USD) and provide some meaningful impetus to the USD/CAD pair. Apart from this, oil price dynamics should contribute to producing short-term trading opportunities.

In the meantime, the growing acceptance that the US central bank will hike interest rates by the end of this year amid inflation risks stemming from volatile oil prices supports the USD. Adding to this, escalating US-Iran tensions help the safe-haven buck to recover a part of the previous day's post-FOMC decline to an over one-week low. This, in turn, is seen acting as a tailwind for the USD/CAD pair and warrants some caution for aggressive bearish traders.

The US central bank refrained from adopting a more hawkish stance at the end of a two-day policy meeting on Wednesday. That said, three members voted for a 25 basis points (bps) rate hike amid concern that inflation remains stubbornly above the Fed's 2% target. Moreover, the CME Group's FedWatch Tool indicates that traders have nearly priced in at least one interest rate hike by the end of this year, which favors USD bulls and supports the USD/CAD pair.

Meanwhile, US President Donald Trump said that he will order heavy strikes on Iran in retaliation for its “surprise attack” on US forces on Tuesday. Adding to this, the US-Iran standoff over the Strait of Hormuz and Yemen’s Iran-backed Houthi attacks in the Red Sea fuel concerns about significant disruptions to global energy supplies. This acts as a tailwind for crude oil prices, which could benefit the commodity-linked Loonie and cap the USD/CAD pair.

• WTI price tumbles to $82.80 in Thursday’s early Asian session. 
• Fears of wider conflict in the Middle East and concerns over oil supply disruption could lift the WTI price. 
• US crude oil inventories fell by 7.167 million barrels last week, EIA said. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $82.80 during the early Asian trading hours on Thursday. WTI falls amid some profit-taking despite escalating conflicts in the Middle East. 

Traders book some profits following the US Federal Reserve (Fed) interest rate decision. The US central bank decided to keep the interest rates unchanged at a range of 3.5% to 3.75% at its July policy meeting on Wednesday, as widely expected. Fed Chairman Kevin Warsh said during the press conference that while the Fed won’t provide hints on where rate policy is heading, it will take necessary steps to meet its 2% inflation target.

However, renewed military escalation in the Middle East could raise concerns over crude flows from the region and boost the WTI price. US President Donald Trump said on Wednesday that the US would strike back at Iran after a recent attack that targeted a military base in Jordan. 

The Iranian military fired ballistic missiles overnight at a US airbase and command center in Jordan, all of them intercepted, per Bloomberg. The US and Saudi Arabia also struck Tehran-backed militias in Iraq, ending a days-long pause in hostilities. 

Meanwhile, Yemen’s Iran-backed Houthi rebels are also tightening pressure on Red Sea oil flows. Reuters reported that the Houthis are considering imposing fees on commercial ships sailing through the narrow Bab el-Mandeb gateway, which links the southern Red Sea with the Gulf of Aden.  

US crude oil inventories fell more than expected last week. According to the US Energy Information Administration (EIA), crude oil stockpiles in the US for the week ending July 24 dropped by 7.167 million barrels, compared to a rise of 2.011 million barrels in the previous week. The market consensus was for a decline of 2.5 million barrels.

(This story was corrected on July 30 at 01:35 GMT to say that the US central bank decided to keep the interest rates unchanged at a range of 3.5% to 3.75% at its July policy meeting on Wednesday, as widely expected, not Thursday.)

Brent slides as US extends pause on Iran strikes

Rabobank’s Senior Market Strategist Benjamin Picton highlights that active Brent crude futures “fell by almost 5% yesterday as the US extended its pause on striking Iran.” He notes that Donald Trump framed the decision as an opportunity to give diplomacy another chance, indicating that the lull was underway to allow “very deep talks” with Iran, but stressing that his patience was limited, saying “either it goes fast or not at all.”

• AUD/USD may depreciate as the US Dollar could find support, as three policy members dissented in favor of a rate hike.
• Australia’s 10-year yield fell to 4.9% as cooling June inflation reduced rate hike expectations.
• Markets cut the probability of a 2026 RBA rate increase to 50% following softer inflation data.

AUD/USD inches higher after two days of losses, trading around 0.6960 during the Asian hours on Thursday. The currency pair may face potential downside pressure as the US Dollar (USD) could gain strength following a hawkish interest rate pause by the Federal Reserve (Fed).

Although the Fed kept rates steady in the 3.5%–3.75% range at its July policy meeting, an outcome widely anticipated by the markets, the decision revealed underlying hawkish sentiment.

Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack, and Minneapolis Fed chief Neel Kashkari all dissented, advocating instead for a 25 basis point rate hike. Reinforcing this stance during the post-meeting press conference, Fed Chairman Kevin Warsh stated that while the central bank will not offer forward guidance on future rate paths, it remains committed to taking all necessary actions to achieve its 2% inflation target.

Fed’s warsh doubles down on 2% goal, keeping Dollar bulls engaged

Warsh’s press conference tone is clearly more forceful than the established baseline, with the FXS Speechtracker score at 7/10 versus a historic 6/10, underscoring a firmer commitment to the inflation fight. The repeated insistence that “only one target and it is 2%” and that “inflation cannot be cured in 9 weeks” signals a resolute, patient stance on tightening conditions, even as Warsh highlights “impressive resilience” in the economy and solid labor markets. The emphasis on trend over short-term data, the rejection of any tolerance for a higher inflation target, and the pledge that the Committee “will not hesitate to act” collectively reinforce a hawkish bias supportive of the Dollar.

The FXS Fed Sentiment Index jumped by +18.94 points to 147.58, firmly in hawkish territory and consistent with the stronger tone captured by the FXS Speechtracker. This elevated reading, well above the neutral 100 mark, suggests markets should continue to price a persistent anti-inflation stance, with upside risks for the Dollar as Warsh stresses resolve on delivering the 2% target.

The Australian Dollar (AUD) may encounter headwinds as Australia's 10-year government bond yield retreats toward 4.9%, backing off multi-week highs following weaker inflation data. Headline inflation unexpectedly slowed to a four-month low of 3.8% in June, underperforming both May's figures and market forecasts of 4.0%. Although inflation remains above the Reserve Bank of Australia's (RBA) 2%–3% target range, the cooler readings led markets to drastically slash expectations for another rate increase this year, dropping probabilities to around 50%, down from over 90% prior to the data release.

These softer economic readings have largely cemented expectations that the RBA will keep policy on hold at its upcoming August 11 meeting. However, the downside for the Australian Dollar may find some support, as the RBA governor recently cautioned that additional rate hikes cannot be entirely ruled out if necessary to return inflation to its target.

Australia inflation holds firm as RBA focus stays on underlying pressures

Strategists at BNY highlight that Australia’s inflation pulse showed little sign of easing in June, with "Australia’s headline CPI rose 3.8% y/y in June 2026, unchanged from May." They add that underlying price pressures also remained stubborn, noting that "underlying inflation, measured by the trimmed mean, was steady at 3.6% y/y, also flat on the previous month." This combination of unchanged headline and core readings underscores persistent inflation dynamics that keep attention firmly on RBA policy and the Aussie’s performance.

The People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.7892 compared to the previous day's fix of 6.7899.

• GBP/USD meets with a fresh supply as the USD regains positive traction after the post-FOMC fall.
• Fed rate hike remains on the table amid inflation fears, supporting the USD amid Mideast tensions.
• Traders now look forward to the key BoE rate decision and important US macroeconomic releases.

The GBP/USD pair struggles to capitalize on the previous day's strong move up to the weekly high and drifts lower during the Asian session on Thursday. Spot prices currently trade around mid-1.3300s, down over 0.10% for the day, and, for now, seem to have stalled the recovery move from a nearly four-week low, touched on Tuesday.

The US Dollar (USD) regains some positive traction following the previous day's post-FOMC slide to an over one-week low and turns out to be a key factor exerting downward pressure on the GBP/USD pair. As was widely expected, the US Federal Reserve (Fed) held interest rates steady at the end of a two-day meeting on Wednesday. The central bank, however, refrained from adopting a more aggressive stance on monetary policy, which, in turn, weighed heavily on the Greenback.

Meanwhile, the on-hold rate decision was far from unanimous, featuring three dissents in a 9–3 vote, which reflected a deeply divided central bank. Furthermore, traders are still pricing in a greater chance of at least one interest rate hike by the end of this year amid rapidly shifting inflationary dynamics due to volatile oil prices. This, along with a further escalation of tensions in the Middle East, helps the safe-haven USD to attract some dip-buyers and is seen weighing on the GBP/USD pair.

Traders, however, might refrain from placing aggressive directional bets and opt to wait for the crucial Bank of England (BoE) policy decision, due later today. This will be followed by important US macro releases – the Advance Q2 GDP report and the Personal Consumption Expenditures (PCE) Price Index. Apart from this, the incoming geopolitical headlines will play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities around the GBP/USD pair.

• EUR/USD posts modest losses near 1.1465 in Thursday’s early Asian session. 
• While the Fed held rates steady at the July meeting, Warsh pledged that the central bank would take action on inflation if needed.
• The preliminary readings of the Eurozone and German GDP for Q2 are due later on Thursday. 

The EUR/USD pair trades with mild losses around 1.1465 during the early Asian session on Thursday. The US Dollar (USD) edges higher against the Euro (EUR) on a hawkish Federal Reserve (Fed) rate hold. Traders brace for the preliminary readings of the Gross Domestic Product (GDP) for the second quarter (Q2) from Germany and the Eurozone. 

The Fed opted to leave interest rates unchanged in the 3.5%-3.75% range at its July policy meeting on Thursday. Though markets widely expected the US central bank to stay on hold,   Dallas Fed President Lorie Logan, Cleveland’s Beth Hammack, and Minneapolis Fed chief Neel Kashkari dissented in favor of raising rates by 25 basis points (bps). 

During the press conference, Fed Chairman Kevin Warsh said that while the Fed won’t provide hints on where rate policy is heading, it will take necessary steps to meet its 2% inflation target. 

The Eurozone and Germany’s GDP data will be in the spotlight later on Thursday. Economists estimate the Eurozone GDP to show a modest 0.2% QoQ expansion in Q2 following a contraction of 0.2% in the previous reading. Germany's GDP is projected to grow 0.1% QoQ in Q2, versus 0.3% prior. If the reports show stronger-than-expected outcomes, this could lift the shared currency in the near term. 

The European Central Bank (ECB) policymaker Peter Kazimir said on Monday that the central bank will need to raise interest rates at least once more to contain inflation, and a deterioration in the outlook could warrant more tightening than now expected. Financial markets see at least two more rate hikes from the ECB, with the first move fully priced in by October and the second by March, according to Reuters. 

Fed seen delivering hawkish hold as markets price in year-end hike

Commerzbank’s Antje Praefcke expects that “in all likelihood, this overall situation should lead to a ‘hawkish hold’ this evening,” with the FOMC under Chair Kevin Warsh keeping rates unchanged but maintaining a tightening bias. She notes that “the market expects at least one interest rate hike from the Fed by the end of the year and sees a chance that more could follow next year as well.” While investors “do not want to completely rule out an interest rate hike even today,” Commerzbank stresses that the market “sees only a low probability for this to happen,” leaving the US Dollar and EUR/USD particularly sensitive to any shift in the perceived path of Fed policy.