Forex News
- The Japanese Yen remains under pressure against the US Dollar after stronger-than-expected US inflation data.
- Markets are now pricing in higher odds of at least one Federal Reserve rate hike this year.
- Investors are also watching the meeting between Donald Trump and Xi Jinping this week.
USD/JPY trades around 157.80 on Wednesday at the time of writing, up 0.13% on the day, as the US Dollar (USD) continues to benefit from renewed hawkish expectations surrounding the Federal Reserve’s (Fed) monetary policy outlook.
The US Dollar remains close to its recent highs after Tuesday’s stronger-than-expected United States (US) Consumer Price Index (CPI) release. Headline inflation in the US rose 3.8% YoY in April, above market expectations of 3.7% and the previous reading of 3.3%, reinforcing expectations that the Fed could keep interest rates higher for longer.
Data released on Wednesday also confirmed persistent inflationary pressures in the United States. The Producer Price Index (PPI) surged 6% YoY in April, above market expectations of 4.9%, while core PPI reached 5.2% YoY. Rising energy prices linked to geopolitical tensions in the Middle East continue to fuel global inflation concerns.
According to the CME FedWatch tool, the chance of at least one Fed rate hike by the end of the year increased sharply after the US inflation data. This shift supports US Treasury yields and the Greenback at the expense of the Japanese Yen (JPY).
The next major catalyst for markets will now be the meeting between US President Donald Trump and Chinese President Xi Jinping in Beijing this week. Investors will closely monitor any comments regarding trade and geopolitical tensions, while developments surrounding Iran and the Strait of Hormuz continue to support risk aversion.
On the Japanese side, the JPY is limiting part of its losses thanks to expectations of further monetary tightening by the Bank of Japan (BoJ). The Summary of Opinions from the central bank’s April meeting showed that several policymakers are considering additional rate hikes as early as the next meetings, mainly due to inflation risks linked to rising Oil prices.
The Organisation for Economic Co-operation and Development (OECD) also stated that the Bank of Japan could raise its policy rate to 2% by the end of 2027, while urging the Japanese government to strengthen fiscal discipline.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.26% | 0.20% | 0.14% | 0.02% | -0.22% | 0.35% | 0.30% | |
| EUR | -0.26% | -0.07% | -0.11% | -0.26% | -0.48% | 0.09% | 0.02% | |
| GBP | -0.20% | 0.07% | -0.04% | -0.18% | -0.40% | 0.18% | 0.08% | |
| JPY | -0.14% | 0.11% | 0.04% | -0.12% | -0.36% | 0.18% | 0.15% | |
| CAD | -0.02% | 0.26% | 0.18% | 0.12% | -0.24% | 0.34% | 0.26% | |
| AUD | 0.22% | 0.48% | 0.40% | 0.36% | 0.24% | 0.57% | 0.50% | |
| NZD | -0.35% | -0.09% | -0.18% | -0.18% | -0.34% | -0.57% | -0.08% | |
| CHF | -0.30% | -0.02% | -0.08% | -0.15% | -0.26% | -0.50% | 0.08% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
BNY’s Bob Savage notes Japanese 20-year yields have climbed to 1997 highs as JGBs track U.S. moves, with markets watching USD/JPY holding below 158. A record current account surplus and supportive comments from U.S. officials reinforce expectations for a BoJ rate hike in June. The OECD projects overnight rates reaching 2% by end-2027, anchoring a gradual tightening path.
Higher yields bolster Japanese Yen outlook
"Japanese 20y bond yields have risen to 1997 highs, up 5bp to 3.495%."
"Japanese bonds tracked the U.S. move overnight, with a focus on JPY holding below 158 and the ongoing elevated oil prices."
"Japan’s current account surplus rose to a record for March, and U.S. Treasury Secretary Scott Bessent told PM Sanae Takaichi that Japan’s economic fundamentals were strong, both of which set the course for the BoJ to hike rates in June."
"The OECD sees overnight rates of 2% at the end of 2027."
"Japanese flows and U.S. bonds will be in the spotlight with the U.S. 30y auction today."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann said on Wednesday that the trade off between inflation and activity is becoming "increasingly stark," per Reuters.
"Tighter policy stance could trigger volatility as new actors unwind positions, potentially leading to tighter domestic financial conditions than intended," Mann added and argued that the monetary policy by itself cannot offset cost-push shocks from energy prices.
Market reaction
GBP/USD remains under modest bearish pressure following these remarks and was last seen losing 0.2% on the day at 1.3515.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
- EUR/USD trades lower for a second straight day as stronger US inflation data and rising Treasury yields lift the Greenback.
- Markets increasingly price in the possibility of a Fed rate hike after US CPI and PPI data topped expectations.
- The Euro remains under pressure despite rising ECB rate hike bets as higher energy prices cloud the Eurozone economic outlook.
The Euro (EUR) trades under pressure against the US Dollar (USD) on Wednesday, with EUR/USD extending losses for a second consecutive day as uncertainty surrounding the US-Iran negotiations and hotter-than-expected US inflation data continue to support the Greenback. At the time of writing, the pair is trading around 1.1710, down roughly 0.25% on the day.
Rising Oil prices, driven by supply disruptions in the Middle East, continued to feed inflationary pressure at both the consumer and producer levels in the United States (US).
Data released by the US Bureau of Labor Statistics showed that headline Producer Price Index (PPI) inflation rose 6.0% YoY in April, accelerating sharply from 4.3% in March and surpassing market expectations of 4.9%. Meanwhile, core PPI excluding Food and Energy climbed 5.2% YoY from 4.0% previously, also beating forecasts of 4.3%.
The latest figures followed the stronger-than-expected Consumer Price Index (CPI) report released on Tuesday, which showed headline inflation accelerating to 3.8% YoY in April from 3.3% in March, marking the highest reading since May 2023.
The back-to-back upside inflation surprises added pressure on the Federal Reserve (Fed) to maintain a restrictive monetary policy stance as inflation drifts further away from the central bank’s 2% target.
Traders currently anticipate no immediate change in Fed interest rates, but the CME FedWatch tool indicates growing expectations of a rate hike later in the year, with the probability rising to around 38% by December and 52% by January 2027.
The hawkish repricing is pushing US Treasury yields higher and boosting demand for the Greenback. The US Dollar Index (DXY), which tracks the USD against a basket of six major currencies, is trading around 98.50, its highest level in more than a week.
In the Eurozone, growing hawkish bets on the European Central Bank (ECB) are failing to provide meaningful support to the Euro, as rising global energy prices linked to the ongoing Middle East war continue to weigh on the region’s economic outlook.
According to a Reuters poll published on Wednesday, 59 of 70 economists expect the ECB to raise interest rates by 25 basis points in June, while 34 of 70 also expect at least one additional rate hike later this year.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
- A majority of economists surveyed by Reuters expect the BoE to leave interest rates unchanged this year.
- UK inflation forecasts remain elevated in 2026, averaging 3.2%.
- Economic growth expectations were slightly revised higher compared with the April poll.
The Bank of England (BoE) is expected to maintain a cautious stance as inflation remains above its target, according to a Reuters poll published on Wednesday.
Among the 56 economists surveyed, 27 expect the central bank to keep the rate unchanged at 3.75% throughout the year, while 7 foresee at least one rate cut and 22 anticipate at least one additional rate hike.
This split in expectations highlights the ongoing uncertainty surrounding the UK economy, as disinflation progresses slowly while growth risks remain present.
The Reuters poll also showed that UK inflation is expected to average 3.2% in 2026, unchanged from the April survey. Meanwhile, economic growth prospects were slightly improved, with Gross Domestic Product (GDP) growth projected at 0.8% for the year, compared with 0.7% in the previous poll.
These projections reinforce the view that the Bank of England could maintain a restrictive monetary policy for longer in order to contain inflationary pressures, even as economic activity shows some signs of stabilisation.
Market reaction
The British Pound did not react to the poll release, with GBP/USD trading around 1.3515 on Wednesday at the time of writing, down 0.17% on the day.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.23% | 0.15% | 0.11% | 0.04% | -0.16% | 0.37% | 0.20% | |
| EUR | -0.23% | -0.09% | -0.13% | -0.19% | -0.41% | 0.13% | -0.06% | |
| GBP | -0.15% | 0.09% | -0.04% | -0.09% | -0.32% | 0.24% | 0.04% | |
| JPY | -0.11% | 0.13% | 0.04% | -0.06% | -0.27% | 0.25% | 0.10% | |
| CAD | -0.04% | 0.19% | 0.09% | 0.06% | -0.21% | 0.34% | 0.15% | |
| AUD | 0.16% | 0.41% | 0.32% | 0.27% | 0.21% | 0.54% | 0.36% | |
| NZD | -0.37% | -0.13% | -0.24% | -0.25% | -0.34% | -0.54% | -0.19% | |
| CHF | -0.20% | 0.06% | -0.04% | -0.10% | -0.15% | -0.36% | 0.19% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
- US Producer Price Index spikes 6.0% YoY, pushing the USD higher.
- Trump said on Tuesday that Iran will either “make a good deal” with the US or face devastation.
- IEA claims Oil inventories are falling faster than expected as the Strait of Hormuz disruption continues.
The AUD/USD pair is trading at a neutral basis near the 0.7250 level after the US Producer Price Index (PPI) for April came in unexpectedly hot.
Separately, United States (US) President Donald Trump threatened Iran ahead of a meeting with Chinese President Xi Jinping.
Trump claimed that Iran will either “make a good deal” with the US or face devastation. The war on Iran, which has sent energy prices soaring because of Tehran’s effective closure of the Strait of Hormuz, will be high on the agenda of the talks between Trump and Chinese President Xi Jinping.
The PPI for April came in well above economists' expectations at 6.0% YoY. Consensus had been 4.9%. This higher reading gave the Greenback some resilience.
Core PPI, which excludes food and fuel, likewise arrived above the consensus of 4.3% at 5.2% YoY and rose 1% MoM.
Oil inventories are falling around the world at a record pace and will continue to drop for months as the disruption to Middle East supplies from the Iran war intensifies, according to a report by the International Energy Agency (IEA).
Global observed Oil inventories declined by about 4 million barrels per day in March and April, according to a monthly report from the agency, which is coordinating the release of emergency fuel stocks by major economies such as the US, Japan and Germany. The market will remain “severely undersupplied” until October, even if the conflict ends next month, the IEA said.
Short-term technical analysis:
On the 4-hour chart, AUD/USD trades at 0.7241, holding a mildly bullish near-term bias as it stays above the 20-period Simple Moving Average (SMA) at 0.7238 and the 100-period SMA near 0.7191. The cluster of nearby supports suggests dips could be contained for now, while the Relative Strength Index (RSI) hovering around 55 hints at steady, but not overstretched, upside momentum.
On the topside, initial resistance appears at 0.7243, ahead of a more notable barrier around 0.7254, where recent supply has emerged. On the downside, the 20-period SMA at 0.7238 forms the first support, followed by horizontal floors at 0.7235 and 0.7234, with the 100-period SMA near 0.7191 reinforcing the broader bullish structure on deeper pullbacks.
(The technical analysis of this story was written with the help of an AI tool.)
ING’s Chris Turner reports that Sterling weakened independently as UK politics took centre stage, with Prime Minister Keir Starmer facing potential leadership challenges from figures like Wes Streeting, Andy Burnham and Angela Rayner. He warns that formal leadership bids, particularly from Burnham, could trigger further Pound losses, though high yields and expected demand in EUR/GBP below 0.8650 provide some support.
Leadership uncertainty and FX reaction
"Sterling finally saw some independent weakness yesterday as Westminster politics moved front and centre. As it stands, Keir Starmer intends to stay on as prime minister and run in any leadership contest against challengers. Those challengers, such as Wes Streeting, Andy Burnham or Angela Rayner, have yet to formally declare themselves in the race."
"Today could prove a day of rest in political manoeuvring, given the state opening of parliament and King Charles delivering Labour's planned legislation over the next term. However, any of those candidates formally launching a leadership bid would probably result in fresh sterling losses – especially any news on Andy Burnham, whose policies are seen threatening the gilt market."
"High yields are probably providing sterling with a little insulation at the moment, but we would expect good demand in EUR/GBP under 0.8650."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
The United States (US) Producer Price Index jumped to 6% on a yearly basis in April, following the 4.3% posted in March and largely surpassing the expected 4.9%. On a monthly basis, the PPI rose 1.4%, doubling the March reading of 0.7%, and much higher than the anticipated 0.5%.
Wholesale inflation hit its highest since December 2022, not really a surprise considering what’s going on in the Middle East. The energy supply disruption triggered by the Iran war is the main source of higher inflationary pressures around the globe and what’s twisting central bankers’ hands.
The figures came a day after the Consumer Price Index (CPI) rose by 3.8% in the same period, nearly doubling the Federal Reserve’s (Fed) goal of 2%, spurring speculation that the central bank will have no choice but to hike interest rates.
Market reaction
The US Dollar Index (DXY) retains the positive momentum across the FX board amid a combination of risk aversion and mounting speculation of upcoming US rate hikes, holding near fresh weekly highs in the 98.60 region. Recent peaks at around 99.10 turn into a critical resistance area ahead of additional gains.
Scotiabank strategists Shaun Osborne and Eric Theoret note USD/CAD is steady around 1.3695, with the Canadian Dollar (CAD) seen as cheap versus a fair value estimate near 1.3510. They highlight slightly wider front-end spreads in favour of the US Dollar (USD) but argues stretched USD valuation should limit further gains. Short-term technicals show resistance near 1.3720 and support around 1.3640/45 and 1.3550/75.
Canadian Dollar seen as undervalued
"The CAD is little changed against the USD as spot continues to hold within recent ranges. A bounce in risk appetite constitutes a minor plus for the CAD on the session with little else to focus on."
"Factors driving the CAD have drifted a little over the past week—front-end spreads have widened a little in the USD’s favour—but the CAD remains “cheap” relative to our fair value assessment (1.3510 today) still. The USD’s somewhat stretched valuation should constrain scope for gains, all else equal."
"BoC DG Alexopoulos will speak at the Ottawa Economics Association (OEA) and the Canadian Association for Business Economics (CABE) 2026 Spring Policy Conference on AI adoption, productivity and economic potential in Canada. Prepared comments hit the wires at 11.05ET. There is a moderated Q&A following her comments. "
"Neutral/bearish—Little change in spot means no real change in the technical backdrop. USD/CAD remains capped by key resistance at 1.3710/20 (a marginal infraction through the 20 point was firmly rejected yesterday)."
"A clear break above 1.3720 is needed to see USD gains extend to 1.3750/00. Support is 1.3640/45 and 1.3550/75. "
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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