Forex News

Rabobank strategists Molly Schwartz and Christian Lawrence discusses Mexico in its latest Mexican Peso (MXN) Market Musings, noting that the Mexican Peso has gained against the US Dollar (USD) year-to-date but weakened recently. They expect deteriorating MXN carry attractiveness as rate differentials narrow and implied volatility rises, yet remains constructive versus other currencies. They forecast USD/MXN moving higher toward 17.9 over a three‑month horizon.

Carry erosion but relative MXN resilience

"MXN has appreciated 3.57% against USD year-to-date, but has depreciated on a month-to date view."

"Non-commercial speculators net long MXN positioning has been slowly falling, and we foresee further contraction in long positioning."

"We foresee deteriorating MXN carry attractiveness due to narrowing interest rate differentials and rising implied volatility as a driving factor in further MXN weakness, but we still remain constructive of MXN relative to many other currencies as carry demand provides support on a relative basis."

"Banxico has cut the overnight policy rate to 6.50%. The market is pricing in 34bp of hikes by year end, but we expect the Bank to hold."

"USD/MXN implied volatilities have been trading sideways across the term structure for the past month."

"We forecast USD/MXN trading up to 17.9 on a three month view."

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

Governor Tiff Macklem is set to take questions from reporters shortly, which should offer markets a clearer read on the central bank’s thinking. His remarks come after the widely anticipated decision to leave the policy rate unchanged at 2.25%.

This section below was published at 13:45 GMT to cover the Bank of Canada's policy announcements and the initial market reaction.

The Bank of Canada (BoC) left its policy rate unchanged at 2.25% on Wednesday, in line with market expectations. Attention now shifts to Governor Tiff Macklem's press conference at 14:30 GMT, where investors will be looking for additional colour on the decision and any clues about the future path of monetary policy.

BoC policy statement key highlights

The Bank of Canada said it is continuing to look through the Middle East war's near-term impact on headline inflation.

Policymakers noted there has been limited evidence so far of a broad-based pass-through of higher energy prices to other consumer prices.

The Bank expects total inflation to hover around 3% in the near term before gradually easing back towards its 2% target.

Officials also said recent data suggest economic growth will resume in the second quarter.

At the same time, the Bank acknowledged that economic activity in Canada has been weak and uncertainty surrounding US trade policy persists.

The Governing Council stressed that it will not allow higher energy prices to become a source of persistent inflation.

Even with some improvement in activity, policymakers expect the economy to remain in excess supply.

Market reaction

The Canadian Dollar (CAD) trades with marked gains vs. the Greenback on Wednesday, prompting USD/CAD to confront the key 1.3900 contention zone in the wake of the central bank’s interest rate decision.

This section below was published as a preview of the Bank of Canada's (BoC) monetary policy announcements at 09:00 GMT.

• The Bank of Canada is expected to keep its interest rate at 2.25%.
• The Canadian Dollar remains weak, with USD/CAD near 1.4000.
• Markets pencil in around 36 bps of hiking by the BoC this year.

The Bank of Canada (BoC) is widely expected to keep its policy rate unchanged at 2.25% on Wednesday. This would be the fifth consecutive gathering with the bank keeping its hand steady.

At its April event, the BoC left rates unchanged at 2.25%, as expected, but the overall message was far from dovish.

While policymakers see some softness in near-term growth, inflation is proving a little more stubborn than anticipated, with wage growth still running in the 3% to 3.5% range. In other words, the economy is slowing, but not enough to completely remove inflation concerns.

Governor Tiff Macklem reiterated that there is no preset path for rates and stressed that policymakers remain guided by incoming data. Importantly, he refused to rule out further tightening, noting that persistently high energy prices could eventually require a policy response. At the same time, he said, existing economic slack should help to contain the inflationary impact of higher energy prices.

Macklem also warned that inflation expectations may be less firmly anchored than they were before the pandemic, while Deputy Governor Carolyn Rogers highlighted trade tensions as a longer-term risk to the outlook.

All in all, the bank remains firmly in wait-and-see mode, but it is not signalling rate cuts anytime soon. Inflation risks still lean modestly to the upside, allowing for further tightening if price pressures prove more persistent than expected.

Inflation, however, remains the key watch point after the headline CPI rose by 2% in the year to April, below the previous month’s print of 2.2% and matching the bank’s target. In the same direction, the BoC’s core inflation eased to 2.1% from a year earlier. The bank’s preferred measures, CPI-Common, Trimmed and Median, also ticked lower, but at 2.5%, 2% and 2.1%, respectively, they still remain above target.

When will the BoC release its monetary policy decision, and how could it affect USD/CAD?

The Bank of Canada will announce its policy decision on Wednesday at 13:45 GMT, followed by a press conference with Governor Tiff Macklem at 14:30 GMT.

Markets anticipate the central bank maintaining its current stance, with a projected tightening of just over 35 basis points by the end of 2026.

Pablo Piovano, Senior Analyst at FXStreet, points out that the Canadian Dollar (CAD) has been depreciating steadily against the Greenback since May, lifting USD/CAD to an area close to the psychological 1.4000 barrier earlier this week.

Piovano says the continuation of the ongoing bullish momentum could prompt the spot to initially reclaim the 2026 ceiling at 1.3966 (March 31). Up from here comes the key 1.4000 threshold, seconded by the November top at 1.4140 (November 5).

On the downside, he adds, "The loss of the 200-day SMA at 1.3813 could pave the way for extra weakness, targeting the weekly floor at 1.3770, which appears reinforced by the provisional 55-day SMA. Down from here emerges the May base at 1.3949 (May 29), ahead of the March trough at 1.3525 (March 9) and the February valley at 1.3504 (February 11).

“Momentum favours extra gains,” he suggests, noting that the Relative Strength Index (RSI) hovers near the 68 level, while the Average Directional Index (ADX) just past 30 is indicative of a strong trend.

• The New Zealand Dollar trades without a clear direction after mixed economic data from China.
• US inflation accelerates to 4.2% YoY in May, reaching its highest level in three years.
• Markets now await clues on whether rising price pressures could alter expectations for US monetary policy.

NZD/USD trades around 0.5815 at the time of writing on Wednesday, little changed on the day, as investors digest a series of macroeconomic releases from China and the United States (US).

The pair remains broadly stable following Chinese data released during the Asian session. According to the National Bureau of Statistics of China, the Consumer Price Index (CPI) declined by 0.1% MoM in May, compared with a 0.3% increase previously. Meanwhile, the Producer Price Index (PPI) rose by 3.9% YoY, above market expectations of a 3.8% increase. These mixed figures failed to provide meaningful support to the New Zealand Dollar (NZD), which is often viewed as sensitive to developments in the Chinese economy.

Market attention has now shifted to the United States, where inflation continues to accelerate. Data released on Wednesday showed that the CPI increased by 4.2% YoY in May, up from 3.8% in April and in line with market expectations. On a monthly basis, inflation rose by 0.5%, also matching consensus forecasts.

The core CPI, which excludes food and energy prices, increased by 0.2% MoM and 2.9% YoY. This underlying inflation measure remains closely watched by policymakers as a gauge of persistent price pressures.

Despite the stronger yearly inflation reading, the reaction in currency markets has remained limited. The US Dollar (USD) has struggled to post a meaningful move following the release, as investors await further clarity on the next policy steps from the Federal Reserve (Fed). Against this backdrop, NZD/USD continues to trade sideways around 0.5815 as market participants assess the potential implications of the inflation data for the US interest rate outlook.

ING’s Frantisek Taborsky notes Czech inflation has surprised on the downside, but strong wage growth and stable core inflation keep the Czech National Bank on track for a rate hike at its June meeting. With markets likely to price further tightening, ING sees EUR/CZK testing 24.00 next week and expects more Koruna gains as Czech Republic becomes an early hiker in EM.

CNB tightening cycle paints bullish FX picture

"Without much surprise today, the CNB seems to be heading for a rate hike at the June meeting next week. The blackout period before the meeting starts on Thursday and we are likely to see more comments from the bank board."

"Even though the rate hike is largely priced in, we believe the decision itself has the potential to boost FX as the start of a cycle. Even though the CNB is unlikely to interpret this decision as the start of a series of rate hikes, the market will want to price in more tightening."

"EUR/CZK could thus test 24.00 next week with ambitions for more koruna gains later as the Czech Republic is an early hiker within the EM space, painting a bullish picture for the CZK."

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

Scotiabank’s Shaun Osborne and Eric Theoret note GBP/USD is slightly higher, British Pound (GBP) outperforming most G10 peers except the Canadian Dollar (CAD) and Norwegian Krone (NOK), as traders await UK trade and industrial production data before the June 18 BoE meeting. They- see stalled rate expectations and stable yield spreads, with near-term resistance around key moving averages and a 1.3350–1.3450 trading range amid elevated domestic political risk.

Sterling edges up into key UK data

"The pound is also entering Wednesday’s NA session with a fractional 0.1% gain as it outperforms all of the G10 currencies with the exception of the CAD and NOK."

"Fundamental releases have been limited and all eyes are on Friday’s trade and industrial production figures, some of the last major data points scheduled ahead of the June 18 BoE meeting."

"The recent recovery in rate expectations looks to have stalled, and yield spreads have stabilized, offering little in terms of near-term directional risk (fundamentally) for the GBP."

"Sentiment has deteriorated somewhat over the past week or so, and political risk is elevated into the June 18 by-election for potential Labour leader Andy Burnham’s constituency. "

"Near-term gains may find resistance around the 200 day MA at 1.3420 and above the 50 day MA at 1.3461. We look to a near-term range bound between 1.3350 and 1.3450."

"Bearish/neutral – the RSI has once again come off its lows and is once again returning to the neutral threshold at 50. Recent price action has offered a potential ‘morning star’ reversal candle formed by Friday’s decline, Monday’s doji, and Tuesday’s solid up day."

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

• Gold trades near an 11-week low as in-line US inflation data keeps Fed rate-hike expectations intact.
• Headline US inflation rises to 4.2%, its highest level since April 2023.
• A break below the 200-day SMA keeps the technical outlook firmly bearish.

Gold (XAU/USD) remains under pressure on Wednesday as the latest US inflation data broadly matched market expectations and did little to alter expectations that the Federal Reserve could raise interest rates later this year. At the time of writing, XAU/USD is trading around $4,148 near 11-week lows, down over 2.5% on the day.

Headline Consumer Price Index (CPI) accelerated to 4.2% YoY in May, its highest level since April 2023. Core CPI rose to 2.9%. However, monthly core inflation eased to 0.2% from 0.4%.

The pickup in inflation comes after the US-Iran war triggered a sharp rise in energy prices, pouring cold water on the Fed's efforts to bring inflation back toward its 2% target.

Before the war began, markets were pricing in at least two rate cuts this year. Those bets have now disappeared, with traders increasingly expecting a rate hike by year-end.

Markets are currently pricing in a 33% chance of a 25-basis-point (bps) rate hike in September, with the odds increasing to 38% for October and 42% for December, according to the CME FedWatch Tool. Higher interest rates are typically negative for Gold because the precious metal offers no yield.

Meanwhile, hopes for a near-term peace deal between the United States and Iran appear slim after both sides launched renewed strikes on Tuesday. US President Donald Trump warned in a Truth Social post that Iran had "taken too long to negotiate a deal that would have been great for them" and that Tehran would now "have to pay the price."

The geopolitical uncertainty, combined with hawkish Fed expectations, has kept the US Dollar (USD) supported near recent highs, creating an additional headwind for Dollar-denominated Gold.

Technical analysis: XAU/USD eyes March low after decisive break below 200-day SMA

XAU/USD remains under heavy selling pressure after breaking below the key 200-day Simple Moving Average (SMA) at $4,444. The Relative Strength Index (RSI) has slipped to oversold territory near 27 on the daily chart, while the Average Directional Index (14) rises above 30, suggesting a strengthening downtrend despite stretched short-term conditions.

On the downside, the March low at $4,098 serves as the next key support level, where buyers may attempt to halt the decline. On the topside, any rebound would first confront the 200-day SMA at $4,444, followed by the 50-day SMA at $4,608 and then the 100-day SMA at $4,782, with the cluster of moving averages overhead likely to limit recovery attempts unless decisively reclaimed.

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

BNY highlights that European governments have raised a record USD 504 billion via syndicated bonds in 2026, driven by defense, infrastructure and energy-transition spending. Despite higher yields and rate uncertainty, demand remains strong, helping governments manage refinancing needs. Italy leads issuance, while Eurozone risk assets and EUR/USD show modest gains alongside Euro government bond yields.

Record Eurozone supply meets strong demand

"Governments have raised a record USD 504bn through syndicated bond sales so far in 2026, surpassing even the pace seen during the first half of the pandemic."

"Despite rising yields and uncertainty over the interest rate outlook, investor demand for sovereign debt remains strong, enabling governments to lock in funding and manage elevated borrowing needs."

"Market participants expect issuance to remain heavy through the second half of 2026 as refinancing pressures continue."

"BRL, USD and CAD recorded the largest outflows, while broad-based inflows favored the rest of the iFlow universe, led by CHF, SEK and EUR."

"Demand remained strongest for LatAm government bonds, followed by Canada and the Eurozone."

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

Brown Brothers Harriman’s (BBH) Elias Haddad reports that the Norwegian Krone is outperforming as underlying inflation overshot expectations in May, bringing forward rate hike bets from November to September. After a surprise 25 bps hike in May, Norges Bank keeps the door open for another increase, with elevated energy prices supporting a firmer NOK, the top major performer year‑to‑date.

Hot inflation and energy support stronger NOK

"NOK is up against most major currencies.Norway underlying inflation ran hot in May. The swaps curve brought forward bets of a follow-up 25bps Norges Bank rate hike from November to September."

"Underlying CPI unexpectedly increased to a four-month high of 3.4% y/y (consensus: 3.2%, Norges Bank forecast: 3.3%) vs. 3.2% in April, while headline CPI matched consensus at 3.1% y/y (Norges Bank forecast: 3.3%) vs. 3.4% in April."

"At its last May 6 meeting, the Norges Bank delivered a surprised 25bps rate hike to 4.25% and left the door open for another hike by year-end because “inflation is too high and has run above target for several years.” Bottom line: a hawkish Norges Bank and elevated energy prices continue to underpin a firmer NOK. NOK is the top performing major currency year-to-date."

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