Forex News

• EUR/GBP hits session lows a few pips above 0.8550, extending its reversal from Thursday's highs at 0.8585.
• Eurozone preliminary data showed that consumer prices ticked up to 2.9% YoY in July from 2.8% in June.
• The Pound is drawing support from a mild hawkish repricing after Thursday's BoE's monetary policy meeting.

The Euro (EUR) edges lower against the British Pound (GBP) on Friday, hitting session lows at 0.8554 following the Eurozone’s preliminary inflation figures from July. The pair has turned negative in the daily chart, but remains on track for a 0.2% weekly appreciation so far.

Data released on Friday showed that the Eurozone’s preliminary Harmonised Index of Consumer Prices (HICP) accelerated to a 2.9% year-on-year growth in July, from June’s 2.8% growth, in line with the market’s expectations. Monthly inflation rose 0.2%, reversing the 0.1% contraction seen in June. Beyond that, the core HICP, ticked up to 2.5% against market expectations of a steady 2.4% growth.

Previously, data from France showed that yearly inflation accelerated to 2.4% in July from 2% in June, well above the 2.1% increase forecast by market analysts and from June's 2.0% reading. On the negative side, the German Unemployment Rate increased against expectations to 6.4% in June from 6.3% in May, as the number of jobless workers increased to 6K after a 1K drop in the previous month.

BoE split gives a fresh boost to the Pound

The Pound, on the other hand, is drawing some support from Thursday’s Bank of England (BoE) monetary policy decisions. The bank left interest rates on hold, as widely expected on Thursday, but the three hawkish dissenters, and Governor Bailey opennness to tighten monetary policy if the Middle East conflict pushes Oil prices beyond $100 fuelled some hopes of a rate hike later this year.

Analysts at TD Securities, however, warn that, “other than the vote split, it would appear to us the rest of the committee is still very comfortable keeping rates on hold, given the lack of clear second-round effects observed in inflation data.” In that context, TD argues that “the knee-jerk GBP rally should be faded vs the EUR and USD,” warning that “further paring back of September BoE rate hike pricing could weigh on GBP.”

• The British Pound drops against its major peers on easing hawkish BoE prospects.
• The BoE clarifies that interest rate hikes would be needed if second-round inflation effects start emerging.
• Investors doubt the Fed's rate hikes in the near term.

The British Pound (GBP) is down against its major currency peers, trading marginally lower at around 1.3444 against the US Dollar (USD) during the European trading session on Friday. The British currency faces selling pressure as financial markets reconsider Bank of England (BoE) interest rate expectations for the September policy meeting after the monetary policy announcement on Thursday.

Markets pare back BoE tightening bets as Deutsche Bank downplays hike risks

Analysts at Deutsche Bank stress that the BoE was not “edging towards a rate hike” at its latest meeting, despite the split vote on the MPC. They note that markets “dialed back expectations for BoE hikes in response,” with the implied probability of a September move dropping from 60% to 30%. In parallel, Deutsche Bank highlights that “31bps of hikes [were] priced by year-end (-11.4bps on the day),” underscoring how investors reassessed the near-term tightening path following the Bank’s communication.

Market experts view remarks from BoE Governor Andrew Bailey at the press conference as indicating that the bar for an interest rate hike in the near term is still high, even as he explicitly said, "If Mideast conflict persists and we get second-round effects, we will likely need to raise rates."

BoE tone tempers hike fears as war outcome shapes rate cut debate

According to analysts at Commerzbank, the Bank of England’s latest communication struck a deliberately cautious tone. They highlight that at the press conference, Governor Andrew Bailey stressed that no one should “leave this room thinking that the BoE is edging towards a hike,” underscoring the Bank’s reluctance to signal any imminent tightening. At the same time, Commerzbank notes that some policymakers acknowledged that “rate cuts could once again come into focus should the war come to an end,” suggesting that the policy debate remains finely balanced and contingent on developments in the Middle East.

Against the US Dollar, the British currency recovers a majority of its early losses as the latter falls back amid doubts about whether the Federal Reserve (Fed) would use interest rate hikes to tame elevated United States (US) inflationary pressures.

In European trade, the US Dollar Index (DXY), which gauges the Greenback's value against six major currencies, gives back a majority of its early gains and trades marginally higher to near 100.00.

Dollar under pressure as Fed ambiguity fuels post-FOMC selloff

Analysts at ING highlight that the “post-FOMC dollar selloff accelerated yesterday,” as markets remained uneasy about the policy outlook. They note that investors are increasingly concerned “that the Federal Reserve may be reluctant to translate its price stability rhetoric into effective policy tightening.” ING adds that this unease has been compounded by “Fed Chair Kevin Warsh's ambiguity about the reaction function,” which has “continued to weigh on USD, whose summer strength had been largely driven by Fed hike expectations.”

Silver prices (XAG/USD) fell on Friday, according to FXStreet data. Silver trades at $58.08 per troy ounce, down 1.59% from the $59.02 it cost on Thursday.

Silver prices have decreased by 18.29% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 69.84 on Friday, up from 69.53 on Thursday.

(An automation tool was used in creating this post.)

Rabobank strategists highlight renewed weakness in China, with official PMI data showing both manufacturing and non-manufacturing back in contraction and domestic demand still soft. Policymakers are prioritizing faster implementation of existing measures over new stimulus. They expect China’s growth trend to drift below the authorities’ 4.5%-5.0% target range over coming years, with growth around 4.5% in 2026 and 4.2% by 2027.

Trend growth seen moving lower

"China was the weak spot. The official PMI data disappointed, with both manufacturing and non-manufacturing activity slipping back into contraction territory. Domestic demand remains soft, and the Politburo meeting offered little comfort for those hoping for a fresh round of stimulus. Instead, policymakers focused on speeding up the implementation of measures already in place."

"The broader challenge is that China still relies heavily on exports to support growth, as the cracks in the domestic economy are wide. Weak consumer demand, falling foreign direct investment, subdued business investment and persistent overcapacity in parts of the industrial sector continue to weigh on activity. Record trade surpluses may flatter headline growth, but they do not provide a sustainable foundation for the economy, let alone its relationship with other countries."

"In this report, we argue that China is likely to be pushed, at least gradually, towards a more consumption-driven growth model. That transition will not be painless. The adjustment could prove costly and disruptive, particularly if trade tensions with the rest of the world continue to intensify in the meantime. Our base case is that China's growth trend will continue to drift lower over the coming years and settle below the authorities' preferred 4.5%-5.0% range. We still expect growth of around 4.5% this year, but see it slowing to roughly 4.2% in 2027."

"As Chinese firms currently look abroad to absorb their excess production, Europe finds itself at the sharp end of the adjustment. Partly in response, the EU has rolled out a broad set of policies aimed at strengthening domestic production, reducing vulnerabilities in key supply chains and limiting exposure to external economic pressure. This report provides a non-exhaustive overview of those initiatives. Whilst there is clearly a more coherent framework emerging from Brussels, it is also fair to say that progress in implementation remains slow and uneven."

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

European Central Bank (ECB) Governing Council member Martin Kocher said in European trade on Friday that recent weeks have demonstrated how quickly geopolitical developments can alter energy prices and, consequently, the inflation outlook. Kocher added, “In autumn, the ECB governing council will make decisions based on incoming data to bring inflation in the euro area back to the target level of 2% on a sustainable basis.”

Market reaction

No immediate reaction was seen in the Euro (EUR) followin remarks from ECB's Kocher. At press time, EUR/USD trades 0.1% lower at around 1.1517.

Kocher flags data-dependent autumn decisions as energy risks cloud Euro outlook

FXS Speechtracker assigns this speech a 5.6/10, below Kocher’s historic 6.3/10, signaling a slightly softer tone versus past remarks. Emphasis on how fast geopolitical shocks can alter energy prices and the inflation outlook underscores upside inflation risks, but the absence of explicit tightening language points to a mildly cautious, rather than strongly hawkish, stance.

The commitment that the ECB Governing Council will decide in autumn based on incoming data to bring Euro area inflation back to 2% on a sustainable basis reinforces a data-dependent, wait-and-see posture. For the Euro, this combination of acknowledged inflation risks and delayed, conditional action leans marginally dovish at the margin, tempering expectations for aggressive policy moves in the near term.

MUFG analysts use a textual sentiment framework on the latest Bank of England (BoE) decision, finding a hawkish hold in Monetary Policy Committee (MPC) member contributions but a more balanced tone from Governor Bailey’s press conference. The Committee remains modestly hawkish overall, yet officials push back on imminent rate hike expectations, leaving GBP supported but with limited upside as restrictive policy is maintained.

BoE hawkish hold but balanced tone

"The latest member contributions point to a hawkish hold stance. While members acknowledged softer growth dynamics and a gradually easing inflation backdrop, members remained focused on inflation persistence, second-round effects and the potential inflationary consequences of higher energy prices and geopolitical risks."

"Individual member scoring highlights a still-divided Committee. Catherine Mann (80 – Hawkish Conviction), Huw Pill (71) and Megan Greene (65) remain firmly in hawkish conviction territory, while Swati Dhingra (-28) and Alan Taylor (-33) continue to represent the dovish wing. The remaining members sit close to neutral, leaving the Committee modestly hawkish overall."

"Importantly, however, the press conference delivered a more balanced message than the written statement. Our framework scored the member contributions at 23.3 versus 17.0 (where -100 represents the strongest dovish conviction and 100 represent the strongest hawkish conviction) for the press conference. Although policymakers reinforced concerns around energy prices and second-round effects, Governor Bailey pushed back against any interpretation that the Bank was preparing to raise rates, explicitly stating that markets should not leave the meeting believing the MPC was "edging towards a hike"."

"The key message from the sentiment analysis is that policymakers remain concerned about inflation risks but are not signalling an imminent tightening. Instead, the MPC continues to favour the current restrictive stance while assessing whether recent inflation pressures prove persistent. For GBP, the communication remains supportive, but the deliberate pushback against rate hike expectations limits the scope for upside."

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

Annual Harmonized Index of Consumer Prices (HICP) in the Eurozone, as measured by changes in the prices of a representative basket of goods and services in the European Monetary Union, rises at a faster pace of 2.9% in July, as expected, against 2.8% in June. On a monthly basis, the inflation data rises 0.2% after declining 0.1% in June.

Eurozone's annual core HICP – which excludes volatile components like food, energy, alcohol, and tobacco – also grows at a faster pace. The underlying inflation data arrives at 2.5% YoY, while it was expected to remain steady at 2.4%. Month-on-month core HICP remains flat after a 0.2% growth.

Market reaction

The initial response by the Euro (EUR) towards the inflation data appears to be slightly negative. As of writing, EUR/USD trades 0.1% lower at around 1.1517.

ING’s commodities team reports that Gold demand was steady in 2Q 2026, with total demand flat year-on-year at 1,269 tonnes as strong central bank purchases balanced weaker ETF demand. They note net ETF outflows amid higher inflation and rate expectations and a stronger Dollar, while revised data imply central bank Gold buying in 2026 will likely fall below 2025 levels.

Steady demand with softer 2026 outlook

"According to the World Gold Council, total gold demand (including OTC transactions) was unchanged year-on-year at 1,269 tonnes in 2Q 2026, as strong central bank purchases offset weaker investor demand through gold exchange-traded funds (ETFs). Total demand reached 2,522 tonnes in the first half of the year, up 2% YoY."

"Gold ETFs recorded 45 tonnes of net outflows in the second quarter, reflecting growing inflation and interest rate expectations, along with a stronger US dollar."

"Central bank purchases increased 62% YoY to 289 tonnes in 2Q26, rebounding strongly from 1Q and remaining consistent with recent buying trends."

"However, revised data showed that central banks added only 57 tonnes in 1Q26, 187 tonnes below the April estimate, marking the weakest first-quarter demand in more than a decade."

"As a result, central bank gold purchases in 2026 are now expected to be lower than in 2025."

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

Commerzbank’s Michael Pfister notes that the Bank of England kept rates unchanged and avoided signalling future hikes, despite a closer-than-expected 6–3 vote and Governor Bailey’s insistence that the BoE is not edging toward tightening. Pfister reiterates that the BoE is likely to delay hikes as long as possible and could quickly revert to cuts if the Middle East conflict ends, leaving the Pound with little policy support.

BoE stance offers scant pound backing

"As expected, the Bank of England left interest rates unchanged yesterday. It also avoided giving any strong indications of possible rate rises. Although the vote was closer than anticipated, at 6–3 (with three votes in favour of a rate hike), the additional vote came from Catherine Mann, who has a volatile voting record."

"At the press conference, Bank of England Governor Andrew Bailey emphasised that no one should 'leave this room thinking that the BoE is edging towards a hike'. At the same time, some policymakers noted that rate cuts could once again come into focus should the war come to an end."

"This essentially confirmed our long-held view that the BoE will wait as long as possible before hiking interest rates, and that should the conflict in the Middle East end, it will swiftly switch back to cutting rates."

"Although a few basis points of rate hike expectations have already been priced out following yesterday’s decision, there is still considerable scope for further adjustments. In short, anyone banking on monetary policy to support the pound is likely to be disappointed."

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

• WTI prices hit session lows near $80.00 amid hopes of some normalisation of crude Oil traffic.
• The Commonwealth Bank of Australia reported an increase in Hormuz traffic to 30%-35% of pre-war levels.
• Analysts at TD keep thinking that the reduced flows are supportive of further upside in oil prices.

Oil prices are ticking lower for the second consecutive day on Friday, with the US benchmark West Texas Intermediate (WTI) barrel hitting session lows a few cents above $80.00. News reporting a moderate recovery of sea traffic through the Strait of Hormuz has pushed prices lower, although WTI Oil is on track to close the month with a more than 15% appreciation.

The Commonwealth Bank of Australia released a note earlier on Friday reporting that Oil traffic through the key waterway had increased to roughly 30%-35% of pre-war levels and that an increase to levels from 50% to 60% of the traffic seen before the conflict started could be enough to reassert oversupply conditions in global markets. 

Beyond that, Saudi Arabia affirmed that it has set up a coalition of 14 countries to secure key sea routes from attacks by Iran or its allies, which added negative pressure on Crude prices.

Tensions in the Gulf are keeping Oil supported

Meanwhile, tensions remain high in the Gulf, as Tehran attacked US bases in Kuwait, a few hours after Jordanian air defences reported the interception of missiles launched from Iran. US President Donald Trump stated that he has reached a deal to disarm Hamas, and for Israel to withdraw from Gaza, but, apparently, key hurdles should be overcome first.

Experts at TD Securities, on the other hand, show a cautious view, as disruptions keep contributing to “reduced flows and global tightening of the energy market,” which the bank views as “supportive of further upside in crude oil.” The strategists argue that the tightening in physical balances is increasingly underpinning the bullish case for prices, even as positioning dynamics remain in flux.