Forex News
- The US Consumer Price Index is expected to rise 3.7% YoY in April as energy prices remain persistently high.
- Annual core CPI inflation is expected to edge slightly higher to 2.7%.
- EUR/USD’s technical outlook highlights a bullish stance that lacks momentum.
The US Bureau of Labor Statistics (BLS) will publish the April Consumer Price Index (CPI) data on Tuesday. The report is expected to show another significant leap in consumer inflation after March’s sharp increase, driven by the elevated Oil prices due to the ongoing conflict between the United States (US) and Iran.
The monthly CPI is forecast to rise 0.6%, following the 0.9% increase recorded in March, while the annual reading is seen climbing to its highest level since September 2023 at 3.7%, from 3.3% in March. Core CPI figures, which exclude volatile food and energy prices, are expected to come in at 0.4% and 2.7%, on a monthly and yearly basis, respectively.
From the beginning of the conflict in the Middle East on February 28 to the end of April, the barrel of West Texas Intermediate (WTI) rose more than 50%. Although crude Oil prices corrected lower in the first week of May, they are still about 40% above where they were before the US-Iran war.
Previewing the inflation data, "our economists expect headline inflation to rise by +0.58% month-on-month, moderating from March’s +0.9%, but still relatively firm,” said Deutsche Bank’s Jim Reid.
"In contrast, the core measure is projected to accelerate to +0.39% MoM from +0.2%, suggesting underlying price pressures remain sticky even as energy-related effects fade. The YoY rates would move from 3.3% to 3.8% for the former and from 2.6% to 2.8% for the latter,” Reid added.
What to expect in the next CPI data report?
CPI figures for April will reflect the impact of persistently high Oil prices on inflation. Since this is largely anticipated, core inflation figures will help markets gauge whether rising energy costs are spilling over into the broader economy and driving up the prices of other goods and services.
A reading above the market expectation of 0.4% in the monthly core CPI could feed into concerns over high inflation getting entrenched in the economy. Conversely, a print below analysts’ forecast could ease fears over prices getting out of control. Still, even in this latter scenario, investors are unlikely to breathe a sigh of relief because the US-Iran crisis remains unresolved and the lack of naval activity in the Strait of Hormuz continues to pose a significant risk to global energy supply chains.
Minneapolis Federal Reserve (Fed) President Neel Kashkari said the price shock from a prolonged closure of the strait could put inflation expectations at risk and requires a strong policy response. Similarly, St. Louis Fed President Alberto Musalem noted that inflation is meaningfully above the Fed’s target and added that policymakers need to worry about the underlying inflation, along with tariff and Oil shocks.
How could the US Consumer Price Index report affect EUR/USD?
Markets currently see about a 73% chance of the Fed leaving the policy rate unchanged at 3.5%-3.75% by the end of the year, and price in about a 20% probability of a 25 basis points (bps) hike, according to the CME FedWatch Tool.
A stronger-than-forecast monthly core CPI print for April could cause investors to lean toward a rate hike later in the year. In this scenario, the US Dollar (USD) could gather strength with the immediate reaction.
On the other hand, a soft core CPI print could have the opposite effect on the USD’s valuation. However, unless there are any significant developments hinting at the US-Iran conflict coming to an end soon, any negative impact on the USD could remain short-lived.
"Investors will be on heightened alert for the possibility of further delays to the first rate cut – or even an inability to ease in 2H26 altogether – should energy prices rise sharply and persistently due to an escalation or prolongation of the Middle East conflict,” UOB Group’s Alvin Liew explains.
“A broader oil-related price spillover across the CPI basket would materially complicate the inflation outlook, raising the risk that the anticipated year-end cut is pushed into 2027,” Liew elaborates.
Eren Sengezer, FXStreet European Session Lead Analyst, shares a brief technical outlook for EUR/USD.
“EUR/USD’s near-term technical outlook points to a bullish stance that lacks strength. The Relative Strength Index (RSI) indicator on the daily chart holds above 50 but retreats after testing 60, and the pair struggles to pull away from the 20-day Simple Moving Average (SMA) despite closing well above it to end the previous week.”
“On the upside, the first resistance area aligns at 1.1800-1.1820, where the upper limit of the Bollinger Band and the Fibonacci 61.8% retracement of the February-April downtrend align. In case EUR/USD manages to stabilize above this region, 1.1900-1.1910 (round level, Fibonacci 78.6% retracement) could be seen as the next hurdle ahead of 1.2000 (psychological level).”
Looking south, a strong support area seems to have formed at 1.1730-1.1680 (Fibonacci 50% retracement, 100-day SMA, 200-day SMA). If EUR/USD drops below the lower limit of this range and starts using it as resistance, technical sellers could take action. In this case, 1.1660 (ascending trend line) could be seen as an interim support level before 1.1560 (Fibonacci 23.6% retracement).”
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.
- USD/CAD rises to near 1.3695 as the US Dollar trades firmly against its peers.
- US President Trump said on Monday that the ceasefire with Iran is on “life support”.
- Investors await the US CPI data for fresh cues on the Federal Reserve’s (Fed) monetary policy outlook.
The USD/CAD pair trades 0.12% higher to near 1.3695 during the European trading session on Tuesday. The Loonie pair rises as the US Dollar (USD) outperforms its peers amid fears that the war between the United States (US) and Iran could resume due to the absence of a breakthrough in their negotiations.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.3% higher to near 98.20.
On Monday, US President Donald Trump said that the counterproposal delivered by Iran against the one-page peace proposal was a “stupid proposal” and lacked Tehran’s decision on pursuing its nuclear ambitions. Trump added, “Ceasefire is on life support.”
Though the Canadian Dollar (CAD) underperforms the US Dollar (USD), the former trades firmly against its other peers as elevated oil prices have improved its appeal. Currencies from economies, such as Canada, which are net oil exporters, tend to outperform in a high oil price environment.
Later in the day, investors will focus on the US Consumer Price Index (CPI) data for April, which will be published at 12:30 GMT.
USD/CAD technical analysis
USD/CAD trades higher at around 1.3695 at the press time. The pair holds a slight bullish bias as it trades above the 20-day exponential moving average (EMA) at 1.3680, suggesting that near-term dips remain supported.
The Relative Strength Index (RSI) around 51 hints at neutral-to-firm momentum, indicating that buyers still have a modest edge while the pair consolidates near current levels.
Looking up, the pair could extend its advance towards the April 14 high at 1.3793 if it manages to hold above the April 24 high at 1.3715.
On the downside, the 20-day EMA at 1.3680 is the immediate support; a sustained break beneath that EMA would expose a deeper correction towards the May 7 low of 1.3620.
(The technical analysis of this story was written with the help of an AI tool.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
MUFG’s strategists note that the US Dollar (USD) has weakened despite solid United States (US) jobs data, as optimism over a potential US/Iran deal and surging US equities support risk appetite. They highlight downside risks to the US economy, scope for Federal Reserve (Fed) easing later this year, and warn that prolonged conflict and energy shocks could eventually limit Dollar selling.
Dollar pressured by risk appetite
"The US dollar weakened further last week with no resolution to the Middle East conflict in sight. Attacks in the Strait of Hormuz increased but the US maintains the ceasefire remains in place. That has seen oil prices drop over the last week."
"The magnitude of such strong risk appetite is lifting global optimism and encouraging US dollar selling. A strong US jobs report was not enough to trigger US dollar strength. The US Dollar could still see renewed gains and the longer the Strait of Hormuz remains closed the greater the potential of a turn in risk sentiment."
"We would still conclude that downside risks to the economy remain more relevant at this stage of the cycle. The Michigan Consumer Sentiment index fell to a new record low on Friday with the cost of living concerns very likely the source of the latest downturn in confidence. This is coinciding with softening nominal wage growth that is set to translate into continued weak growth in real incomes."
"Weak real income growth will likely encourage the Fed to ease its monetary stance later in the year, assuming there is no escalation in the conflict that results in larger inflation increases. That backdrop for US consumers, the prospects of continued geopolitical uncertainties and the risk of renewed trade uncertainties with Trump threatening further tariff actions do not suggest a sustained pick-up in labour demand is imminent."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- GBP/JPY attracts heavy selling on Tuesday and is pressured by a combination of factors.
- Intervention fears and US-Iran tensions boost the safe-haven JPY, weighing on the cross.
- UK political uncertainty undermines the GBP and contributes to the sharp intraday decline.
The GBP/JPY cross struggles to capitalize on the previous day's bounce from the 100-day Simple Moving Average (SMA) and attracts heavy intraday selling on Tuesday. Spot prices maintain an offered tone through the early part of the European session and currently trade around the 213.00 mark, down over 0.40% for the day.
The Japanese Yen (JPY) strengthens across the board after US Treasury Secretary Scott Bessent confirmed through a post on X that the US and Japan took some actions together against excessive volatility in currency markets. The comments fueled fresh speculations that authorities will step in again to stem further weakness in the JPY, which turns out to be a key factor exerting pressure on the GBP/JPY cross.
Meanwhile, the summary of Opinions from the Bank of Japan's (BoJ) April meeting left the door open for an imminent interest rate hike. This helps offset the disappointing release of Japan's Household Spending data for March and lends additional support to the JPY. Apart from this, persistent geopolitical uncertainties benefit the JPY's relative safe-haven status and contribute to the GBP/JPY pair's decline.
Meanwhile, more than 70 Labour MPs publicly called for Prime Minister Keir Starmer to step down following the party's heavy losses in English local elections and parliamentary votes in Scotland and Wales. This, along with a broadly firmer US Dollar (USD), turns out to be another factor weighing on the British Pound (GBP) and the GBP/JPY cross, backing the case for a further near-term depreciating move.
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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.31% | 0.60% | 0.13% | 0.14% | 0.41% | 0.27% | 0.32% | |
| EUR | -0.31% | 0.28% | -0.15% | -0.20% | 0.09% | -0.05% | 0.00% | |
| GBP | -0.60% | -0.28% | -0.47% | -0.48% | -0.19% | -0.33% | -0.28% | |
| JPY | -0.13% | 0.15% | 0.47% | -0.02% | 0.25% | 0.12% | 0.16% | |
| CAD | -0.14% | 0.20% | 0.48% | 0.02% | 0.27% | 0.14% | 0.17% | |
| AUD | -0.41% | -0.09% | 0.19% | -0.25% | -0.27% | -0.13% | -0.10% | |
| NZD | -0.27% | 0.05% | 0.33% | -0.12% | -0.14% | 0.13% | 0.03% | |
| CHF | -0.32% | -0.01% | 0.28% | -0.16% | -0.17% | 0.10% | -0.03% |
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).
US Treasury Secretary Scott Bessent said during the European trading session on Tuesday that he and Japan’s Prime Minister (PM) Sanae Takaichi both believe that forex volatility is undesirable.
Additional remarks
Discussed with PM Takaichi regarding President Trump's trip to Beijing.
Made no request to PM Takaichi regarding monetary policy.
In very close contact with Japan's finance ministry.
Discussed importance of US-Japan relationship with regard to Trump's China visit.
We both believe forex volatility is undesirable.
Japan economic fundamentals strong and resilient.
That will be reflected in exchange rates.
- NZD/USD depreciates as the US Dollar remains firm amid intensifying US-Iran tensions.
- Trump expressed increasing frustration regarding the current progress of negotiations to resolve regional hostilities.
- The NZD may find support as the RBNZ weighs tightening policy to return inflation to its 2% target.
NZD/USD extends its losses for the second successive day, trading around 0.5940 during the early European hours on Tuesday. The pair depreciates as the US Dollar (USD) strengthens on the back of renewed United States (US)-Iran tensions.
Global investors are pivoting toward safe-haven assets following reports of deteriorating diplomatic relations in the Middle East. The shift in sentiment comes as market participants weigh the possibility of a return to major combat operations, a move that typically triggers a flight to quality and bolsters the Greenback against more sensitive currency valuations.
According to a CNN report released Monday, US President Donald Trump has expressed growing frustration over the current state of negotiations to end regional hostilities. Aides suggest that the administration is now more seriously considering a resumption of military action than in previous weeks. Compounding these fears, Iranian Parliament speaker Mohammad Bagher Ghalibaf warned via Reuters that Iran’s military remains fully prepared to retaliate against any future strikes, putting the region’s fragile ceasefire under immense strain.
Investors are closely watching April’s consumer inflation report due on Tuesday for insight into how the war with Iran is impacting the economy and influencing Federal Reserve policy. Additionally, President Trump’s high-stakes meeting with Chinese President Xi Jinping this week is expected to center on trade, artificial intelligence, and global energy security.
The New Zealand Dollar (NZD) may receive support from market expectations of the Reserve Bank of New Zealand (RBNZ) to maintain a cautious stance or consider tightening to bring inflation back to the 2% midpoint.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
BNY strategists John Velis and David Tam argue that resilient United States (US) data and likely elevated inflation prints make it harder to justify Federal Reserve (Fed) rate cuts this year. Their base case still assumes two cuts in Q4 2026, contingent on a reopening of the Strait of Hormuz and a weaker labor market, both of which they expect could materialize by the end of Q3.
Conditional path to late-2026 rate cuts
"The last two weeks’ worth of U.S. macro data showed an economy that is not yet feeling acute pressure from the shocks generated by the Iran conflict. This includes a solid labor market print at the end of last week. Given the likelihood of elevated inflation readings (CPI on Tuesday and PPI on Wednesday), the case for eventual rate cuts this year looks increasingly difficult to sustain."
"We have long argued that for our two-cut outlook (in Q4 2026) to be valid, it would require a reopening of the Strait of Hormuz, a prospect that still looks unlikely in the short-term. If it eventually does reopen before the end of this summer, we still think that receding oil prices in such an event would allow the Fed to concentrate on the jobs side of its dual mandate. Of course that would require the jobs market to weaken alongside, something that doesn’t look likely in the short term."
"Nevertheless, we still think both of these things – a reopening of the Strait and a weaker labor market – can manifest by the end of Q3, prompting the Fed to move to a more dovish stance. The dissents in the April FOMC were not on rate policy, but rather on the language in the statement, indicating a desire to move to a more explicit expression of two-way risk to rates."
"The jobs data weren’t unequivocally strong. Establishment survey data for April showed an increase of 115,000 jobs. The household survey indicated an increase of 134,000 unemployed persons alongside a decline of 226,000 employed people."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Rabobank's Senior Market Strategist Benjamin Picton notes that Brent and WTI have reacted only modestly to renewed United States (US)-Iran tensions, with Brent holding near $105 and WTI below $100. Picton highlights the Strait of Hormuz being functionally closed and stresses that US control over global energy supply chains allows it to pressure China via Oil flows, impacting Chinese industrial conditions.
Energy markets under war pressure
"“On massive life support” was Donald Trump’s characterisation of the US-Iran ceasefire yesterday. This followed Sunday’s rejection of Iranian terms for peace that Trump described as “totally unacceptable”. In a boy-who-cried-wolf-style sign of growing market insensitivity to Presidential prognostications, Brent was only up 2.88% to $104.21/bbl and WTI crude remains below $100/bbl."
"Of course, while all this is going on the Strait of Hormuz remains functionally closed and world fertiliser and energy markets are treading air like Wile-e-Coyote run off the cliff."
"This perhaps overstates the weakness of Trump’s position by ignoring the fact that the US has tightened its grip on global energy supply chains and has shown that is has the power to put its foot on the hosepipe of Chinese energy imports whenever it likes."
"In the flurry of commentary over China’s bumper trade surplus in April, it seems to have been missed that import volumes for crude oil were down sharply, but values were higher."
"Yesterday’s April PPI figures for China also underscored the uncomfortable effects that the Iran war is having on the Chinese industrial economy."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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