Forex News

• Trump’s ceasefire push improves sentiment despite Iran-Israel attacks.
• Strong NFP keeps Fed hike odds elevated before CPI.
• BoE tightening bets limit Sterling downside amid quiet UK docket.

The Pound Sterling registers modest gains of 0.10% on Monday as risk appetite improved despite attacks exchanged between Iran and Israel, which agreed to halt fire as US President Donald Trump demanded the end of shooting, to resume talks between Washington and Tehran.

Sterling steadies as softer Dollar offsets Fed hike repricing

The GBP/USD trades at 1.3349 after bouncing off daily lows of 1.3305, as the Greenback reversed some of its Friday’s gains, with the US Dollar Index (DXY) down 0.16% at 99.91.

Oil prices trimmed some of their earlier gains after Iran’s army announced that its attack on Israel was over, though it warned that further strikes on Lebanon would open the door for retaliation.

Last Friday, a strong Nonfarm Payrolls report in the US revealed that the labour market is solid. This justifies hawkish remarks by some Federal Reserve officials, such as Cleveland Fed President Beth Hammack—a voter in 2026—who favours tightening policy if inflation continues to edge higher.

On Wednesday, traders and Fed policymakers will get an update on inflation figures, as the Consumer Price Index (CPI) in May is expected to breach the 4.2% threshold, up from April’s 3.8%. Investors increased the chances that the Federal Reserve will raise interest rates in 2026, with odds at 92% for a 25-basis-point rate hike towards the end of the year.

In the UK, the docket was absent, but speculation that the Bank of England (BoE) will tighten monetary policy by at least 50 bps in 2026, capped Sterling’s decline.

Ahead on Tuesday, the UK economic schedule is absent. In the US, traders will eye the ADP Employment Change 4-week average and housing data.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3340, keeping a bearish near-term bias as spot holds beneath the grouped simple moving averages around 1.3456, which now act as overhead resistance. The pair also remains positioned well below the broader downward resistance trend line drawn from 1.3869, reinforcing a capping structure, while the Relative Strength Index (14) at roughly 39 leans toward the weaker side of neutral, suggesting sellers still retain control despite the approach to mildly oversold territory.

On the topside, initial resistance aligns with the cluster of simple moving averages near 1.3456, and further upside would face a more distant barrier at the descending trend line traced from 1.3869. On the downside, the main technical floor emerges from the upward support trend line originating around 1.3159, where a sustained break would likely open a deeper corrective leg in the broader bearish sequence.

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

• Eurozone Sentix Investor Confidence improved modestly in June.
• Markets expect the ECB to hike interest rates on Thursday as inflation remains elevated.
• Investors will be on the lookout for clues in Lagarde's comments about the ECB's future policy path.

The EUR/USD pair trades near 1.1540 on Monday as investors assess mixed Eurozone sentiment data and position ahead of the European Central Bank's (ECB) highly anticipated interest rate decision later this week.

Eurozone investor confidence improved in June, with the latest Sentix Investor Confidence index rising to -13.4 from -16.4 previously. Although the indicator remains in negative territory, the improvement suggests investor sentiment is becoming less pessimistic, offering modest support to the Euro.

Attention now turns to Thursday's ECB policy announcement, where markets expect policymakers to deliver another interest-rate hike as inflation remains above the central bank's target. Investors will closely monitor comments from Christine Lagarde for guidance on whether additional tightening could be required in the coming months.

Short-term technical analysis:

On the 4-hour chart, EUR/USD trades at 1.1540, retaining a bearish near-term bias as it remains below both the 20-period Simple Moving Average (SMA) at 1.1587 and the 100-period SMA at 1.1621. The pair is attempting to stabilize just above short-term support, while the Relative Strength Index (RSI) near 38 hints at lingering downside pressure but shy of oversold conditions, suggesting scope for further weakness if nearby resistance levels cap the upside.

On the topside, initial resistance emerges at 1.1544, followed by 1.1555; a sustained break above these levels would be needed to ease immediate selling pressure and expose the 20-period SMA at 1.1587 and then the 100-period SMA at 1.1621. On the downside, first support is seen at 1.1533, ahead of the lower horizontal floor at 1.1516, where a clear violation would likely reinforce the broader bearish tone and open the door to a deeper decline.

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

National Bank of Canada’s (NBC) Warren Lovely, Stéfane Marion and Matthieu Arseneau argue that the Bank of Canada (BoC) should add an explicit unemployment rate forecast to its quarterly Monetary Policy Report. They stress that unemployment is central to understanding labour market slack, complements Consumer Price Index (CPI) and Gross Domestic Product (GDP) projections, and is widely forecast by peer central banks, international institutions and private-sector economists.

Call for BoC jobless rate projections

"It’s past time for the Bank of Canada to permanently incorporate the unemployment rate as part of the baseline economic forecast. There’s no reason to delay; the sooner the Bank’s economic forecast is enhanced the better."

"But if maximum sustainable employment is also to be retained as a complementary objective—as sensible today as it was in 2021—shouldn’t the Bank outline its thinking on the subject? After all, standard economic theory postulates that inflation and unemployment are inter-related."

"Adding just a single labour market indicator to the BoC’s economic forecast table would jibe with the Bank’s established mandate, acknowledging the connection between inflation and unemployment while simultaneously illustrating a focus on maximum sustainable employment. As for the metric best suited to the job, well there’s one obvious option: the unemployment rate."

"As it stands, the BoC is more of an outlier. Its economic outlook is hardly ‘best in class’ (in terms of completeness), with key stakeholders missing guidance on the labour market."

"From our perspective, the sooner the BoC shifts its focus from the ‘output gap’ to labour market slack the better. Again, to be clear, there needn’t be any change to the explicit monetary policy mandate to support or justify this overdue addition to the Bank’s economic outlook."

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

Societe Generale strategists argue that the negative 1Q Gross Domestic Product (GDP) print mainly reflects Irish volatility rather than broad weakness, with ex‑Ireland growth at 0.3% qoq and stronger PMI and French industrial data. They see risks of French technical recession receding and project headline and core inflation peaking around 3.8% and 2.8% year-on-year in early 2027.

Irish distortions and inflation peaks

"The revision to negative territory for euro area GDP growth in 1Q is a bit embarrassing less than a week before an ECB hike."

"The main surprise was a very sharp downward revision of Irish GDP growth in 1Q to -12.1% qoq. Euro area GDP growth is now in negative territory in 1Q (-0.2% qoq)."

"And while most of the actual weakness in sentiment is in Germany and France, French hard data also surprised to the positive side."

"The risk of a second consecutive fall in GDP in 2Q has therefore receded in France."

"For its part, headline inflation came out in line with our expectations at 3.2% yoy in May. Underlying inflation was also in line with our expectations at 2.5%."

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

• Gold stages a rebound on Monday but remains near 11-week lows.
• Higher-for-longer interest rate expectations continue to weigh on non-yielding Gold.
• XAU/USD remains below its key moving averages, keeping the near-term technical outlook bearish.

Gold (XAU/USD) recovers some ground on Monday after sliding to its lowest level since March, as traders assess fresh geopolitical developments in the Middle East. However, hawkish Federal Reserve (Fed) expectations continue to cap the upside.

At the time of writing, XAU/USD is trading flat around $4,320 after hitting an intraday low of $4,268, a level last seen on March 23.

Iran and Israel exchanged fire over the weekend for the first time since the ceasefire announced in April. The renewed hostilities have dimmed hopes for a near-term peace deal in the Middle East.

US President Donald Trump tried to calm the situation, posting on Truth Social that, "Both sides, Israel and Iran, are looking to do an immediate CEASEFIRE! Final negotiations on 'Peace' are proceeding."

Trump also warned that the US naval blockade of Iranian ports would remain "in full force and effect" until a final agreement is reached.

Meanwhile, Iran's armed forces announced the end of military operations against Israel, according to Fars News Agency, and said it would respond more forcefully to any future Israeli attacks on Lebanon.

Following the developments, the US Dollar Index (DXY) reversed earlier gains, offering some relief to Dollar-denominated Gold. At the time of writing, the DXY, which tracks the Greenback's value against a basket of six major currencies, is trading around 99.97 after earlier touching 100.21, its highest level since early April.

Markets remain concerned about the economic fallout from the war, as higher Crude Oil prices have heightened inflation risks and increased the likelihood of interest rate hikes by major central banks, particularly the Fed.

On top of that, resilient US economic data, including the stronger-than-expected Nonfarm Payrolls (NFP) report released on Friday, further reinforced expectations that the US central bank can keep borrowing costs higher for longer.

According to the CME FedWatch Tool, traders now see a 38% chance of a 25-basis-point (bps) rate hike at the September meeting, up from 22% a week ago.

Gold is often seen as a hedge against inflation and geopolitical uncertainty. However, higher interest rates can weigh on demand because the precious metal offers no yield.

Looking ahead, traders will watch US inflation figures due later this week while keeping a close eye on the situation in the Middle East.

Technical analysis: XAU/USD stays bearish as RSI nears oversold territory

On the daily chart, XAU/USD maintains a bearish near-term tone as spot holds beneath the major moving averages. The Relative Strength Index (RSI) sits near 34, showing weak momentum edging toward oversold conditions, while the Average Directional Index around 28 suggests a moderately developed downtrend rather than a volatile selloff.

On the topside, initial resistance is seen at the 200-day Simple Moving Average (SMA) near $4,436, and a daily close above this area would be needed to ease immediate selling pressure. If buyers manage to extend a recovery, the next hurdles emerge at the 50-day SMA around $4,624 and then the 100-day SMA close to $4,793, where the medium-term bearish structure would likely be challenged.

On the downside, the next notable cushion sits at the horizontal support zone near $4,100, where a break would open the way to deeper losses.

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

Brown Brothers Harriman’s Elias Haddad (BBH) notes that May Consumer Price Index (CPI) in Norway could be pivotal, with a hot print potentially bringing forward another Norges Bank hike after its surprise May move. While USD/NOK is expected to follow broad Dollar strength, Haddad argues Norwegian Krone (NOK) can still outperform on crosses thanks to favorable terms of trade and fiscal space.

Norwegian inflation keeps hike risk alive

"Norway May CPI is due Wednesday. Headline is expected at 3.1% y/y vs. 3.4% in April and underlying CPI is seen at 3.3% y/y vs. 3.2% in April."

"The Norges Bank projects both CPI and underlying CPI at 3.3% y/y in May. A hot inflation print can bring forward the timing of the next Norges Bank rate hike."

"At its last May 6 meeting, the Norges Bank unexpectedly raised rates 25bps 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.” The swaps curve price in a full 25bps hike to 4.50% in November."

"USD/NOK is unlikely to buck the trend of broad USD strength. But NOK can keep outperforming on the crosses the longer the energy price shock persists."

"Norway gets the terms of trade boost and has fiscal space to absorb some of the growth drag to domestic demand."

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

MUFG’s Michael Wan analyses new Reserve Bank of India and government measures that could generate around US$40bn of inflows and partially plug India’s FY2026/27 balance of payments gap. He turns somewhat less negative on the Indian Rupee, sees USD/INR near 94.00 by the September quarter before a rebound towards 96.00 next year, and expects INR yields to grind higher.

RBI inflows temper Rupee downside risks

"RBI announced a slew of measures to help shore up the Indian Rupee during its 5 June 2026 monetary policy meeting. These policies include RBI fully subsidising the FX hedging costs of banks raising fresh 3-5 year FCNR(B) deposits and a concessional FX swap facility to incentivise the raising of ECBs by state-owned enterprises (PSUs). In addition, the government has removed taxes on capital gains and interest on government securities for foreign investors, applied retrospectively from 1 April 2026, while expanding the list of government securities available for investment."

"Net-net our preliminary estimates suggest that there could be around US$40bn of inflows from these policies, and more so if India were to be included in the Bloomberg Global Agg Index as an indirect result."

"We tentatively adjust our forecasts for INR stronger near-term and see USD/INR at 94.00 by the September quarter before rebounding towards the 96.00 handle in the next calendar year."

"With the combined impact of these measures from RBI’s policy meeting, we are now somewhat less negative on the Indian Rupee than we were before, and are less confident that INR will underperform moving forward."

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

• USD/JPY comes under modest pressure as the US Dollar loses momentum following Middle East headlines.
• Iran says military operations against Israel have ended, while Trump says US-Iran peace talks remain ongoing.
• Traders await next week's Fed and BoJ monetary policy decisions for fresh direction.

USD/JPY holds firm on Monday as traders track rapidly changing headlines from the Middle East. Lingering concerns about another intervention by Japanese authorities also limit the pair's upside as the Japanese Yen (JPY) once again tests the 160.00 level against the US Dollar (USD).

At the time of writing, the pair trades around 160.15, virtually unchanged on the day.

Iran's Fars News Agency reported that Iran had ended its military operations against Israel. The development followed an exchange of strikes between Iran and Israel over the weekend, the first since the ceasefire announced in April.

Meanwhile, US President Donald Trump sought to reassure markets by saying that peace talks between the United States and Iran are still ongoing, while warning that the US naval blockade of Iranian ports would remain in place until a final deal is reached.

In reaction, the US Dollar weakened as improving risk sentiment helped the Japanese Yen regain some ground. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading around 99.96 after touching 100.21 earlier, its highest level since early April.

However, the downside in USD/JPY appears limited as the fundamental backdrop surrounding the Japanese Yen remains weak.

Why is the Yen weak?

The Japanese Yen has erased all of the gains triggered by Tokyo's intervention in late April, when the currency weakened beyond the 160.00 level. Reports showed that Japan's Ministry of Finance spent a record ¥11.735 trillion supporting the Yen between April 28 and May 27.

The US-Iran war has boosted demand for the US Dollar while adding pressure on energy-importing economies such as Japan. More than 90% of Japan's crude Oil imports come from the Middle East, leaving the Japanese Yen highly exposed to elevated Oil prices and supply disruptions.

The wide interest rate differential between the United States and Japan continues to favor the US Dollar. In addition, the recent surge in Oil prices has increased upside risks to inflation, fueling expectations that the Federal Reserve (Fed) may need to raise interest rates again.

Such a move could further widen the interest rate gap, given the Bank of Japan's (BoJ) slow pace of policy normalization.

What's ahead?

Traders are bracing for US inflation data due later this week ahead of the central bank decisions next week. Markets are fully pricing in a rate hike from the BoJ, while the Fed is widely expected to leave interest rates unchanged.

Beyond the decisions themselves, markets will be watching for clues on the future policy path of both central banks. Any indication that the Fed could keep rates higher for longer, or that the BoJ will remain cautious about further tightening, could drive the next move in USD/JPY.

BNY’s Bob Savage notes that escalating Middle East tensions and higher U.S. Treasury yields are driving risk-off flows, with the Dollar supported at two‑month highs. He highlights that KRW gained on official support while other EM FX such as MYR, IDR, HUF and INR weakened, suggesting yields are not compensating for risk. The Dollar’s path is tied to conflict, Oil and global risk sentiment.

Dollar holds firm on risk-off flows

"Financial markets reacted sharply, with Brent crude oil rising above $97/bbl and the U.S. dollar strengthening as investors sought safe-haven assets."

"The renewed conflict has intensified concerns over energy supply disruptions and a potential increase in global inflation pressures."

"While in other EM FX, MYR, IDR, HUF and INR all suffered, suggesting yields are not enough to offset risks."

"Overall, the USD is bid at two-month highs, holding steady with focus on JPY and intervention risk."

"The downside for today revolves around the breakout of more conflict and what it means for oil, the USD and the summer mood for U.S. consumers."

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

TD Securities economists Robert Both and Emma Lawrence expect the Bank of Canada (BoC) to keep the overnight rate at 2.25% at the June meeting and through 2026, despite softer Canadian data. They see inflation peaking near 3% in Q2, above BoC projections, but argue well-anchored expectations and muted core pressures allow policymakers to look through higher Oil prices.

BoC seen on extended policy hold

"All eyes will be on Wednesday's BoC decision as the primary risk event for Canada, where TD and the wider market look for the Bank to hold the overnight rate at 2.25%, however, we do not expect any material change to the Bank's messaging as it continues to balance a softer domestic backdrop with the risk of broader inflation pressures."

"We look for the Bank of Canada to hold the overnight rate at 2.25% in June while sticking to its message from the last meeting."

"However, we do not expect the Bank to dismiss the risk of broadening inflation pressures and consecutive rate hikes in their guidance, even as they pledge to look through near-term impacts of higher oil prices."

"We look for the Bank of Canada to stay on hold at 2.25% through 2026 before a return to neutral (2.75%) next year, with 25bp hikes in January and March."

"We look for inflation to peak ~3% in Q2, which is above BoC projections in the April MPR, but the combination of well anchored expectations, lower inflation breadth, and muted core inflation momentum leave the Bank well positioned to look through stronger headline CPI."

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