Forex News
Federal Reserve Bank of New York President John Williams said on Thursday that the the path for the monetary depends on data, outlook and risks, per Reuters.
Key takeaways
"Some of US productivity rise predates rise of AI."
"US dynamism is behind rise in productivity."
"AI will have lasting impact on productivity."
"We have a solid economy, the underlying labor market is doing well."
"Middle East war impacts consumer spending amid higher energy costs."
"US is less sensitive to oil shocks compared to history."
"Middle East war is boosting inflation, energy surge should have short impact."
"Hit to inflation likely to peak in next few months."
"Tariff impact should peak in next few months."
"Near term, inflation around 4% and core inflation around 3%."
"Anchoring inflation expectations is critical."
"Seeing elevated near-term inflation expectations but long-term stable."
"Supply chain disruptions are a concern and they are happening due to war."
Market reaction
These comments don't seem to be having a noticeable impact on the US Dollar's (USD) action. At the time of press, the USD Index was virtually unchanged on the day at 99.20.
Scotiabank strategists Shaun Osborne and Eric Theoret notes that the Canadian Dollar (CAD) is soft against the US Dollar (USD), with USD/CAD trading near fresh local highs in an environment of mild risk aversion linked to renewed US/Iran tensions. Wider US-Canada yield spreads and limited Bank of Canada (BoC) guidance are weighing on CAD, while markets price at least one 25bp BoC hike by October.
CAD pressured by yields and risk tone
"The CAD is soft, down a modest 0.2% vs. the USD and a mid-performer among the G10 currencies in an environment of mild risk aversion driven by renewed hostilities between the US and Iran."
"The broader tone is a headwind for the CAD, compounding recent fundamental weakness that has resulted from wider US-Canada yield spreads."
"Markets are pricing little chance of a hike for either the June 10 or July 15 meetings, but pricing at least one full 25bpt hike by October."
"Bullish—the rally continues as USDCAD clears fresh local highs in the upper 1.38s. Momentum is confirming and the RSI has now reached the overbought threshold at 70. "
"We see little resistance ahead of 1.3900 and see support around the 200 day MA at 1.3812. We look to a near-term range bound between 1.3800 and 1.3900."
(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 USD/KRW has eased back toward 1500 after briefly trading above 1510, as the Bank of Korea (BoK) delivered a hawkish hold and signaled its next move is likely a hike. Haddad notes South Korean Won (KRW) is significantly undervalued on a real effective basis, but expects this mispricing to persist until the current energy shock subsides.
Won seen undervalued versus trend
"USD/KRW eased back to near 1500 after a brief rally above 1510. The Kospi plunged as much as 5% before trimming losses to around 1%. Bank of Korea (BoK) delivered a hawkish hold. BoK kept the policy rate unchanged at 2.50% for an 8th consecutive meeting (expected) and signaled the next move is a hike."
"BoK Governor Shin Hyun Song stressed that the Board “judged necessary to raise the Base Rate at an appropriate time.” Moreover, two (Chang Yongsung, and Ryoo Sangdai) of the seven Board members dissented in favor of a 25bps hike, the first hawkish dissent of this cycle."
"Finally, BoK raised its 2026 real GDP growth (+0.6ppt to 2.6%) and CPI forecasts (headline: +0.5ppt to 2.7%, core: +0.3ppt to 2.4%)."
"Indeed, KRW is significantly undervalued. The won is over -11% undervalued relative to its real effective exchange rate trend, the most since 2009. KRW undervaluation is unlikely to unwind until the energy shock fades."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- US economy grew at an annual rate of 1.6% in Q1.
- USD Index edges lower toward 99.00 following disappointing US data.
The United States' (US) real Gross Domestic Product (GDP) expanded at an annual rate of 1.6% in the first quarter, the US Bureau of Economic Analysis (BEA) reported on Thursday. This print followed the 2% growth reported in the initial estimate and came in below the market expectation of 2%.
"The contributors to the increase in real GDP in the first quarter were exports, investment, consumer spending, and government spending. Imports, which are a subtraction in the calculation of GDP, increased," the BEA explained in its press release and added:
"Real GDP was revised down 0.4 percentage point from the advance estimate, primarily reflecting downward revisions to investment and consumer spending."
Market reaction
The US Dollar (USD) remains under modest bearish pressure in the early American session. At the time of press, the USD Index was down 0.1% on the day at 99.12.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
- Silver trades on the back foot as renewed US-Iran attacks keep markets cautious.
- Energy-driven inflation concerns continue to limit upside in the white metal.
- Technically, XAG/USD trades with a soft bearish bias while momentum indicators remain subdued.
Silver (XAG/USD) recovers on Thursday as the US Dollar (USD) eases following the latest US Personal Consumption Expenditures (PCE) data. At the time of writing, XAG/USD is trading around $734.11, rebounding after hitting a one-month low near $71.79 earlier in the day.
The core PCE Price Index, the Federal Reserve’s (Fed) preferred inflation gauge, rose 0.2% MoM in April, below market expectations and down from the 0.3% increase recorded in March. Meanwhile, the annual Core PCE reading accelerated to 3.3% YoY from 3.2% in March, matching market expectations.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 99.15 after hitting a seven-week high of 99.54 earlier in the day.
Meanwhile, fresh attacks in the Middle East region have dashed hopes for a quick end to the war, keeping Oil prices elevated amid ongoing supply disruption through the Strait of Hormuz.
The precious metal’s upside remains limited in the current macro environment. Even with the DXY pulling back slightly during the day, traders are still favoring the US Dollar (USD) for safety, which is keeping pressure on Dollar-denominated commodities.
Meanwhile, rising expectations that the Fed could raise interest rates to tackle energy-driven inflation are adding further pressure on non-yielding assets such as Silver.
Technical Analysis:
On the daily chart, XAG/USD maintains a mildly bearish near-term tone, holding below the 20-period Bollinger Simple Moving Average (SMA) around $78 and well under the upper band near $86.76, which together suggest rallies are being capped by overhead supply.
Price still sits comfortably above the lower Bollinger band at about $69.29, but a soft Relative Strength Index (RSI) at 44 and a very low Average Directional Index (ADX) near 12 hint at downside momentum within a weakly trending environment.
On the topside, initial resistance is defined by the 20-period Bollinger SMA around $78, with a subsequent barrier at the upper band near $86.76 if buyers regain traction.
On the downside, immediate support emerges at the lower Bollinger band around $69.29, ahead of a more substantial horizontal floor near $60.00, where a deeper correction could seek stabilization if bearish pressure extends.
(The technical analysis of this story was written with the help of an AI tool.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
ING’s Frantisek Taborsky highlights that a less hawkish Central and Eastern European rates outlook is undermining Koruna strength. Markets have scaled back expected hikes in Poland and the Czech Republic, while Hungary is priced for sizeable cuts. He expects inflation divergence and a tighter rate differential versus the Euro and Zloty, leaving EUR/CZK biased higher after touching 24.25.
CEE repricing pressures koruna
"Markets in the CEE region have seen some relief in the last two days, along with global markets, with investors backing off from pricing roughly four hikes in Poland and the Czech Republic to roughly two to three hikes over a one-year horizon now."
"At the same time, Hungary has deepened its pricing of rate cuts after Tuesday's dovish National Bank of Hungary meeting, and at this point, nearly 115bp of rate cuts are expected over the same horizon."
"From this perspective, Friday's inflation in Poland will be interesting, where we have seen the biggest jump in CEE so far. May's numbers should move us to 3.7% year-on-year, the highest since June last year and above the National Bank of Poland's tolerance band."
"For now, our economists do not expect a rate hike this year, but from a CEE perspective, the NBP seems the riskiest at this point. In turn, it seems that further relief in oil prices may not necessarily bring further rate cuts in Poland, given that the real rate should reach neutral levels in May and probably turn negative in June."
"The Czech National Bank may be on hold for a longer period due to lower inflation prints in the coming months, and we should see visible inflation divergence between Poland and the Czech Republic emerging in the summer months. Together with an expected ECB rate hike in June, this does not put the koruna in a comfortable position."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Annual inflation in the United States (US), as measured by the change in the Personal Consumption Expenditures (PCE) Price Index, climbed to 3.8% in April from 3.5% in March, the US Bureau of Economic Analysis (BEA) reported on Thursday. This reading came in line with the market expectation. In this period, the core PCE Price Index, which excludes volatile food and energy prices, rose 3.3%, as anticipated.
On a monthly basis, the PCE Price Index and the core PCE Price Index increased 0.4% and 0.2%, respectively.
Other details of the publication showed that Personal Income was unchanged in April, while Personal Spending was up 0.5%.
Market reaction
The US Dollar (USD) Index retreated from session highs with the immediate reaction and was last seen trading unchanged on the day at 99.20.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.10% | 0.28% | 0.32% | 0.29% | 0.47% | -0.37% | 0.44% | |
| EUR | -0.10% | 0.21% | 0.26% | 0.18% | 0.33% | -0.48% | 0.32% | |
| GBP | -0.28% | -0.21% | -0.17% | -0.03% | 0.11% | -0.70% | 0.15% | |
| JPY | -0.32% | -0.26% | 0.17% | -0.07% | 0.11% | -0.73% | 0.09% | |
| CAD | -0.29% | -0.18% | 0.03% | 0.07% | 0.17% | -0.67% | 0.15% | |
| AUD | -0.47% | -0.33% | -0.11% | -0.11% | -0.17% | -0.81% | -0.02% | |
| NZD | 0.37% | 0.48% | 0.70% | 0.73% | 0.67% | 0.81% | 0.85% | |
| CHF | -0.44% | -0.32% | -0.15% | -0.09% | -0.15% | 0.02% | -0.85% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of the US PCE inflation data at 06:00 GMT.
- The core Personal Consumption Expenditures Price Index is forecast to rise 0.3% MoM and 3.3% YoY in April.
- Headline annual PCE inflation is expected to rise to its highest level in three years at 3.8%.
- Markets see about a 50% chance of the Federal Reserve raising the policy rate at least once by end-2026.
The United States (US) Bureau of Economic Analysis (BEA) will publish the Personal Consumption Expenditures (PCE) Price Index data for April on Thursday at 12:30 GMT.
The PCE Price Index is closely watched by market participants because it is the Federal Reserve’s (Fed) preferred measure of inflation and could influence the policy outlook.
Anticipating the PCE: Insights into the Federal Reserve's key inflation metric
The core PCE Price Index, which excludes volatile food and energy prices, is expected to advance 0.3% month-over-month (MoM) in April, matching March’s increase.
In 12 months to April, the core PCE inflation is set to edge higher to 3.3%. Meanwhile, the headline annual PCE inflation is forecast to reach its highest level since May 2023 at 3.8%.
Markets will scrutinize the PCE Price Index data as Fed officials take this inflation gauge into account when deciding on the next policy move. Given the uncertainty created by the ongoing Middle East conflict, investors will assess the details of the PCE inflation report to see whether the US central bank is likely to opt for an interest rate hike before the end of the year.
According to the CME FedWatch Tool, markets are currently pricing in about a 50% probability that the Fed will raise the policy rate by at least 25 basis points by end-2026.
In an interview with Reuters on Wednesday, Minneapolis Fed President Neel Kashkari, who dissented at the April policy meeting and voted against the inclusion of the easing bias in the policy statement, noted that data released since the last meeting have shown that inflationary risks are higher. In the meantime, Fed Governor Christopher Waller, known for his dovish outlook, shifted his tone last week and said that he should remove the easing bias from the statement. Waller further added that he would not hesitate to support an increase in the policy rate if inflation expectations were to become unanchored.
Previewing the PCE inflation report, TD Securities said:
“We expect core and headline PCE prices moderated in April to 0.26% and 0.43% m/m, respectively. Tariff passthrough was moderate in the month, and a slowdown in supercore services offset strength in shelter. Our forecast translates to 3.3% and 3.8% y/y for core and headline, respectively. We also look for nominal and real personal spending to slow down in the month.”
How will the Personal Consumption Expenditures Price Index affect EUR/USD?
The US Dollar (USD) stays resilient against its rivals this week. Still, it struggles to gather strength as investors refrain from taking large positions due to the uncertainty surrounding the conflict between the United States (US) and Iran.
Earlier in the week, the US carried out what it called "self-defense strikes" on Iranian missile sites and mine-laying vessels. In turn, Iran's Islamic Revolutionary Guard Corps (IRGC) threatened to retaliate, calling the US's action a violation of the ceasefire. Nevertheless, the truce officially remains in place, while the sides are reportedly working toward finalizing a Memorandum of Understanding (MOU), specifically trying to resolve disputes over language regarding Iran's nuclear program and sanctions relief.
If the US and Iran reach an agreement to fully open the Strait of Hormuz, crude Oil prices could decline sharply and ease fears over global inflation running out of control. In this scenario, the USD could remain under bearish pressure and help EUR/USD turn north even if the PCE inflation data come in above analysts’ estimates.
In case the US-Iran issue remains unresolved by the time the inflation data is released, it could have a noticeable effect on the USD’s valuation. A stronger-than-forecast print in the monthly core PCE Price Index could boost the USD with the immediate reaction and hurt EUR/USD, as it would suggest that rising energy costs are lifting price pressures in the wider economy. Conversely, a soft print in this data could make it difficult for the USD to gather strength and allow EUR/USD to hold its ground.
Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief technical outlook for EUR/USD:
“The near-term technical outlook for EUR/USD points to a bearish bias but doesn’t show a buildup in momentum. The pair remains in the lower half of the Bollinger Bands on the daily chart and trades below the 20-day, 50-day, 100-day and the 200-day Simple Moving Averages (SMA).”
“On the downside, 1.1560, where the Fibonacci 23.6% retracement level of the late-January to mid-March downtrend meets the lower limit of the Bollinger Bands, aligns as key technical support. A daily close below this level could attract technical sellers and open the door to an extended decline toward 1.1400 (static level).”
“Looking north, a strong resistance area seems to have formed at the 1.1670-1.1700 region (20-day SMA, 100-day SMA, 200-day SMA) ahead of 1.1800 (Fibonacci 61.8% retracement, upper limit of the Bollinger Bands).
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.
- Initial Jobless Claims increased to 215K vs. the previous week.
- Continuing Jobless Claims went up to 1.786M.
According to a report from the US Department of Labor (DOL) released on Thursday, the number of US citizens submitting new applications for unemployment insurance increased to 215K for the week ending May 23. The latest print came in above initial estimates and was higher than the previous week’s 210K (revised from 209K).
Additionally, the four-week moving average went up by 6.25K, bringing it to 209K from the revised average of the previous week (202.75K).
The report also indicated that Continuing Jobless Claims increased by 15K to 1.786M for the week ending May 16.
Market reaction
The Greenback trades with marginal gains amid steady uncertainty in the geopolitical landscape, with the US Dollar Index (DXY) navigating the 99.20 area in a context of widespread lack of direction in the risk complex.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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