Forex News

Rabobank's Senior FX Strategist Jane Foley outlines her baseline view on Bank of England (BoE) policy, citing softer United Kingdom (UK) Consumer Price Index (CPI), lower Oil prices and a slack labour market. Foley expects no change in BoE rates for the rest of the year, contrasting with market pricing for modest tightening over six months, and warns that further repricing could pressure the Pound and support EUR/GBP.

Stable policy stance versus market pricing

"While GBP will be keeping a close eye on the gilt market, short-term interest rates tend to be a larger driver of FX. This month’s release of softer than expected UK May CPI inflation data at 2.8% y/y for the headline rate, and the subsequent drop in oil prices should help contain inflation expectations."

"Against the backdrop of a slackened UK labour market, Rabobank’s baseline view is that the centrists within the MPC would only vote in favour of a rate hike if there were clear evidence that another period of prolonged high energy prices is generating second round inflation effects. With this in mind, RaboResearch is forecasting no change in BoE rates through to the remainder of the year."

"The market, however, is currently priced for around 20 bps of tightening on a 6-month view. A further re-pricing of BoE rate hike expectations is likely to weigh on the pound. We see scope for a moderate move higher in EUR/GBP on a 1-to 3-month view."

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

According to a Reuters poll published on Tuesday, analysts have lowered their 2026 Oil price forecasts for the first time since the Iran war began as shipping through the Strait of Hormuz gradually improves, easing concerns over prolonged supply disruptions.

The poll, which surveyed 31 economists and analysts, showed Brent crude is expected to average $84.50 per barrel in 2026, down from the $90.44 forecast made in May. US benchmark West Texas Intermediate (WTI) crude is expected to average $79.49 per barrel, compared with $84.63 projected last month.

On average, they expect Brent to average about $84 per barrel in the third quarter of 2026, before falling to around $79 in the fourth quarter and declining to the mid-$70s by the middle of 2027.

According to the poll, global Oil demand growth in 2026 is expected to slow to roughly 1.0 million to 2.0 million barrels per day. Analysts said demand has softened due to weaker consumption in China, the world's largest oil importer.

At the time of writing, WTI trades around $70.80, back near its March lows after fully unwinding its US-Iran war rally.

• EUR/JPY edges slightly higher despite weaker-than-expected German inflation data.
• Markets' attention turns to the Eurozone preliminary inflation figures for fresh clues on the ECB’s policy outlook.
• Repeated intervention warnings from Japanese authorities continue to limit the pair's upside potential.

EUR/JPY trades modestly higher on Tuesday, hovering around 185.10 at the time of writing, up 0.07% on the day. The pair is supported by a resilient Euro (EUR) despite softer-than-expected German inflation data. At the same time, the Japanese Yen (JPY) remains weighed down despite repeated warnings from Tokyo officials over excessive currency moves.

Data released in Germany showed that inflation slowed more than expected in June. The Consumer Price Index (CPI) rose 2.3% YoY, down from 2.6% in May and below the market forecast of 2.5%. Meanwhile, the Harmonized Index of Consumer Prices (HICP), the European Central Bank's (ECB) preferred inflation gauge, also came in below expectations, rising 2.4% annually after 2.7% previously, while falling 0.2% on a monthly basis.

The figures reinforce signs that inflationary pressures continue to ease in the Eurozone's largest economy. Earlier in the day, Dutch Central Bank Governor Olaf Sleijpen said that lower energy prices following the easing of Middle East tensions should help cool inflation further. However, ECB policymakers Pierre Wunsch and Joachim Nagel warned that inflation could remain above the 2% target for several more quarters, arguing that the geopolitical situation remains highly uncertain.

Investors also digested stronger-than-expected German Retail Sales data. According to Destatis, Retail Sales increased by 1.1% MoM and 1.8% YoY in May, beating market expectations and pointing to resilient consumer spending despite higher inflation.

Attention now shifts to Wednesday's preliminary Eurozone HICP release, which could provide further guidance on the ECB's interest rate outlook.

On the Japanese side, the Japanese Yen (JPY) continues to receive support from intervention risks. Chief Cabinet Secretary Minoru Kihara reiterated that authorities stand ready to take action in the foreign exchange market if necessary, while Finance Minister Satsuki Katayama said the government would respond appropriately to currency moves whenever needed. Meanwhile, discussions within the Bank of Japan (BoJ) continue to support expectations for gradual monetary policy normalization, although Japan's still-low interest rates continue to limit the Japanese Yen's broader appeal.

• US JOLTS are forecast to have eased to 7.3 million in May, yet remaining above the 2025 average.
• Job Openings data will be watched to confirm market expectations of Federal Reserve rate hikes.
• EUR/USD remains on the defensive, with 13-month lows at a relatively short distance.

The US Bureau of Labor Statistics will release the Job Openings and Labor Turnover Survey (JOLTS) for May on Tuesday at 14:00 GMT. The report, which gathers US employers’ estimates of job openings, hires, and separations nationwide, is closely watched by the market as it normally comes ahead of an array of employment gauges released throughout the week, culminating in the key Nonfarm Payrolls report.

May’s JOLTS figures are likely to be closely watched on Tuesday because they come in a crucial moment, with markets repricing chances of interest rate hikes by the US Federal Reserve (Fed) as inflation keeps rising well above the central bank’s target.

A high level of uncertainty surrounds the Middle East conflict, and inflationary pressures have failed to abate despite the recent decline in Crude prices. The Fed has reiterated its commitment to fight inflation, boosting investors’ hopes of at least one rate hike this year. In this scenario, this week’s labour market data might be key to assessing the timing of the next monetary policy move and give a fresh boost to US Dollar (USD) volatility.

What to expect in the next JOLTS report?

Job openings are expected to come in at 7.3 million in May, according to the market consensus. This is a moderate decline from April’s 7.61 million openings, which was the best reading since July 2024, but still a good reading, as it remains significantly above the 2025 average of 7.08 million openings. If these figures are confirmed, they are likely to endorse the theory of a stabilising US labour market and underpin the narrative of US economic exceptionality.

April’s JOLTS data beat expectations with a 4.6% monthly increase in job openings – 731,000 new vacancies – from March’s 6.88 million openings, while quits, layoffs, and discharges were little changed.

Beyond that, the US Nonfarm Payrolls release reported 172K new jobs in May, completing an impressive performance in the three months to May. These figures boosted market confidence about the US economic resilience to the Middle East war and allowed Fed policymakers to forget about the labor market and focus solely on the overshooting inflationary levels to draw their near-term monetary policy. This new scenario has prompted investors to ramp up bets of some monetary policy tightening in the coming months.

Data from the CME Group’s Fedwatch Tool shows that futures markets are pricing a 30% chance of a rate hike at next month’s Federal Open Market Committee (FOMC) meeting, and a more than 60% chance of monetary tightening in September, up from  6% and 20% respectively a month ago. This week’s employment figures will be analysed to contrast these views.

 When will the JOLTS report be released and how could it affect EUR/USD?

Job Openings will be published on Tuesday at 15:00 GMT. The EUR/USD is trading at a relatively short distance from the 13-month lows, on track to a 2.17% sell-off in June, and a nearly 3% decline over the last two months.

Guillermo Alcalá, analyst at FXStreet, sees the pair skewed to the downside while the US economy keeps outperforming the Eurozone’s and Iran’s war keeps dampening risk appetite: “The Euro has remained vulnerable over the last two months amid geopolitical woes and a sluggish economic growth in the Eurozone. Unless the scenario changes significantly, Euro rallies are likely to offer good entry opportunities for sellers. The 13-month low at 1.1325 remains the key support level. Further down, bears might be tempted to revisit the late May 2025 low at 1.1210.”

To the upside, Alcala sees the 1.1500 and the 1.1620-1.1640 resistance areas as the main hurdles for bulls: “The pair is struggling to consolidate above 1.1400 at the time of writing in a rebound from the mentioned 13-month lows, which, so far, seems corrective. Bulls should break the 1.1500 area (June 8,11 lows) and preferably also the area between 1.1620 and 1.1640, where late May and early June highs meet the descending trendline from the year-to-date (YTD) highs, to break the negative structure.”

Societe Generale strategists note that USD/INR is trading in a tight range, with robust foreign portfolio inflows into Indian debt and supportive domestic factors offset by a hawkish Federal Reserve (Fed) stance. The pair remains constrained despite the improving backdrop for Indian bonds and potential benchmark index inclusion, suggesting limited near‑term directional bias for the Indian Rupee against the Dollar.

Tight range under Fed pressure

"Elsewhere, the rally in Indian bonds shows no sign of slowing, helped by supportive measures of the RBI and MoF."

"These include (a) the appeal of foreign flows via FCNR deposits and subsidised FX hedging costs for banks raising 3–5y funds, (b) allowing ECBs for PSU lenders, and (c) removing taxes on capital gains and interest income from government securities."

"Softer oil and gold prices have also supported FPI demand for Indian debt. In addition, potential inclusion of Indian FAR bonds in the Bloomberg Global Aggregate Index at the mid‑2026 review, after a deferral in January on operational and infrastructure concerns, points to a brighter outlook."

"Meanwhile, USD/INR is maintaining a tight range of 94.15-94.95 hawkish Fed view negates the tailwinds mentioned above as well as robust FPI inflows into debt securities."

"Even a 1% weight for Indian debt in this benchmark gauge could result in $25bn-$30bn FPI inflows in the next 12 months. The 10y IGB yield has eased to 6.75%, just 9bp away from pre‑war levels after peaking near 7.143%."

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

• GBP/JPY consolidates near two-week highs as traders remain alert to possible Japanese FX intervention.
• Wide interest-rate differentials continue to weigh on the Japanese Yen despite rising JGB yields.
• UK Q1 GDP is revised lower, offering little fresh support to the British Pound.

GBP/JPY trades in a narrow range on Tuesday, struggling to build on the previous day's gains as traders remain wary of a possible intervention by Japanese authorities after the Japanese Yen (JPY) weakened to a fresh 40-year low against the US Dollar (USD). At the time of writing, the cross is trading around 214.70, hovering near two-week highs.

Japan's Chief Cabinet Secretary, Minoru Kihara, reiterated that authorities are "always prepared to take necessary steps" in the foreign exchange market if needed. However, Kihara declined to comment on any specific exchange-rate level.

Japan has already spent more than ¥11.7 trillion intervening in the currency market this year. Still, the Yen remains under pressure, with its weakness primarily driven by the wide interest-rate differential between Japan and other major economies, which continues to support carry trades.

The Bank of Japan's (BoJ) shift away from ultra-loose policy has done little to stem the Yen's decline even as Japanese Government Bond (JGB) yields continue to climb. The BoJ raised its policy rate by 25 basis points to 1.0% at its latest meeting and signaled further rate hikes ahead. However, the pace of normalization remains slow.

BoJ new board member Ayano Sato said on Tuesday, "foreign exchange shifts must reflect fundamentals," adding that "a weak Yen lifts exports but raises import costs, driving down real household income."

On the UK side, the latest Gross Domestic Product (GDP) data did little to provide fresh support for the British Pound (GBP). The UK economy expanded by 0.6% QoQ in the first quarter of 2026, matching both the preliminary estimate and market expectations. However, annual GDP growth was revised down to 0.9% from the preliminary estimate of 1.1%.