Forex News

• Gold trades under pressure on Wednesday as the US Dollar and Treasury yields recover from their post-CPI decline.
• Softer US CPI data cools near-term Fed rate hike bets, but rising Oil prices keep inflation risks alive.
• Technically, XAU/USD keeps a bearish bias below its key moving averages, with sellers eyeing a sustained break below $4,000.

Gold (XAU/USD) trades on the back foot on Wednesday as the US Dollar (USD) and US Treasury yields rebound after coming under pressure on Tuesday following softer-than-expected US Consumer Price Index (CPI) data.

At the time of writing, XAU/USD trades around $4,036, down 0.40% on the day.

US inflation cooled sharply in June, although much of the decline was driven by lower energy prices following last month’s interim peace deal between the United States (US) and Iran.

Headline CPI fell 0.4% MoM after a 0.5% rise in May, slowing the annual rate to 3.5% from 4.2%. Core CPI month-on-month came in flat at 0% after a previous 0.2% gain, while the annual core rate eased to 2.6% in June from 2.9%.

The data reduced expectations of an immediate Federal Reserve (Fed) interest rate hike and briefly lifted Gold above $4,100 on Tuesday. Still, it did not materially change the Fed’s hawkish outlook, as inflation risks persist with Oil prices creeping higher again following renewed fighting in the Middle East.

In an interview with Fox News on Tuesday, US President Donald Trump warned that military strikes against Iran would intensify unless Tehran resumed negotiations. "Next week comes the bridges. We're going to knock out all their power plants. We're going to knock out all their bridges unless they get to the table and negotiate," Trump said.

According to the CME FedWatch Tool, markets see an 85% chance that the Fed will leave interest rates unchanged at its July meeting, while the probability of a September hike stands at around 60%.

Meanwhile, Fed Chair Kevin Warsh reiterated the central bank’s commitment to bringing inflation back to its 2% target during his congressional testimony on Tuesday, saying “no tolerance for persistently elevated inflation.”

“The June CPI was positive relative to expectations,” Warsh added. “I’m not cherry-picking. There is still plenty of work to do.”

Attention now turns to the US Producer Price Index (PPI) data, due at 12:30 GMT, for more clues on the inflation outlook.

Technical analysis: XAU/USD keeps bearish bias with $4,000 support in focus

On the daily chart, XAU/USD retains a bearish near-term bias as the price holds well below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs). The clustering of these longer-term SMAs above spot suggests upside attempts are likely to be capped for now.

The Relative Strength Index (RSI) around 40 stays in neutral-to-soft territory, hinting at limited bullish momentum despite a pause in the recent slide. The Average Directional Index (ADX) at 38.37 points to a still-established trend backdrop.

On the topside, initial resistance emerges at the horizontal level of $4,200, ahead of the 50-day SMA near $4,319 and another barrier at $4,400, with the 200-day SMA at $4,495 and the 100-day SMA at $4,559 marking a broader supply zone higher up.

On the downside, immediate support is seen at the psychological $4,000.00 handle, and a sustained break below this floor would likely open the way for a deeper bearish extension in line with the prevailing trend structure.

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

Commerzbank’s Volkmar Baur notes that softer US inflation has reduced expectations for Federal Reserve rate hikes and pressured the US Dollar. June headline and core inflation fell more than consensus, leading markets to price out roughly half a hike by year-end. Baur argues that improving productivity and AI-related investment support a wait-and-see Fed stance, keeping the Dollar under pressure, though higher Oil prices may slow adjustment.

Lower inflation shifts Fed pricing

"The lower inflation figures also had an impact on the fx market. On a trade-weighted basis, the US dollar lost about 0.3% yesterday, and it also gave up a similar amount against the euro. While the market had previously anticipated about 1.7 interest rate hikes by year-end, by the end of the day that figure had dropped to just 1.2."

"Although Waller’s speech the previous day was interpreted as hawkish in some news reports, Waller stated explicitly that while inflation was too high in his view, the situation was clearly different from that in 2022 (when interest rates were raised). He noted that the labor market is currently nowhere near as tight as it was back then, and that inflation expectations remain low."

"He also said that a wage increase of currently around 3.5% is consistent with inflation of around 2%, because productivity is improving accordingly. And this is likely to be the main argument for a wait-and-see monetary policy in the coming months."

"In this regard, it’s still reasonable to assume that the market will have to continue adjusting its expectations of the Fed, which will weigh on the US dollar. However, given the renewed flare-up of the Iran conflict and the resulting rise in oil prices, this is likely to take some time yet."

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

• GBP/USD retreats to 1,3390 from session highs near 1.3420.
• Market concerns about the consequences of the escalating Middle East tensions are boosting the US Dollar's recovery.
• The Greenback took a hit on Tuesday as US CPI cooled hopes of immediate Fed rate hikes.

The British Pound (GBP) has retraced previous gains against the US Dollar (USD) on Wednesday, returning to the 1.3390 area from session highs of 1.3420 and turning negative on the daily chart. The safe-haven US Dollar has bounced up during the London session amid the risk-averse sentiment as US and Iran escalate their threats following the resumption of hostilities.

Risk aversion is weighing on the Pound on Wednesday with tensions in the Middle East simmering and Oil prices 17% above early July highs. Iranian authorities said that 30 people have been killed in the latest round of US strikes, and US President Trump has threatened to target civilian infrastructure, including power plants.

Iran’s Islamic Revolutionary Guard Corps (IRGC), in turn, threatened to block other energy routes and halt all Middle East energy exports, in response to the US blockade of Iranian ports.

Soft US inflation data cools Fed tightening expectations

These tensions have offset the US Dollar’s weakness seen in Tuesday's and Wednesday’s Asian sessions, as softer-than-expected US Consumer Price Index (CPI) figures dampened expectations that the US Federal Reserve might hike interest rates as soon as July.

Later on the day, the focus will shift to the US Producer Prices Index (PPI) figures, to confirm with markets looking for confirmation of the disinflationary trend pointed by Tuesday’s CPI data.

In the UK, Andrew Burnham has practically confirmed his nomination as the new leader of the Labour Party, with the backing of 349 MPs. He still needs the support from at least three organisations of the Labour Party, but this will not be an obstacle, as it is mathematically impossible for a rival to beat him.

After that, the former mayor of Manchester is expected to be nominated as Prime Minister on July 20. Markets remain calm about it, especially after his efforts to convey a responsible fiscal policy, which has contributed to the 2% GBP/USD appreciation since the former Prime Minister, Keir Starmer, stepped down in late June.

• NZD/USD remains firm near 0.5820 amid an upbeat market mood.
• Traders trump hawkish Fed bets following soft US CPI data.
• Investors await the US PPI data for June.

The New Zealand Dollar (NZD) clings to Tuesday’s gains around 0.5820 during the European trading session on Wednesday. The Kiwi pair reflects strength in a risk-on market environment, driven by easing fears of Federal Reserve (Fed) interest rate hikes this year.

In the European trade, S&P 500 futures trade 0.25% higher around 7,563, indicating strong demand for riskier assets.

According to the CME FedWatch tool, the odds of the Fed raising interest rates in the policy meeting this month have eased to 16.6% from 31% seen last week.

Market participants have scaled back hawkish Fed bets as the United States (US) inflation cooled down at a faster-than-expected pace in June.

Meanwhile, investors await the US Producer Price Index (PPI) data for June, which will be published at 12:30 GMT. Ahead of the US producer inflation data, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades marginally higher to near 101.00 after recovering early losses.

NZD/USD technical analysis

NZD/USD trades marginally higher at around 0.5820. The pair has edged back above the 50.00% Fibonacci retracement at 0.5810 while holding over the 20-day exponential moving average (EMA) at 0.5746, which together hint at a constructive near-term tone.

A rising Relative Strength Index (RSI) at 60.8 reinforces improving bullish momentum, though prices are still capped by the 61.80% retracement at 0.5853 just overhead.

On the topside, immediate resistance is located at the 61.80% Fibonacci retracement at 0.5853, followed by the 78.60% retracement at 0.5915, with the recent swing high at the 100.00% level of 0.5994 acting as a stronger barrier if gains extend. On the downside, initial support is seen at the reclaimed 50.00% retracement at 0.5810, ahead of a minor floor around the 38.20% level at 0.5766 and the 20-day EMA at 0.5746, while deeper declines would expose the 23.60% retracement at 0.5712 and the structural anchor near 0.5625.

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

• The Indian Rupee rebounds against the US Dollar as hawkish Fed bets ease.
• US headline and core CPI growth cooled faster than expected in June.
• Oil price rally halts while US-Iran military aggression continues.

The Indian Rupee (INR) gains ground against the US Dollar (USD) on Wednesday after rising significantly in the last three trading days. The USD/INR pair drops to near 96.11 as the US Dollar comes under selling pressure, with traders repricing Federal Reserve (Fed) interest rate expectations following the release of the softer-than-expected United States (US) Consumer Price Index (CPI) data for June.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.15% lower to near 100.80.

Hawkish Fed bets ease

On Tuesday, the US CPI report for June showed that the headline inflation cooled down at a faster-than-expected pace to 3.5% Year-on-Year (YoY) from 4.2% in May. In the same period, the core CPI – which excludes volatile food and energy items – grew at a moderate pace of 2.6% YoY against 2.8% estimates and the previous reading of 2.9%.

Signs of decelerating price pressures have eased fears of Federal Reserve (Fed) interest rate hikes in the near term.

According to the CME FedWatch tool, the odds of the Fed raising interest rates at the policy meeting this month have eased to 16.6% from 41.7% recorded on Monday.

Meanwhile, Fed Chairman Kevin Warsh has reiterated the need to bring price stability in his testimony before Congress on Tuesday. Warsh said in his prepared remarks, “The Fed has no tolerance for persistently elevated inflation.” "If we get policy right - and we will- the inflation surge of the last five years will be a thing of the past," Warsh added.

Oil price rally hits pause

Over-a-week-long rally in oil prices appears to have paused for a while as US President Donald Trump has rolled back the idea of charging a 20% toll fee from cargo ships transiting through the Strait of Hormuz, a vital passage to almost 20% of global energy supply.

However, the continued aggression between the US and Iran will keep the energy supply disrupted, a scenario that is favorable for the oil price.

FIIs dump Indian shares again

Foreign Institutional Investors (FIIs) turned out to be net sellers in the Indian stock market for the second consecutive trading day on Tuesday, paring their stake worth Rs. 739.69 crore. FIIs also sold shares worth Rs. 3,062.27 crore.

Technical Analysis: USD/INR sees more upside to near 97.10

USD/INR trades subduedly at around 96.15 at press time. However, the near-term bias of the pair remains bullish as it holds above the 20-day Exponential Moving Average (EMA), which is at 95.37.

The positive slope of the EMA hints at a constructive underlying trend, while the Relative Strength Index (RSI) at 62.1 stays in bullish territory without yet reaching overbought, suggesting buyers still have room to press the move higher.

On the downside, immediate support is seen at the 20-day EMA at 95.37, where dip-buying interest could emerge if a corrective pullback unfolds. Looking up, the pair aims to revisit the all-time high at 97.10.

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

The Canadian Dollar (CAD) is facing an upward correction, with the USD/CAD currency pair sliding below the critical 1.4100 mark. This retreat comes after lower-than-expected US CPI data and as the Bank of Canada (BoC) is widely anticipated to hold its policy rate steady at 2.25% for the sixth consecutive meeting. 

Beneath the surface of this rate pause lies a quite resilient domestic economy, emerging geopolitical triggers in the Middle East, and shifting technical dynamics that could soon test key support levels for the pair.

Economic resilience keeps a year-end rate hike on the table

Analysts at Societe Generale expect the Bank of Canada (BoC) to keep rates on hold on Wednesday after recent data showed the country’s economic outlook has strengthened notably.

The Canadian economy rebounded in April and labor market conditions have improved. While falling gasoline prices may pull headline inflation below 3.0%, core measures remain anchored near the BoC’s 2.0% target. This combination of growth and still-high core inflation keeps the door open for further tightening.

Labor market conditions have improved of late, reflected in the decline of the unemployment rate by 0.4pp since April to 6.5% in June, the lower end of the BoC forecast range. Market pricing suggests a 25bp hike before year-end cannot be dismissed.

Oil, geopolitics, and USMCA trade risks dictate CAD momentum

External forces are heavily influencing the Canadian Dollar. ING highlights that while the BoC's Business Outlook Survey showed elevated inflation expectations, those surveys were conducted in May, prior to the reopening of the crucial Strait of Hormuz.

Recent re-escalations in the Middle East and higher Oil prices have provided a natural buffer for the Oil-sensitive Loonie. However, any structural upside for the Canadian currency remains capped by lingering trade concerns surrounding the United States-Mexico-Canada Agreement (USMCA).

We expect few changes in the policy tone by the BoC at this meeting, leaving CAD front-end rates primarily driven by developments in the Gulf. CAD should enjoy more short-term momentum if oil prices stay supported and the BoC doesn’t surprise on the dovish side.

Technical levels: Can USD/CAD break below 1.4000?

From a technical perspective, USD/CAD’s failure to consolidate above its previous range boundary of 1.4130 has triggered a breakdown. Societe Generale notes that gains were capped near interim resistance at 1.4250, leaving the pair vulnerable to further short-covering.

The immediate downside target is the 50-day moving average hovering near 1.3970, followed by stronger support at 1.3850. However, ING cautions that clearing the psychologically significant 1.4000 level permanently will require clear, dovish policy signals from the US Federal Reserve.

Banks anticipate tight trading range with downward bias

The banks project a near-term consolidation for the USD/CAD pair with a mild downward bias, targeting the 1.3970-1.4000 support corridor. Societe Generale expects the current technical pullback to extend lower in the absence of a bullish US PPI inflation surprise.

Meanwhile, ING maintains that while strong Oil prices and a hawkish-leaning BoC pause will keep the Canadian Dollar structurally supported, trade-related USMCA headwinds and a resilient US Dollar will prevent the pair from embarking on a deeper, sustained decline below 1.4000.

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

• . Gold ticks lower on Wednesday and remains trapped within a tight range above $4,000.
• Escalating tensions in Iran and high Oil prices are keeping precious metals weighed.
• The US Dollar lost ground after US CPI cooled expectations of immediate Fed rate hikes.

Gold (XAU/USD) edges lower on “inside trading” on Wednesday, with price action contained within Tuesday’s range, as the pair keeps looking for direction above the $4,000 level. Rising tensions in Iran and high Oil prices have offset the positive impact from the soft US Consumer Price Index (CPI) data.

US data released on Tuesday revealed that inflationary pressures eased beyond expectations in June. Yearly CPI slowed down to 3.5% from 4.2% in May, well below the 3.8% market consensus, and monthly inflation contracted 0.4%, its largest decline in nearly six years. These figures triggered a significant repricing of Federal Reserve (Fed) rate hikes and sent the USD lower across the board

Precious metals, however, have failed to capitalise on the US Dollar’s weakness amid escalating hostilities between the US and Iran. Threats of further attacks and the closure of more energy routes are underpinning OIil prices near one-month highs, fuelling expectations of higher inflationary pressures and global monetary tightening.

Technical Analysis: Bearish momentum fades with bulls still subdued

XAU/USD trades at $4,027, still capped below the downward trend-line barrier yet with the Relative Strength Index (14) on the daily chart showing a bullish divergence as it reaches the neutral territory in the 40 area. The Moving Average Convergence Divergence (MACD) remains in positive territory yet at levels suggesting that bullish attempts remain frail.

Gold bulls should break the mentioned trendline, now around $4,100 and the July 7 high, in the $4,200 area to confirm a trend shift and gain confidence to pursue a deeper correction. On the downside, the precious metal has a cluster of supports between Thursday's low in the $4,020 area and the late October 2025 lows near $3,885.

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

MUFG’s Derek Halpenny reports that the Canadian Dollar (CAD) has benefited from weaker United States (US) Consumer Price Index (CPI) and higher Oil prices, with spreads pointing to modest further gains versus the US Dollar (USD). However, he expects the Bank of Canada (BoC) to remain on hold, stress a sizeable output gap and mixed data, and warns that current rates pricing leaves CAD risks skewed to the downside.

Upside capped as BoC stays patient

"The Norwegian krone, the Canadian dollar and the Australian dollar are performing best behind the New Zealand dollar within G10 since the re-escalation of the conflict with the rebound in energy prices underlining the terms of trade driver of FX performance once again. The same three currencies are in the top four behind the pound covering the period since the conflict first began at the end of February. But from a relative monetary policy stance the Canadian dollar gained yesterday like the rest of G10 versus the US dollar and the 2-year nominal US-CA swap spread points to scope for some further modest gains."

"As stated above, the CPI print has certainly weakened the support for the dollar and CAD can benefit from that as well. For CAD this can be reinforced by the upturn in crude oil prices."

"However, the macro backdrop certainly points to limits to CAD gains from crude oil and today the BoC monetary policy decision should highlight the scope for patience from the BoC given the mixed macro backdrop and weaker inflation. The need for a hawkish message is far less from Governor Macklem than from Fed Chair Warsh yesterday (notwithstanding the better US CPI data)."

"With close to 20bps of tightening priced by the end of the year the risks appeared skewed to another cautious communication highlighting the scope for remaining on hold that may disappoint current rates market pricing. Nominal and real spreads, while recently moving in favour of lower USD/CAD are still at levels that point to downside risks for CAD."

"The crude oil / Brent correlation is not particularly stable and with the BoC set to remain sidelined, CAD risks are skewed to the downside given the rates pricing (80% priced for hike by year-end)."

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

TD Securities projects UK GDP to grow 0.1% month-on-month in May, led by services and strong retail sales, while manufacturing and industrial output remain under pressure from Middle East-related headwinds and higher input costs. Governor Bailey’s Mansion House speech emphasized inflation returning to target more slowly, weak productivity, and a focus on stability, with little indication of support for near-term rate hikes.

GDP outlook and monetary policy signals

"UK GDP likely scraped out modest growth in May, which we see at 0.1% m/m (mkt: 0.0%; prior: -0.1%). We expect this to be led by the services sector, which should benefit from the strong retail sales recorded during the month and the effect of mean reversion in some major components, bringing the May growth to 0.1% m/m (mkt: 0.1%; prior: -0.2%)."

"Offsetting this, Manufacturing and Industrial Production likely remained under pressure as the peak of the Middle East crisis weighed on activity and higher input costs dampened output."

"Should this materialise, it would be in line with our forecast of 0.2% q/q and slightly above BoE's most recent projections of 0.1% q/q for Q2."

"Similar to his previous speeches, Bailey argued that UK inflation would likely have returned to the 2% target by now were it not for recent energy-related supply shocks, and remains confident that it will do so, albeit more slowly than previously expected."

"Ultimately, though the speech is more long-term outlook focused, there was little sense that he would be ready to vote for a hike in the upcoming meetings."

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