Forex News
Societe Generale’s commodity team notes Brent has lost its 50-day moving average and is testing support around $96. They map several Strait of Hormuz reopening scenarios, with early resolution pointing to Brent near $85 by year-end, later outcomes implying spikes toward $150–$160, and a low-probability prolonged disruption scenario where Brent could exceed $200 per barrel.
Hormuz scenarios drive wide price paths
"Brent carved out a lower high around $113 last week and has given up the 50-DMA for the first time since January."
"The low reached earlier in May, around $96, serves as interim support."
"If Brent fails to defend it, a deeper downtrend may take shape toward the ascending trend line drawn since March at $91/$90 and $86."
"In summary: an early June reopening would nudge Brent down steadily to around $85/bbl by year-end."
"The lower probability event of Hormuz staying shut until year-end means Brent could top $200/b."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
BNY’s Bob Savage highlights that global equities extend gains on AI optimism and Iran peace talks. South Korean chip names power the KOSPI to records, while Chinese stocks lag despite strong profit data. iFlow shows broad equity outflows, with selective inflows into New Zealand, Singapore, Thailand and China.
AI chip boom versus selective outflows
"Global equities have extended their rally on AI optimism and ongoing peace talks with Iran in Pakistan. The Eid al-Adha holiday meant markets in much of South Asia were closed, while liquidity across markets remains focused on month-end and rebalancing."
"Chinese equities fell, countering the wider APAC rally, even as January-April industrial profits rose 18.2% y/y. "
" SK Hynix has joined the $1tn market capitalization club, which includes Samsung and Micron, on the back of AI memory chip demand. The South Korean KOSPI printed a new record high, with Samsung and SK Hynix accounting for half of the index."
"Broad-based outflows dominated across the iFlow universe, led by Japan, Indonesia and South Korea. Selected inflows were seen in Norway, New Zealand, Singapore, Thailand and China. Within DM sectors, utilities, materials and energy underperformed, while financials and consumer staples attracted buying."
"Samsung is up 149% YTD while SK Hynix has gained 215%. Their U.S. counterpart Micron is up 245% YTD. Expectations are that semiconductor chip prices will rise 63% in Q2. The investment boom continues, with returns from data centers justifying the money flow."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Gold slides to its lowest level since March 30 despite a softer US Dollar and declining Oil prices.
- Expectations that the Fed will keep interest rates higher for longer continue to weigh on non-yielding Gold.
- Technically, XAU/USD trades near the lower Bollinger Band while RSI remains below the neutral zone, keeping the broader bias bearish.
Gold (XAU/USD) struggles to attract buying interest on Wednesday, even as the US Dollar (USD) and Oil prices trade on the back foot, with markets remaining cautiously optimistic that the United States (US) and Iran could eventually reach a deal to end the war in the Middle East. At the time of writing, XAU/USD is trading around $4,440, its lowest level since March 30.
Diplomatic talks between Washington and Tehran remain ongoing despite Iran accusing the US of a “grave violation” of the ceasefire after American forces carried out fresh “defensive strikes,” targeting missile sites and boats near the Strait of Hormuz earlier this week.
An official from Iran’s Revolutionary Guard said on Wednesday that a renewed war with the US was unlikely, though he warned Tehran remained prepared to respond to any attack. The remarks eased fears of further escalation and kept hopes alive that both sides could eventually reach an agreement that may lead to the reopening of the Strait of Hormuz.
Meanwhile, US President Donald Trump will hold a cabinet meeting later on Wednesday as markets await fresh updates on US-Iran negotiations.
However, Gold is struggling to capitalize on the improving sentiment as traders increasingly view Oil-driven inflation as the bigger near-term risk. Higher energy prices have strengthened expectations that major central banks, including the Federal Reserve (Fed), may need to maintain restrictive monetary policy for longer.
At the same time, the broader US macroeconomic backdrop continues to reflect resilient growth and sticky inflation, further supporting expectations of a hawkish Fed.
Even if a US-Iran peace deal is eventually reached and the major Oil chokepoint reopens, restoring normal shipping flows could take months, likely keeping Crude prices elevated and inflation concerns in focus. As a result, markets expect the Fed to remain patient before shifting back toward policy easing.
With markets pricing in a hawkish Fed outlook, Gold may continue to trade with a downside bias in the near term, as higher interest rates tend to weigh on non-yielding assets.
Traders now await the US Personal Consumption Expenditures (PCE) data due on Thursday and speeches from several Fed officials throughout the week for fresh clues on the monetary policy outlook.
Technical Analysis: XAU/USD trades near the lower Bollinger Band as sellers retain control
On the daily chart, XAU/USD hovers just above the lower Bollinger Band, which sits near $4,425, keeping the broader tone fragile as price remains capped below the 20-period Simple Moving Average (SMA) around $4,595. The Relative Strength Index (RSI) holds near 38, pointing to weak but not extreme downside momentum, while the Average Directional Index (ADX) near 22 suggests a developing but not yet robust trend.
On the topside, initial resistance is located at the 20-period SMA near $4,595, ahead of the upper band around $4,766. On the downside, immediate support aligns with the lower Bollinger Band near $4,425, followed by a horizontal floor at $4,350 and a deeper level near $4,100, where a break would likely reinforce the prevailing bearish bias.
(The technical analysis of this story was written with the help of an AI tool.)
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.
Brown Brothers Harriman’s (BBH) Elias Haddad notes AUD/USD slid toward 0.7136 and is expected to settle closer to 0.7000, consistent with Australia–US 2‑year yield spreads. Mixed April Consumer Price Index (CPI), with softer headline but firm trimmed mean, saw Reserve Bank of Australia (RBA) hike pricing pared back and leaves risks skewed toward a longer pause in the tightening cycle.
Yield spreads point to lower Aussie
"AUD/USD dropped to intra-day lows near 0.7136. We expect AUD/USD to stabilize lower around 0.7000, the level implied by Australia-US 2-year bond yield spreads."
"Australia April inflation was mixed. Headline CPI dipped more than expected to 4.2% y/y (consensus 4.4%, March: 4.6%) while the trimmed mean CPI matched consensus at 3.4% vs. 3.3% in March."
"The monthly CPI is Australia’s primary measure of inflation, but the RBA continues to focus on measures of underlying inflation from the quarterly CPI. Australia Q2 CPI data is due end-July."
"RBA cash rate futures trimmed bets of a 25bps hike by year end. In our view, the risk is skewed towards a more extended pause in the RBA tightening cycle."
"First, the RBA projects real GDP growth to be below potential over the next two years. Second, the RBA cash rate at 4.35% currently sits near the top of the range of model-based central estimates of the nominal neutral rate."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Silver price plummets 3.5% to near $74.10 as Fed officials warn of rising US inflation.
- The Fed is unlikely to cut interest rates this year.
- The US headline inflation has accelerated to 3.8% YoY in April.
Silver price (XAG/USD) is down almost 3.5% to near $74.10 during the European trading session on Wednesday. The white metal faces intense selling pressure as the focus of Federal Reserve (Fed) officials appears to be shifting towards elevated energy prices-driven high United States (US) inflation rather than weak labor market conditions.
Earlier in the day, Minneapolis Federal Reserve (Fed) Bank President Neel Kashkari said that the major concern for the central bank now is higher US inflation than deteriorating labor market conditions; however, the central bank needs to pay attention to both.
Fed’s Kashkari added, “Most of the US data released since my dissent in April has shown inflationary risks are higher, not lower.” On the monetary policy outlook, Kashkari said, “The Fed should have a neutral policy outlook going forward.”
Higher oil prices due to the Middle East war have prompted US inflation. As measured by the Consumer Price Index (CPI), the US headline inflation for April came in at 3.8%, the highest level seen in almost three years.
According to the CME FedWatch tool, the odds of the Fed holding interest rates steady at their current levels this year are 52.3%, while the rest favor at least one interest rate hike this year. This is a sharp turnaround from two interest rate cuts anticipated before the onset of the war.
Theoretically, the scenario of hawkish Fed bets or persistent hold on interest rates bodes poorly for non-yielding assets, such as Silver.
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.
The Australian Dollar (AUD) strength against the New Zealand Dollar (NZD) may be about to reverse.
Recent data from Australia reveals a softer-than-expected inflation alongside underwhelming employment figures, prompting market participants to scale back expectations for further interest rate hikes by the Reserve Bank of Australia (RBA). Conversely, a hawkish holding stance from the Reserve Bank of New Zealand (RBNZ) is providing strength to the Kiwi, leading major financial institutions to project a softer outlook for the Australian Dollar when compared to its main antipodean peer.
The cross is already losing more than 1.2% on Wednesday, a daily decline not seen since the end of 2019.
Narrowing rate differentials threaten to drag AUD/NZD lower
Analysts at Societe Generale point out that while the RBA’s monetary tightening cycle appears to be losing steam due to cooling domestic indicators, the RBNZ has surprised the markets by leaning more hawkish. This contrast is expected to squeeze the interest rate differential between Australia and New Zealand, stripping away a major pillar of support for the Australian Dollar against the Kiwi.
AUD/NZD retreated from the 13-year high and the prospect of narrowing RBA/RBNZ rate differentials is a signal that the cross is destined to cheapen. A break below 1.2130 (50dma) opens 1.20.
Cooling inflation gives RBA breathing room to pause
Taking a closer look at the Australian economy, Commerzbank notes that lower-than-expected inflation metrics justifies a pause in Australia's interest rate hikes. Although underlying trimmed-mean inflation remains a warning sign, the broader cooling trend grants policymakers the flexibility to keep rates steady.
Unlike the Reserve Bank of New Zealand, the Reserve Bank of Australia (RBA) has already raised its key interest rate three times in recent months. However, this morning’s inflation data confirms our assessment that a pause is now likely to follow.
Banks point toward a cooling or peaking outlook for the Australian Dollar
Based on the insights from both institutions, the banks anticipate a downward or capping trend for the Australian Dollar's against the Kiwi. Societe Generale explicitly projects a bearish path for the currency against its regional peer, predicting that the AUD will cheapen as its yield advantage over the NZD shrinks. Supporting this softer outlook, Commerzbank expects the RBA to halt its rate-hiking cycle entirely for the time being, a move that removes immediate upward momentum to the Australian Dollar.
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
ING’s Chris Turner notes EUR/USD remains sluggish despite progress toward a US–Iran agreement that could reopen the Strait of Hormuz and despite hawkish ECB commentary from Philip Lane and Isabel Schnabel. He argues that a stronger Fed tightening narrative should dominate in coming weeks, limiting EUR/USD upside and preventing sustained gains above the 1.1650/60 region.
Euro seen struggling to extend gains
"EUR/USD remains sluggish despite the world seemingly being days away from the US and Iran signing a Memorandum of Understanding to extend the ceasefire and reopen the Strait of Hormuz."
"Notably, the euro failed to get much of a lift yesterday from ECB speakers Philip Lane and Isabel Schnabel, firming up views for a 25bp rate hike on 11 June."
"We think the hawkish Fed story will be the more dominant theme over the next few weeks and struggle to see EUR/USD sustaining gains over the 1.1650/60 area in the current environment."
"The eurozone data calendar is exceptionally light today."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- EUR/USD holds near 1.1650 weekly highs after bouncing from 1.1615.
- ECB's Schnabel affirmed on Tuesday that the bank will have to hike rates in June.
- Oil prices remain below $100 on hopes of a US-Iran peace deal.
The Euro (EUR) posts minor gains against the US Dollar (USD) on Wednesday, trading near 1.1640 at the time of writing, right below weekly highs at the 1.1650 area. Hawkish comments from European Central Bank (ECB) officials have given a fresh boost to the Euro, while hopes of a US-Iran peace deal keep USD rallies limited.
On Tuesday, ECB Board member Isabel Schnabel warned that “looking through the inflation spike is no longer an option” and that a June rate will be needed. Earlier in the day, ECB Chief Economist Philip Lane said in an interview with Nikkei that he does not think that the market needs extra guidance from the bank and seemed comfortable with ongoing speculation on upcoming monetary tightening.
Beyond that, investors remain hopeful that the US-Iran war might end through negotiation, despite Tehran’s outrage over a US attack earlier this week. These hopes are keeping Oil prices significantly below last week's highs, easing pressure on the Eurozone economies and providing additional support for the Euro.
In the US, the Dallas Federal Reserve (Fed) President Lorie Logan kept all options open on Monday, affirming that the next Fed move might either be a hike or a rate cut. Investors are likely to await the release of the US Personal Consumption Expenditure (PCE) Price Index figures, due on Thursday to better assess the central bank's rate path.
Technical Analysis: Consolidating below the range top
EUR/USD trades at 1.1638, with price action hovering just under the top of the last 10 days' horizontal channel, in the 1.1550-1.1560 area. The 4-hour Relative Strength Index (RSI) shows modest bullish momentum, while a positive Moving Average Convergence Divergence (MACD) reading hints that buyers retain some control, though they seem to require additional impulse to breach current boundaries.
A break of the May 18 high at 1.1660 would confirm a bullish reversal and bring the May 14 low, at 1.1720, into focus ahead of May's peak, in the 1.1790 area.
Bearish attempts, on the contrary, are likely to be tested at Tuesday's low near 1.1615, although the key support is at the May 21 low, near 1.1575. If this level gives way, sellers are likely to regain confidence to target April's bottom in the 1.1505-1.1525 area.
(The technical analysis of this story was written with the help of an AI tool.)
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
Commerzbank’s Tatha Ghose reports that Hungary’s MNB kept rates at 6.25%, citing Iran-related inflation risks but acknowledging room to cut after a strong Forint rally. With improved inflation dynamics and EUR/HUF strength, he expects a couple of cuts in coming months, sees a 50 bp move as more likely than 25 bp, and forecasts EUR/HUF around 360 next quarter.
Rate cuts seen with stable forint
"The forint's post-election appreciation, gaining over 7% year-to-date and making it the clear top performer in CEE, combined with notable improvement in underlying inflation indicators (seasonally-adjusted month-on-month changes in core HICP) are strong enough that MNB will likely find room for a couple of rate cuts in coming months."
"Hungary's National Bank (MNB) kept its key interest rate flat at 6.25% yesterday, a widely anticipated decision consistent with its communicated guidance to wait-and-see until updated June projections were available. This cautious approach is necessitated by increased inflationary risks stemming from the Iranian conflict and high global energy prices."
"However, the MPC acknowledged the clear rate cutting room created by a significant forint rally (which MNB chief, Mihaly Varga, attributed to a decline of risk premia – which may be correct, but just to be clear, it is an exogenous rally produced by the election outcome)"
"Deputy Governor Zoltan Kurali had previously signalled that a stronger forint could enable rate cuts, pending evaluation of updated inflation forecasts in the June Inflation Report. Varga basically repeated the same view yesterday. MNB is satisfied with the improved inflation outlook, now described as “more moderate” (despite current global energy price concerns)."
"The forward market is discounting a 25bp rate cut in 3-6 months – we think that 50bp is more likely. We do not anticipate a negative impact on the exchange rate from 50bp lower interest rates. We expect EUR/HUF to trade around the 360.0 level over the coming quarter."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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