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ING strategists Francesco Pesole and Frantisek Taborsky expect the Federal Reserve to keep rates unchanged, with two dissenters possibly voting for a hike, limiting downside in front-end USD rates. They argue the Dollar could weaken as precautionary positioning is unwound and DXY reconnects with lower Oil prices. ING sees downside risks for the Dollar and a potential test of 101.0 in DXY this week.

Dollar seen pressured after Fed

"Our Fed preview, published last week, argued that precautionary positioning for a potential surprise Fed hike could keep the dollar supported going into today’s FOMC announcement. That appears to have been the case. Despite softer consumer confidence data and de-escalation headlines weighing on the dollar yesterday, DXY has shown little sensitivity to the recent decline in oil prices."

"But that resilience will be tested heavily today. Markets are pricing in 7bp, or about a 25-30% probability of a Fed hike today. That, in theory, implies a mechanical correction lower in front-end USD rates if – like we expect – rates are kept unchanged."

"It seems to us that consensus expects two dissenters – Logan and Hammack – to vote for a hike. In that case, year-end rate expectations (41bp) may remain broadly supported, but we would still see downside risks for the dollar."

"A Fed hold should trigger an unwinding of precautionary USD positioning, allowing the dollar to reconnect with the signal from lower oil prices. The resumption of military strikes in the Gulf overnight does not seem to be severely denting markets’ hopes for de-escalation, with Brent remaining below US$90 a barrel for the moment."

"In other words, unless Fed Chair Kevin Warsh surprises with a hawkish spin, or we see more than two dissenters, we think the dollar will come under pressure today. If constructive headlines from the Gulf return, we expect a test of 101.0 in DXY by the end of this week."

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

Commerzbank’s Michael Pfister analyses how the Swiss National Bank’s recent shift toward tolerating a weaker Swiss Franc affects inflation and EUR/CHF. Using a structural exchange rate pass-through model based on invoicing currencies, he finds Euro-denominated trade dominates short-term effects and that the 2026 policy stance has modestly lifted inflation, while the SNB is expected to keep rates unchanged and EUR/CHF should benefit over the medium term.

Euro invoicing drives Swiss inflation dynamics

"As we demonstrate below, despite the US dollar’s dominance in world trade, the euro dominates short-term exchange rate pass-through due to the invoicing structure of Swiss imports. After one month, the modelled euro channel is around 3.8 times stronger than the US dollar channel, a difference that remains significant even under extensive robustness analyses. This enables us to quantify the impact of the SNB’s different policy approaches on inflation."

"We estimate the inflationary effect of the franc’s depreciation at 0.18 percentage points after 12 months. This is also relevant given that, in May, we demonstrated just how vulnerable Swiss industry is relative to its competitors in the event of an energy price shock. If the inflationary exchange rate effect is smaller than usually assumed in this case, the situation for industry will be somewhat less severe."

"Compared with 2022, however, the difference is greater. The strength of the Swiss franc at that time reduced inflation by roughly 0.22 percentage points after 12 months. Had the SNB acted this year as it did four years ago, the overall price increase thus would have been 0.4 percentage points lower."

"As our model suggests that imported inflationary pressure is moderate, the interest rate differential between the euro area and Switzerland is likely to persist for some time. EUR/CHF should benefit from this in the medium term. For investors who share this view, the options market currently offers attractive entry points as it provides exposure to the expected exchange-rate move while avoiding the financing costs associated with the interest-rate differential embedded in spot positions."

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

The US Dollar (USD) stands at a critical juncture as financial markets prepare for the Federal Open Market Committee's (FOMC) upcoming interest rate announcement. Following a volatile month marked by sharp swings in crude Oil prices and mixed economic indicators, US Dollar bulls have accumulated substantial long positions in anticipation of a hawkish stance by Federal Reserve Chairman Kevin Warsh. However, softer recent macroeconomic data—including cooling consumer confidence and weaker labor additions—has sparked a sharp debate among institutional strategists over whether the greenback's premium is sustainable or if overextended long positions are vulnerable to a dovish repricing.

Institutional Analysis: MUFG vs. DBS Bank

To examine how leading strategists view positioning ahead of the central bank's decision, we outline the primary contrasts between MUFG and DBS Bank:

• Baseline Policy Expectation: MUFG expects a "hawkish hold," with benchmark rates remaining unchanged while official commentary emphasizes elevated inflation risks. DBS Bank notes that US Dollar bulls have built heavy positions on expectations of a surprise rate hike, creating asymmetric downside if the Fed delivers a quieter pause.
• Economic Assessment: MUFG acknowledges softer US economic releases—such as July consumer confidence falling to 90.8 and ADP weekly employment additions cooling to 15,000—but contends high inflation risks will keep policy restrictive. DBS Bank highlights that slowing growth models and pulling-back Treasury yields suggest markets may have overpriced hawkishness by relying too heavily on volatile energy price swings.
• Market Positioning & FX Impact: MUFG maintains that a high-for-longer policy narrative will keep US yields and the US Dollar supported, pressuring broader Asian currencies (particularly SGD, KRW, and MYR). DBS Bank warns that stretched long USD positions face liquidation risks if the Fed refrains from signaling explicit tightening for September.

Elevated inflation risks to maintain yield support and US Dollar resilience

According to Lloyd Chan at MUFG, the FOMC is set to deliver a hawkish hold that keeps the US Dollar anchored near recent highs. Despite recent softer data prints—such as US 2-year and 10-year yields easing around 4 bps and July market pricing reflecting roughly a 34% chance of a 25 bps rate hike—the broader balance of risks remains tilted toward US Dollar strength. Chan emphasizes that as long as Chair Warsh reiterates that inflation risks remain elevated, US yields will remain supported, maintaining pressure across Asian foreign exchange markets.

"Our base case is for a hawkish hold, with the Fed likely to keep rates unchanged and emphasized that inflation risks remain high. This could keep US yields and the dollar supported, in turn weighing on Asia FX broadly."

Overextended USD longs face liquidation if the Fed refrains from hawkish surprise

Taking a more cautious stance on greenback momentum, Philip Wee at DBS Bank warns that speculators holding heavy long USD positions may be exposed to downside risks. Driven by Brent crude's rally from $70 to $100 earlier in July, investors piled into the US Dollar on bets that Chairman Warsh would deliver a surprise rate hike. However, with Oil prices retracing and US economic growth models cooling, a quiet or neutral hold from the Fed could force traders to unwind those aggressive bullish bets.

"The sceptics believe that these USD bulls have overpriced such hawkishness, banking too much on volatile energy prices rather than data... Hence, there is a risk that speculators may have to lighten their long USD positions if today’s FOMC meeting does not turn out hawkish enough to prompt a surprise hike today or to support a tightening in September."

Based on the combined insights of both financial institutions, the banks present a high-stakes environment where market expectations for the Federal Reserve are tightly wound. MUFG maintains a baseline forecast of US Dollar resilience, projecting that a hawkish pause and persistent inflation warnings will keep bond yields firm and maintain broad pressure on regional peers. Conversely, DBS Bank cautions that because market pricing has heavily leaned on hawkish energy-driven narratives rather than deteriorating economic data, any failure by the FOMC to explicitly endorse near-term policy tightening could trigger a sharp unwind of long USD positions.

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

Societe Generale analyst highlight that AUD/USD is offered below 0.6950 after softer June Consumer Price Index (CPI), with markets scaling back expectations for an RBA hike. Technically, the pair has defended the March trough and 200-DMA near 0.6900, with resistance at 0.7025 and higher projection targets if that level breaks, while a sequence of lower highs keeps the bias cautious.

CPI miss and technical supports

"Spot offered below 0.6950 on June CPI."

"Sequence of lower highs since May is bearish. Inflation undershoot cements case for RBA status quo. Dec-26 OIS implied odds drop to 50%"

"AUD/USD defended both the March trough and the 200-DMA (now around 0.6900) resulting in a brief rebound."

"Notably, the decline in November 2025 also found support near this moving average."

"The recent pivot high at 0.7025 represents the first resistance. A break above this hurdle could signal an extension of uptrend."

"The next objectives could be located at the projections of 0.7090/0.7110 and 0.7200. The 200-DMA near 0.6900 is an important support."

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

• The Indian Rupee corrects against the US Dollar after rising for three straight trading days.
• Oil prices bounce back strongly on revival of geopolitical risks.
• Investors await the Fed’s policy announcement, which is scheduled at 18:00 GMT.

The Indian Rupee (INR) trades marginally lower against the US Dollar (USD) on Wednesday after a three-day winning streak. The USD/INR pair rebounds to near 95.85, the intraday high, as oil prices have rebounded strongly due to revived geopolitical risks.

In India's late trading hours, the MCX Crude Oil contract expiring on August 19 is up 5% at around Rs. 7,990, snapping a three-day losing streak.

A sharp recovery in oil prices bodes poorly for the Indian currency, given that India covers 85% of its energy needs from imports. Higher oil prices increase foreign outflows from reserves.

US-Saudi forces jointly attack Iran-aligned military

Late Tuesday, the United States (US) Central Command (CENTCOM) and Saudi Arabia, in a joint operation, reported carrying out precision strikes in Iraq targeting Iran-backed groups for planning attacks on US forces and Saudi oil facilities in the Eastern Province and Riyadh regions, AlJazeera reported.

The exchange of attacks in the Middle East has renewed fears of a prolonged closure of the Strait of Hormuz, which is a vital passage for almost 20% of global energy supply.

Meanwhile, the announcement from the Iranian Islamic Revolutionary Guard Corps (IRGC) that three oil tankers were 'struck and stopped' a few hours ago after ignoring warnings in the Hormuz indicates that energy transport from the passage remains shut, a scenario that will keep global oil supply squeezed.

Fed’s monetary policy decision awaited

The major event of the week will be the Federal Reserve’s (Fed) monetary policy decision, which will be announced at 18:00 GMT. The CME FedWatch tool shows that traders see a 69.5% chance that the Fed, will leave interest rates unchanged in the range of 3.50%-3.75%. This will be the fifth straight policy meeting when the Fed will maintain the status quo.

Financial markets should not expect monetary policy guidance from the as Chairman Kevin Warsh explicitly said in the previous meeting that “so-called forward guidance is not well-suited in the current policy juncture”.

Ahead of the Fed’s policy announcement, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.13% lower to near 101.25.

Bloodbath in KOSPI – Boon for Indian markets

Plummeting KOSPI stock markets due to nosediving shares of memory-chip manufacturer giant SK Hynix could turn out to be a boon for Indian equity markets in the near term. The Indian stock market underperformed in the last year as global investors diverted their funds to equity markets in South Korea and Taiwan to play the Artificial Intelligence (AI) and semiconductors theme.

The significant plunge in South Korean markets is expected to force global investors to return to the Indian stock market, a scenario that will boost foreign inflows and hence strengthen the Indian currency.

Technical Analysis: USD/INR faces pressure near 20-day EMA

USD/INR trades higher at around 95.70 at press time, but is keeping a mild bearish near-term bias as it holds just under the 20-day Exponential Moving Average (EMA) at 95.8921.

The pair has slipped back below this short-term average after recent gains, suggesting rallies are being capped by nearby overhead supply, while the Relative Strength Index (14) near 50 hints at fading momentum rather than a decisive directional push.

On the topside, immediate resistance is aligned with the 20-day EMA around 95.89, and a sustained break above this barrier would be needed to resume the journey toward the all-time high at 97.10. Looking down, Tuesday's low at 95.51 is the key support zone, followed by 95.00.

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

• Gold holds above $4,000 as traders await the Federal Reserve's interest rate decision.
• Renewed attacks in the Middle East lift Oil prices, keeping inflation concerns in focus.
• The technical picture remains bearish, with XAU/USD holding below its 21-day, 50-day and 100-day SMAs.

Gold (XAU/USD) consolidates above $4,000 on Wednesday, as price action remains choppy amid growing caution ahead of the Federal Reserve’s (Fed) monetary policy announcement, while the war in the Middle East intensifies again after a brief lull.

Iran’s Islamic Revolutionary Guard Corps (IRGC) launched missiles at a US base in Jordan. Separately, the US Central Command (CENTCOM) said it carried out precision strikes in coordination with Saudi Arabia against Iran-backed groups in Iraq planning attacks on US forces and Saudi Oil facilities.

Oil prices reversed course following the latest attacks, snapping a three-day sell-off. West Texas Intermediate (WTI) trades around $82, up more than 4.50% on the day.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.40, supported by Fed rate-hike expectations and tensions in the Middle East.

The Fed will announce its interest-rate decision at 18:00 GMT, followed by Chair Kevin Warsh’s press conference at 18:30 GMT.

The US central bank is widely expected to leave interest rates unchanged within the 3.50%-3.75% range. However, a rate hike cannot be ruled out amid heightened energy-driven inflation risks.

According to the CME FedWatch Tool, traders price in around a 31% chance of a 25-basis-point increase (bps). Higher borrowing costs typically reduce demand for Gold by increasing the appeal of interest-bearing assets.

Even if the Fed keeps rates unchanged, Gold may struggle to stage a recovery as policymakers are expected to maintain a hawkish stance while assessing the inflationary impact of elevated Oil prices. If the Fed signals that a rate hike could come in the next few months, XAU/USD could face renewed selling pressure.

Technical analysis: sellers retain control below key daily SMAs

From a technical perspective, XAU/USD maintains a bearish bias as it trades below the 21-day, 50-day, 100-day and 200-day Simple Moving Averages (SMAs).

The Relative Strength Index (RSI) on the daily chart is near 44 and remains below the neutral 50 level, while the shrinking green bars on the Moving Average Convergence Divergence (MACD) histogram suggest that sellers retain control.

On the topside, initial resistance is seen at the 21-day SMA around $4,070, followed by the 50-day SMA near $4,202. Further up, the 100-day and 200-day SMAs at $4,446 and $4,490, respectively, form a key resistance zone.

On the downside, immediate support is located at the psychological $4,000 mark, with a break below this level exposing the next structural support around $3,850.

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

• EUR/USD remains capped below 1.1400, with the YTD low of 1.1324 at a short distance.
• The Fed is expected to leave rates on hold and leave the door open for a hike in September.
• The technical picture shows the pair consolidating losses within a broader bearish trend.

The Euro (EUR) holds marginal gains against the US Dollar on Wednesday after finding some support in the mid-range of the 1.1300s earlier this week but remains unable to find acceptance above 1.1400. This leaves the EUR/USD pair vulnerable to further decline below the year-to-date low, at 1.1324, if a hawkish Federal Reserve (Fed) provides an additional boost to the US Dollar.

The Fed is expected to leave its benchmark interest rate on hold, although markets are pricing a 35% chance of a quarter-point hike later in the day. A surprise tightening move is highly likely to send the US Dollar rallying, but a hawkish pause, the most likely scenario, might also provide support for the USD as it will cement hopes of a September hike.

In Europe, European Central Bank (ECB) council member and Cyprus Central Bank Governor Christodoulos Patsalides reiterated that higher Oil prices are boosting inflation risks, but he refused to give any hint about September’s monetary policy decision. The Euro showed no reaction to the comments.

Technical Analysis: Consolidating losses amid a bearish trend

EUR/USD trades around 1.1390, wavering in the lower range of July's trading channel and unable to put any significant distance from the 13-month low of 1.1324. Momentum indicators hint at a neutral-to-slightly-capped near-term bias with the Relative Strength Index (RSI) below the midline, and the Moving Average Convergence Divergence (MACD) edging marginally above zero, highlighting subdued bullish conviction.

On the topside, above 1.1400, bulls are likely to be challenged at 1.1440 (July 23 highs) ahead of the top of the last six weeks' trading range, at the 1.1480 area. On the downside, key support is at the mentioned 1.1324 low; further down, the next target is in the area between the 127.2% Fibonacci extension of the June 17-24 sell-off, at 1.1245, and the late May 2025 low, at 1.1210.

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

According to a Reuters report, Yemen's Houthis are considering imposing fees on commercial ships sailing through the Southern Red Sea. The report also shows that Houthis might exempt China's shipping fleet from any fee system.

This came after Houthis declared a maritime embargo on Saudi Arabia and closed the Bab el-Mandeb gateway, a passage to almost 7% of the global energy supply, located in the Southern Red Sea.

Market reaction

A significant increase in oil prices is seen following the news release. At press time, the WTI Oil price trades near its intraday high at around $82.20.

• EUR/GBP remains steady above 0.8550 with four-week highs of 0.8574 at hand.
• Rising concerns about Burnham's welfare reform and a dovish BoE are weighing on the Pound.
• The pair is on a bullish channel with the next targets at 0.8575 and the 0.8600 area.

The Euro (EUR) is nursing moderate losses against the British Pound (GBP) on Wednesday, as bulls failed to find acceptance above the 0.8575 resistance area on Tuesday. The pair, however, remains within the upper range of the 0.8500s with the near-term bullish bias intact, and the focus shifting towards the Bank of England’s (BoE) monetary policy meeting, due on Thursday.

Rabobank’s FX strategists warn that the Pound could come under pressure as markets reassess the UK policy outlook. They argue that “the potential for disappointment over a lack of rate rises from the Bank this year, coupled with the likelihood of political friction over budget cuts,” may turn market sentiment less supportive for sterling.

Technical Analysis: Bulls target 0.8575 and the 0.8600 area

EUR/GBP trades at 0.8566, hovering in the upper half of a bullish channel. Momentum indicators are in positive territory, with the Relative Strength Index (14) around 64, after pulling back from overbought levels, and the Moving Average Convergence Divergence (MACD) histogram at slightly positive levels, hinting that upside pressure is still intact.

Immediate resistance is in the area between the mentioned 0.8575 area (July 2, 3, and 29 highs) and the channel cap, now around 0.8580. Above these levels, the next target is the late-June lows, around 0.8605.

On the downside, first support emerges at the 0.8550 area where Tuesday's lows meet the channel base. Below here, the July 23 low, near 0.8530, and July 17 and 20 highs in the 0.8510-0.8515 area are expected to challenge bears.

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

(This story was corrected at 11:20 GMT to correct the first bullet point, writing EUR/GBP and not EUR/USD as previously reported.)

UOB Global Economics & Markets Research notes that the Federal Reserve is widely expected to keep the Federal Funds Target Rate at 3.50%-3.75% at the July FOMC meeting. The bank’s base case is for an extended pause through 2026, with easing only resuming in 2Q and 4Q 2027 as transitory inflation pressures subside. However, it highlights rising risks of further rate hikes given oil and geopolitical developments.

Fed seen on prolonged policy pause

"In line with Bloomberg consensus expectations, the Fed is widely expected to keep the Federal Funds Target Rate (FFTR) unchanged at 3.50%-3.75% at its July meeting."

"With the FOMC remaining divided and ongoing policy reviews being conducted by five task forces, our base case continues to be an extended pause through 2026, before the Fed resumes its easing cycle in 2Q and 4Q 2027 as transitory inflation pressures subside."

"That said, the risk of further rate hikes has increased, with upcoming inflation data and geopolitical developments likely to play a key role in shaping policy expectations."

"OIS swaps continue to price in roughly a one-third probability of a 25bp rate hike at the July 29 FOMC meeting."

"Meanwhile, rates on contracts expiring next year declined by approximately 5bps, reflecting reduced expectations for more than two rate hikes over that period."

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