Forex News

ABN AMRO’s research examines how evolving Federal Reserve policy and Eurozone fundamentals may shape EUR/USD over the coming quarters. The authors describe a gradual convergence in growth and inflation between the US and Euro area and argue this should support a higher EUR/USD level over time, while highlighting risks from divergent central bank paths and global risk sentiment.

Euro Dollar pair and convergence

"We expect EUR/USD to trend higher over the coming year as interest rate differentials narrow and markets price out some of the exceptionalism that has supported the Dollar in recent quarters."

"In our view, a gradual normalisation of US growth relative to the Eurozone, combined with a Fed that is closer to the end of its tightening cycle than the ECB, should provide a constructive backdrop for the Euro."

"If the Fed is forced to maintain a more restrictive stance for longer, while the ECB proceeds with its own easing plans, the upside for EUR/USD could be more limited than in our baseline."

"Our central forecast is for EUR/USD to move towards levels that are more consistent with medium-term fundamentals, but we acknowledge that short-term volatility driven by data surprises and shifts in risk sentiment could be significant."

"Downside risks to our EUR/USD view include a renewed deterioration in Eurozone growth prospects, a resurgence of fragmentation concerns, or a scenario in which US growth remains persistently stronger than we currently project."

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

• The US Federal Reserve is expected to leave the policy rate unchanged for the fourth consecutive meeting in June. 
• The revised Summary of Economic Projections will provide key clues on potential rate hikes.
• All eyes will be on the new Fed Chair Kevin Warsh’s comments.

The United States (US) Federal Reserve (Fed) announces its interest rate decision on Wednesday, another pivotal meeting for markets to gauge the stance of policymakers and new Chair Kevin Warsh as energy prices retreat after the United States and Iran reached a framework deal to reopen the Strait of Hormuz.

Markets widely expect the Federal Open Market Committee (FOMC) to keep interest rates unchanged in the range of 3.5%-3.75% for the fourth consecutive meeting in June.  

As this decision is fully priced in, the revised Summary of Economic Projections (SEP) and Fed Chair Warsh’s comments in his first post-meeting press conference will grab all the attention as they could offer key clues on the policy outlook and thus drive the US Dollar’s (USD) performance. 

Despite the recent decline in crude Oil prices, markets still see a relatively strong probability of the Fed tightening the policy later in the year. According to the CME FedWatch Tool, investors are currently pricing in about a 58% probability that the Fed will raise the interest rate by 25 basis points (bps) at least once by end-2026. 

After fluctuating at around $65 per barrel before the US and Israel launched a joint attack on Iran on February 28, the West Texas Intermediate (WTI) rose to its highest level since June 2022 above $110 by mid-March. Since the first temporary ceasefire agreement between the US and Iran was announced in early April, Oil prices corrected lower but remained elevated relative to pre-war levels. With the latest deal finally paving the way for the reopening the Strait of Hormuz, WTI declined further and broke below $80. 

Policymakers will take this development into account when penciling down their macroeconomic projections and interest rate expectations. 

Previewing the Federal Open Market Committee (FOMC) meeting, “the policy rate will remain unchanged with likely hawkish changes in communications,” said TD Securities analysts.

“The easing bias will be dropped with hawkish adjustments to the SEP and dot plot. The uncertainty lies in new Fed Chair Warsh's press conference. A strong pushback from Warsh is unlikely as that would damage his credibility and effectiveness towards his long-term, reform-minded agenda,” they added.

When will the Fed announce its interest rate decision and how could it affect EUR/USD?

The Fed is scheduled to announce its interest rate decision and publish the monetary policy statement, alongside the SEP at 18:00 GMT. This will be followed by Fed Chair Kevin Warsh’s press conference starting at 18:30 GMT. 

The latest SEP published in March showed that policymakers’ median projection pointed to a 25 basis points (bps) cut this year, unchanged from the SEP published in December 2025. It won’t be a surprise if there are hawkish revisions in the SEP given the changes in the macroeconomic backdrop.

Nevertheless, the market positioning suggests that the USD has room on the upside if the document shows that a majority of policymakers project at least one rate hike by the end of the year. In this scenario, market participants could continue to price in a rate hike and fuel another leg higher in US Treasury bond yields and the USD, causing EUR/USD to stretch lower.

Conversely, the USD could come under pressure if the SEP shows that a majority of policymakers expect to keep the policy rate unchanged for the rest of the year. Although this would still be a hawkish revision when compared to the March SEP, it would still be a less hawkish outlook than what markets are currently expecting. In this case, EUR/USD could gather recovery momentum.  

Comments from Warsh in the post-meeting press conference could also drive the USD’s valuation. If Warsh pushes back market expectations for a rate hike and adopts an optimistic tone about the inflation outlook, now that Oil prices are coming back down, the USD could struggle to find demand. In the less likely scenario, Warsh could acknowledge strong labor market data and refrain from delivering a dovish message. 

ING strategists Francesco Pesole, Chris Turner and Frantisek Taborsky note that the US Dollar (USD) is supported by strong US data and Fed expectations despite sharply lower Oil prices. 

"The Dollar can stay resilient, but needs a nod from policymakers (especially from new Chair Kevin Warsh) that rate hikes are a real possibility,” they add. “This keeps questions around the durability of the oil sell-off open, and FX markets are, for now, reluctant to fully price in that optimism.”

In summary, the USD’s valuation, and EUR/USD’s performance, will depend on how convinced Fed policymakers are of a quick return to disinflation. Unless there is a clear message, either within the SEP or from Chair Warsh, that policy-tightening is no longer the preferred path forward, any weakening in the USD could remain short-lived. 

Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short-term technical outlook for EUR/USD:

“The technical outlook is yet to point to a bullish reversal. On the daily chart, the Relative Strength Index (RSI) recovered but is yet to make a decisive breakthrough 50. Additionally, EUR/USD remains well below the 100-day and 200-day Simple Moving Averages (SMAs).”

“On the upside, a key resistance area seems to have formed at 1.1655-1.1675, where the Fibonacci 38.2% retracement of the February-April downtrend, the 100-day SMA and the 200-day SMA converge. In case EUR/USD manages to clear this area, it could face an interim resistance at 1.1730 (Fibonacci 50% retracement) ahead of 1.1800 (Fibonacci 61.8% retracement).”

“Looking south, the first support level could be spotted at 1.1560 (Fibonacci 23.6% retracement) before 1.1500 (static level, round level) and 1.1410 (March 13 low).”

Warsh, at the helm of a hawkish-leaning Fed

New Fed Chair Warsh inherits a committee that consists of mostly hawkish voting and non-voting members. Dallas Fed President Lorie Logan, Cleveland Fed President Beth Hammack and Minneapolis Fed President Neel Kashkari stand out as the most hawkish voters, according to the FXStreet Speechtracker scores.

In a speech on May 27, Kashkari scored 7.4/10 on the FXS Speechtracker, modestly above the 7/10 historical average and thus slightly more hawkish relative to the established baseline. The speech leaned clearly toward vigilance on inflation as he stressed that the risk to the US inflation now outweighs the risk of labour-market deterioration. Kashkari also noted that most post-April data point to higher inflationary risks and that a Middle East war shock could keep global price pressures elevated. 

Fed’s Logan delivered a distinctly more hawkish tone on June 3, with an FXS Speechtracker score of 8.2/10. The remark that “inflation is trending toward the mid-2s, not all the way to 2%” and that trimmed-mean inflation is “not currently a reliable signal,” alongside comments that financial conditions are accommodative, the labor market is stable, and corporate earnings are “going gangbusters,” underscored concern that inflation is taking too long to return to target. By stressing that monetary policy is not restraining the economy and expressing increasing concern that higher interest rates could be necessary later this year, the speech pushed the policy narrative further into hawkish territory.

If Warsh intends to convince policymakers of the need for policy-easing, he will have an uphill battle. Some of the more neutral members, such as New York Fed President John Williams and Fed Governor Jerome Powell, could be inclined toward holding settings steady but they are unlikely to support rate cuts until there is convincing evidence that inflation is moving back toward the target, or there is a persistent and clear deterioration in labor market conditions.

• UK inflation misses forecasts, forcing traders to trim BoE hike bets.
• US Retail Sales beat estimates, reinforcing the consumer resilience narrative.
• Fed dot plot and Warsh press conference to drive the next move.

The Pound Sterling (GBP) retreats towards 1.3400 against the US Dollar (USD) on Wednesday following the latest UK inflation report, forcing investors to reassess hawkish bets on the Bank of England (BoE), while solid US Retail Sales boost the Greenback ahead of the Federal Reserve (Fed) decision. The GBP/USD pair trades with losses of over 0.22%.

GBP/USD retreats as strong US sales revive Dollar momentum

Sentiment remains neutral, as US equity markets fluctuate between gains and losses, with traders awaiting the Federal Reserve’s monetary policy meeting. The US central bank is expected to hold rates unchanged and update its economic projections and the path of interest rates in the Summary of Economic Projections (SEP). After this, the new Fed Chair, Kevin Warsh, will hit the stand at his first press conference leading the Fed.

So far, traders have priced in a nearly 20% chance that the Federal Reserve would raise interest rates towards the end of 2026, according to Prime Terminal data.

In the meantime, US Retail Sales in May expanded by 0.9% MoM, exceeding estimates of a 0.5% increase, according to the US Census Bureau. Digging into the report, gas stations rose 3.4%, lifting the headline figure as gasoline prices jumped due to the Iran war. The data showed consumers' resilience, with 11 of 13 categories posting increases.

Across the pond, UK inflation steadied at 2.8% YoY in May, unchanged from April’s, below economists' estimates for a 3% jump. Speculation that the Bank of England would raise rates was trimmed. A week ago, the BoE was expected to tighten policy by 50 basis points (bps), but at the time of writing, money markets are pricing in a 30-bps tightening.

Ahead, traders eye the Fed’s policy decision and Kevin Warsh's press conference. In the UK, investors are waiting for the release of economic growth figures.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3397, keeping a soft tone as it hovers below a cluster of overhead levels. The pair is capped by the simple moving average around 1.3475 and trades beneath both the reclaimed upward trend-line break at 1.3432 and the broader downward resistance trend line coming in near 1.3551, suggesting rallies remain vulnerable. The Relative Strength Index (14) around the mid‑40s hints at fading momentum, reinforcing a cautious, mildly bearish bias while price holds under these reference levels.

On the topside, initial resistance is seen at the former upward support trendline break around 1.3432, with the simple moving average near 1.3475 forming the next hurdle and the downward resistance trendline at approximately 1.3551 acting as a more distant cap. With no clear structural support levels printed below the market in this dataset, any break under 1.3397 would leave the pair exposed to fresh downside exploration, keeping focus on how price reacts to the nearby resistance band overhead.

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

• AUD/USD trades with a neutral tone as improved risk sentiment supports the Australian Dollar.
• Trump’s comments on Iran and the Strait of Hormuz helped ease market concerns.
• Investors await the first Fed decision under Kevin Warsh, with rates expected to remain unchanged.

The AUD/USD pair trades near 0.7070 with a neutral tone on Wednesday, as the Australian Dollar (AUD) benefits from improved risk sentiment following the latest developments in the US-Iran conflict.

Market mood improved partially after United States (US) President Donald Trump defended the ceasefire framework with Iran, saying the Strait of Hormuz had reopened but warning that bombing could resume if Tehran “acts up.”

Shipping data showed that several Iranian oil tankers had passed through the Strait of Hormuz following the US-Iran framework deal, adding to expectations that Middle East supply could return to the market. The prospect of lower energy prices supported risk-sensitive currencies such as the Aussie, although uncertainty remains high.

Meanwhile, investors remain cautious ahead of the Federal Reserve’s (Fed) June policy decision. The first Fed meeting led by Kevin Warsh is expected to end with interest rates unchanged in the 3.50%-3.75% range as policymakers continue to balance easing Oil-related inflation against still-elevated headline inflation and solid US economic activity.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.7070. The pair holds a mild bullish bias, trading above the 20-period Simple Moving Average (SMA) at 0.7064 but capped by the 100-period SMA at 0.7101. The Relative Strength Index (RSI) around 55 hints at steady, rather than impulsive, upside momentum as price grinds higher within a tight range.

On the topside, immediate resistance emerges at the temporary range high around 0.7074, with the 100-period SMA at 0.7101 acting as the next key hurdle if buyers extend the move. On the downside, initial support is seen at 0.7065, reinforced by the clustering of the 20-period SMA at 0.7064 and additional horizontal levels at 0.7058 and 0.7054, where a break would expose a deeper corrective pullback.

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

• The New Zealand Dollar loses ground against the US Dollar ahead of the Federal Reserve’s monetary policy decision.
• Investors await updated economic projections and comments from Kevin Warsh at his first meeting as central bank chair.
• New Zealand consumer confidence falls to its lowest level since 2023 as traders look ahead to first-quarter GDP data.

NZD/USD trades around 0.5820 on Wednesday at the time of writing, down 0.24% on the day as investors reduce risk exposure ahead of the Federal Reserve (Fed) monetary policy announcement.

Markets widely expect the central bank to keep its benchmark interest rate unchanged within the 3.5%-3.75% range, delaying any policy adjustment until a later date. Attention is now focused on the Fed’s updated economic projections and comments from Fed Chair Kevin Warsh, whose first post-meeting press conference could provide important clues about the future path of interest rates.

This cautious stance supports the US Dollar (USD) in the short term and weighs on risk-sensitive currencies, including the New Zealand Dollar (NZD). However, Kiwi losses remain limited as improving geopolitical sentiment continues to reduce demand for traditional safe-haven assets. Investors are closely monitoring developments surrounding negotiations between the United States (US) and Iran after recent comments suggested progress toward a peace agreement.

In New Zealand, data released on Wednesday delivered mixed signals. The first-quarter current account deficit stood at NZ$1.01B, compared with NZ$0.71B a year earlier, while coming in slightly better than market expectations. Meanwhile, the Westpac McDermott Miller Consumer Confidence Index dropped to 80.4 in the second quarter, its lowest level since 2023, as households faced higher living and energy costs.

Despite this softer economic backdrop, the Reserve Bank of New Zealand (RBNZ) maintains a relatively hawkish stance. The central bank recently signaled the possibility of a 25-basis-point rate increase at its July 8 meeting, while its projections suggest the Official Cash Rate could reach around 2.85% by year-end, a factor that continues to provide some support for the New Zealand Dollar.

Traders now turn their attention to New Zealand’s first-quarter Gross Domestic Product (GDP) release, as well as the Fed’s policy decision later on Wednesday, with both events likely to shape the next directional move in NZD/USD.