Forex News

Commerzbank’s Michael Pfister expects EUR/CHF to rise in coming months as the Euro (EUR) recovers and markets push back Swiss National Bank (SNB) rate hikes, with the bank’s strategy combining verbal intervention and steady rates. However, lower Swiss inflation and stronger public finances should reassert Swiss Franc strength later, with EUR/CHF projected to trend lower again into 2027.

SNB tactics support near-term EUR/CHF

"In early March, it seemed that the SNB had lost patience with the strength of the Swiss franc. It intervened verbally several times, thereby halting the currency’s appreciation in the short term. EUR/CHF is likely to rise further over the next few months if the euro recovers and the SNB interest rate hikes expected by the market are delayed."

"In this regard, SNB market expectations currently offer an alternative. Market expectations of rate hikes have moved forward significantly since the outbreak of the Iran war; roughly one rate hike is currently priced in by the end of the year. In our view, however, a rate hike this year is highly unlikely."

"Amid the ECB rate hike we expect in June, we anticipate that interest rates will remain unchanged, which is likely to widen the interest rate differential with the euro and make the franc less attractive."

"We expect the SNB's strategy in the coming months to consist of a combination of verbal (but only small actual) interventions and unchanged interest rates. This may be enough to push EUR/CHF up by a further two centimes once the recent weakness of the euro has been priced out of the market."

"In the long term, however, the SNB is unlikely to be able to weaken the franc sufficiently through interventions or changes to the key interest rate alone. Inflation is likely to remain lower than in other countries, while public finances are likely to look considerably healthier. If this comes back into focus at the end of the year, EUR/CHF is likely to trend lower again."

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

In an interview with Fox News on Monday, US Treasury Secretary Scott Bessent said that the US is opening up the Strait of Hormuz and added that they have "absolute control" of it, per Reuters.

Key takeaways

"Iranians do not have control of the strait."

"US is firing only when fired upon."

"Now would be good time for international partners to step up pressure on Iran."

"I think market will be very well supplied."

"Aware gas prices affecting Americans but expecting prices to come down quickly when conflict ends."

Market reaction

The US Dollar (USD) Index showed no immediate reaction to these comments and was last seen rising 0.12% on the day at 98.32.

BNY’s Bob Savage highlights comments from Reserve Bank of New Zealand (RBNZ) policy member Prasanna Gai, who argues the Strait of Hormuz supply shock does not warrant automatic rate hikes. He favors a conventional look-through approach, noting pre-emptive tightening requires conditions not currently met. Gai concedes the neutral rate has risen, but his stance remains dovish against a backdrop of a fragile New Zealand economy and prior aggressive cuts.

Dovish RBNZ rhetoric supports Kiwi rates

"RBNZ policy member Prasanna Gai has stated that the Strait of Hormuz supply shock does not justify automatic rate hikes, advocating a conventional look-through approach to supply shocks."

"He emphasized that pre-emptive tightening is only warranted when economic synchronization is high and coordination mechanisms are active, and that these conditions are not currently met."

"However, Gai acknowledged that the shock has raised the neutral interest rate, implying a higher baseline for future policy normalization."

"His dovish stance contrasts with hawkish signals from other central banks, reflecting New Zealand’s fragile economy and prior aggressive rate cuts throughout 2025."

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

BNP Paribas economists expect the United States (US) economy to grow above potential in 2026, with Gross Domestic Product (GDP) at 2.4% and inflation at 3.3%, while the Fed Funds target range is seen steady at 3.5%-3.75%. They project a gradual US Dollar (USD) depreciation against the Euro (EUR), with EUR/USD forecast at 1.21 by Q4 2026 and 1.25 by Q4 2027.

Gradual depreciation path versus Euro

"The US economy is expected to grow above its potential in 2026, with an average annual growth rate of 2.4%, a yearly improvement (up from 2.1% in 2025)."

"Inflation overshooting is set to continue (3.3% in 2026) at least through 2028, largely because of the rise in oil prices and tariffs – although the impact of these appears to be less significant than expected."

"We expect the Fed Funds target range to remain steady at 3.5% - 3.75%, with a FOMC shifting to a ‘two-sided outlook’, signaling equal readiness to implement rate hikes or cuts if warranted."

"In our base-case scenario (gradual normalisation of the Middle East situation with persistent price tensions), we expect the USD depreciation against the EUR to resume, albeit very gradually, amid broader diversification away from the dollar."

"We forecast EUR/USD to reach 1.21 by Q4 2026 and 1.25 by Q4 2027."

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

TD Securities’ Robert Both and Emma Lawrence expect the Bank of Canada (BoC) to keep the Overnight Rate at 2.25% through 2026, before lifting it back to a 2.75% neutral level in early 2027. Strategists argue higher Oil prices from US–Iran tensions are an inflation shock, but believe well-anchored expectations and muted core momentum allow policymakers to look through stronger headline CPI.

Inflation shock but patient stance

"Wednesday's Bank of Canada decision delivered a slightly dovish tone in the policy statement, with the Bank warning that deteriorating trade conditions could force it to cut rates further, while an escalation of geopolitical risks could produce "consecutive increases"; markets latched onto the hawkish elements as the front-end repriced for more aggressive hikes."

"We look for the Bank of Canada to stay on hold at 2.25% through 2026 before a return to neutral (2.75%) next year, with 25bp hikes in January and March."

"Higher oil prices resulting from US strikes on Iranian and subsequent threats to global crude supply have introduced a material shock for inflation, but we believe the Bank can remain patient as it waits for more clarity on the geopolitical outlook and spillovers to domestic CPI."

"We look for inflation to peak ~3% in Q2, which is above BoC projections in the April MPR, but the combination of well anchored expectations, lower inflation breadth, and muted core inflation momentum leave the Bank well positioned to look through stronger headline CPI."

"Note, we changed our BoC call this past week where we now look for two hikes to 2.75% (previously three) in the beginning of 2027."

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

Societe Generale economists note that firm and consumer confidence fell more than expected in April, with Commission indices at multi‑year lows. Despite slightly positive 1Q Gross Domestic Product (GDP), domestic demand appears subdued and credit conditions are tightening. They see healthy balance sheets and AI (Artificial intelligence), energy and defence investment as potential buffers against a sharper slowdown.

Confidence slumps as credit conditions tighten

"Concerning for growth is that firm and consumer confidence kept dropping more than expected in April, with the Commission’s Economic Confidence dropping to a 5-year low and consumer confidence to a 3-year low."

"However, weakening confidence was not fully reflected in the preliminary1Q GDP data, which saw the euro area GDP rise slightly less than expected, by 0.1% qoq, with growth in Germany (0.3%), Spain (0.6%) and Italy (0.2%). In France, in contrast, growth stagnated, while growth in the rest of the euro area looks to have decelerated compared with 4Q25 (with Irish GDP contracting by 2% qoq)."

"The question now is to what extent we can expect the weakening confidence to spill over into domestic demand or whether we could have more resilience in activity, as was the case in 2022. Household and corporate balance sheets remain healthy so there is a buffer to take from if needed. In addition, we believe the momentum for AI and energy investments remain positive, helped by increased defence spending and the German fiscal stimulus."

"The final PMIs should confirm the weakening momentum in April, especially in services, while retail sales in March could show another contraction, with German retail sales dropping by 2% mom."

"In Germany, factory orders, industrial production and trade data for March may point to modest growth, with the outlook weighed down by the energy price shock, while industrial production in France could see a short-lived rebound."

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

• Gold remains under pressure as hawkish interest rate expectations weigh on the non-yielding metal.
• Tensions in the Strait of Hormuz rise as US-Iran diplomatic efforts fail to produce a breakthrough.
• XAU/USD holds near the lower edge of the Bollinger Band on the 4-hour chart.

Gold (XAU/USDS) kicks off the week under pressure, hovering near one-month lows as hawkish interest rate expectations continue to weigh on the non-yielding metal amid ongoing tensions in the Middle East. At the time of writing, XAU/USD is trading around $4,560, down nearly 1.10% on the day.

Strait of Hormuz tensions keep markets on edge

Market sentiment remains fragile amid uncertainty over the future of US-Iran peace talks, with tensions escalating. Iran’s Fars news agency reported that two missiles struck a US naval vessel near the island of Jask after it allegedly ignored warnings from the Islamic Revolutionary Guard Corps (IRGC) to halt.

The incident follows US President Donald Trump’s announcement of a naval initiative dubbed “Project Freedom,” aimed at escorting stranded commercial vessels through the Strait of Hormuz. In response, Tehran warned it would attack US forces if they attempted to approach or enter the waterway. However, a US official denied that any American vessel had been hit, according to Axios.

Meanwhile, diplomatic efforts remain stalled. Washington has rejected Iran’s revised 14-point proposal and presented a counteroffer, now under review in Tehran, with nuclear disagreements still unresolved.

Hawkish Fed bets pressure Gold

While a ceasefire appears to be holding, the conflict drags on with no clear end in sight. Ongoing supply disruptions in the Strait of Hormuz are keeping Oil prices elevated, sustaining global inflation risks.

The resulting energy shock is adding pressure on central banks, particularly the Federal Reserve (Fed), to keep borrowing costs higher for longer, or even tighten policy if inflationary pressures intensify. This is pushing US Treasury yields higher, weighing on the non-yielding metal.

The CME FedWatch Tool shows the Fed is expected to hold rates through this year, while markets are now pricing in rate hikes next year, with the probability of a January 2027 rate hike rising to 22% from near 0% a week ago.

At the same time, persistent geopolitical tensions and growing hawkish Fed expectations are supporting the US Dollar (USD), adding further pressure on dollar-denominated XAU/USD.

Looking ahead, traders will continue to monitor US-Iran developments alongside upcoming US economic data for fresh clues on the Fed’s monetary policy path, with Fed officials also scheduled to speak throughout the week.

The US economic calendar features ISM Services Purchasing Managers Index (PMI) and JOLTS Job Openings on Tuesday, followed by ADP Employment Change on Wednesday, weekly Jobless Claims on Thursday, and the Employment report on Friday, which includes Nonfarm Payrolls (NFP) data.

Technical Analysis: XAU/USD hovers near support as momentum softens

In the 4-hour chart, XAU/USD holds just above the lower Bollinger Band at $4,533, but the price remains capped beneath the 20-period Bollinger Simple Moving Average around $4,594, keeping the near-term tone bearish. The Relative Strength Index hovers near 39, pointing to weak momentum after a failed recovery attempt toward the mid-$4,600s.

On the topside, initial resistance is located at the Bollinger mid-line near $4,594, followed by the upper band around $4,655, with a more substantial barrier at the horizontal level of $4,850. On the downside, immediate support aligns with the lower Bollinger Band at $4,533, ahead of the previously drawn horizontal floor at $4,400, where buyers would be expected to show more interest if the decline extends.

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

Commerzbank’s Volkmar Baur highlights strong market conviction that the RBA will deliver a third consecutive rate hike, with futures implying a 75% probability. Inflation and expectations remain well above target and RBA rhetoric has turned more hawkish. Still, prior tightening, softer March data and a split board mean a pause surprise cannot be ruled out.

Hawkish case tempered by recent hikes

"When the Reserve Bank of Australia (RBA) convenes tomorrow morning for its third monetary policy meeting of the year, there is a good chance that a third interest rate hike will result. Only one of the 28 economists surveyed by Bloomberg expects the policy rate to remain unchanged - all others agree that the cash rate will be raised by 25 basis points. And based on futures contracts, the market also sees a roughly 75% chance of a hike."

"And there are, of course, good reasons for this. While inflation in March did not rise quite as sharply as analysts had expected on average. At 4.6% overall, however, it was well above the central bank’s target range (2-3%) and would remain significantly above it even without the energy component. Furthermore, surveys by the Melbourne Institute show that inflation expectations have recently risen to 5.9%. That’s more than 1 percentage point higher than at the start of the year."

"Second-round effects were not yet evident in the March inflation data (it would also be a bit early for that). However, the sharp rise in inflation expectations could make them more likely in the coming months. And this has not gone unnoticed by the members of the central bank."

"An analysis of recent speeches shows that, on average, they have been even slightly more hawkish in the weeks since the last rate hike than they were before."

"However, one shouldn’t be too certain. After all, the RBA has already raised rates twice, and as we know, it takes time for such a hike to have an impact on the real economy anyway."

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