Forex News

Bob Savage highlights that the OECD now sees the Middle East conflict as the main driver of the global outlook, with surging energy and input prices lifting inflation and weighing on growth. The OECD cut its 2026 global GDP forecast and outlines time-limited versus prolonged disruption scenarios, warning inflation could rise notably under a prolonged shock while urging central banks to stay vigilant.

OECD warns on energy-driven risks

"The OECD has warned that the Middle East conflict has become the main driver of the global outlook, with energy and input prices surging since February, lifting inflation while weighing on real incomes and growth."

"It cut its projected global GDP growth for 2026 to 2.8% from 3.4%, while leaving 2027 unchanged at 3.1%."

"Its outlook presents two scenarios: a time-limited disruption, where growth slows modestly before recovering, and a prolonged disruption, where higher energy prices, supply shortages, tighter financial conditions and weaker confidence would depress activity further."

"Inflation could rise by around 0.4 percentage points in 2026 and 1.3 percentage points in 2027 under the prolonged scenario."

"The OECD is urging central banks to remain vigilant where temporarily higher headline inflation resulting from the energy price shock can be looked through provided longer-term inflation expectations remain well-anchored, and says governments should keep energy relief temporary, targeted and well-designed."

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

Scotiabank’s Analyst Team highlights that Japanese Yen gains are modest as USD/JPY hovers near the key 160 level, keeping intervention risk in focus. They note that hawkish comments from BoJ Governor Ueda and market pricing for limited tightening keep attention on the June 16 decision, while technical levels remain centred on 160 resistance and support in the 156–158 post-intervention range.

Yen sensitive to intervention risk

"The JPY is up 0.1% vs. the USD while underperforming most of the G10 currencies into Thursday’s NA session. Risk remains centered on the potential for official currency management (intervention) as USD/JPY tests the psychologically important 160 level."

"Comments from BoJ Gov. Ueda have been hawkish, and media reports suggest meaningful deliberations as policymakers look to next week’s meeting and consider an additional hike before year-end."

"Markets are currently pricing 24bps for the June 16 decision and are just below 50bps by December, offering little in terms of near-term upside. For USD/JPY, we continue to highlight the importance of the 160 level, with limited additional resistance ahead of 162."

"Near-term support is expected at 159, followed by the 156-158 range that prevailed in the immediate aftermath of the government’s interventions in late April/early May."

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

ING highlights that investment funds in TTF gas remain relatively relaxed despite LNG supply disruptions in the Middle East. The bank notes that speculative accounts reduced length but still hold a sizeable net long position, which they argue leaves considerable upside risk for TTF prices if LNG flows through the Strait of Hormuz do not resume soon as currently anticipated.

Funds stay long despite disruptions

"Positioning data for TTF continues to show that investment funds have been somewhat unfazed by ongoing LNG supply disruptions in the Middle East amid optimism over a resumption of LNG flows through the Strait of Hormuz."

"Funds sold 17.9TWh in TTF last week, leaving them with a net long of 262.2TWh."

"Clearly, this leaves a fair amount of upside risk if we do not see an imminent resumption of LNG flows."

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

TD Securities expects the Bank of Canada to stay data dependent despite USMCA uncertainty. The bank sees a high bar for trade risks to alter the current path, with the next BoC hike projected for Q1 2027 while the Fed shifts toward easing. Trade outcomes are not expected to materially change the rate-hike timeline under most scenarios.

Trade risks unlikely to shift BoC path

"We look for the Bank of Canada to take a wait-and-see approach to USMCA negotiations, but see a high bar for trade uncertainty to push it off its current path. While the Bank of Canada has said it may need to cut rates further if the US were to impose new trade restrictions on Canada, we've also seen it take a more patient approach when evaluating the impact of tariffs imposed last March (after the move to 2.75%). We would expect a similar approach should USMCA negotiations deteriorate in the coming months, giving the BoC more time to assess growth impacts, any offsets from new fiscal measures, and the risk of de-escalation."

"We also see a high bar for USMCA extension to materially impact the timeline for rate hikes. Insofar as a positive outcome at the joint review is more likely to formalize the status quo than return tariffs to 2024 levels, we don't think that will have a large enough impact on the output gap to pull forward hikes into 2026, especially given recent weakness in Canadian economic data."

"We would push back against the notion that USMCA uncertainty is the only reason keeping the BoC on hold with headline CPI sitting near 3%, given the backdrop of excess supply and softer core inflation. Lastly, Canada's longer economic track record suggests that trade uncertainty is not the only factor constraining business investment. If we do not see material spillovers into core inflation from higher oil prices, we think the Bank can stay patient."

"And if higher energy prices do spillover into broader price pressures and inflation expectations drift higher, then we don't think trade uncertainty will be enough to keep the BoC on hold through 2026."

"In either case, we look for the Bank to remain data dependent over the coming months with the evolution of the output gap, core inflation, and inflation expectations driving the timeline for rate hikes."

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

• The Japanese Yen outperforms its major peers amid growing expectations for a BoJ rate hike as soon as June.
• Comments from Governor Kazuo Ueda reinforce expectations of further monetary tightening in Japan.
• Investors now await the US May Nonfarm Payrolls report for fresh clues on the future path of US monetary policy.

USD/JPY trades around 159.90 at the time of writing on Thursday, down 0.10% on the day. The pair is moving lower as the Japanese Yen (JPY) benefits from renewed demand, supported by growing expectations that the Bank of Japan (BoJ) will deliver another interest rate hike at its June policy meeting.

According to Reuters, sources familiar with the matter indicated that the central bank is leaning toward a 25-basis-point rate increase this month. These reports have strengthened market expectations, with investors now pricing in a high chance that the policy rate will be raised. Markets are also anticipating further policy adjustments over the coming quarters to address persistent inflation risks linked to Japanese Yen weakness and higher energy costs.

BoJ Governor Kazuo Ueda also maintained a distinctly hawkish tone on Wednesday. He reiterated that the institution’s fundamental stance remains to continue raising interest rates in line with economic, inflation and financial developments. This communication has reinforced expectations of a gradual but sustained normalization of Japanese monetary policy.

Analysts at BNY believe the central bank is preparing the ground for a gradual tightening cycle, while BBH argues that rate hike expectations have become a key fundamental support for the Japanese currency. At the same time, the risk of official intervention in the foreign exchange market remains elevated as USD/JPY approaches the psychologically important 160 level.

Meanwhile, market sentiment remains cautious as investors continue to monitor geopolitical developments in the Middle East. Negotiations between the United States (US) and Iran have yet to produce a concrete breakthrough, although US President Donald Trump stated that final talks are underway to end the conflict. This uncertainty is also supporting demand for safe-haven assets, including the Japanese Yen.

On the US side, the US Dollar (USD) remains under pressure. The US Dollar Index (DXY) is trading around 99.25 after weekly Initial Jobless Claims came in at 225K, above market expectations of 213K. Investors are now focused on Friday’s May Nonfarm Payrolls (NFP) report. According to consensus estimates, the US economy added 85K jobs last month, while the Unemployment Rate is expected to remain unchanged at 4.3%. These figures could influence expectations regarding the future policy path of the Federal Reserve (Fed) and are likely to be the main catalyst for the US Dollar in the near term.

• Gold gains as the Israel-Lebanon ceasefire boosts hopes for progress in US-Iran talks
• Central banks resumed buying Gold in April, according to the WGC.
• XAU/USD holds above its 200-day SMA, keeping key long-term support intact.

Gold (XAU/USD) rebounds on Wednesday as the US Dollar (USD) weakens in the wake of a ceasefire between Israel and Lebanon brokered by the United States. At the time of writing, XAU/USD is trading around $4,497, up 1.40% on the day.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is down 0.27% on the day and trading around 99.27.

The ceasefire agreement is contingent on "a complete cessation of Hizbollah (sic) fire and the evacuation of all Hizbollah operatives from the South Litani Sector," according to a joint statement issued by the United States, Lebanon and Israel.

Markets view the development as a positive step toward a broader US-Iran agreement, particularly after both sides exchanged missile and drone strikes in the Gulf region earlier this week.

The breakthrough also removes a major obstacle in the US-Iran talks. Tehran has repeatedly insisted that any agreement with Washington must include an end to hostilities in Lebanon.

Still, the lack of clarity and slow progress in the US-Iran negotiations are keeping traders cautious, limiting stronger gains in Gold. Traders remain reluctant to place aggressive bets in either direction as XAU/USD consolidates within a familiar range above long-term support provided by the 200-day Simple Moving Average (SMA).

The recent surge in Crude Oil prices has increased upside risks to inflation, fueling expectations that major central banks, including the Federal Reserve (Fed), may need to keep interest rates higher for longer or even consider further tightening.

Higher interest rates are typically negative for Gold because the metal offers no yield. Recent US employment data further reinforces the view that the US central bank can afford to keep borrowing costs unchanged.

However, weekly Initial Jobless Claims rose to 225K from 212K and came in above market expectations of 213K. The increase contrasted with stronger-than-expected JOLTS and ADP employment data released earlier this week. Friday's Nonfarm Payrolls (NFP) report will be closely watched for fresh clues on the future path of interest rates.

Meanwhile, the underlying demand for Gold remains supported by steady central bank buying. According to the World Gold Council (WGC), central banks added a net 17 tonnes of Gold to their reserves in April after recording net sales in March.

Technical Analysis: XAU/USD struggles to build momentum above 200-day SMA

On the daily chart, XAU/USD holds above the 200-day Simple Moving Average (SMA) at roughly $4,427 but well below the 100-day SMA near $4,798, which keeps the broader tone neutral to slightly bearish as rallies face overhead supply.

The Relative Strength Index (RSI) around 45 suggests subdued buying interest, while the Moving Average Convergence Divergence (MACD) remains marginally negative, hinting that bullish momentum is subdued even as price stays supported by the longer-term trendline implied by the 200-day SMA.

On the topside, initial resistance is seen at the horizontal barrier around $4,600, with the 100-day SMA at approximately $4,798 acting as a higher cap if buyers extend the recovery.

On the downside, immediate support emerges from the 200-day SMA near $4,427, ahead of more substantial structural backing at the prior horizontal support zone around $4,100.

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

RaboResearch Global Economics & Markets discusses how the Australian Dollar has been one of the best-performing G10 currencies in 2026, helped by three RBA rate hikes, but notes recent softer Australian data suggest the cycle may be near its peak. The bank expects one more RBA hike, likely in August, and sees AUD/NZD stabilizing, GBP/AUD downside over 3–6 months, AUD/USD higher over 3–12 months, and EUR/AUD range-bound.

Rabobank sees AUD still well positioned

"In view of the rate hikes announced by the RBA and the Norges Bank this year and the swiftness with which both central banks threw off their dovish guidance which had persisted into the end of last year, it is unsurprisingly that the NOK and the AUD are the best performing G10 currencies this year."

"More recently, however, the AUD has fallen back in the rankings with softer domestic economic data suggesting that the central bank’s rate hiking cycle may already be close to a peak."

"In line with the market consensus, it is Rabobank’s view that the RBA is likely to hike rates once more this year, potentially in August."

"Uncertainties about growth and inflation suggest scope for further movements in the weeks and months ahead, but from a relative basis the Australian economy and the AUD still appear well positioned."

"After a correction lower last month, AUD/NZD appears to have already found its feet."

"We also forecast a move higher in AUD/USD on a 3-to-12-month view."

"We expect range trading in EUR/AUD in the coming months."

"While GBP/AUD has remained in a tight range in recent weeks, we would look to sell rallies in anticipation of a move lower on a 3-to-6-month view."

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

Scotiabank’s Analyst Team notes the Canadian Dollar (CAD) has slipped below 1.39 against the US Dollar (USD) as weak domestic data contrast with stronger United States (US) figures, widening rate spreads in favour of the USD. They highlight CAD undervaluation versus their short-term equilibrium estimate, but stress that weak fundamentals and trade uncertainty leave CAD driven by external developments, with technicals pointing to vulnerability toward the late-March high.

CAD pressured by weak fundamentals

"Weak domestic economic data of late contrast with the obviously more robust US data run, accentuating widening US/Canada interest rate spreads that have helped drive spot higher in the past few weeks."

"The CAD’s undervaluation relative to our short-term equilibrium estimate (1.3689) is becoming a little more acute which may limit the scope for additional losses in the short run but, as we have mentioned often recently, weak domestic fundamentals and lingering trade uncertainty mean that the CAD is not master of its own destiny at the moment. External developments will remain a strong influence on price action. "

"Neutral—New lows for the CAD this morning negate in effect the USD-bearish price signals that developed on the charts last week. Intraday price signals do indicate some minor relief for the CAD potentially this morning but the USD’s push above the mid-1.38 area leaves the CAD vulnerable to a retest of the late March high at 1.3967."

"Since the start of the year, the USD has struggled to hold 1.39+ levels for more than a week or so and a swift CAD recovery has followed. Intraday support is 1.3860/70. "

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

Silver (XAG/USD) climbs more than 2% on Thursday as a ceasefire agreement between Israel and Lebanon weighs on the US Dollar (USD). At the time of writing, XAG/USD is trading around $74.80, but remains stuck within a familiar range between $72-$78 that has held since mid-May.

What's keeping Silver stuck in a range?

The metal is struggling to break out as the market awaits a clearer signal from the US-Iran talks. While the Israel-Lebanon ceasefire has improved sentiment and removed one obstacle in the diplomatic process, key issues between Washington and Tehran remain unresolved.

At the same time, the recent rise in Crude Oil prices has added to inflation concerns. That has fueled expectations that major central banks, including the Federal Reserve (Fed), may need to keep interest rates higher for longer. Higher borrowing costs tend to weigh on precious metals because they reduce the appeal of non-yielding assets.

What could trigger a breakout?

A meaningful breakthrough in the US-Iran negotiations could be the catalyst Silver has been waiting for. A deal between the two sides could lead to the reopening of the Strait of Hormuz, easing concerns over supply disruptions and potentially pushing Crude Oil prices lower. That would help reduce inflation pressures and could prompt markets to scale back expectations for higher interest rates.

On the other hand, renewed tensions or a breakdown in negotiations could boost demand for the US Dollar while driving Oil prices higher, increasing the risk of a downside break in XAG/USD.

Technical Analysis:

On the daily chart, XAG/USD keeps a bearish near-term bias as spot holds beneath the 50-day Simple Moving Average (SMA) at roughly $76.20 and well below the 100-day SMA near $80.84, while still trading comfortably above the 200-day SMA around $67.65.

The Relative Strength Index (RSI) is around 46, while the Moving Average Convergence Divergence (MACD) remains negative, which together hint that momentum still favors the downside, even as price consolidates above its longer-term trend floor.

On the topside, immediate resistance is seen at the 50-day SMA around $76.20, with a stronger barrier aligned at the 100-day SMA near $80.84, and only a break above this zone would ease the current corrective tone.

On the downside, immediate support is seen at the horizontal level near $72.00, ahead of the 200-day SMA clustered around $67.65, a break of which would open the door to a deeper retracement.

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