Forex News

Societe Generale’s Sam Cartwright notes United Kingdom (UK) Gross Domestic Product (GDP) rose 0.4% qoq in 2Q26, driven mainly by business investment and resilient consumer spending. ICT equipment investment, likely linked to AI, has been a key growth driver since 4Q24 and is expected to support GDP near term. However, Cartwright anticipates softer GDP growth of 0.1% qoq in 2H26 as temporary supports fade and energy-related headwinds intensify.

Growth seen slowing in 2H26

"Since 4Q24, ICT equipment investment has added 0.45pp to GDP, against a total increase in GDP of 1.9%, and is likely to continue supporting growth in the near term if AI-related investment remains strong."

"Over the past few years, strong growth in the first half has typically been followed by weaker growth in the second half. With the US-Iran conflict still unresolved, some of the one-off factors that supported 2Q26 GDP, such as the World Cup and favourable weather, likely to fade, speculation over Autumn Budget tax rises potentially encouraging firms to adopt a wait-and-see approach, monetary policy remaining restrictive, and utility price increases set to weigh on real incomes, we expect this pattern to repeat and continue to forecast soft growth in 2H26."

"Overall, we forecast GDP growth to average 0.1% qoq in 2H26, matching the BoE's July MPR forecast, leaving 2026 growth at 1.1%. Even so, this is well above our 2026 forecast of 0.7% at the end of 2025."

"The key risk remains the trajectory of the US-Iran conflict. However, so far, UK activity data has proved resilient to the crisis."

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

• EUR/GBP trades in the mid-0.8500s as UK second-quarter growth lands on forecast.
• Weak UK factory data caps the Pound's gains and keeps the pair off its lows.
• Eurozone flash GDP and employment figures, due Friday, are the next catalyst.

EUR/GBP is trading sideways on Thursday near the 0.8540 level, with the Euro (EUR) steadying after three consecutive days of losses despite the Pound Sterling (GBP) gaining support from UK economic growth data that was broadly in line with expectations.

Data from the UK Office for National Statistics showed the Gross Domestic Product (GDP) grew a steady 0.4% in the second quarter, matching forecasts though slowing from the pace seen in the previous quarter. A firmer-than-expected monthly reading for June added to the picture, giving the Pound a small lift.

Factory data curbed the optimism. Both Industrial Production and Manufacturing Production shrank in June, worse than the market had anticipated, with the prior month's figures revised lower. The prints are a reminder of the drag from higher energy prices tied to the Middle East conflict.

Attention now turns to Friday's Eurozone flash releases, with second-quarter Gross Domestic Product (GDP) seen holding at a steady 0.4% on the quarter, and the Employment Change for Q2 Prints in line would keep the Euro side quiet; any surprise could hand EUR/GBP its next push.

Technical Analysis:

On the 4-hour chart, EUR/GBP trades at 0.8544, keeping a mildly bearish near-term tone as it holds below the 100-period Simple Moving Average (SMA) at 0.8556 while testing the 20-period SMA at 0.8544 as a pivot. The cluster of overhead levels around 0.8546 and 0.8553 reinforces a capped structure, with the Relative Strength Index (RSI) at 44 hinting at balanced but slightly soft momentum rather than aggressive selling.

On the topside, immediate resistance is seen at 0.8546, followed by the horizontal barrier at 0.8553 and the 100-period SMA at 0.8556, which collectively form a dense supply zone that bulls would need to reclaim to ease downside pressure. On the downside, initial support is located at 0.8542 ahead of 0.8539, where a break lower would open the door to a deeper pullback, while holding above these levels would keep the cross in a consolidative range beneath the moving average cap.

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

Royal Bank of Canada (RBC) analysts Rachel Battaglia and Abbey Xu note Canadian consumers kept spending in Q2 despite weak real wage gains and higher energy costs. They highlight that fuel outlays are taking a larger budget share, yet discretionary goods and services spending, including sports-related activity, rebounded. Insolvencies remain below pre-pandemic levels, supporting a cautiously optimistic outlook for consumption through 2026.

Consumers juggle fuel costs and spending

"Canadian consumers continued spending through another challenging quarter, likely drawing on savings or taking on more debt to maintain consumption patterns amid weak real wage gains and higher energy costs."

"Energy costs are eating up a larger share of consumer budgets due to prices spiking in early March—likely forcing Canadians to dip into savings or take on more debt to keep up with rising costs."

"Per capita insolvencies remain below pre-pandemic levels, suggesting consumers still have the capacity to weather current pressures."

"Outside of fuel, broader spending strengthened lead by a rebound in discretionary goods purchases and maintained strength in discretionary services amid FIFA and other summer events."

"The broader economy is improving, supporting our cautiously optimistic outlook that consumers will continue spending over the remainder of 2026."

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

• EUR/USD holds above 1.1500 after softer-than-expected US PPI data.
• Cooling US inflation and weaker payrolls reduce the chances of a September Fed rate hike.
• The ECB is widely expected to raise interest rates next month.

EUR/USD holds modest gains on Thursday as softer-than-expected US Producer Price Index (PPI) data fails to trigger a strong reaction in the pair. At the time of writing, EUR/USD trades around 1.1537 after recovering from an intraday low of 1.1511, its lowest level in more than a week.

Data released by the US Bureau of Labor Statistics showed that the headline PPI was unchanged in July after falling by 0.1% in June, while the annual rate eased to 4.7% from 5.5%. Core PPI rose by 0.2% MoM, down from 0.4%, while the annual rate slowed to 4.2% from 4.7%.

The report follows Wednesday’s broadly in-line Consumer Price Index (CPI) data, which showed both headline and core inflation easing on an annual basis. Together with the weaker-than-expected July Nonfarm Payrolls (NFP) report, the latest inflation figures have dampened expectations for a Federal Reserve (Fed) interest-rate hike.

According to the CME FedWatch Tool, markets now assign a 32% probability of a September rate hike, down from 55% a week ago. The repricing weighs on the US Dollar Index (DXY), which retreats below the 100 psychological mark after touching a two-week high earlier in the day.

US Treasury yields are also falling across the curve. The 2-year yield, which is particularly sensitive to expectations for Fed policy, trades around 4.14%, its lowest level since July 17.

However, the pair’s muted response suggests traders are reluctant to build large positions as elevated energy prices and the lack of progress toward reopening the Strait of Hormuz keep upside inflation risks in place.

Cleveland Fed President Beth Hammack said on Thursday that the latest two inflation reports were “welcome news,” although she was not confident that the progress would continue. She added that the labour market is stable, while inflation caused by supply shocks has proved more persistent. “My view is we need to act now,” Hammack said.

While expectations for a September Fed rate hike have eased, markets still see the ECB raising rates next month. A Reuters poll conducted from August 10 to 13 showed that 57 of 69 economists expect the ECB to raise its deposit rate by 25 basis points (bps) to 2.50% in September.

Brown Brothers Harriman’s (BBH) Elias Haddad reports Norwegian Krone weakness after Norges Bank left rates at 4.25% but softened its hawkish bias. Forward guidance shifted from a likely hike to a more conditional stance, dropping an explicit call for tighter policy. Haddad notes that further downside inflation surprises would reduce hike odds, though Norway’s carry still supports NOK.

Less hawkish guidance hits Krone

"NOK weakened after the Norges Bank delivered a less hawkish hold. As was widely expected, the Norges Bank left the policy rate at 4.25% for a second straight meeting."

"Norges Bank softened its hawkish bias. It shifted from signaling that another rate hike was “likely” at “at one of the forthcoming monetary policy meetings” to simply noting “It may still become necessary to raise the policy rate.”"

"The Norges Bank also dropped its explicit call for a tighter stance, reiterating only that “a restrictive monetary policy stance is still needed.”"

"Further downside surprise in Norway’s inflation backdrop relative to the Bank’s projection will weaken the case for an additional rate hike. Still, Norway’s attractive carry remains supportive of NOK."

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

Rabobank's Senior FX Strategist Jane Foley analyzes the US Dollar’s (USD) evolving relationship with Oil and its safe haven role. Foley notes that reduced Fed rate hike speculation opens downside risks for the Dollar, but ongoing Strait of Hormuz disruptions and US energy exporter status support a premium. Market positioning, de-dollarisation debates and recent US data are highlighted as key drivers of US Dollar Index (DXY) performance.

Fed expectations and energy-linked haven flows

"Since around 2022, it is widely perceived that this relationship has altered, driven by the US’s current position as an energy exporter. This year, the US’s energy exporter status likely helped renew the USD’s safe haven credentials at the start of the Iran war. That said, correlations within the context of FX are rarely robust, reliable or straightforward given the confluence of factors that drive markets."

"Fed rate hike speculation has recently suffered a setback on the back of recent US data releases. This opens the prospect of further slippage for the greenback. That view, however, could still be thrown off course if oil prices spike higher again."

"The combination of yesterday’s fairly benign CPI inflation release and softer jobs data should reduce criticism of Fed Chair Warsh. The USD softened on the back of the July FOMC meeting as the market questioned the credibility of the Fed Chair and his claims that the Fed would drive inflation back to target."

"If Fed rate hike speculation continues to be pared back, in line with RaboResearch’s view, the USD will be exposed to potential downside pressures. That said, the uncertainties regarding the re-opening of the Strait of Hormuz remain a USD supportive factor. At the start of the Iran war, the market was positioned short of USDs."

"For as long as shipping through the Strait of Hormuz is curtailed, the USD is likely to retain a safe haven premium, supported by the US’s energy exporter status. By contrast, in these circumstances we would expect the market to remain wary of rebuilding long EUR positions."

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

Standard Chartered’s Christopher Graham and Emily Ashford highlight that Europe’s record heat and drought in 2026 are disrupting refiners, power generation, inland waterways and agriculture. European Central Bank (ECB) research suggests sizeable output losses, especially in Eastern Europe, and warns that climate adaptation investment may divert resources from more productive uses. ECB policy makers and fiscal agencies face difficult trade-offs as inflation and weaker demand interact.

Heat, drought and policy trade-offs

"Temperature records have been broken in many EU countries in 2026, with Western Europe experiencing the hottest June on record."

"Large parts of Europe are also experiencing drought conditions, compounded by the evaporative effects of higher temperatures."

"The effects of extreme weather are likely to impact the economy via multiple channels."

"Recent European Central Bank (ECB) analysis shows that extreme heatwave and drought conditions – similar to those observed in 2022 – could result in a sizeable output loss, with Eastern Europe more heavily affected."

"Separate ECB research finds significant regional effects that could intensify over time, while investment in climate adaptation infrastructure can divert resources away from more productive investment."

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

India’s Consumer Price Index (CPI) inflation accelerated slightly to 4.45% year-on-year in July from 4.38% in June, primarily propelled by rising food costs. Although this marks the second consecutive month that headline inflation has printed above the Reserve Bank of India’s (RBI) 4.0% midpoint target, it remains comfortably within the central bank’s broader 2–6% tolerance band. Both MUFG and DBS Group Research agree that the latest data validates the RBI’s decision to keep the repo rate on hold at 5.25%, but they offer differing perspectives on how long this policy pause will last.

Institutional Overview: MUFG vs. DBS Group Research

• Inflation Dynamics: MUFG highlights rising food inflation (jumping to 5.52% y/y) and warns that strong domestic demand could broaden price pressures. DBS Group Research emphasizes benign core inflation and the absence of generalized price shocks across the wider economy.
• RBI Policy Trajectory: MUFG expects the RBI to maintain its neutral stance in the near term but projects a 50-basis-point rate-hiking cycle starting in December 2026. DBS anticipates an extended pause with no immediate need for tightening.
• Market & Yield Buffer: MUFG points to risks from weather shocks and accelerating credit growth. DBS notes that stable 10-year government bond yields (6.75–6.85%) and unchanged domestic fuel pump prices provide a solid buffer for onshore markets.

Food inflation drives CPI uptick, signaling potential long-term rate hikes

According to Michael Wan at MUFG, July's CPI print of 4.45% y/y reinforces the view that domestic inflation is undergoing a slow buildup. The primary driver behind the acceleration was food inflation, which climbed to 5.52% y/y from 5.32% in June, leaving consumer prices vulnerable to weather disruptions and supply shocks. While headline metrics remain well inside the RBI's target band, MUFG cautions that robust credit growth and firm domestic demand could eventually bleed into broader price categories.

"We believe that the RBI will continue to maintain its neutral stance for now, but we see some signs that inflation is likely to broaden out more moving forward given firm domestic demand, accelerating credit growth and overall supportive fiscal position. We continue to see RBI hiking rates by 50bps this cycle but we have recently pushed out the timing of hikes to start from December 2026 instead."

Benign core inflation supports an extended policy hold

Taking a more accommodative view, Radhika Rao at DBS Group Research asserts that the July inflation release gives the RBI's Monetary Policy Committee ample headroom to maintain its current interest rate pause. Despite elevated global crude prices earlier in the year, domestic retail fuel prices have stayed steady. Furthermore, because core inflation remains subdued and shows no signs of broad-based pass-through, the central bank can comfortably navigate a near-zero real policy rate environment while onshore bond yields hover in a tight band.

"Benign core measures and absence of generalised pickup in price pressures support our baseline call for the central bank to stay on hold at the next review... Onshore markets have been ambivalent to volatile moves in global oil benchmarks in recent weeks, while 10Y bond yield hovers within 6.75-6.85%."

Banks project a stable near-term policy stance with diverging future paths

Based on the assessments from both financial institutions, the banks project an extended period of policy stability for the Reserve Bank of India at its 5.25% benchmark rate. DBS Group Research expects the central bank to remain firmly on hold as muted core inflation keeps broader price pressures in check. Conversely, MUFG maintains a more hawkish long-term view, anticipating that persistent food price risks and solid economic growth will eventually require the RBI to deliver 50 basis points in rate hikes beginning in late 2026.

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

Deutsche Bank’s Sanjay Raja notes that the UK economy remained strong over spring, with UK GDP rising 0.4% q/q and annualised growth in the first half reaching 2%. He highlights stronger-than-expected household spending, business investment and stockpiling in Q2-26, but expects a slowdown as energy costs, pump prices and budget uncertainty weigh on growth later in the year.

Strong start, slower second half expected

"The UK economy showed no signs of stopping over spring. After a thumping start to the year, UK GDP expanded by 0.4% q/q, taking the annualised growth rate in the first half of the year to a scorching 2%. And for a second straight quarter, it looks like the UK will take top place in the G7 league table."

"Yet again, as we signalled in our preview, forecasters will be forced to revisit their forecasts with another marginal upgrade looking likely for the year (to 1.1%)."

"Looking ahead, while the UK economy has been on a tear lately, some slowdown remains likely – reflecting recent patterns in GDP data (i.e. a strong start, followed by a weaker more subdued second half). Indeed, the energy crisis will likely catch up with households and business in Q3-26, as dual fuel bills rise."

"Elevated pump prices will also continue to squeeze on real disposable incomes. Budget uncertainty, we think, could also dampen spending as we await PM Burnham’s inaugural fiscal event."

"We continue to think that growth in the second half of the year will run closer to 0.1% q/q. But for the first time in a while, we now see modest upside risks brewing."

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

• Gold stays under pressure after hitting a fresh two-month high.
• Fading Fed rate-hike expectations and falling US Treasury yields help cushion the downside in the non-yielding metal.
• XAU/USD struggles around the 100-day SMA, while bullish RSI and MACD readings suggest buyers still retain some control.

Gold (XAU/USD) trades under pressure on Thursday after hitting a fresh two-month high of $4,449 during Asian trading hours. The metal fails to capitalise on softer-than-expected US Producer Price Index (PPI) data, even as the US Dollar and Treasury yields edge lower. At the time of writing, the precious metal trades around $4,377, down 0.70% on the day.

The metal struggles to extend its gains as market participants remain reluctant to chase prices higher amid an uncertain macroeconomic backdrop. The recent rally from near $4,000 has largely been fuelled by softer US economic data, including a broadly in-line Consumer Price Index (CPI) and weaker-than-expected Nonfarm Payrolls (NFP) reports for July. These releases have reduced the chances of an imminent interest-rate hike by the Federal Reserve (Fed).

Data released by the US Bureau of Labor Statistics on Thursday showed that the headline PPI was unchanged in July after falling by 0.1% in June, while the annual rate eased to 4.7% from 5.5%. Core PPI rose by 0.2% MoM, down from 0.4%, while the annual rate slowed to 4.2% from 4.7%.

According to the CME FedWatch Tool, markets now assign a 32% probability of a September rate hike, down from 55% a week ago. US Treasury yields are falling across the board, while the US Dollar Index (DXY) retreats below 100 after touching a two-week high earlier in the day.

The 2-year Treasury yield trades around 4.14%, its lowest level since July 17. Lower yields and a softer US Dollar (USD) are limiting Gold’s downside.

Analysts at MUFG/BTMU highlight that the CPI data “supports our view that Fed is likely to leave rates on hold in September,” although they caution that “it is unlikely that the US rate market will scale back rate hike expectations much further in the near-term given a hike still can’t be ruled out.” They also flag ongoing upside risks to the inflation outlook, warning that “the lack of progress to reopen the Strait of Hormuz and elevated energy prices continues to pose upside inflation risks in the near-term.”

At the same time, they argue that “the lack of clear forward guidance from Fed Chair Kevin Warsh makes it harder to assess how they are likely to set policy going forward,” leaving markets to navigate a still uncertain policy path despite the latest CPI print.

Against this backdrop, falling US Treasury yields and a softer US Dollar are likely to keep Gold supported, although uncertainty over the Fed’s policy path and heightened energy-driven inflation risks could cap the upside.

Technical analysis: Buyers struggle to clear the 100-day SMA

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XAU/USD is fluctuating just around the 100-day Simple Moving Average (SMA) at $4,387 and well below the 200-day SMA at $4,502, while it holds comfortably above the 50-day SMA at $4,146, leaving the metal trapped between medium-term support and longer-term overhead resistance and hinting at a capped, neutral tone.

On the daily chart, the Relative Strength Index (14) at 65 sits in bullish territory, and the Moving Average Convergence Divergence (MACD) remains positive, which suggests underlying buying interest.

On the upside, a sustained move above the 100-day SMA at $4,387 could expose the $4,500 psychological mark, which closely aligns with the 200-day SMA at $4,502.

On the downside, the first meaningful support is located at the 50-day SMA at $4,146, followed by the psychological and structural floor at $4,000.

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