Forex News

Brown Brothers Harriman’s (BBH) Elias Haddad highlights EUR/USD trading defensively near 1.1530 ahead of an expected 25 bps European Central Bank (ECB) rate hike to 2.25% and updated projections likely downgrading growth. With Eurozone inflation elevated but activity soft, Haddad expects EUR/USD to edge lower and stabilize closer to 1.1400, reflecting stronger US growth relative to the Eurozone.

Euro pressured by weak growth outlook

"EUR/USD is trading on the defensive around 1.1530. The ECB policy rate decision is today’s highlight (1:15pm London, 8:15am New York) followed 30mins later by ECB President Christine Lagarde’s press conference. The ECB is set to end a seven meeting pause with a 25bps policy rate hike to 2.25% because of rising inflation pressures."

"In May, Eurozone core CPI rose to a 13-month high at 2.5% y/y, tracking closer to the ECB’s Q2 severe scenario (2.4%) than to its baseline forecast (2.2%) and adverse scenario (2.3%). Moreover, services CPI surged to a seven-month high at 3.5% y/y, raising the risk of a persistent pickup in inflation."

"The ECB will also publish its June macroeconomic projections which will likely show a downgrade to its growth forecast. PMI data indicates Eurozone real GDP could contract by -0.2% q/q in Q2, a pace that sits between the ECB’s adverse (-0.1%) and severe (-0.3%) scenarios and below its current baseline forecast of +0.1%."

"We expect EUR/USD to edge lower and stabilize closer to 1.1400, reflecting a stronger US growth outlook relative to the Eurozone. ECB rate hikes in a sluggish growth, high inflation environment, is not bullish for EUR but should help cushion the downside."

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

• EUR/JPY trades around 185.20 on Thursday, virtually unchanged on the day after surrendering its recent gains.
• The ECB is expected to raise interest rates by 25 basis points, but investors are primarily focused on guidance.
• Fears of intervention and expectations of a BoJ rate hike are limiting the pair’s upside potential.

EUR/JPY trades around 185.20 on Thursday at the time of writing, as market participants remain cautious ahead of the European Central Bank (ECB) monetary policy decision. While a 25-basis-point rate hike is largely priced in, attention is centered on the tone adopted by ECB President Christine Lagarde and the institution’s updated economic projections.

Investors are attempting to determine whether this rate increase marks the beginning of a new tightening cycle or merely a one-off move aimed at containing inflation risks stemming from higher energy prices caused by tensions in the Middle East. Economists expect the ECB to revise its inflation forecasts higher while lowering its growth projections for the Eurozone, reflecting the negative impact of rising energy costs on economic activity.

On the Japanese side, the Japanese Yen (JPY) remains supported by speculation surrounding another Bank of Japan (BoJ) rate hike at next week’s policy meeting. A Reuters poll shows that a 25-basis-point increase is widely expected, which would further advance the central bank’s ongoing monetary policy normalization process.

However, concerns about Japan’s economic outlook persist. Iran’s announced closure of the Strait of Hormuz and the potential disruption of energy supplies represent a major risk for Japan, which remains heavily dependent on imported energy. This situation limits the Japanese Yen’s ability to strengthen sustainably despite expectations of tighter monetary policy.

In addition, Japanese authorities continue to closely monitor foreign exchange market developments. Finance Minister Satsuki Katayama recently reiterated that the government remains prepared to take decisive action to prevent excessive weakness in the domestic currency. These warnings are gaining importance as current exchange rate levels approach areas that previously triggered intervention in the currency market.

According to BNY’s Geoff Yu, even if the BoJ continues its gradual tightening cycle, capital flow dynamics and concerns surrounding the government Bond market limit the prospects for a significant appreciation of the JPY. This combination of factors could keep EUR/JPY in a consolidation phase as traders await greater clarity on the respective policy outlooks of both the ECB and the BoJ.

Silver prices (XAG/USD) rose on Thursday, according to FXStreet data. Silver trades at $64.05 per troy ounce, up 1.05% from the $63.39 it cost on Wednesday.

Silver prices have decreased by 9.89% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 63.78 on Thursday, down from 64.24 on Wednesday.

(An automation tool was used in creating this post.)

ING’s Frantisek Taborsky expects the Central Bank of Turkey (CBRT) to keep its policy rate at 37%, maintaining a tight stance and policy flexibility. He notes recent macroprudential tightening and stable FX have supported the Turkish Lira (TRY), but a widening current account deficit clouds the longer-term outlook. ING forecasts USD/TRY at 53.00 by year-end.

Tight policy meets longer term risks

"The Central Bank of Turkey is likely to leave rates unchanged at 37% today."

"Against this backdrop and considering the recent macroprudential tightening through reduced lending growth caps, along with contained retail foreign exchange demand, we expect the central bank to leave interest rates unchanged at today's MPC meeting."

"With the difficult disinflation story of the last few months and the CBT’s visible efforts to keep FX stable, it is clear that the current FX regime is here to stay."

"FX reserves remain high, and despite the thinning FX carry, TRY remains a popular trade in the EM space, which we believe will not change in the coming months."

"At the same time, the widening current account deficit clouds the longer horizon and poses a problem for CBT in the future."

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

Commerzbank’s Erik Liem expects the European Central Bank (ECB) to deliver a fully priced 25bp hike, leaving markets focused on guidance for the path of rates beyond summer. He notes that forwards already discount more than two further hikes this year, which he deems ambitious given the current backdrop, and argues that more explicit comments from President Lagarde would be required to generate a hawkish surprise.

Markets eye post‑summer rate guidance

"The ECB takes centre-stage today. A 25bp rate hike seems a done deal and the focus is on the future rate path. As forwards look stretched already, the bar for a hawkish surprise is high."

"Before we can celebrate the start of the World Cup in the evening, with Mexico facing South Africa, markets first have to face the ECB decision and press conference. A hike by 25bp is a done deal and fully discounted by forwards."

"Thus, the focus will mainly be on the guidance beyond summer. As Lagarde will likely stick to the meeting-by-meeting approach, the fresh projections and potential updates to the different scenarios should be key."

"Back in March, the projections and scenarios assumed 40bp in hikes until year-end. Against this backdrop, the March adverse scenario looks rather fair at the moment and we consider the current pricing of more than two hikes this year to be rather ambitious even after accounting for the latest developments in Iran."

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

• The US Dollar Index rebounds to near 100.10 amid fears of US-Iran ceasefire collapse.
• US CENTCOM launched attacks on Iran again in retaliation for shooting down the US Apache helicopter.
• The US monthly headline and core CPI growth cooled down to 0.5% and 0.2% in May, respectively.

The US Dollar (USD) claws back its slight early losses and edges higher during the European trading session amid intensifying fears that the ceasefire between the United States (US) and Iran, announced on April 8, could collapse due to the exchange of attacks in the last few days.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, turns positive at around 100.10.

On Wednesday, the US Central Command (CENTCOM) conducted military operations against Iran again, in retaliation for Tehran’s attack on a US Apache helicopter patrolling over the Strait of Hormuz earlier this week.

In response, Iran’s Foreign Ministry has condemned US attacks, calling the ceasefire “practically meaningless.

Meanwhile, a report from CNN has stated that negotiations between the US and Iran towards a permanent peace deal are still going on.

On the domestic front, soft US monthly Consumer Price Index (CPI) data, released on Wednesday, weighed slightly on the US Dollar. The report showed that monthly headline and core CPI grew at a moderate pace of 0.5% and 0.2%, respectively.

BNY’s Geoff Yu argues that Swiss Franc (CHF) positioning looks stretched as investors bet on policy tightening that the Swiss National Bank (SNB) is unlikely to deliver. He highlights subdued Swiss inflation, soft Gross Domestic Product (GDP) data and the risk that an European Central Bank (ECB) hike further dampens external demand. Yu notes that conditional inflation forecasts leave little justification for SNB rate hikes and sees policy remaining cautious.

Franc overheld versus Euro on policy mispricing

"As a generally zero- or even negative-yielding currency, the franc is rarely in an overheld position due to carry loss. There is passive hedging in place by CHF-denominated investors, but beyond regulatory mandates, we doubt such purchases are strongly encouraged – they conflict with the SNB’s general approach of deterring CHF purchases in normal times. Hence, when CHF moves into overheld territory on a standalone basis and is even better held than EUR, circumstances must be “abnormal.”"

"With the ECB moving toward a rate hike, circumstances are still very different, and there’s little chance the SNB can suddenly shift course. Headline inflation continues to run at relatively “normal” levels on a sequential basis, while Q1 GDP (sports-adjusted) surprised to the downside. There’s simply no demand-driven inflation impulse; if anything, the ECB’s hike will further slow demand among Switzerland’s key trading partners, and the SNB may even view hawkish policy as a risk to Swiss growth."

"Fundamentally, we continue to see a glaring inconsistency in how the market actually “prices” SNB policy. Interest rate futures still point to a 60% chance of a 25bp hike by the end of the year, perhaps in sympathy with the ECB, which is signaling a hawkish tilt. Despite current ECB guidance on rate hikes (which we expect to change as the Eurozone economy slows), options markets still point to marginally lower EUR/CHF via risk-reversals."

"Whatever the SNB’s own messaging, which we see as internally consistent, rate markets and FX options continue to point in opposite directions. If the SNB were truly worried about inflation, especially from external supply factors, there would be much greater tolerance of currency strength rather than an “increased willingness” to intervene. Ultimately, it comes down to the conditional inflation forecasts."

"We would also keep an eye on the Swiss Population Cap referendum, as its passage will have material implications for Swiss–EU relations in the long term."

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

• The European Central Bank is widely expected to raise interest rates by 25 basis points on Thursday.
• Investors will focus on whether the ECB signals that further tightening could follow in the coming months.
• The outlook remains clouded by the Middle East war, rising energy prices and weakening Eurozone growth.

The European Central Bank (ECB) is set to announce its monetary policy decision at 12:15 GMT following its June meeting. The Frankfurt-based institution is widely expected to raise its key interest rates by 25 basis points, taking the deposit facility rate to 2.25% from 2%. Such a move would mark the first rate hike since September 2023 and reflect policymakers’ growing concern about the inflationary impact of the energy shock caused by the war in Iran and the disruption of shipping routes in the Middle East.

ECB President Christine Lagarde will hold a press conference shortly after the announcement, at 12:45 GMT, where investors will seek guidance on whether June represents the start of a broader tightening cycle or merely a precautionary adjustment. The ECB is expected to publish updated staff projections alongside the decision, with economists anticipating higher inflation forecasts and weaker growth estimates compared with the March projections.

While a rate hike is largely priced in by financial markets, uncertainty remains elevated. Policymakers must balance the risk of inflation becoming more persistent against the danger of further weakening an already fragile Eurozone economy. As a result, communication regarding future policy steps is likely to be the key market driver.

What to expect from the ECB interest rate decision?

The ECB enters the June meeting facing a significantly different environment than it did only a few months ago. Eurozone inflation accelerated to 3.2% YoY in May from 3% in April, while core inflation rose to 2.5%, reflecting the gradual transmission of higher energy prices into broader price categories.

Several Governing Council members have openly supported a rate increase in recent weeks. ECB Chief Economist Philip Lane indicated that inflation projections would likely be revised higher, while Executive Board member Isabel Schnabel argued that the central bank could no longer simply “look through” the energy shock. Even traditionally dovish policymakers have acknowledged that a tightening of monetary policy may be necessary to prevent inflation expectations from becoming unanchored.

Updated ECB projections are expected to reinforce this view as several institutions forecast that inflation estimates for 2026 could be revised closer to 3%, up from 2.6% in March, while growth forecasts are likely to be downgraded as higher energy costs weigh on activity. Recent Purchasing Managers Index (PMI) surveys have already pointed to deteriorating business conditions, with Eurozone economic activity remaining in contraction territory.

Despite the expected hike, the ECB is unlikely to provide explicit forward guidance. Policymakers continue to emphasize a data-dependent and meeting-by-meeting approach, reflecting the exceptional uncertainty surrounding the geopolitical situation and future energy prices. Most analysts expect Christine Lagarde to maintain a cautiously hawkish tone, acknowledging upside risks to inflation while avoiding any commitment regarding the timing of additional moves.

The key debate within markets is whether June marks the beginning of a new tightening cycle or simply an insurance hike designed to preserve the ECB’s anti-inflation credibility. While some institutions foresee multiple hikes over the coming months, others argue that weakening growth, tighter financial conditions and limited evidence of wage-driven inflation should ultimately restrict the scope of further tightening.

How could the ECB meeting impact EUR/USD?

Ahead of the decision, markets have largely priced in a 25-basis-point rate increase, meaning the Euro’s immediate reaction may depend more on the ECB’s communication than on the decision itself.

A more hawkish-than-expected message from Christine Lagarde, particularly if she suggests that additional rate hikes could be warranted in July or September, would likely support the Euro (EUR) by pushing European rate expectations higher. An upward revision to inflation forecasts that highlights persistent price pressures could further reinforce this reaction.

Conversely, if the ECB emphasizes downside risks to growth and signals that June should not be interpreted as the start of an aggressive tightening cycle, the common currency could struggle to gain traction despite the rate increase. Traders would likely interpret such communication as confirmation that only limited additional tightening remains likely.

Interest rate differentials will remain a key driver for EUR/USD. While the ECB is expected to raise rates this week, the Federal Reserve (Fed) is widely expected to keep policy unchanged at its upcoming meeting, even as markets start to anticipate rate hikes later this year. This divergence could provide near-term support for the Euro if the ECB adopts a sufficiently hawkish tone.

Nevertheless, broader market themes remain highly influential, as developments in the Middle East conflict, energy markets and global risk sentiment could continue to dominate EUR/USD price action. As a result, unless the ECB substantially alters expectations regarding the future path of interest rates, the pair may remain driven as much by geopolitical developments as by monetary policy itself.

Since early June 2025, the EUR/USD pair has been trading within a broad horizontal range, with no clear trend. In the daily chart above, EUR/USD maintains a bearish near-term tone as spot remains anchored below the 50-day, 200-day and 100-day Simple Moving Averages (SMAs), clustered between roughly 1.1670 and 1.1692. 

The downward resistance trend line, last intersected around 1.1704, continues to frame the broader downside bias. Meanwhile, the Relative Strength Index (RSI) at 38.9 indicates weak momentum but stops short of oversold territory, suggesting that sellers retain control, albeit with limited immediate exhaustion signals.

On the topside, initial resistance emerges at the 50-day SMA near 1.1670, followed closely by the 200-day SMA around 1.1678, creating a dense supply band just overhead. A move above these would then expose the 100-day SMA at 1.1692 ahead of the trend-line reference near 1.1704. 

On the downside, the first support comes at the psychological 1.1500 level, close to Monday’s low. A break below this area could reinforce the bearish pressure and open the door for a move toward 1.1400, a key support zone located near the March 13 and August 1 lows. A sustained decline below 1.1400 would further strengthen the negative outlook and expose lower levels not seen since June 2025.

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