Forex News

ING economists Min Joo Kang and Lynn Song expect the Bank of Korea to leave policy rates unchanged this week but to adopt a more hawkish tone. They see updated dot plots pointing to one or two rate hikes within six months, alongside upgraded GDP and CPI forecasts. Strong chip production and resilient activity data are expected to support South Korea’s growth outlook.

BoK seen steady but turning hawkish

"We expect the Bank of Korea to keep rates unchanged on Thursday, but signal a hawkish stance."

"Dot plots should indicate one or two rate hikes within six months, with the BoK upgrading its own GDP and CPI forecasts."

"At least one board member may vote for a rate hike at the meeting."

"Prices are likely to rise soon despite government measures, though the economy appears resilient to energy shocks."

"We expect robust chip production to boost overall industrial production, even with lower refinery and petrochemical output."

"The April monthly activity data should support our view."

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

Kevin Warsh was sworn in as the 17th head of the Fed on Friday, the first chair to take the oath at the White House since Alan Greenspan in 1987, a venue choice that says plenty about how close this central bank now sits to the executive branch. The optics got stranger from there. The president used the ceremony to insist he wants Warsh to act independently and to ignore him entirely, an extraordinary thing to say from a man who spent two years publicly hounding the previous chair to cut faster, reportedly joked about suing his successor if rates stayed high, and picked Warsh in the first place because he wanted a chair more willing to ease.

A new chair with old instincts

Take the independence pledge at face value, and it is a remarkable about-face. Take it as theater, and nothing has changed. Either way, a market betting on a calmer relationship between the White House and the Fed is betting against two years of evidence.

None of that softens the man himself. Warsh inherits a fractured committee; the last meeting produced the most dissents since 1992, and he has repeatedly said he wants to shrink the central bank's bloated balance sheet. For a market leaning on easy money, a chair that talks about pulling trillions of dollars of bonds back out of the system is not an obvious cue to buy the highs.

Reform is a double-edged word

Warsh used his first remarks to promise a reform-oriented Fed, one that escapes what he called static frameworks and models. Strip away the ceremony language, and that points squarely at how the Fed communicates, most likely an effort to wind down forward guidance, the practice of pre-announcing the rate path that traders have leaned on for more than a decade. Reform sounds tidy. In practice, a Fed that deliberately tells markets less pulls away a safety net that record-high valuations have quietly depended on. For a market conditioned to be led by the hand, less hand-holding is not the bullish development that the word "reform" implies.

• The Dow Jones shrugged off sliding consumer sentiment, rising inflation expectations, and a Middle East peace deal that refuses to materialize.
• Kevin Warsh was sworn in with a stated wish to change how the Fed talks to markets.
• Rate markets now see ~70% odds that rates will rise by December.

There is confident, and then there is Friday. The Dow Jones Industrial Average (DJIA) ground out a fresh all-time high, up around a quarter of a percent, on a day that gave it nothing to celebrate. A famously hawkish new chief took the gavel at the Federal Reserve (Fed), consumer sentiment fell off a cliff, households said they expect more inflation, not less, and the Middle East ceasefire stayed firmly off. None of it mattered. The tape wanted a record and took one.

A hawkish handover the bulls ignored

The day's headline event ought to have given the rally pause. Kevin Warsh took the oath as the new Fed chair, a man with a hawkish track record, a declared intent to shrink the central bank's bloated balance sheet, and plans to reform how the Fed guides markets. That is a structural headwind for risk assets, not the easy-money backdrop stocks have spent two years pricing. The tape pushed to a record anyway.

Sentiment cracks, the bid does not

Friday's University of Michigan (UoM) survey was ugly in the way a record high should find uncomfortable. Sentiment and expectations both dropped sharply, well below consensus, while one-year and five-year inflation expectations rose, overshooting forecasts in both cases. That is the stagflation-lite cocktail in miniature, softer confidence and stickier prices together, and it landed just as Fed governor Christopher Waller struck a pointedly hawkish tone. Soft data is easy to wave away on any single day, but the survey and the hawk together takes nerve.

A peace premium built on rumor

Then there is Iran. The story doing the rounds is that a US-Iran deal is close, perhaps imminent, and risk assets have quietly banked a slice of that optimism. The trouble is the same story has been close for weeks. The early-April ceasefire has been called barely alive by the US president himself, Tehran's latest proposal was waved off, and fire is still being traded near the Strait of Hormuz with Oil holding above $100. Talk of a breakthrough keeps surfacing from unnamed sources, but no document has been produced, with some doubting that a draft exists at all. Leaning on a peace dividend that may never arrive is leaning on hope.

Pricing hikes, not cuts

Here is where the stock market and the rate market part company completely. Futures see effectively no chance of a move at the June meeting, a near-certain hold, and from there the curve drifts the wrong way for the bulls. By October, a hike is priced as more likely than a hold, and by December, the market puts better than 70% odds on rates sitting higher than they are today, with the probability of a cut at zero. The Fed has held its benchmark at 3.50% to 3.75% through its last two meetings. April Consumer Price Index (CPI) ran hot near 4% YoY, and the bond market has quietly decided the next move, if there is one, is up.

Even the president has softened, conceding he will let his new chair do as he sees fit, which, from a man who demanded cuts for two years, reads like a quiet admission they are not coming. Record highs are supposed to reflect a market that expects policy to ease. The curve says tightening is the bigger risk, and only one of those stories can be right.

The reckoning lands Thursday

None of this gets seriously tested until midweek. US markets are shut Monday for the holiday, thinning liquidity into the long weekend and making a low-volume melt-up easy to manufacture and hard to trust. Thursday brings the April Personal Consumption Expenditures Price Index (PCE), the Fed's preferred inflation gauge and a top-tier release. With UoM inflation expectations already creeping up and CPI still sticky, a hot PCE print would only reinforce the hawkish path the rate market is already pricing, leaving record-high equities looking ever more like the odd one out. A soft one buys the bulls another week of denial.

Trading a record into a long weekend

For now the trend is up. The breakout zone near the record around 50,800 is the line that matters, a hold above it keeps momentum chasers engaged. Below, the first shelf is around 50,200, Friday's low, and beneath that the round 50,000 level is the floor bulls cannot afford to lose. The honest read is a momentum tape running on thin conviction and thinner holiday liquidity. Long into strength is fine while 50,000 holds, but this is not a level to marry. If Thursday's inflation print runs hot or the Iran talks fall apart in the open, the unwind from a record tends to move far faster than the grind that produced it.

Dow Jones 5-minute chart

Freshly-minted Federal Reserve (Fed) Chair Kevin Warsh delivered his first public speech as head of the Fed on Friday, delivering his key talking points after being sworn in.

Key Warsh highlights

Ours is a time of great consequence
Not naive about challenges we face
Will lead a reform-oriented Fed
Will learn from past mistakes and successes
Inflation can be lower, but growth is strong
These years can bring unmatched prosperity

Speaking ahead of the swearing-in of new Federal Reserve (Fed) Chair Kevin Warsh, President Trump stated that he wants Warsh to be "independent", stating that the Fed will "make their own decisions". Donald Trump also stated that he wants to stop inflation, and reminded listeners that economic growth and inflation are two different concepts.

Key Trump highlights

Want warsh to be independent
Warsh will restore confidence in the Federal Reserve
Fed will make their own decisions
Warsh will safeguard Federal Reserve's integrity
Want to stop inflation
Economic growth does not mean inflation
Stock market doing well means Warsh is liked
Warsh will have full support of my administration

• Gold remains confined within this week’s trading range as traders assess ongoing diplomatic talks between the United States and Iran.
• A pullback in US Treasury yields offers some support for Gold, though hawkish Fed expectations continue to cap the upside.
• XAU/USD stays pressured beneath the 100-day SMA, while momentum signals remain tilted to the downside.

Gold (XAU/USD) consolidates on Friday, remaining confined within this week’s trading range as investors cautiously monitor ongoing diplomatic efforts between the United States and Iran to reach a deal to end the war in the Middle East. At the time of writing, XAU/USD is trading around $4,520, staying on course for a second consecutive weekly decline.

Indirect negotiations between the United States and Iran continue under Pakistani mediation. However, major disagreements remain unresolved. A senior Iranian source told Reuters that “no deal has been reached yet, but gaps have narrowed,” while adding that Iran’s uranium enrichment programme and its control over the Strait of Hormuz remain among the key sticking points in the negotiations.

US Secretary of State Marco Rubio also struck a cautious tone, saying there has been “some progress” in talks with Iran, though he added, “I would not exaggerate it,” and stressed that “we’re not there yet.”

Iran and Oman are discussing a plan to introduce a toll system for vessels transiting through the Strait of Hormuz. Speaking at the White House, US President Donald Trump opposed the idea, saying, “We want it open, we want it free, we don’t want tolls.” The US President also warned that Iran “will not get a nuclear weapon or we’ll do something drastic.”

Meanwhile, hawkish Federal Reserve (Fed) expectations and a stronger US Dollar (USD) continue to act as headwinds for Gold, as global inflation concerns stemming from elevated Oil prices have prompted traders to increase bets that the central bank may raise interest rates by the end of the year. A higher interest rate environment tends to weigh on the non-yielding metal by increasing the opportunity cost of holding Gold.

Fed Governor Christopher Waller said on Friday that he does not think the central bank “should consider hikes in the near future,” adding that “the current position is to hold rates steady in the near term.” Waller also said that inflation will “be the driving force in policy decisions ahead.”

On the economic data front, the final reading of the University of Michigan’s Consumer Sentiment Index fell to 44.8 in May from 48.2 previously, while the Consumer Expectations Index also declined to 44.1 from 48.5. 1-year Consumer Inflation Expectations rose to 4.8% from 4.5%, while the 5-year inflation outlook climbed to 3.9% from 3.4%.

Technical Analysis: XAU/USD struggles below 100-day SMA

On the daily chart, XAU/USD is holding above the 200-day Simple Moving Average (SMA) near $4,375 but capped well below the 100-day SMA around $4,798, which keeps the broader tone neutral with a slight downside risk.

The Relative Strength Index (RSI) at 40 signals soft, non-oversold momentum, while the Moving Average Convergence Divergence (MACD) remains in negative territory and has been weakening again, which together hint that rebounds may struggle while price remains lodged between these medium- and longer-term trend references.

On the downside, initial support is seen at the nearby horizontal level around $4,500, ahead of the 200-day SMA clustered lower near $4,375. A clear break beneath these would expose the next key floor at roughly $4,100. On the topside, immediate resistance is defined by the 100-day SMA at about $4,798, with a subsequent barrier at the $5,000 horizontal level, and only a sustained move above these caps would meaningfully ease the current pressure and reopen the path toward higher highs.

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

Rabobank’s Senior FX Strategist Jane Foley notes that the Australian Dollar (AUD) has shifted from a top G10 performer to one of the weakest on a 5‑day view as markets reassess Reserve Bank of Australia (RBA) tightening prospects after softer labour data. With the Bank of Japan (BoJ) expected to hike and AUD/JPY losing momentum, Rabobank sees scope for a pullback toward the AUD/JPY112 area over three months.

AUD strength fades as BoJ risk rises

"The AUD has become a familiar fixture at, or close to, the top of the G10 FX performance table this year. This relates to the sharp turnaround in RBA policy expectations relative to the end of last year and the follow-through in the form of the three 25 bps interest rate hikes that have been announced so far in 2026. Now, however, it would appear as if the tide might be turning."

"Currently, the market expects steady policy from the RBA in June, while it is almost fully priced for a 25 bps interest rate hike from the BoJ. Reflecting the softer stance of the AUD, AUD/JPY has lost momentum having reached a recent high earlier this month close to 114.73. For now the 50 day sma at 112.67 is providing near-term support, though a break below could trigger further downside potential for the currency pair."

"Both the RBA and the BoJ are due to hold their respective policy meetings on the same day next month (June 16), and the guidance offered will be key for the outlook for AUD/JPY."

"That said, the paring back of rate hike speculation for some other G10 central banks such as the RBA should improve the relative attraction of the JPY. In our view, there is scope for dips back to the AUD/JPY112 area on a 3-month view. That said, a move lower in AUD/JPY will likely require a firming in expectations that the BoJ can hike for a second time later this year."

"While the market has been paring back perceived rate hike risks for some G10 central banks, given that real rates in Japan remain at extremely low levels, it can still be argued that there is significant risk of a BoJ rate hike in June."

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

• USD/JPY remains on track for a second consecutive weekly gain as the Greenback stays broadly supported.
• Traders increasingly price in the possibility of a Fed rate hike by year-end following stronger US inflation expectations data.
• Softer Japanese inflation data does little to alter expectations for a potential Bank of Japan rate hike in June.

USD/JPY holds firm on Friday, remaining confined within this week’s trading range as traders refrain from placing aggressive bullish bets near the 160.00 handle following suspected intervention by Japanese authorities in late April. At the time of writing, the pair is trading around 159.20 and remains on track for a second consecutive weekly gain.

Meanwhile, the US Dollar (USD) remains supported as no meaningful progress has emerged despite ongoing diplomatic efforts to end the war in the Middle East, while disagreements over Iran’s nuclear programme continue to weigh on negotiations. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, remains near six-week highs around 99.32.

In contrast, elevated Oil prices linked to ongoing supply disruption risks in the Strait of Hormuz continue to weigh on the Japanese Yen (JPY), as Japan relies heavily on imported energy from the Middle East, with a significant portion of its crude Oil imports passing through the strategic waterway.

Adding to US Dollar support, the final reading of the University of Michigan’s Consumer Sentiment Index fell to 44.8 in May from 48.2 previously, while the Consumer Expectations Index declined to 44.1 from 48.5. Meanwhile, the 1-year Consumer Inflation Expectations rose to 4.8% from 4.5%, while the 5-year inflation outlook climbed to 3.9% from 3.4%.

The sharp rise in inflation expectations signals growing consumer concerns over the impact of higher Oil prices. Against this backdrop, traders are increasingly pricing in the possibility of a Federal Reserve (Fed) rate hike by the end of the year, compared with earlier market expectations for at least two rate cuts before the war began.

White House Senior Adviser Kevin Hassett said on Friday that central banks must pay close attention to the ongoing Oil shock, while warning that higher energy prices could feed into core inflation.

Fed Governor Christopher Waller said, “If shorter-run inflation expectations go up, that’s alarming, we might have to take steps then.” Waller added that “the current position is to hold rates steady in the near term,” while stressing that inflation will remain “the driving force in policy decisions ahead.

In Japan, inflation data released earlier in the day came in softer than expected, though traders still expect the Bank of Japan (BoJ) to raise interest rates at its June meeting.

• US sentiment hits record low, inflation expectations move higher.
• Waller signals rate-hike risk if expectations become unanchored.
• ECB officials split as energy shock fuels June hike talk.

The Euro retreats by 0.14% during the North American session amid growing speculation that the US and Iran may reach a deal to end the conflict. The Greenback is recovering some ground, underpinned by Oil prices trimming some of its earlier losses. The EUR/USD trades at 1.1598, poised to end the week with losses of around 0.20%.

EUR/USD weakens as mixed Iran headlines revive Dollar demand

Middle East headlines continued to drive the financial markets, with mixed messages and people denying directives about Iran’s not shipping uranium abroad and the content of a peace draft sent by Washington to Tehran. In the meantime, the Pakistan Army Chief is visiting Tehran, but according to Al Araby, it does not mean that a deal is within reach.

Wall Street Journalist Laurence Norman posted on this X.com account that “draft deals circulating are inaccurate.”

As of writing, Kevin Warsh is being sworn in at the White House as the new Federal Reserve Chairman.

Data from the US showed that Consumer Sentiment deteriorated sharply, according to the University of Michigan, dropping from 48.2 in its May preliminary reading to 44.8, an all-time low, below economists' forecasts of 48.2. The survey revealed that households are concerned about the cost of living, indicating that high prices are “eroding their personal finances, up from 50% last month,” said Joanne Hsu, the director of the survey.

Inflation expectations had risen from 4.7% to 4.8% over the next twelve months and from 3.5% to 3.9% over the next five years.

In the meantime, Fed Governor Christopher Waller said that he doesn’t expect to support a change in the policy rate yet, but favoured removing the easing bias from the statement. He added that if inflation expectations start to become unanchored, he “would not hesitate” to support a rate hike.

In Europe, the European Central Bank (ECB) President Christine Lagarde said that inflation expectations are “still” near the the 2% target, despite the ongoing rise of energy prices due to Iran’s war.

ECB’s Muller said he sees a strong case for a rate hike in June due to the recent surge in energy prices.

Data-wise, the German economic docket was busy. The GDP for Q1 2026 showed that the economy expanded by a minimal 0.4% YoY. Recently, the IFO Business Sentiment rose unexpectedly, but the economic outlook looks gloomy, according to the survey.

EUR/USD Price Forecast: Technical outlook

In the daily chart, EUR/USD trades at 1.1599. The pair remains capped in the near term, trading below the clustered simple moving averages around 1.1655, which act as immediate topside resistance and keep the recent recovery in check. Momentum has faded, with the 14-period Relative Strength Index slipping towards the 40 region, which hints at lingering downside pressure despite price holding modestly above the broken ascending trend-line area.

On the downside, initial support is located near the former uptrend break around 1.1567, where a daily close below would open the door toward the deeper structural floor around 1.1290. On the topside, a move above the triple simple moving average barrier at 1.1655 would be needed to ease the current bearish bias, with the next notable resistance emerging near the more distant descending trend-line break around 1.1816.

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