Forex News

• United States (US) private employers added 42,250 workers, supporting the USD.
• Trump says the US “may have to give Iran another hit,” increasing demand for the USD as a safe-haven.
• ECB officials warn about long-term Eurozone growth challenges despite resilient labor-market conditions.

The EUR/USD pair weakens toward the 1.1600 region on Tuesday as the United States (US) Dollar (USD) strengthens following solid labor-market data and rising Treasury yields, while mixed developments in the Eurozone limit support for the shared currency.

The latest ADP employment report showed that United States (US) private employers added 42,250 jobs in the first week of May, marking the strongest reading since the series began in October 2025. The data reinforced expectations that the Federal Reserve (Fed) could maintain a cautious stance on interest rate cuts.

Additional USD demand emerged after US President Donald Trump adopted a more aggressive tone regarding Iran. Trump stated that “we may have to give Iran another hit” and added that “Iran is begging to make a deal,” reviving concerns about a possible escalation in the Middle East and increasing safe-haven flows into the US Dollar.

Meanwhile, Eurozone sentiment remained fragile after European Central Bank (ECB) officials highlighted concerns about the region’s long-term growth outlook. A recent ECB report noted that labor market trends and immigration continue supporting economic activity, but policymakers warned that structural demographic challenges may weigh on future growth prospects.

Short-term technical analysis:

On the 4-hour chart, EUR/USD trades at 1.1599, maintaining a bearish near-term bias as it holds beneath both the 20-period Simple Moving Average (SMA) at 1.1638 and the 100-period SMA at 1.1710. The pair is pressing lows near the only nearby horizontal support at 1.1592, while the Relative Strength Index (RSI) slips into oversold territory around 27, hinting that while downside pressure dominates, the pace of the decline could slow if sellers hesitate at this floor.

On the topside, initial resistance emerges at 1.1612, followed by 1.1624 and the 1.1635 barrier that aligns with the 20-period SMA just above at 1.1638, forming a dense cap before the broader resistance of the 100-period SMA at 1.1710. On the downside, a clear break under 1.1592 would expose fresh lows, reinforcing the prevailing bearish structure on the 4-hour timeframe.

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

• The US Dollar Index climbs near more than one-month highs as stalled US-Iran negotiations support the Greenback.
• Rising Oil prices and Strait of Hormuz disruptions reinforce expectations of a Fed rate hike by year-end.
• Hawkish Fed repricing pushes US Treasury yields to multi-month highs, providing additional support to the US Dollar.

The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, extends its rally on Tuesday, climbing near more than one-month highs as stalled US-Iran negotiations and hawkish Federal Reserve (Fed) expectations support the US Dollar. At the time of writing, the index is trading around 99.33, up nearly 0.35% on the day.

With no clear end in sight to the Middle East conflict and the Strait of Hormuz remaining largely closed, traders are increasingly pricing in the possibility of a Fed rate hike by year-end as rising Oil prices continue to fuel inflation concerns. According to the CME FedWatch Tool, markets are now pricing in nearly a 35% probability of a 25 basis point (bps) rate hike at the October meeting, rising to around 42% for the December meeting.

The hawkish repricing continues to push US Treasury yields sharply higher, providing additional support to the Greenback. On Tuesday, the benchmark US 10-year Treasury yield climbed to a 16-month high near 4.687%, while the US 30-year Treasury yield rose to around 5.197%, its highest level since July 2007.

Meanwhile, traders continue to monitor developments in the US-Iran talks, as indirect negotiations remain stalled over disagreements surrounding Iran’s nuclear programme.

US President Donald Trump said on Tuesday that military action against Iran could still resume if talks fail, adding that “we may have to give Iran another hit.” Trump said the United States was giving Iran a limited timeframe for negotiations, suggesting a decision on possible military action could come within the next two to three days or by early next week.

The remarks came just one day after Trump said he had halted an immediate planned military attack on Iran following requests from Gulf leaders to allow peace negotiations to continue.

Meanwhile, Iran’s Deputy Foreign Minister Kazem Gharibabadi said Tehran remains prepared to confront any military aggression, accusing Washington of presenting threats as an “opportunity for peace.”

On the data front, the US economic calendar remains relatively light this week, though the latest ADP Employment Change 4-week average rose to 42.25K from 33K previously. Traders now await the release of the Fed meeting minutes on Wednesday, preliminary May Purchasing Managers Index (PMI) data on Thursday and the University of Michigan Consumer Sentiment survey on Friday for fresh clues on the Fed’s policy outlook.

• WTI gains more than 1% on Tuesday and extends its rally for a fourth consecutive day.
• Donald Trump pauses a planned US strike on Iran to allow negotiations, while keeping the threat.
• India raises fuel prices to offset higher crude costs amid persistent concerns over global supply.

West Texas Intermediate (WTI) trades around $103.20 at the time of writing on Tuesday, up 1.16% on the day and extending its advance for a fourth consecutive day. Oil prices remain supported despite signs of temporary easing in Middle East tensions, with markets continuing to price in a geopolitical risk premium linked to potential supply disruptions.

Crude prices could nevertheless limit their upside after US President Donald Trump announced on Monday a pause on a planned US military attack against Iran. According to reports, the decision followed appeals from leaders of Qatar, Saudi Arabia and the United Arab Emirates (UAE) for regional de-escalation.

Donald Trump noted that serious negotiations with Tehran are currently underway, while warning that the United States (US) remains prepared to launch a large-scale military operation if discussions fail. This stance continues to keep energy markets on edge, as tensions between Washington and Tehran have fueled a sharp rise in prices in recent days.

Concerns surrounding the Strait of Hormuz also continue to support the market. This strategic waterway remains a key route for global Oil flows, while Iran’s nuclear program and sanctions continue to represent major obstacles to a lasting agreement.

On the demand side, India announced an increase in petrol and diesel prices by 87 and 91 paise per litre, respectively, in an effort to offset losses caused by rising global Crude costs. As the world’s third-largest Oil importer, developments in Indian demand are closely monitored by investors.

Comments from banks continue to highlight longer-term downside risks. Rabobank believes that increased fragmentation within the Oil market could weigh on prices in the coming years, particularly following the United Arab Emirates’ exit from the Organization of the Petroleum Exporting Countries (OPEC). Meanwhile, ING notes that the market remains extremely sensitive to headlines related to Iran and risks surrounding global supply.

• Equities broadly declined as long-end Treasury yields climbed to their highest in nearly two decades.
• Chip stocks led the breather, with the semiconductor complex down more than 7% over three sessions ahead of Nvidia's earnings after Wednesday's close.
• Oil eased after President Trump called off planned strikes on Iran, but the relief failed to translate into any reprieve for the bond market.

The Dow gave up a chunk of last week's record run on Tuesday, sliding back from the 50K handle it had briefly tagged days earlier, with the broader equity tape leaning lower as bonds did the heavy lifting on the downside. Futures opened the session with a tentative bid after Trump's overnight reversal on Iran, but the relief was short-lived once cash trading exposed the real story. The 30-year Treasury yield punched above 5.18%, a level not seen in nearly nineteen years, and the move came on a day when Oil was actually falling. That decoupling is the interesting part. If the inflation story were really just an Iran premium on crude, bonds should have caught a bid the moment Trump called off the strikes. They didn't. The bond market is telling you the inflation impulse is more structural than the headlines suggest, and that the Federal Reserve (Fed) is starting to look behind the curve.

Bond vigilantes pick their moment

Kevin Warsh is sworn in as Fed Chair on Friday, and the institutional view making the rounds is that the long-end selloff is the bond market warming up to test him. New chairs traditionally get a credibility audit from rates desks in their first weeks, and traders appear to be pricing the idea that a Warsh-led Fed will either need to talk tougher on inflation or wear the consequences in yields. Either way, equities sit awkwardly in the middle. Higher mortgage and credit card rates squeeze the consumer story, and higher discount rates take a bite out of the long-duration growth names that have done most of the index's heavy lifting through the rally.

Chips take a breather right on cue

The Philadelphia Semiconductor Index (SOX) dropped 1.4% on Tuesday and is now off more than 7% over three sessions. Nvidia, which prints fiscal Q1 numbers after Wednesday's close, fell for a third straight day. Qualcomm shed more than 3% and Broadcom pulled back close to 2%. The timing is striking. Investors trimming the most stretched names in the market just hours before the most important earnings print of the cycle suggests positioning is being lightened rather than reset, with most of the pain concentrated in the stocks that had run furthest. Whether Nvidia's guidance can re-light the fuse on Thursday's open is the question that matters more than the print itself.

Oil's quiet retreat tells its own story

West Texas Intermediate (WTI) slipped toward $104 and Brent dipped under $111 after Trump's overnight reversal on Iran. The de-escalation is real, but the price reaction has been muted. That fits the broader rates narrative: if Oil were the dominant inflation channel, then bonds and crude would be moving in lockstep. They aren't. The energy complex is unwinding a geopolitical premium while the rates market is pricing something stickier underneath. Markets are running two different stories at once, and the bond version is the one equities are listening to.

Thursday's PMIs, then Warsh on Friday

Thursday delivers flash S&P Global Purchasing Managers Index (PMI) prints for May, with manufacturing and services both tagged high-impact. Consensus has manufacturing at 54 and services at 51, leaving little margin for an upside surprise to add more fuel to the inflation worry already gripping the long end. A hot services print would land especially badly. Friday closes the week with Warsh's swearing-in and the second look at University of Michigan (UoM) inflation expectations, where one-year sits at 4.5% and five-year at 3.4%. Both are uncomfortable readings for a brand-new Fed Chair walking into his first set of meetings. If the bond vigilantes are setting up a welcome party, those two prints are where they'll likely bring the cake.

Dow Jones 15-minute chart

• US 10-year yield hits 16-month peak on inflation fears.
• UK payrolls drop 100K as unemployment rises to 5%.
• Starmer leadership pressure deepens as Burnham eyes challenge.

The British Pound (GBP) retreats by 0.31% during the North American session as the US Dollar (USD) rises, underpinned by soaring US Treasury yields as investors price in a spike in inflation from the energy shock. The GBP/USD pair trades at 1.3392 after reaching a daily high of 1.3437.

GBP/USD slips as inflation fears lift US Dollar and yields

Geopolitical matters and their impact are driving the financial markets. High energy prices due to Iran’s war prompted investors to increase risk premiums in the bond market, with the US 10-year Treasury note reaching a 16-month peak of 4.687% as traders priced in a Federal Reserve (Fed) rate hike towards the end of the year.

The US crude Oil benchmark, West Texas Intermediate (WTI), is up 0.79% to $103.29 a barrel, even though US President Donald Trump is optimistic about reaching a deal with Tehran. On Monday, he posted that he would not proceed with an attack against Iran on Tuesday, due to its allies pushing to strike a deal.

Nevertheless, Iran’s proposal has not changed from its previous offer, in which it delayed discussions on uranium enrichment.

The US economic docket was absent, with traders eyeing the release of the minutes of the Fed’s last monetary policy meeting, led by the outgoing Chair Jerome Powell. On Friday, Kevin Warsh will be sworn in as the new Chief of the US central bank.

In the UK, payroll data showed employment dropped by 100K from March to April, while previous months were revised lower. The Unemployment Rate rose from 4.9% to 5%.

Political turmoil in Great Britain is pressuring Sterling as Prime Minister Keir Starmer fights to retain the Labour Party leadership. The Greater Manchester Mayor, Andy Burnham, is seeking a seat in parliament to challenge Starmer.

Ahead this week, the UK economic docket will feature April inflation data, expected to dip from 3.1% to 2.6% YoY.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3394, holding just under a cluster of simple moving averages (SMAs) near 1.3429 that now cap the upside and keep the near-term bias tilted bearish. Price is also testing a descending resistance trend line, suggesting rallies remain fragile, while the Relative Strength Index (RSI) at 43.6 leans toward weak momentum rather than oversold conditions, hinting that sellers still retain the upper hand unless the pair can reclaim the overhead averages.

On the topside, immediate resistance is located at the confluent 50-day, 100-day and 200-day SMAs clustered around 1.3429, where any daily close above would ease the current downside pressure and open the door to a broader recovery attempt. On the downside, the absence of clearly defined nearby support levels from the provided indicators implies that a failure to hold the 1.3390 area could see GBP/USD extending its slide toward prior swing lows on the chart, leaving short-term risks skewed to further weakness while it remains capped beneath the moving average cluster.

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

Royal Bank of Canada (RBC) economist Abbey Xu notes that Canadian inflation accelerated in April, mainly due to higher energy prices and fading base effects, while underlying pressures stayed contained. Core measures such as CPI-trim and CPI-median eased, and broader price pressures are moderating. Xu concludes that higher Oil prices will not reignite systemic inflation and expects the Bank of Canada (BoC) to stay on hold through 2026.

Energy lifts headline, core stays contained

"The increase in headline inflation, however, continues to overstate underlying price pressures."

"Measures of core inflation, including CPI-trim and CPI-median, averaged 2.1% year-over-year in April compared with 2.3% in March."

"The report is consistent with our broader view that higher oil prices will lift headline inflation and cut into household purchasing power but are unlikely to reignite systemic inflation pressures."

"While some categories, particularly food and shelter, continue to contribute disproportionately to inflation, broader price pressures are easing alongside soft labour market conditions."

"Upside inflation risks could build the longer energy prices remain at elevated levels, but overall the April data support our base case that the Bank of Canada will remain on hold for the remainder of 2026."

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

United States (US) President Donald Trump said on Tuesday that he might restart attacks on Iran, but that he hasn't made up his mind. He also claimed that Iran is begging to make a deal while speaking to reporters at the White House on Tuesday.

Key quotes:

We may have to give Iran another hit, but I’m not sure.

Iran is begging to make a deal.

I don’t know about changing the regime in Cuba.

Cuba really needs help.”

BNP Paribas economists note Germany is moving away from its traditional reliance on automotive and chemicals towards defence, aerospace and electronic equipment. They highlight strong new industrial orders in communications, electronics and aerospace, and expects German growth to improve in 2026 and 2027, although it warns that energy risks and exposure to China-sensitive sectors still pose short-term challenges.

Defence and tech drive German orders

"The German economy is gradually moving away from its traditional model. Historically reliant on the automotive and chemical industries – two sectors facing particularly fierce competition from China – it is now shifting its focus towards defence, aerospace, and electronic and electrical equipment."

"German Mittelstand companies are capitalising on defence, electrification and AI investment cycles through inputs into sectors such as electronics and IT, and electrical equipment. This is underlined by the sustained rise in new orders for communications equipment (+30% since January 2025[2]), electronic parts (+11%) and precision optical instruments (+30%)."

"Orders for ‘other transport equipment’ (accounting for 5.8%) – driven mainly by the aerospace sector – are also seeing an unprecedented rise in volumes. This rebounding demand is still hampered by production constraints. However, it points to a recovery in industrial activity."

"There are still significant short-term risks, as the energy crisis caused by the conflict in the Middle East could hit the German automotive and chemicals sectors even harder. Despite this, German growth is expected to strengthen to 0.8% in 2026, and then 1.1% in 2027."

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

• US long-term yields continue to rise, with the 30-year Treasury yield reaching its highest level since 2007.
• Rising Oil prices and geopolitical tensions are reinforcing inflation concerns and reducing expectations of near-term monetary easing.
• Investors are increasingly demanding higher compensation to hold long-dated debt amid fiscal and inflation uncertainty.

US 30-Year Treasury Yield and US 10-Year Treasury Yield continue to advance on Tuesday, with the 30-year yield trading at 5.195% and the 10-year yield at 4.683% at the time of writing. The US 30-year Treasury yield reached a peak of 5.197% earlier in the day, its highest level since July 2007, highlighting growing pressure across fixed-income markets.

The sharp increase in yields reflects renewed concerns that inflation could remain elevated for longer than previously expected. Rising energy prices linked to the conflict involving Iran are adding upward pressure on inflation expectations, forcing investors to reassess the trajectory of monetary policy. Higher Oil prices have recently revived speculation that the next move from the Federal Reserve (Fed) may not necessarily be a rate cut.

At the same time, investors are also demanding a higher term premium, the additional compensation required to hold longer-duration debt. Concerns around persistent fiscal deficits and increasing government borrowing needs continue to weigh on sentiment toward long-dated Treasuries.

A Bank of America survey reported by Reuters on Tuesday shows that 62% of fund managers expect the US 30-year Treasury yield to rise above 6% over the next year.

Market participants also continue to monitor geopolitical developments in the Middle East. Any meaningful de-escalation could help ease Oil prices and improve the inflation outlook, potentially supporting Bond demand and weighing down on yields. However, uncertainty surrounding negotiations with Iran continues to keep investors cautious.

The recent move higher in Treasury yields is also beginning to raise concerns for broader financial markets. Higher long-term borrowing costs may increase pressure on mortgages, consumer credit conditions and equity valuations if the current trend persists.

Rabobank’s energy team sees the UAE’s departure from OPEC (Organization of Petroleum Exporting Countries) as a potential catalyst for further cartel erosion and structurally lower Oil prices. With spare capacity and new US swapline and defence ties, the UAE can ramp production and possibly prioritise allies. The authors warn this shift could deepen geopolitical segmentation between OPEC, NOPEC producers and emerging energy ‘stacks’.

Cartel under pressure from geopolitics

"The UAE’s withdrawal from OPEC/+ after six decades of membership allows it unrestricted control over its oil production to capitalise on its substantial spare capacity."

"By exiting OPEC, the UAE gains full sovereignty to ramp up output and can now pursue maximum economic returns, if OPEC does not fracture further, diversify funding for non-oil ambitions, and position itself as a high-volume supplier."

"The UAE’s OPEC exit is a geostrategic win for the US because it may encourage the further break-up of the cartel, increase oil output, and help reduce energy prices after the Iran War is over."

"However, a larger shift may be in play via the following question: who will the UAE prioritise its extra oil sales to – anyone, or its geopolitical allies and the partners they prefer?"

"Then we have OPEC, where the bulk of global energy production is centred. There, a drift towards energy stacks may start, as the UAE underlines."

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