Forex News

European Central Bank (ECB) Governing Council member and head of Lithuania's central bank, Gediminas Simkus, said during European trading hours on Friday that the chances of an interest rate hike in the near term are higher than maintaining the status quo. Simkus also ruled out fears of second-round effects of higher inflation.

Additional remarks

$100 oil will have repercussions on inflation.

Inflationary environment has increased.

No value in rushing with a decision now.

In September, again we'll have additional inflation data.

Still see probability of rate hike higher than hold.

We do not see second-round effects of higher inflation.

Inflation seen higher than target for a long time.

 Market reaction

A slight recovery move is seen in the Euro (EUR) following ECB Simkus's remarks. At press time, EUR/USD trades 0.1% higher to near 1.3325.

• The S&P Global flash PMIs for July are expected to show stable business expansion. 
• Investors will pay close attention to comments surrounding input costs.
• EUR/USD remains technically bearish in the near term. 

S&P Global will release the July flash Purchasing Managers' Indices (PMIs) for the United States (US) on Friday. These surveys of top private-sector executives are seen as an early indicator of the country’s economic health.

Market participants anticipate the S&P Global Services PMI to decline slightly to 51.0 from 51.2 in June, while the S&P Global Manufacturing PMI is expected to edge higher to 54.5 from 53.9, with both prints remaining in the expansion territory above 50. In addition to headline PMI figures, the surveys also include comments on employment and input inflation, which could influence the US Dollar’s (USD) valuation. 

What can we expect from the next S&P Global PMI report?

While PMI surveys are forecast to reaffirm healthy business conditions in the private sector, details surrounding input costs could ramp up market volatility. Although the softer-than-expected June inflation data from the US eased bets for a Federal Reserve (Fed) interest rate hike in July, the recent increase in Oil prices caused investors to refrain from pricing in a prolonged policy hold.

With the US and Iran ramping up military aggression in the Middle East, the barrel of West Texas Intermediate (WTI) is up nearly 30% in July. In the meantime, the CME FedWatch Tool shows that markets are pricing in a nearly 80% probability of an at least 25 basis points (bps) Fed rate hike by September.

Previewing the PMI data, “we expect both the S&P manufacturing and services PMIs to improve in July. Manufacturing is likely to rebound to 54.5, in line with strong regional surveys in the month (Empire and Philly Fed),” TD Securities analysts said.

“Meanwhile, services is likely to continue improving to 51.5. NY Fed services improved in July, and we expect S&P to begin catching up to ISM,” they added. 

When will the July flash US S&P Global PMIs be released and how could they affect EUR/USD?

The S&P Global Manufacturing, Services, and Composite PMIs reports will be released at 13:45 GMT on Friday. As previously noted, they are expected to show that US business activity continued to expand in July.

In case the publication suggests that business owners are facing increasing input costs in July and considering transferring those costs to customers by raising prices, markets could see that as a sign of inflationary pressures resurfacing again in July. In this scenario, the USD could continue to gather strength heading into the weekend and weigh on EUR/USD.

Conversely, an unexpected drop into the contraction territory below 50, in either the headline Manufacturing or the Services PMI, could hurt the USD with the immediate reaction and help EUR/USD hold its ground.

Middle East tensions risk being underplayed in early July PMI signals

Analysts at Rabobank caution that the initial July PMI signals may not fully capture the latest geopolitical and commodity-market developments. They argue that “this preliminary reading may understate the impact of the escalation in the Middle East,” noting that “the July poll was probably conducted in the past two weeks, so the results may be skewed if many respondents replied early – and therefore could not fully factor in the current situation in the Middle East, or this week’s increase in oil prices.”

Eren Sengezer, European Session Lead Analyst, shares a brief technical outlook for EUR/USD:

“EUR/USD trades below the 20-day Simple Moving Average (SMA) following multiple failed attempts to clear that level earlier in the week. Additionally, the Relative Strength Index (RSI) indicator on the daily chart stays near 40, reaffirming the bearish stance.”

“On the downside, 1.1370-1.1350 (Bollinger Band lower arm, static level) aligns as the first support area ahead of 1.1270 (static level) and 1.1160 (static level). Looking north, the immediate resistance level could be spotted at 1.1420 (20-day SMA), followed by 1.1470 (Bollinger Band upper arm) and 1.1570 (100-day SMA).”

(This story was corrected on July 24 at 10:36 GMT to say when the July flash US S&P Global PMIs will be released and how they could affect EUR/USD, not June.)

According to Commerzbank’s Tatha Ghose, the Central Bank of the Republic of Türkiye (CBRT) kept its one-week repo rate at 37.0% and maintained the corridor at 35.5%-40.0%. With the repo window still closed, effective funding remains near 40%, which Ghose views as Lira-supportive. Renewed Oil price gains, rising inflation expectations and fragile FX reserves justify CBRT’s cautious stance.

High effective rate seen lira-positive

"Turkey’s central bank (CBRT) left its one-week repo rate at 37.0% yesterday, as unanimously expected; and also left the interest rate corridor unchanged at 35.5%-40.0%. The repo rate is still not the effective interest rate because CBT has kept the weekly repo window closed since the Iran shock, pushing funding towards the 40% overnight lending facility."

"Hence, we think that whenever CBRT officials hint at gradually bringing back repo, that will tantamount to a rate cut – and prove problematic for the exchange rate. CBRT did not provide such a signal, or hint about timing, yesterday, which counts as positive news."

"But, it was not entirely surprising given the renewed jump in oil prices. The statement cited rising energy prices and geopolitical uncertainty, while noting that the underlying inflation trend had softened slightly in June, but would rise again in July. This is precisely the problem. "

"June’s CPI data looked better in raw month-on-month terms, but even that still implied 1.8%m/m after seasonal adjustment. July may move back above 2%m/m, helped by administered price increases and the unwinding of the fuel tax discount."

"So the question is: should we still look back at an outdated data-point and be encouraged by it? Or, should we ignore it? Inflation expectations have worsened again, FX reserves are not yet comfortable, and the balance of payments remains vulnerable."

"For now, CBRT gave no immediate signal about when effective funding could be normalised back down from 40% to 37%. And that, by itself, has to count as lira-positive, at the margin."

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

• EUR/GBP trades around 0.8550 on Friday, little changed on the day.
• Flash PMIs from Germany, the Eurozone and the United Kingdom all beat market expectations.
• Risk aversion driven by Middle East tensions limits the reaction of European currencies.

EUR/GBP trades around 0.8550 at the time of writing on Friday, remaining broadly stable despite a series of stronger-than-expected economic releases from the Eurozone and the United Kingdom (UK). Investors continue to favor a cautious stance as escalating geopolitical tensions in the Middle East overshadow the positive macroeconomic data and keep currency market moves limited.

Preliminary S&P Global surveys point to a stronger-than-expected improvement in economic activity across Germany and the Eurozone. Germany's Manufacturing Purchasing Managers Index (PMI) jumps to 52.2 in July from 50.3 in June, well above the 50.1 consensus forecast. Germany's Composite PMI also returns to expansion territory at 51.2, supported by a strong rebound in manufacturing activity, while the services sector remains slightly below the 50 threshold.

Across the Eurozone, Manufacturing PMI also accelerates, rising to 52 from 51.4 and beating expectations of 51.3. Services activity also returns to expansion territory with a reading of 51.6, lifting the Composite PMI to 51.9, comfortably above market expectations. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said the Eurozone economy is enjoying a welcome revival in July, while warning that the geopolitical environment continues to cloud the outlook.

The British Pound (GBP) also draws support from stronger domestic data. UK Retail Sales rise by 1% MoM in June, defying expectations for a 0.3% decline. Meanwhile, the preliminary S&P Global surveys show the Services PMI returning to expansion at 51.8, while the Manufacturing PMI accelerates to 52.8, both exceeding market forecasts. As a result, the Composite PMI climbs to 52.1, pointing to stronger overall business activity at the start of the third quarter.

On the monetary policy front, European Central Bank (ECB) Governing Council member Martin Kocher said he sees no hard evidence of second-round inflation effects, while stressing that the ECB remains vigilant and stands ready to act should the inflation outlook deteriorate. He nevertheless acknowledged that recent developments in Oil markets remain a source of concern.

Despite the encouraging economic releases, the Euro (EUR) and the British Pound struggle to extend their gains. Concerns about the economic consequences of the conflict in the Middle East, higher energy prices and the latest tariff announcements from the US President Donald Trump administration continue to fuel risk aversion, supporting safe-haven assets and limiting moves in EUR/GBP.

Silver prices (XAG/USD) rose on Friday, according to FXStreet data. Silver trades at $58.40 per troy ounce, up 1.98% from the $57.27 it cost on Thursday.

Silver prices have decreased by 17.84% 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 69.50 on Friday, down from 70.72 on Thursday.

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

• The Indian Rupee attracts significant bids against the US Dollar on provisional RBI support.
• Higher oil prices will likely keep the Indian Rupee under pressure.
• US Treasury Yields surge on revival of hawkish Fed bets.

The Indian Rupee gains strongly after a flat opening against the US Dollar (USD) on Friday. The USD/INR pair declines to near 96.50 as the Reserve Bank of India (RBI) has intervened again to support the Indian Rupee.

According to a Reuters report, the Indian central bank is likely selling US dollars near 96.80 INR levels. The report also showed that state-run banks were spotted offering US dollars, most likely on the RBI's behalf.

On Thursday, the RBI also intervened in spot and non-deliverable forwards (NDFs) markets to provide a cushion to the Indian currency.

However, the provisional support by the RBI is expected to be short-lived as surging oil prices and the revival of Federal Reserve (Fed) interest rate expectations will likely batter the Indian Rupee soon.

Escalating US-Iran conflicts keep oil prices higher

Oil prices have rallied significantly in the past few weeks due to renewed military aggression between the United States (US) and Iran. In retaliation, Yemen’s Iran-aligned Houthis have closed the Bab el-Mandeb Strait, the southern gateway of the Red Sea, which has squeezed global energy supply further.

No signs of a diplomatic breakthrough between the nations have prompted fears that oil supply tightness could be prolonged, a scenario that bodes poorly for currencies from economies, such as India, which rely heavily on oil imports to fulfill their energy needs.

Rising oil prices revive hawkish Fed bets

Fed interest rate hike expectations have shown a resurgence as surging oil prices have de-anchored inflation projections. According to the CME FedWatch tool, the odds of the Fed delivering an interest rate hike at the policy meeting next week stand at 35.8%, significantly higher than the 11.8% recorded last week.

The revival of hawkish Fed bets has prompted US Treasury Yields, which typically result in diminishing the appeal of risky currencies. At press time, US Treasury Yields trade at around 4.70%, the highest level seen since January 2025.

Higher US bond yields have also strengthened the US Dollar. In the Asian trade, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades firmly near the three-week high at around 101.50 posted on Thursday.

India's private sector PMI growth cools down

India's flash HSBC Composite Purchasing Managers' Index (PMI) data for July arrives at 54.3, lower than 57.1 in June. A slowdown in both manufacturing and service sector activity has weighed on the overall PMI number.

"Renewed tensions in the Middle East have once again resulted in firms building buffers to manage the uncertainties around the longevity of the supply-side shock. Finished goods and input inventories increased alongside a pick-up in purchasing volumes. Both, output and new export orders rose, even as the overall manufacturing growth eased slightly. Price pressures firmed, with output charge inflation gathering pace and signalling a renewed push to protect margins," Pranjul Bhandari, Chief India Economist at HSBC, said.

Technical Analysis: USD/INR struggles to revisit all-time high at 97.10

USD/INR trades lower at around 96.50, but is holding its advance above the 20-day Exponential Moving Average (EMA) at 95.9678 and keeping a constructive bullish bias intact.

The positioning over this short-term trend gauge suggests dips are being absorbed, while the Relative Strength Index (RSI) around 61 points to firm but not yet overbought upside momentum.

On the downside, immediate support is located at the 20-day EMA near 95.97, where buyers would be expected to defend the uptrend on pullbacks. Looking up, the all-time high at around 97.10 will be the key resistance level

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

ING’s Chris Turner notes the US Dollar (USD) is supported as higher energy prices fuel expectations of further central bank tightening, with markets pricing more hikes from the European Central Bank (ECB) and Bank of England (BoE). While ING does not expect the Federal Reserve (Fed) to hike next week, Turner warns it is dangerous to fight the trend and sees US Dollar Index (DXY) potentially breaking above June’s 101.80 high.

Fed credibility and energy-driven support

"The dollar continues to perform well as high energy prices raise expectations for a central bank response."

"President of the ECB, Christine Lagarde, made it pretty clear yesterday that the central bank would be hiking in September, and markets now price a further 75bp of tightening for both the ECB and the Bank of England. That seems excessive, but is hard to fight unless energy prices turn sharply lower soon."

"Crucially – and after the June FOMC meeting – the market believes the Federal Reserve will have to respond as well. Since that June FOMC meeting, two-year real USD swap rates have risen 30bp as investors buy into the only message we have heard from the Fed – the need to restore credibility when it comes to fighting inflation."

"US data today is relatively light – just July S&P PMI readings and new home sales. But with US President Donald Trump threatening a fresh military onslaught on Iran, expect investors to hold onto their long dollar balances into the weekend. DXY is not far from June's 101.80 high and an upside break-out cannot be ruled out."

"While we do not think the Fed will hike next week, it remains very dangerous to fight this trend and, as we have been saying all week, we expect the dollar to outperform."

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

• GBP/USD returns to the 1.3320 area after rejection at 1.3340.
• Stronger-than-expected UK business activity and Retail Sales figures have failed to lift the Pound.
• The safe-haven US Dollar is trading higher across the board amid growing geopolitical risks and new trade tariffs

The British Pound (GBP) remains depressed near three-week lows against the US Dollar (USD) on Friday, with upside attempts capped below 1.3340, and on track for a 1% weekly decline. The upbeat UK Preliminary S&P Global Purchasing Managers Index (PMI) and Retail Sales reports failed to lift the Pound, heavily weighed by risk-averse markets and increasing fiscal concerns in the UK.

Preliminary data for July revealed that UK business activity expanded beyond expectations in both the manufacturing and services sectors. The S&P Global Manufacturing PMI rose to 52.8. from 52.5 in June, against market expectations of a slowdown to 52.0. The Services PMI returned to expansion levels at 51.8 in July from 48.8 in June, also beating market expectations of a milder improvement to 49.4.

A few hours earlier, data released by National Statistics showed an unexpected 1% increase in retail consumption in June, beating the market consensus, which had anticipated a 0.3% decline. Year-over-year, Retail Sales increased 4.2%, almost twice the 2.3% increment forecasted by market experts.

UK data, however, has failed to offset the US Dollar's strength amid the risk-averse market mood. Reports of attacks on Saudi vessels in the Red Sea have pushed Brent Oil to levels near $100, fuelling inflationary concerns across the globe and sending US Treasury yields to multi-month highs. If that was not enough, the Trump administration announced new tariffs of 10 to 12% on 60 trading partners, including the UK, as temporary 10% global tariffs expire, further souring investors' sentiment.

Sterling strength seen on weak foundations

The Sterling, on the other hand, has been suffering from weaknesses of its own this week, with investors growing increasingly wary that Prime Minister Andrew Burnham’s spending plans might endanger the UK's fiscal stability.

In that sense, analysts at ING argue that the recent bout of Pound strength is unlikely to prove durable, stressing that “Sterling’s rally has been driven more by positioning, carry and potentially some M&A flows than by a lasting improvement in UK fundamentals.”

ING experts warn that “Sterling’s summer rally (...) looks to be built on weak foundations,” with “UK short-dated rates likely to drift lower and fiscal risks set to return ahead of the autumn.” Against that backdrop, ING expects “sterling to hand back recent gains.”

• USD/JPY consolidates the previous day’s strong gains amid looming intervention risks.
• The wide US-Japan rate differential holds back the JPY bulls from placing aggressive bets.
• US-Iran tensions and Fed rate hike expectations favor USD bulls, supporting spot prices.

The USD/JPY pair edges lower on Friday as bulls turn cautious in anticipation of a potential government intervention to prop up the Japanese Yen (JPY). Nevertheless, spot prices remain within striking distance of the four-decade high, touched on Thursday, and the 164.00 mark amid a supportive fundamental backdrop.

A stark contrast in monetary policy between Japan and the rest of the world keeps the so-called carry trade active, which might continue to undermine the JPY. Despite the recent Bank of Japan (BoJ) rate hike to 1%, or the highest since 1995, borrowing costs in Japan remain exceptionally low relative to other major economies, including the US. Furthermore, economic risks stemming from energy supply disruptions due to the Middle East conflict contributed to the JPY's relative underperformance.

The US military announced that it has completed another round of strikes against Iran on Thursday, marking the 13th straight night of operations. Meanwhile, Iran and its allies launched retaliatory strikes against US-linked military assets in Kuwait, Bahrain and Jordan. Adding to this, Iran-aligned Houthis extended the Middle East war to a second major shipping chokepoint and struck two Saudi oil tankers in the Red Sea, describing the action as part of a naval blockade against Saudi Arabia.

This comes on top of the closure of the Strait of Hormuz and further exacerbates supply disruption concerns, lifting crude oil prices to a fresh high since June 11 on Thursday. Investors remain worried that elevated energy prices will rekindle inflationary pressure and force major central banks, including the US Federal Reserve (Fed), to adopt a more hawkish stance. Moreover, data showed on Thursday that US Jobless Claims fell to the lowest level since September 1969, pointing to a resilient labor market.

This reaffirmed market expectations that the US central bank will raise borrowing costs by the end of this year, which favors the US Dollar (USD) bulls and backs the case for the emergence of dip-buying around the USD/JPY pair. Traders, however, seem hesitant and opt to move to the sidelines ahead of the highly anticipated FOMC policy meeting next week. Nevertheless, spot prices remain on track to register strong weekly gains for the third straight week and seem poised to climb further.

• Gold recovers from the daily low amid a modest USD pullback, though it lacks follow-through.
• Elevated crude oil prices fuel inflation fears and bolster Fed hike bets, undermining the bullion.
• Escalating US-Iran tensions and Trump’s tariffs favor USD bulls, capping the precious metal.

Gold (XAU/USD) builds on its modest intraday bounce and climbs back above the $4,050 level, hitting a fresh daily high during the first half of the European session on Friday amid a modest US Dollar (USD) pullback. The fundamental backdrop, however, warrants some caution before confirming that the pullback from an over two-week high, touched on Wednesday, has run its course and positioning for any meaningful upside. Crude oil prices remain elevated amid escalating US-Iran tensions, fueling inflation fears and bolstering expectations of higher-for-longer US interest rates. This might continue to act as a tailwind for the USD and keep a lid on the non-yielding bullion.

The US military announced that it has completed another round of strikes against Iran on Thursday, marking the 13th straight night of operations. In a statement, US Central Command (CENTCOM) said that its forces targeted “Iranian military command centers, drone storage facilities, communication networks, coastal surveillance sites, and maritime capabilities.” The attack was aimed at diminishing further the threat Iran poses to civilian mariners and commercial vessels transiting the Strait of Hormuz.

The latest strikes come amid a widening regional confrontation, with Iran and its allies launching retaliatory strikes against US-linked military assets in Kuwait, Bahrain and Jordan. Moreover, Iran-aligned Houthi forces struck two Saudi oil tankers in the Red Sea, describing the action as part of a naval blockade against Saudi Arabia and extending the Middle East war to a second major shipping chokepoint. This exacerbates supply disruption concerns and lifts crude oil prices to a fresh high since June 11.

Investors remain worried that elevated crude oil prices will rekindle inflationary pressure and force major central banks, including the US Federal Reserve (Fed), to adopt a more hawkish stance. Adding to this, data released on Thursday showed that US Jobless Claims fell to the lowest level since September 1969, pointing to a resilient labor market. This should allow Fed officials to keep their focus on containing inflation, which backs the case for at least one interest rate hike move by the end of this year.

Meanwhile, US President Donald Trump imposed sweeping new tariffs ranging from 10% to 12.5% on 60 of the country's key trading partners, covering 99.4% of US imports. The latest developments threaten to reignite a global trade war, tempering investors' appetite for riskier assets and further benefiting the Greenback's reserve currency status. This, in turn, backs the case for an extension of the XAU/USD pair's pullback from a two-week top, set on Wednesday, as the focus shifts to the FOMC next week.

XAU/USD 4-hour chart

Gold bears have the upper hand while below 200-EMA pivotal resistance

From a technical perspective, this week's failure near the 200-period Exponential Moving Average (EMA) and the subsequent fall suggest that the recent bounce from the $3,960-$3,959 area, or the monthly low, has run out of steam. Adding to this, the Moving Average Convergence Divergence (MACD) indicator is in negative territory, with the line deeply below zero, while the Relative Strength Index (RSI) sits near 41, hinting that downside momentum remains in play.

Some follow-through selling below the $4,000 psychological mark and the $3,980-$3,975 support will reaffirm the negative outlook, setting the stage for deeper losses. Meanwhile, intraday floors are likely to be determined by prior price reactions rather than well-established indicator-based levels. On the topside, initial resistance is defined by the 200-period EMA at $4,158.08, and only a sustained recovery above this medium-term barrier would start to ease the prevailing downside pressure.

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