Forex News

Nomura reports that the Swiss National Bank kept its policy rate at 0.00% in June and reiterated an increased willingness to intervene in FX markets if necessary to curb Swiss Franc strength. With inflation still within the 0–2% target and only slightly higher near-term projections, Nomura expects the SNB to hold rates at 0.00% for the foreseeable future.

SNB holds rates and keeps FX tool ready

"The Swiss National Bank (SNB) left its policy rate at 0.00% at its June meeting, as we and consensus expected. It maintained guidance, introduced at the last meeting, that it has ​​​​​​”an increased willingness to intervene” in FX markets to curb CHF appreciation pressures, in line with what we expected."

"However, in a very marginal change, it added that it will do so “if necessary”, perhaps in acknowledgement that CHF has depreciated against EUR since March. Indeed, at the press conference Chairman Schlegel noted that CHF has depreciated since the last decision and the adjustment of the statement language was appropriate."

"The SNB revised up its conditional inflation forecast for 2026, as a result of energy price pressures, to 0.6% (from 0.5%). However, it sees medium-term inflationary pressures as virtually unchanged compared with the previous forecast (Figure 3)."

"The SNB highlighted the resilience of the Swiss economy despite risks from the Iran war, and maintained its expectation that GDP growth will be around 1% for 2026 as a whole."

"We believe the SNB will leave its policy rate unchanged at 0.00% for the foreseeable future. The SNB has some breathing space, as inflation is comfortably within its target range of 0-2%. Higher global energy prices have added upward inflation pressure, which likely reduces any urgency to discuss lowering the policy rate into negative territory to prevent deflation."

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

• EUR/GBP hits Fresh three-week highs at 0.8674 after the BoE's interest rate decision.
• The VBoE left rates unchanged at 3.75% with two policymakers calling for a hike.
• Grim German IFO inflation and growth forecasts are weighing on the Euro on Thursday.

The Euro (EUR) accelerated its recovery against a weaker British Pound (GBP) on Thursday, following the Bank of England’s (BoE) decision to leave interest rates unchanged. The EUR/GBP pair has broken above the previous June’s peak in the 0.8655 area and is exploring fresh three-week highs at 0.8670 at the time of writing.

The BoE posted no surprises on Thursday and left the Bank Rate unchanged at 3.75% as widely expected. The decision was approved by 7 votes to two, as Swati Dhingra joined Huw Pill in calling for a 25-basis-point rate hike.

The summary of the bank’s monetary policy meeting observed the moderation in inflationary pressures shown by May’s data. The BoE also cut inflation forecasts for this year, while warning about volatile energy prices, and revised up forecasts for underlying growth from April’s estimates.

UK unemployment falls with wages growing fast

Earlier on the day, data released by National Statistics showed that the UK Unemployment Rate declined to 4.9% in the three months to April, down from 5% in the previous period, against market expectations of a steady 5% rate

The report also stated that the UK economy created 100K jobs in the mentioned period, down from the previous 148K increase, but above the 80K consensus. In this context, wages continued growing at a strong pace, with Average Earnings Excluding Bonus steady at 3.4%, against expectations of a slowdown to 3.2%. Including bonuses, salaries grew at a 4.4% yearly rate, unchanged from the previous month.

In the Eurozone, the German IFO institute confirmed the outlook of strong inflation and sluggish growth for the region’s major economy, which is likely to act as a headwind for Euro rallies. IFO forecasts show that German inflation is expected to average 2.9% this year and 2.7% in 2027,  while the economy is seen growing 0.8% this year, unchanged from previous estimations, and another 0.8% in 2027, this one revised down 1.2%.

Deutsche Bank’s Chief UK Economist Sanjay Raja notes that the Bank of England kept Bank Rate at 3.75%, matching their expectations. He highlights a more divided MPC on paper but a stronger consensus to hold rates, citing improved data, lower wage and price inflation, and an Iran/US deal. Raja expects Bank Rate to stay on hold through 2024, with cuts resuming from spring 2025.

MPC maintains hawkish bias and flexibility

"As expected, the Bank of England kept Bank Rate steady at 3.75% – in line with our call and market expectations."

"First, the MPC may, on paper, be more divided than in April – but there is a stronger consensus to keep Bank Rate on hold for now."

"Second, for the MPC, recent data outturns combined with an Iran/US deal has meant that the risks around second-round effects have receded."

"Third, the MPC has retained full optionality heading into summer."

"We expect Bank Rate to remain on hold through the remainder of the year."

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

BNY’s Bob Savage observes that recent ECB hikes have found few followers among other European central banks, with the BoE, SNB, Norges Bank and Riksbank all on hold. Inflation concerns remain largely domestic, while markets continue to price downside growth risks in the Euro area. This divergence underscores cautious policy stances across Europe.

ECB tightening lacks regional backing

"ECB hikes find few followers in Europe: The BoE, SNB, Norges Bank and Riksbank remain on hold."

"Regional inflation concerns remain largely domestically driven, and markets continue to see downside growth risks in the euro area."

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

• GBP/USD extends losses below 1.3220 following the BoE's interest rate decisions.
• The Bank left its benchmark rate unchanged at 3.75% as widely expected.
• Data released earlier on the day revealed that UK unemployment declined unexpectedly in April.

The British Pound (GBP) remains on the defensive against the US Dollar (USD) on Thursday, with the GBP/USD pair hitting fresh two-month lows near 1.3200, following the Bank of England’s (BoE) decision to leave interest rates unchanged.

No surprises at June’s BoE monetary policy meeting. The Bank Rate remains steady at 3.75% as widely expected, with two policymakers calling for a rate hike, as Swati Dhingra joined Huw Pill on the hawkish side. The bank also cut inflation forecasts for this year and upgraded underlying growth compared to April’s estimates.

UK Unemployment Rate declined unexpectedly in April

Earlier on the day, data released by National Statistics showed that the UK Unemployment Rate declined to 4.9% in the three months to April, down from 5% in the previous period, against market expectations of a steady 5% rate

The report also stated that the UK economy created 100K jobs in the mentioned period, down from the previous 148K increase, but above the 80K consensus. In this context, wages continued growing at a strong pace, with Average Earnings Excluding Bonus steady at 3.4%, against expectations of a slowdown to 3.2%. Including bonuses, salaries grew at a 4.4% yearly rate, unchanged from the previous month.

The pound, however, remains on its back foot as the Federal Reserve (Fed) delivered a rather hawkish hold, in the first meeting chaired by Kevin Warsh, which sent the US Dollar rallying across the board. The bank left its benchmark rate in the 3.50%-3.75% range, but removed language hinting at an easing bias from the statement, and the interest rate projections showed that nearly half of the board members foresee a rate hike before the end of the year. 

Rabobank’s FX Strategy report argues the Euro played a significant role in last year’s strong EUR/USD rally, supported by Germany’s debt brake loosening and improved European growth expectations. The bank now sees Europe’s outlook dampened by inflationary effects from the Strait of Hormuz closure and expects ECB growth forecasts to be revised lower. Rabobank maintains below-consensus EUR/USD projections, with a 3‑month target of 1.16.

Euro’s role and tempered outlook

"In our view, the EUR’s part in the strong directional move higher in EUR/USD last year is often underestimated. While the USD’s fall last year has been well documented, the EUR had a key part to play in the move higher in EUR/USD. Early last year, the single currency was propelled by the loosening in Germany’s debt brake and by resultant optimism about Europe’s growth prospects."

"This year, Europe’s growth prospects have been set back by the inflationary implications related to the closure of the Strait of Hormuz, with much damage already incurred. Although the latest forecasts from the ECB did not show a significant decrease in growth forecasts, we see risk that these will be pared back further in the next forecasting round."

"While the EUR has found some support in the past few months from ECB rate hike expectations, these have been in the price for some time. While we see some scope for a recovery in EUR/USD in the months ahead, we retain below consensus forecasts for EUR/USD. Our 3-month forecast stands at EUR/USD1.16."

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

Societe Generale’s Kit Juckes notes that the Dollar Index is closely tracking EUR/USD and highlights how President Trump’s policies weakened the Dollar relative to what economic and monetary fundamentals implied. He argues the Dollar is now recoupling with relative interest rates and is testing 12‑month highs after stubborn inflation and resilient growth led the FOMC to deliver a less dovish message.

Dollar tracks rates and FOMC stance

"Whether I look at the Dollar Index, or its near-mirror, EUR/USD, it’s very easy to see the influence that President Trump had on the dollar last year, weakening relative to where the economy and monetary policy settings might have been expected to take the dollar."

"It’s equally easy to see that gradually, the dollar is recoupling with relative rates."

"This could change again, of course, but on a morning after stubborn inflation and resilient growth persuaded the FOMC, and its new Chairman, to deliver a significantly less dovish message than many expected, the dollar is testing 12-month highs."

"Our economists’ central case is that Fed rates will be on hold throughout this year, but high (and sticky) inflation, and a booming equity market, will..."

"E-mails are susceptible to alteration."

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

Brown Brothers Harriman notes Norges Bank kept its policy rate at 4.25% but delivered a hawkish hold by reinforcing guidance for another hike at an upcoming meeting. The updated rate path now peaks at 4.55% by year-end, slightly above March projections, though the bank says this offers only limited fresh support for the Norwegian Krone.

Higher policy path but limited NOK boost

"The Norges Bank delivered a hawkish hold.The Norges Bank left the policy rate unchanged at 4.25% (widely expected) and firmed up its guidance of another hike “at one of the forthcoming monetary policy meeting.”"

"The Norges Bank’s updated policy rate path is a little higher in line with the pricing from the swaps curve, offering limited fresh support for NOK. The Norges Bank now sees the policy rate peak at 4.55% by year-end vs. 4.35% in March, adding “a somewhat tighter monetary policy stance will likely be needed to return inflation to target within a reasonable time horizon.”"

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