Forex News

Scotiabank strategists Shaun Osborne and Eric Theoret describe USD/CAD around 1.4215 as consolidating, with the Canadian Dollar retaining a soft undertone despite narrower US–Canada front-end spreads. They note United States-Mexico-Canada Agreement (USMCA) non-renewal prolongs trade uncertainty, while the Bank of Canada's (BoC) Q2 Business Outlook Survey may reflect this. CAD is seen as fundamentally cheap, but its undervaluation versus equilibrium has narrowed, implying limited upside potential.

CAD soft as trade risks linger

"The CAD retains a soft undertone. While front-end US/Canada spreads have narrowed over the past week, the CAD has been unable to pick up any ground."

"Confirmation that the US would not renew the USMCA agreement was perhaps no great surprise and while there is still room for trade talks to progress, the outcome means a prolonged period of uncertainty for Canadian and Mexican exporters."

"The BoC’s Q2 Business Outlook Survey this morning is likely to reflect that uncertainty to some extent at least. The CAD continues to look fundamentally cheap but the undervaluation relative to our equilibrium estimate (1.4141 this morning) has narrowed steadily over the past month which points to limited upside potential for the CAD."

"But there is also the possibility that the sustained USD rally over the past six weeks is merely pausing ahead of another push higher. The 1.4250/00 range should continue to offer some resistance to a USD advance for now. Support is 1.4150 and 1.4075/80."

"Neutral—USD/CAD price action is consolidating. There are some negative signs from short-term price action and the USD remains extremely overbought on the daily RSI oscillator."

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

• GBP/JPY rises to its highest level since January 2008 as the Japanese Yen stays under pressure.
• Wide interest-rate differences continue to support carry trades and weigh on the Yen.
• Traders remain alert for possible intervention from Japanese authorities.

GBP/JPY edges higher on Monday, climbing to levels last seen in January 2008 as the Japanese Yen (JPY) remains under pressure across the board. The Yen resumed its decline after a brief pullback last week, with USD/JPY climbing back to its highest level in four decades. At the time of writing, the cross is trading around 216.75, up 0.60% on the day.

The persistent weakness in the Yen is keeping traders alert to the risk of foreign exchange intervention, with Japanese officials repeatedly stating they stand ready to act against excessive currency moves if necessary.

The Yen's recent weakness increasingly appears to be driven by crowded speculative bets. However, structural headwinds remain, including plans by Japan's Prime Minister to increase government spending, which could worsen the fiscal outlook at a time when the country's debt-to-GDP ratio is already above 250%.

The Bank of Japan (BoJ) ended more than a decade of ultra-loose monetary policy in March 2024 and has gradually raised interest rates since then, lifting its policy rate to 1.0% from 0.75% at its June meeting, the highest level since 1995. Even so, the pace of policy normalization remains slow, leaving Japan's interest rates well below those of other major economies.

The wide interest-rate differential continues to weigh on the Yen by encouraging carry trades, in which investors borrow at Japan's relatively low borrowing costs to invest in higher-yielding currencies such as the British Pound (GBP).

Meanwhile, the BOJ's hawkish stance has lifted Japanese Government Bond (JGB) yields, but the move has failed to support the Yen because higher yields also raise future debt-servicing costs. The benchmark 10-year JGB yield climbed to 2.83% on Monday, its highest level since May 1997.

With the UK and Japan economic calendars relatively light this week, traders are likely to keep a close eye on any signs of foreign exchange intervention from Japanese authorities.

Societe Generale analysts describe AUD/USD extending its pullback after breaking below the May trough around 0.7070 and retesting the 200-DMA near 0.6870/0.6830, aligned with March lows. They stress this zone as key support, noting November 2025’s correction also held there. With risk tone crucial, a short-term rebound is possible while 0.7070/0.7090 caps upside.

Key moving averages and range levels

"AUD/USD has experienced an extended pullback after breaking below the May trough around 0.7070."

"The pair has recently retested the 200-DMA around 0.6870/0.6830, which also coincides with the March lows."

"Notably, the correction in November 2025 found support near this MA."

"If AUD/USD defends the support zone around 0.6870/0.6830, a short-term rebound cannot be ruled out."

"The recent lower high near 0.7070/0.7090 may act as an important hurdle."

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

BNY’s Geoff Yu notes that OPEC+ has ratified another production quota increase, extending gradual supply normalization and adding pressure on Brent and WTI. Yu highlights that lower Oil prices, if sustained, could ease a key macro headwind for risk assets and support expectations that major central banks’ next moves will lean toward easier policy rather than renewed tightening.

OPEC+ adds to downside pressure

"OPEC+ has agreed another 188,000 bpd production increase for August, extending the gradual normalization of supply and maintaining the downward pressure on crude prices."

"The move continues a phased unwinding of production curbs introduced a few years ago and lifts the total quota increase since the war began to 940,000 barrels/day, or close to 1% of global demand."

"The decision comes as Gulf exporters restore shipments after an interim peace pact, while Brent has fallen sharply from war highs to close to $72/barrel."

"If sustained, lower energy prices will remove one of the key macro headwinds for risk assets and reinforce the view that the next move by major central banks is more likely to be toward easier policy than renewed tightening."

"The alliance now faces pressure over unity, market share and the risk of a future global supply glut."

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

MUFG’s Lee Hardman highlights that EUR/USD is trading just above 1.1400, testing the bottom of its 1.1400–1.1800 range. The Euro has faced selling on weaker data and reduced ECB hike expectations, but recent indicators show resilience. Stronger industrial output and improving confidence lead MUFG to see scope for EUR/USD to move back towards the top of the range as the ECB delivers one final hike.

Euro resilience within established range

"EUR/USD is trading just above the 1.1400-level at the start of this week after one failed attempt break below on sustained basis at the end of last month. The pair is currently testing the bottom of the 1.1400-1.1800 trading range that has been in place over the past year."

"The resilience of the euro area economy is a supportive development for the euro and should help to limit further selling pressure. In addition, a faster-than-expected reversal of the energy price shock should improve investor sentiment towards both the euro area economy and the euro over the remainder of this year."

"We expect improving cyclical momentum in the euro area to encourage EUR/USD to rebound back towards the top of the 1.1400-1.1800 trading range. We are also assuming still that the ECB will follow through and hike rates one final time in September even though upside inflation risks have eased significantly."

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

TD Securities’ Oscar Munoz and Eli Nir expect the Federal Reserve to keep the Fed funds rate on hold throughout 2026 as US growth moves sideways and inflation stays elevated. They argue the recent jobs report reduces the risk of a July hike and see any policy move this year more likely to be a hike than a cut, with data dependence emphasized under Chair Warsh.

Fed seen on extended policy hold

"The jobs report likely does not alter the Fed's thinking. Underlying employment trends remain healthy, allowing the Fed to stay on hold indefinitely while focusing on the inflation mandate. The lower risk of acceleration in the labor market should also close the door to a July rate hike."

"The FOMC minutes this week could provide additional insight into the policy discussion, but the risk is that it is also pared back as part of Warsh's efforts to limit forward guidance."

"Waller in a panel on Monday will be the Fedspeak highlight of this week. He has not yet commented on future policy since the June FOMC, and choosing not to do so again could signal he is following Warsh's lead with limited forward guidance."

"We expect the Fed to remain on hold over our forecast horizon. Inflation should remain high for the rest of the year, and the labor market has stabilized, allowing the FOMC to shift focus to its inflation mandate. If the Fed were to move this year, we believe that move is more likely to be a hike than a cut."

"Under a new management that espouses a blurrier reaction function, data dependence will gain prominence for determining the path ahead for monetary policy."

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

ING’s Francesco Pesole expects the Reserve Bank of New Zealand (RBNZ) to deliver a 25bp ‘insurance’ hike in July, taking the policy rate to 2.50%, despite the sharp drop in Oil prices. He notes that May’s rate projections have been largely invalidated by lower Oil and softer inflation, and warns this move could end up being a one-off, limiting further New Zealand Dollar (NZD) support.

Insurance hike seen as finely balanced

"The collapse in oil prices makes the Reserve Bank of New Zealand’s 8 July decision more finely balanced. Even so, we expect policymakers to avoid disappointing hawkish pricing and deliver a 25bp ECB-style ‘insurance’ hike to anchor inflation expectations. That said, the risk of this being a one-off move is rising, which can limit NZD upside."

"Back in May, the RBNZ kept rates on hold at 2.25% in a 3-3 split decision, with Governor Anna Breman casting the tiebreaking vote. The hawks’ concerns echoed those across other developed markets: the risk of inflation expectations de-anchoring and second-round effects. Breman opted for patience, but official rate projections signalled 50-75bp of tightening by end-2026."

"But the oil assumptions underpinning those forecasts could not be more different now. The RBNZ assumed Dubai crude at around $95-105/bbl for the rest of 2026, versus current levels near $65. Accordingly, projections for headline CPI above 4.0% until 4Q26 now look unrealistic."

"We therefore expect a 25bp hike to 2.50%, akin to the ECB’s June ‘insurance’ move. We still narrowly see one more hike in 2026, but the risk of this being a one-off has increased materially."

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

Commerzbank’s Tatha Ghose notes that June Turkish Consumer Price Index (CPI) and Producer Price Index (PPI) data were better than expected as the energy shock faded, with headline CPI slowing to 32.1% year-on-year and PPI to 28.1%. However, seasonally adjusted monthly gains imply roughly 24% underlying inflation momentum. Ghose warns this pace remains far from a credible path to single-digit inflation or the Central Bank of the Republic of Türkiye's (CBRT) 5% target, limiting scope for policy easing.

Underlying price pressures constrain CBRT options

"Turkish CPI/PPI data from last Friday broadly matched the preview we outlined: headline CPI slowed to 32.1%y/y, core eased slightly, and both implied a seasonally-adjusted 1.8%m/m increase."

"In other words, the “soft” 0.9%m/m raw print still translates into roughly 24% underlying inflation momentum, both for headline and core."

"This is a clear improvement from the Iran-war spike months, but such a rate of fresh price increase is nowhere near a credible path towards single-digit inflation, let alone CBRT’s long-term 5% target"

"The producer side gave a similar message. PPI eased to 28.1%y/y, with a 1.8%m/m rise after 2.8%m/m in May."

"So the cost channel has cooled a bit, but it is not yet offering genuine disinflation support."

"In conclusion, June’s data were better-than-expected as the energy shock retreated, but underlying inflation is still far too fast to offer meaningful relief for policymakers, or justify their signals about easing back the rate corridor."

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