Forex News
Commerzbank’s Michael Pfister argues that recent strength in the Pound (GBP) is unlikely to last, as ambitious Bank of England (BoE) rate expectations and renewed political risks weigh on the outlook. The bank forecasts EUR/GBP rising towards 0.89 in coming weeks, while GBP/USD is seen gradually appreciating over the longer term, with current Pound levels not expected to be revisited until 2027.
BoE repricing and UK politics threaten Pound
"Of the G10 currencies, the pound is one of only five to have posted a positive performance since the start of the war, alongside the four major commodity exporters. This surprising performance is based on two factors: the Bank of England (BoE) is expected to respond very decisively, and the political risk premium was priced out in early March. However, we doubt the sustainability of these factors, which is why we expect the pound to weaken in the coming months."
"Instead of anticipating two rate cuts by the end of the year, the market has at times priced in more than three rate hikes. This massive correction naturally gave the pound a strong boost."
"We doubt that the Bank of England will meet these expectations."
"The BoE may raise rates once, but the focus is likely to shift back to rate cuts in the second half of the year. If the market moves in this direction as well, the GBP gains driven by ambitious rate expectations will likely be priced out again."
"Given the ambitious BoE expectations and the ongoing political risks, we believe there is a strong possibility that the pound will come under pressure again in the coming weeks. Although EUR/GBP is now trading close to the 0.86 level again, if the local elections yield a poor result for Labour, the exchange rate is likely to trend towards 0.89."
"Nevertheless, political risks are unlikely to persist indefinitely, so we expect a recovery to begin in the second half of the year. But the current level is unlikely to be reached again until 2027."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
National Bank of Canada (NBC) strategists Stéfane Marion and Kyle Dahms note the Canadian Dollar (CAD) has rebounded sharply, with USD/CAD moving back toward 1.35 as higher Oil prices bolster Canada’s trade and fiscal outlook. They argue markets are overpricing Bank of Canada (BoC) tightening and expect CAD weakness into quarter-end, but retain a constructive view for H2 2026 on pro-energy policy and smoother CUSMA (Canada-United States-Mexico Agreement) talks.
Short‑term setback, medium‑term support
"The Canadian dollar has staged an impressive comeback against the U.S. dollar. After weakening to 1.396 on March 31, a move toward 1.40 that materialized earlier than we had expected, USD/CAD now appears to be converging toward 1.35, a level not seen since 2024."
"The CAD is certainly gaining traction from the potential boost that higher oil prices could provide to Canada’s trade balance—and, by extension, fiscal balances. After surging nearly 50% since the onset of the U.S.–Iran conflict, the current crude oil price shock ranks among the largest since WTI futures began trading in the mid-1980s."
"The Bank of Canada (BoC) held its overnight rate at 2.25% for a fourth consecutive meeting on April 29. Governing Council reiterated its data-dependent stance, emphasizing that it is closely monitoring geopolitical developments and trade dynamics."
"Our rates strategists view this as somewhat aggressive, given weak business investment and ongoing uncertainty surrounding this year’s pending CUSMA renewal, both of which continue to weigh on payroll job creation."
"At this stage, we expect renewed CAD depreciation through quarter-end, as ongoing geopolitical uncertainty and a likely unwinding of Bank of Canada tightening expectations weigh on the currency. For H2 2026, however, we have not abandoned the prospect of CAD appreciation."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- USD/INR appreciates as the US Dollar gains on increased risk aversion amid Middle East concerns.
- Modi’s BJP won a third term in Assam and captured opposition stronghold West Bengal in a key election.
- India’s forex reserves fell from $728.5 billion, while equity outflows hit $19 billion in March and April.
USD/INR extends gains for the third successive day, trading around the fresh record high of 95.40, during the Asian hours on Tuesday. Traders will likely observe India’s HSBC Composite and Services Purchasing Managers' Index (PMI) data to be released on Wednesday.
The USD/INR pair appreciates as the US Dollar (USD) strengthens on safe-haven demand following Iran’s attack on the United Arab Emirates (UAE). CNBC reported Monday that the UAE was targeted by Iranian drones and missiles, while the US said it destroyed Iranian boats in the Strait of Hormuz. US President Donald Trump warned that Iran would be “blown off the face of the earth” if it targets US ships protecting commercial vessels passing through the Strait of Hormuz.
The Indian Rupee (INR) faced challenges as an overnight surge in crude oil prices dampened investor sentiment. Oil prices, however, have since declined as concerns over immediate supply disruptions eased, with the United States (US) Navy taking steps to reopen the crucial Strait after Iran attempted to close it. Maersk, a Danish shipping and logistics company, later confirmed that its Alliance Fairfax, a US-flagged vehicle carrier, exited the strait under US military escort.
Indian Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) clinched a third straight term in Assam and captured opposition stronghold West Bengal in a key election.
On Monday, HSBC Manufacturing Purchasing Managers' Index (PMI) in India came in at 54.7 for April, revised down from the preliminary 55.9 but higher than 53.9 in the prior month. Both output and new orders continued to expand, though growth remained subdued relative to levels seen over the past three and a half years.
Foreign institutional investors (FII) turned net buyers of Indian equities on Monday after nine consecutive days of selling, with inflows totaling 28.36 billion rupees ($298 million). Domestic institutional investors (DII) bought local shares worth 47.64 billion rupees, marking their seventh straight session of purchases, per Reuters.
Stock-specific moves linked to earnings are also expected to remain in focus. Nifty 50 constituents Larsen & Toubro, Mahindra and Mahindra, and Hero MotoCorp are scheduled to announce their quarterly results later in the day.
India’s foreign exchange reserves have declined from a peak of $728.5 billion, while equity outflows reached $19 billion across March and April. Nevertheless, the Reserve Bank of India (RBI) has stated that it remains comfortable with reserve levels sufficient to cover 11 months of imports, though recent policy discussions highlight renewed urgency to strengthen buffers amid ongoing capital outflows.
Technical Analysis: USD/INR nears rectangular channel top, all-time highs near 95.50
USD/INR trades around 95.40 at the time of writing on Tuesday. The technical analysis of the daily chart indicates a potential for a bullish emergence as the pair is testing the upper boundary of the rectangular channel.
However, the USD/INR pair retains a bullish near-term bias as price holds above the nine-day and 50-day Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) at 66.7 points to firm positive momentum edging toward overbought territory, suggesting upside pressure persists while leaving the pair vulnerable to bouts of consolidation if buyers lose traction.
The USD/INR pair is testing the upper boundary of the rectangle, followed by the all-time high of 95.40, which was recorded on May 4. On the downside, the initial support lies at the nine-day EMA of 94.71. A break below the short-term average would lead the pair to test the 50-day EMA at 93.20, followed by the lower rectangle boundary around 92.50 and a seven-week low of 92.14.
(The story was corrected on May 5 at 6:10 GMT to say in the first paragraph to say that the HSBC PMI data will be released on Wednesday, not Tuesday.)
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | INR | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | 0.06% | 0.00% | -0.02% | 0.16% | 0.10% | 0.14% | |
| EUR | -0.04% | 0.00% | -0.02% | -0.03% | 0.12% | 0.06% | 0.25% | |
| GBP | -0.06% | -0.00% | -0.04% | -0.08% | 0.10% | 0.07% | 0.09% | |
| JPY | 0.00% | 0.02% | 0.04% | -0.01% | 0.15% | 0.11% | 0.30% | |
| CAD | 0.02% | 0.03% | 0.08% | 0.00% | 0.16% | 0.11% | 0.32% | |
| AUD | -0.16% | -0.12% | -0.10% | -0.15% | -0.16% | -0.04% | 0.15% | |
| NZD | -0.10% | -0.06% | -0.07% | -0.11% | -0.11% | 0.04% | -0.01% | |
| INR | -0.14% | -0.25% | -0.09% | -0.30% | -0.32% | -0.15% | 0.01% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
BNY’s John Velis reviews the April Federal Open Market Committee (FOMC), highlighting four dissents against the easing bias and implications for future policy under incoming Chair Kevin Warsh. He argues markets overstate the impact of the dissents and maintains a forecast of two Federal Reserve (Fed) rate cuts in Q4, conditional on the Strait of Hormuz reopening and Oil prices easing.
FOMC dissents, Powell tenure, Q4 cuts
"For a meeting that was supposed to be straightforward and relatively predictable, the April FOMC proved considerably more eventful than expected. Chair Jerome Powell may not be riding off into the sunset just yet, but the real story of the meeting was four dissents, the first time in over 30 years. Three of these – from Beth Hammack (Cleveland), Neel Kashkari (Minneapolis), and Lorie Logan (Dallas) – opposed the “inclusion of an easing bias” in the statement language, a signal that incoming Chair Kevin Warsh will get the “messier meetings” that he asked for in his Senate Banking Committee testimony."
"The dissents suggest the new Chair will likely face at least a few obstacles in fulfilling the President’s stated desire for quick rate cuts. We think this is currently a moot point and the market is overweighting the significance of this development."
"Current market pricing has indeed shifted in a more hawkish direction, with the December 2026 implied rate showing 8bp of hikes, and March 2027 pricing showing about 17bp."
"Warsh will only be able to cut rates if he can do the same or if macro conditions shift materially. Those who believe Powell is staying on to block rate cuts misunderstand both him and Committee dynamics."
"We maintain our outlook of two cuts in Q4 – contingent on the Strait of Hormuz reopening and oil prices beginning to recede, taking inflation fears lower with them. We view the labor market as a key risk."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Here is what you need to know on Tuesday, May 5:
Financial markets remain on edge on Tuesday as investors grow increasingly concerned about the continuation of the ceasefire between the United States (US) and Iran. In the second half of the day, the US economic calendar will feature the Institue for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) report for April and JOLTS Job Openings data for March.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.50% | 0.43% | 0.35% | 0.22% | 0.84% | 0.41% | 0.40% | |
| EUR | -0.50% | -0.09% | -0.20% | -0.28% | 0.39% | -0.09% | -0.07% | |
| GBP | -0.43% | 0.09% | -0.11% | -0.20% | 0.48% | -0.00% | 0.00% | |
| JPY | -0.35% | 0.20% | 0.11% | -0.07% | 0.55% | 0.15% | 0.04% | |
| CAD | -0.22% | 0.28% | 0.20% | 0.07% | 0.64% | 0.21% | 0.20% | |
| AUD | -0.84% | -0.39% | -0.48% | -0.55% | -0.64% | -0.48% | -0.47% | |
| NZD | -0.41% | 0.09% | 0.00% | -0.15% | -0.21% | 0.48% | 0.01% | |
| CHF | -0.40% | 0.07% | -0.01% | -0.04% | -0.20% | 0.47% | -0.01% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
After US President Donald Trump launched "Project Freedom" on Monday, which aims to assist neutral vessels in passing through the Strait of Hormuz, Iran reportedly targeted US warships in the region. President Trump also noted that that the US military "shot down" seven Iranian fast boats but Iran denied this claim. Moreover, Iran reportedly attacked an oil depot in the United Arab Emirates (UAE) and caused fire, while South Korea reported damage to a commercial ship. Additionally, the UAE's Defence Ministry said that it confronted 12 ballistis missiles, three cruise missles and four drones launched by Iran on Monday.
After rising about 0.3% on Monday, the US Dollar (USD) Index holds steady at around 98.50 in the European on Tuesday. Meanwhile, crude Oil prices correct lower following Monday's rally. The barrel of West Texas Intermediate (WTI), which rose about 3% on Monday, was last seen trading near $101.50, losing about 1% on the day.
The Reserve Bank of Australia (RBA) announced early Tuesday that it raised the benchmark interest rate by 25 basis points (bps) to 4.35%. This decision came in line with analysts' estimates. In the post-meeting press conference, RBA Governor Michele Bullock explained that the rate hike will help them contain the inflationary shock and added that they will now have time to assess the situation before tightening the policy further. After losing 0.5% on Monday, AUD/USD struggles to gain traction in the European session on Tuesday and trades near 0.7150.
EUR/USD stays in a consolidation phase slightly below 1.1700 after falling 0.25% on Monday. Later in the day, European Central Bank (ECB) President Christine Lagarde will be delivering a speech.
GBP/USD fell about 0.3% on Monday before stabilizing at around 1.3550 early Tuesday.
Japan's Finance Minister Satsuki Katayama reiterated on Monday that they are ready to take decisive action against speculative foreign exchange moves. USD/JPY finds it difficult to gain traction and moves sideways in a narrow channel above 157.00.
Gold (XAU/USD) fell nearly 2% on Monday and touched its lowest level in a month near $4,500. XAU/USD edges higher early Tuesday and trades at around $4,550.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- NZD/USD rises as the US Dollar loses recent gains despite safe-haven demand amid Middle East uncertainty.
- Iran targeted the UAE with drones and missiles; the US said it destroyed Iranian boats in the Strait of Hormuz.
- RBNZ member Prasanna Gai said models of a Strait of Hormuz disruption do not point to a reflexive tightening bias.
NZD/USD inches higher after two days of losses, trading around 0.5880 during the Asian hours on Tuesday. The pair holds ground as the US Dollar (USD) lost its daily gains despite increased safe-haven demand following uncertainty surrounding the Middle East conflict.
CNBC reported on Monday that the United Arab Emirates (UAE) was targeted by Iranian drones and missiles, while the US said it destroyed Iranian boats in the Strait of Hormuz. US President Donald Trump warned that Iran would be “blown off the face of the earth” if it targets US ships protecting commercial vessels passing through the Strait.
Iranian parliament speaker Mohammad Bagher Ghalibaf said on X that “The new equation of the Strait of Hormuz is taking shape. The security of shipping and energy transit has been undermined by the United States and its allies through ceasefire violations and blockade measures; however, their actions will ultimately fail. We fully understand that maintaining the current situation is unacceptable for the US, while we have not even begun yet.”
However, the Greenback may regain its ground amid expectations that the Federal Reserve (Fed) may need to lift interest rates to curb inflation. Minneapolis Fed President Neel Kashkari said Sunday that additional rate hikes cannot be ruled out, especially as inflation risks remain elevated due to higher energy prices linked to the Iran conflict.
Traders are awaiting New Zealand’s first-quarter employment report due Wednesday for fresh insight into the economy’s resilience amid the Middle East energy shock. RBNZ board member Prasanna Gai said models of a Strait of Hormuz disruption do not imply an automatic tightening bias, though they have lifted the neutral rate.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
Commerzbank’s Volkmar Baur notes that the Reserve Bank of Australia (RBA) has raised rates for the third time this year to 4.35%, prioritizing inflation expectations and second‑round risks over softer March Consumer Price Index (CPI). The RBA now sees inflation near 4.8% mid‑year and above target all year. However, weaker growth and stagflationary pressures from higher fossil fuel prices are seen as negative for the Australian Dollar (AUD).
Stagflation risks overshadow tighter RBA stance
"The Reserve Bank of Australia decided to raise its key interest rate for the third time this year to 4.35%."
"The RBA has thus remained true to its statements from the last meeting and views the risks of potential second-round effects as greater than the (currently still) muted response of inflation to rising fossil fuel prices."
"In its forecasts, the RBA lowered its growth projections for this year and next, and now expects inflation to rise to 4.8% by mid-year (it was already at 4.6% in March)."
"The RBA therefore assumes that inflation will remain well above its 2–3% target range for the entire year."
"And this is not an environment in which the AUD is likely to benefit."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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