Forex News

DBS' Senior Economist Radhika Rao with data support from Daisy Sharma, highlights that India’s real Gross Domestic Product (GDP) grew 7.8% year-on-year in 1Q26, slightly below the revised 8.0% in 3QFY26. The Nowcast model points to softer momentum ahead, with growth seen easing in 2Q26 and full-year 2026 GDP projected below 2025 levels.

Growth moderation signaled

"This week’s featured insight is on GDP Nowcast, which is best viewed as an estimate of real GDP growth based on available economic data and forecasts for the current quarter."

"Today we focus on India’s real GDP for 1Q26 (4QFY26), released earlier this month."

"The economy grew 7.8% yoy from a revised 8.0% in 3QFY26 (Oct-Dec25)."

"As per the Nowcast model, growth is expected to moderate to 6.9% in 2Q26 (1QFY27), driven by softer industrial activity, freight traffic, sales of farm tractors and commercial vehicles."

"We expect 2026 growth to average 6.5% (CY) from 7.8% in 2025."

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

National Bank of Canada's (NBC) Kyle Dahms notes that the Canadian economy began Q2 on a stronger-than-expected footing, with real Gross Domestic Product (GDP) boosted by energy, manufacturing and construction. He highlights that energy strength and inventory rebuilding should support volumes, and that real GDP is tracking a solid annualized gain, though he stresses the outlook remains fragile given tariffs, housing and inflation headwinds.

Energy-led growth with fragile outlook

"The Canadian economy started the second quarter on a stronger footing than expected, with real GDP rising 0.5% in April, above consensus expectations of 0.4%. While broad-based, the rebound was led by the energy sector, which rose 3.1% as mining/quarrying/oil & gas extraction surged 2.9%."

"Much of April’s gain reflected a normalization in oil sands and pipeline activity following earlier disruptions, but energy should remain supportive through Q2 given elevated prices in May and much of June, as well as higher volumes given demand for stable sources of supply amid global uncertainty."

"Looking ahead, price pressures should ease, but volumes could remain supported as inventories drawn down in Q2 are rebuilt."

"Still, including this preliminary estimate, real GDP growth in the second quarter is tracking a 2.3% annualized increase, a strong pace given the headwinds facing the economy. Adjusted for the decline in population, growth looks even stronger, with GDP per capita tracking a 2.8% annualized increase in Q2."

"However, the outlook remains fragile. Tariff uncertainty, weak resale activity in major housing markets, and the lingering inflation impact from previously elevated energy prices continue to represent meaningful headwinds for consumers and business investment."

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

HSBC’s Willem Sels and Lucia Ku note that UK inflation remains above target but see risks as more balanced after the US-Iran interim peace agreement. They expect no further rate hikes in 2026, keep a neutral stance on UK gilts and UK equities, and stay overweight 5–7-year GBP investment grade credit, while upgrading GBP high yield to neutral despite ongoing political uncertainty.

BoE on hold with neutral UK view

"As expected, the Bank of England (BoE) maintained its policy rate at 3.75% in June. While CPI moderated to 2.8% in May, it remains above target. Wage pressures and weak consumer confidence persist, while economic growth is expected to remain modest amid mixed indicators."

"With energy prices stabilising following the US-Iran interim peace agreement, inflation risks are now more balanced. Accordingly, we have revised our rate forecast to reflect no further hikes in 2026. We maintain a neutral position on UK gilts and UK equities, while remaining overweight on GBP investment grade credit, favouring 5-7-year duration. We also upgrade GBP high yield to neutral due to improved risk sentiment."

"Inflation is expected to peak at 3.25% in Q4 as the second-round effects from the Middle East conflict are contained, we now expect the Bank of England to hold rates steady this year."

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

Commerzbank’s Dr. Ralph Solveen notes that Eurozone inflation fell to 2.8% in June, mainly on lower energy prices, while core inflation eased to 2.4%. The bank expects overall inflation to stay close to 3% in coming months. With firms likely to pass on still-elevated energy costs, Commerzbank anticipates another ECB rate hike in September.

Inflation easing but still elevated

"In the coming months, the inflation rate is likely to remain close to 3%, to which the ECB would probably respond with another interest rate hike at its September meeting."

"We expect the inflation rate to remain close to 3% in the second half of this year as well."

"Although energy prices are likely to fall slightly, companies are expected to increasingly pass on their energy costs – which remain higher than they were before the start of the Iran war – to their customers, meaning that the indirect effects feared by the ECB will intensify for the time being."

"The central bank is likely to respond to this with another interest rate hike in September."

"However, this should likely be viewed more as a counter-movement to the sharp increase in the previous month rather than as a sign of a sustained reduction in underlying price pressures."

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

• Gold rebounds above the $4,000 mark as the US Dollar eases on Fed Chair Warsh's remarks.
• ADP private payrolls miss forecasts ahead of Thursday's Nonfarm Payrolls report.
• Technical indicators point to persistent downside momentum despite oversold conditions.

Gold (XAU/USD) advances above the $4,000 psychological mark on Wednesday as the US Dollar (USD) eases following remarks from Federal Reserve (Fed) Chair Kevin Warsh and softer-than-expected US economic data.

However, hawkish Fed expectations keep the upside limited, with traders still pricing in the possibility of a rate hike later this year. At the time of writing, XAU/USD is trading around $4,097, recovering from the seven-month low of $3,941 touched on Tuesday.

Speaking at the ECB Forum in Sintra on Wednesday, Warsh said, "We're not going to give forward guidance," adding, "We'll chart a new course so we can make better decisions." He also noted that "inflation risks have come down."

On the data front, ADP Employment Change showed that private payrolls increased by 98K in June, below the market expectation of 113k and down from the 122K increase recorded in May. The ISM Manufacturing Purchasing Managers Index (PMI) eased to 53.3 in June from 54.0 in May, missing market forecasts of 54.0.

Traders now await the US Nonfarm Payrolls (NFP) report, due on Thursday.

Gold's glitter has faded over the past few months, posting its steepest quarterly decline since 2013 on Tuesday. The precious metal is now trading around 28% below its all-time high near $5,600 set in January.

The correction follows a powerful two-year rally, including a 67% gain in 2025, driven by strong central bank buying, robust ETF inflows, geopolitical tensions and Fed interest rate cuts.

However, in 2026, the bull run appears to have stalled, with the primary driver of the sell-off being a sharp shift in interest rate expectations. Earlier this year, traders were pricing in at least two Fed rate cuts before the US-Iran war triggered an energy-driven inflation shock, pushing US inflation to more than double the Fed's 2% target.

That forced traders to reassess the Fed's monetary policy outlook, with markets currently pricing in a 67% probability of a rate hike at the September meeting, according to the CME FedWatch Tool.

As a non-yielding asset, Gold tends to perform well in a low-interest-rate environment because lower borrowing costs reduce the opportunity cost of holding the precious metal.

Meanwhile, weak physical demand from India, one of the world's largest Gold consumers, is also weighing on prices. According to the India Bullion & Jewellers Association (IBJA), Indian households sold nearly 50 tonnes of old Gold during the April-June quarter, a 43% increase from a year earlier, as consumers locked in profits at elevated prices. Demand has also been pressured by the Indian government's decision to raise the customs duty on Gold from 6% to 15% in May.

On the geopolitical front, progress toward a final US-Iran peace agreement remains slow. Although US and Iranian envoys have arrived in Doha, Qatar, no direct talks between the two sides are scheduled.

Technical Analysis: XAU/USD risks deeper losses below $4,000 support

On the daily chart, the metal holds below the 20-day Simple Moving Average from the Bollinger Bands at around $4,184, keeping the near-term tone mildly bearish, while the price still trades comfortably above the lower band at about $3,926.

The Relative Strength Index (RSI) near 40 and a negative Moving Average Convergence Divergence (MACD) both suggest subdued upside momentum, reinforcing the idea that rallies are likely to face selling pressure rather than mark a sustained trend reversal.

On the topside, initial resistance emerges at the Bollinger midline near $4,184.59, with the next cap at the horizontal barrier around $4,300, ahead of the upper Bollinger band clustered near $4,442.

On the downside, immediate support is seen at the lower Bollinger band around $3,926, with a more significant floor at the previously drawn horizontal level near $3,800.00, where buyers would be expected to defend the broader uptrend if the current pullback deepens.

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

TD Securities’ Ryan McKay and Bart Melek note that Copper remains under pressure as the missed June 30 Section 232 tariff update removes a near-term supply risk and weakens short-term momentum. CTAs have already cut around 13% of historic net length, while ongoing tariff and inventory fragmentation risks support Copper but a softer demand backdrop limits upside.

Tariff delay shifts CTA positioning

"Copper and aluminum are in the crosshairs for CTAs today. Lack of an update on copper tariffs has removed a near-term supply risk, opening the red metal up to further selling, while a continuation of the Hormuz trade unwind weighs heavy on aluminum."

"The June 30th deadline for recommendations on refined copper tariffs under Section 232 came and went without any official update from President Trump."

"For flat prices however, short-term momentum is weaker again with the immediate supply risk event in the rearview mirror, prompting CTAs to once again liquidate some 13% of their historic net length."

"Looking forward, the continued risk of tariffs and inventory fragmentation will support the red metal, but a weakening short-term demand backdrop is likely to also cap any material upside."

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

• The US ISM Manufacturing PMI lost traction in June.
• The US Dollar adds to Tuesday’s uptick beyond 101.00.

The Institute for Supply Management’s (ISM) data showed the Manufacturing PMI edging lower to 53.3 in June, down from May's print and analysts’ expectations of 54.

Meanwhile, the Prices Paid Index, which tracks inflation in the sector, fell to 73 from 82.1. The Employment Index strengthened a tad to 49.7 from 48.6, and the New Orders Index deflated to 56 from 56.8.

Market reaction

The Greenback extends its upward bias on Wednesday, motivating the US Dollar Index (DXY) to maintain the trade well above the 101.00 barrier while flirting with multi-day highs.

This section below was published as a preview of the US ISM Manufacturing report for June at 08:00 GMT.

• The US ISM Manufacturing PMI is seen unchanged at 54 in June.
• Investors will also follow the ISM Prices index and the Employment index. 
• EUR/USD seems to have met some resistance ahead of 1.1450.

Attention shifts to Wednesday’s release of the June ISM Manufacturing Purchasing Managers Index (PMI), one of the most closely followed indicators of activity in the US manufacturing sector and an important barometer of the broader economy.

Markets expect the headline index to remain unchanged at 54, matching May’s print. That would be the sixth consecutive month with the index above the key 50.0 level that separates expansion from contraction, suggesting manufacturing activity continues to expand despite ongoing challenges.

But the story of the manufacturing sector is only part of the story. The broader US economy has continued to prove impressively resilient thanks to better-than-expected growth and a labour market that has largely held firm despite high interest rates. That resilience has kept the narrative of US exceptionalism alive, even as factory activity remains muted.

But it will be more than just the headline figure that matters for investors. Signs of improving demand, new orders or employment could raise confidence that manufacturing is slowly stabilising, while another disappointing report would add to concerns that the sector is struggling to gain meaningful traction despite the economy's broader strength.

What to expect from the ISM Manufacturing PMI report?

The manufacturing sector advanced to levels last seen nearly two years ago in May, with the business activity managing to stay in the expansion territory for the fifth consecutive month, extending the auspicious start to the year.

The biggest jump was in new orders, with the related index climbing to 56.8, its highest in the past four months, suggesting demand remained solid. At the same time, price pressures eased as the Prices Paid Index fell to 82.1 from 84.5, showing that inflationary pressures in the manufacturing sector appear to be slowly cooling. The picture in the labour market has also improved after the Employment Index rose to 48.6 from 46.4 in the prior month, but it still remained well short of the 50.0 mark, signalling that hiring conditions are still tough.

A reading above 50.0 on the ISM Manufacturing PMI is generally considered a sign of expansion in factory activity, with a reading below that point indicating contraction. However, history suggests that sustained levels above 42.5 are still generally consistent with growth in the overall US economy.

A stronger-than-expected PMI would likely boost confidence in the resilience of the US economy for markets and underpin equities and broader risk sentiment.

But the implications for the US Dollar are less straightforward. A stronger report could also stoke expectations that the Federal Reserve (Fed) will hold interest rates at restrictive levels for longer, providing more support for the currency. A stronger report tends to favour the Greenback. On the flip side, a softer-than-expected reading could raise concerns about the manufacturing outlook and dampen sentiment.

When will the ISM Manufacturing PMI report be released, and how could it affect EUR/USD?

The ISM Manufacturing PMI report is scheduled for release at 14:00 GMT on Wednesday.

Prior to the data release, EUR/USD has managed to extend its rebound from last week’s multi-month troughs, although extra gains seem to have met a tough barrier ahead of the 1.1450 level. 

Pablo Piovano, Senior Analyst at FXStreet, explains that further advances need to initially clear 1.1450 to attempt a move toward the weekly peak at 1.1622 (June 15). Immediately to the upside comes the critical 200-day SMA at 1.1657, preceding the weekly high at 1.1685 (May 29).

Piovano also noted that on the downside, the pair faces initial contention at the 2026 bottom of 1.1324 (June 24). A breach below this level could spark a likely challenge to the 1.1300 round level, ahead of the weekly floor at 1.1210 (May 29, 2025).

Piovano added that the outlook remains tilted to further weakness as long as spot trades below its 200-day SMA.

He also pointed out that the Relative Strength Index (RSI) hovers around 37, indicating a pick-up in the bearish stance, while the Average Directional Index (ADX) around 36 suggests that the current trend is quite firm.