Forex News

• GBP/JPY edges lower as the Japanese Yen strengthens across the board.
• Intervention fears and expectations of a September BoJ rate hike support the Yen.
• The Pound Sterling lacks a fresh catalyst as UK markets close for the Summer Bank Holiday.

GBP/JPY trades on the back foot on Monday as the Japanese Yen (JPY) strengthens against its major peers. The Pound Sterling (GBP), meanwhile, lacks a fresh domestic catalyst as UK markets remain closed for the Summer Bank Holiday. At the time of writing, the cross trades around 216.40, retreating from an intraday high near 216.85.

The Yen attracts buyers after USD/JPY briefly moved above the psychologically important 160.00 mark, a level that has previously prompted Japanese authorities to intervene in the foreign exchange market. Finance Ministry data released on Friday showed that Japan spent a record ¥15.4 trillion, around $96.5 billion, supporting the Yen between July 30 and August 26, after USD/JPY surged to a 40-year high near 164.00.

Meanwhile, hawkish Bank of Japan (BoJ) expectations also lend some support to the Yen. Still, the broader outlook remains fragile as Japan’s expansionary fiscal policies, large government debt and relatively low interest rates continue to pose headwinds for the currency.

OCBC FX strategists note that “a September move would break from the BoJ's pattern in the current tightening cycle, where rate increases have typically come about every six months,” with the last hike delivered in June. They caution that “even so, it will be difficult for the BoJ to out-hawk market expectations,” given how aggressively the rates curve is already positioned. Japan's rates market is “already pricing a roughly 85% chance of a September hike, alongside a faster pace of tightening thereafter,” with current pricing implying “the policy rate rising from 1.00% to 1.75% by July 2027.”

Against that backdrop, OCBC argues that “given the constraints on how quickly and how far the BoJ can raise rates, additional measures may still be needed to counter more persistent JPY depreciation pressures.” In their view, “one option could be policies aimed at encouraging the repatriation of overseas assets,” as “future JPY gains may require policy support that goes beyond the pace and extent of rate increases.”

On the UK side, the Bank of England (BoE) is widely expected to leave interest rates unchanged in the coming months, even as inflation stays above its 2% target. At its latest meeting, most policymakers judged that the tightening in financial conditions since the Middle East war began was providing sufficient protection against inflation risks stemming from higher energy prices.

Looking ahead, the economic calendar is relatively light on both sides this week. Data released earlier on Monday showed that Japanese Retail Trade rose 4% YoY in July, above the 3% forecast, while Large Retailer Sales increased 1.4%, rebounding from a 1% decline previously.

OCBC FX Strategist Sim Moh Siong and Christopher Wong note that Fed Chair Warsh’s Jackson Hole speech eased debasement concerns and supported the Dollar, with Gold lower and the US yield curve flatter. They say structural worries about Fed credibility have diminished, shifting focus back to US cyclical data ahead of the September FOMC, where markets now price modest tightening but OCBC still expects no hike.

Fed stance keeps Dollar supported

"Debasement concerns faded following Fed Chair Warsh's Jackson Hole speech, with the USD strengthening, gold falling and the US yield curve flattening. Despite recent improvements in inflation data, Warsh stressed that inflation remains too high and remains the Fed's primary concern. He reaffirmed the Fed's commitment to achieving its 2% PCE inflation target and emphasised that short-term interest rates remain the Fed's primary policy tool for fulfilling its dual mandate."

"The FX market's recent focus on structural USD headwinds, driven by policy uncertainty surrounding the Treasury's surprise EUR/JPY intervention and expanded buyback announcement, had challenged our modestly bullish USD view. However, Warsh's Jackson Hole speech has reduced concerns that Fed credibility could become a lasting drag on the USD."

"Markets now price around 15bp of tightening for the September FOMC meeting, up from just 8bp before Warsh's speech. While Warsh's remarks suggest a September rate hike is possible if August CPI surprises on the upside, our base case remains that the Fed stays on hold. Nevertheless, a resilient labour market, sticky inflation and the Fed's determination to preserve its inflation-fighting credibility should maintain a hawkish policy bias and keep the USD supported."

"Asian FX may start the week on a softer footing after the USD rebounded following Warsh’s Jackson Hole remarks. While the speech is not a pre-commitment to a Sep hike, it reinforced the Fed’s inflation-fighting credibility and kept further tightening in play if inflation fails to ease meaningfully. A firmer USD can be a headwind for Asian FX, but not sufficient to erase differentiation across the region."

"USD dips may also prove more restrained for now, with USD bears likely needing softer US data to rebuild conviction. Focus turns to incoming US labour and inflation data ahead of the Sept FOMC."

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

BNY’s Wee Khoon Chong notes Oil prices are underpinned by renewed U.S.–Iran tensions near the Strait of Hormuz and President Trump’s claim of a deal granting U.S. majority control over Venezuela’s vast reserves. Chong stresses elevated energy costs, tighter global crude flows and limited detail on legal terms, suggesting uncertainty around implementation and market impact.

Hormuz tensions and Venezuelan reserves

"The U.S. says it has struck Iranian rocket launchers that were preparing to send mines into the Strait of Hormuz, in its first military action against Iran in more than a month. U.S. Central Command said forces are monitoring the area closely and remain ready to protect commerce through the waterway, which carries a large share of global oil and LNG flows."

"Risk sentiment has deteriorated following Fed Chair Kevin Warsh’s hawkish Jackson Hole message, while renewed U.S.-Iran exchanges near the Strait of Hormuz have added to geopolitical risk. Weak Chinese PMI data have provided another growth headwind."

"President Trump has announced that the U.S. has struck a deal with Venezuela to secure majority control of more than 65 billion barrels of oil reserves. He said the agreement would come at “no cost” to U.S. taxpayers and claimed it would strengthen bilateral ties while helping to lower gasoline prices."

"The announcement comes amid elevated energy costs and tighter global crude flows, with prices at U.S. gas pumps around $4.09/gallon and WTI up sharply since the war with Iran began. The statement provided no details on legal terms, timing or implementation, and no official government document was included in the provided context."

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

Rabobank’s Elwin de Groot discusses Fed Chair Kevin Warsh’s Jackson Hole speech and its impact on US rates. He notes that Warsh signalled dissatisfaction with recent inflation and openness to further hikes, lifting near-term rate expectations while lowering longer-term premia. He still expects the FOMC to stay on hold in 2026, but sees renewed upside risks to their forecasts.

Warsh boosts hike expectations, data key

"Fed Chair Kevin Warsh appeared to rebuild some of his credibility as an inflation fighter in his first speech at the annual Jackson Hole Symposium, stressing that the Federal Reserve still has “work to do” to return inflation to its 2% target. The message marked an important shift from the communication strategy he had followed since taking office."

"More importantly, for the first time since becoming Chair, he explicitly expressed dissatisfaction with recent inflation developments and signalled that he was open to further rate hikes unless underlying inflation began to improve convincingly."

"Markets accordingly priced a greater probability of additional rate increases. Yet longer-dated Treasury yields fell, suggesting that investors saw Warsh’s remarks as reducing policy uncertainty and reinforcing the Fed’s commitment to restore price stability. Put differently, the reaction combined a slightly more hawkish near-term policy outlook with lower longer-term inflation and policy-risk premia."

"So Warsh’s prepared remarks seemed designed to lift rate-hike expectations, rebalance the September debate towards the hawks and rebuild his inflation-fighting credibility after July’s “all talk, no action” criticism. Yet this creates a difficult balancing act, as the White House may oppose a hike so close to November’s midterms."

"Even so, Warsh delivered an important signal: the Fed is not relying on tighter financial conditions alone and remains willing to tighten further if underlying inflation stalls. The next round of data – especially the 4 September employment report and 11 September CPI – could therefore prove crucial for the Committee’s swing voters."

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

Preliminary Germany Harmonized Index of Consumer Prices (HICP) data for August arrives at 2.9% Year-on-Year (YoY), lower than estimates of 3.1%, but higher than the previous reading of 2.8%. On a monthly basis, inflation data grew by 0.2%, slower than 0.3% estimates and the prior release of 0.9%.

Earlier in the day, the Consumer Price Index (CPI) data from all six states of Germany came in higher than July readings.

Market reaction

No major reaction is seen in the Euro (EUR) following the German inflation data release. At press time, EUR/USD trades 0.15% higher to near 1.1595.

Brown Brothers Harriman’s (BBH) Elias Haddad expects Eurozone August headline Consumer Price Index (CPI) to accelerate to 3.3% year-on-year on higher energy, with core inflation steady at 2.5%. Above-target inflation and firmer growth give the European Central Bank (ECB) room to move rates toward the upper end of its neutral range, while swaps have nearly fully priced a September hike, which Haddad sees as supportive for EUR/USD and reducing the risk of fresh lows below 1.1400.

Inflation backdrop backs ECB normalization

"Eurozone August preliminary CPI inflation expected to quicken (Tuesday). Headline CPI is forecast at 3.3% y/y vs. 2.9% in July on higher energy prices, while core CPI should hold at 2.5% y/y for a second straight month."

"Above target inflation and a firmer growth outlook give the ECB scope to normalize the policy rate towards the upper end of its estimated 1.75% to 3.00% neutral range."

"The swaps curve has virtually fully priced in a 25bps ECB rate hike to 2.50% on September 10 and a total of 60bps of tightening over the next twelve months."

"That’s EUR/USD supportive and makes fresh cyclical lows below 1.1400 unlikely."

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

• USD/JPY declines to near 159.65 as the Japanese Yen outperforms its peers.
• Financial markets hope for US-Japan intervening jointly again.
• Investors await key US ISM Manufacturing PMI and the JOLTS Job Openings data.

The US Dollar (USD) is down 0.3% to near 159.65 against the Japanese Yen (JPY) during the European trading session on Monday. The USD/JPY pair declines as the Japanese currency outperforms its peers on hopes of support from the United States (US)-Japan joint intervention.

Yen intervention in focus

Analysts at Scotiabank flag that the recent “defensive price action is notable, and somewhat worrisome for policymakers at the BoJ, as well as officials at the MoF,” particularly as media reports highlight “the aggregate $96.4bn intervention effort to support the yen from July 30 to August 26.”

US Treasury Secretary Scott Bessent stated that Washington would intervene with Japan to shore up the Asia-Pacific currency, if needed. These comments came after the US and Japan jointly intervened in late July, as USD/JPY jumped to a multi-decade high near 164.00.

Meanwhile, the US Dollar trades lower, with investors shifting their focus to a slew of US economic data, starting with ISM Manufacturing PMI for August and the JOLTS Job Openings data for July releasing on Tuesday.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.16% lower to near 99.50.

USD/JPY Technical Analysis

In the daily chart, USD/JPY trades at 159.66. The pair holds a mildly bullish near-term bias as spot remains above the 20-day exponential moving average (EMA) at 159.55, suggesting ongoing demand on dips.

The Relative Strength Index (RSI) at 49.39 sits just below the 50 mark, hinting at consolidative conditions rather than overextended momentum, but still compatible with a gradual topside bias while price holds over the short-term EMA.

On the downside, the August 19 low at 158.05 is the key support level. Looking up, the major hurdle is the Friday high at 160.20, followed by the July 31 high at 160.88.

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

• EUR/USD bounced up from 1.1575 lows but is struggling to extend gains beyond 1.1600.
• Rising Fed tightening hopes and risk aversion amid the resumption of hostilities in Iran are capping the Euro's upside attempts.
• German preliminary HICP is expected to show that price pressures accelerated in August.

The Euro (EUR) posts marginal gains against the US Dollar (USD) on Monday, but it remains close to Friday’s lows at 1.1578, as bulls fail to find significant acceptance above 1.1600. A combination of rising bets of Federal Reserve (Fed) interest rate hikes and cautiousness amid the resumption of hostilities in Iran is weighing on Euro rallies ahead of the release of preliminary German Harmonized Index of Consumer Prices (HICP) data for August.

The common currency dropped sharply on Friday, following an unexpectedly hawkish rhetoric by the Fed Chairman Kevin Warsh at the Jackson Hole summit. Warsh said that the central bank should focus on prices right now and added that they have “work to do” to bring inflation to the bank’s 2% target. Bets for a September hike rose to 61% after the speech from 36% the day before, according to the CME’s FedWatch Tool.

Tensions in Iran dampen risk appetite

Apart from that, the US military attacked Iran for the first time since late July on Sunday, with strikes on the island of Larak, where the Islamic Revolutionary Guard Corps (IRGC) were allegedly preparing missiles to place sea mines in the Strait of Hormuz. Tehran responded by targeting US airbases in Jordan and the United Arab Emirates in a tit-for-tat reaction that complicates the resolution of the conflict even further. The market's risk-averse reaction is posing additional pressure on the Euro.

Against this background, traders await Germany’s preliminary HICP figures from August, which are expected to show that yearly inflation accelerated to 3.1% from 2.8% in July. Landers data published early on the day has shown mixed figures,

Strategists at Danske Bank highlight that the calendar remains packed with market-moving releases, pointing to “another crucial event for the US market with the labour market report for August, which is released on Friday.” They add that, alongside the US jobs data, “we have inflation data from the Eurozone,” underscoring that the twin focus on US labour conditions and Eurozone price dynamics will be central to shaping near-term policy expectations and market sentiment.

• Gold finds some stability after falling to its lowest level since August 19.
• Higher-for-longer interest-rate expectations remain the main hurdle for the non-yielding metal.
• XAU/USD needs to reclaim the 200-day SMA to ease the latest bearish pressure.

Gold (XAU/USD) steadies on Monday after opening the week lower and briefly falling below $4,400, its lowest level since August 19, during Asian trading hours. However, the metal lacks strong upside momentum as hawkish Federal Reserve (Fed) expectations keep buyers cautious. At the time of writing, XAU/USD trades around $4,454 after reaching a more than three-month high of $4,697 last week.

The metal fell about 3.20% on Friday following Fed Chair Kevin Warsh’s speech at the Jackson Hole Symposium. Markets viewed Warsh’s remarks as hawkish, reviving expectations that the central bank could raise interest rates as soon as September and pushing the US Dollar (USD) and short-term US Treasury yields sharply higher.

Analysts at Rabobank point out that Warsh made clear that he is “open to further rate hikes unless underlying inflation began to improve convincingly,” underscoring that “we must be convinced that underlying inflation is moving toward our target clearly and at a sufficient pace. Otherwise, we still have work to do.”

According to the CME FedWatch tool, markets are now pricing in around a 61% chance of a September rate hike, up from roughly 38% before Warsh’s speech. A higher interest-rate environment reduces the attractiveness of Gold because the metal offers no yield.

However, a modest pullback in the US Dollar and Treasury yields on Monday lends some support to bullion. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.53, easing from 99.72, its highest level since August 14. Gold is still on track to gain around 10% in August, largely driven by the US Treasury’s announcement that it would double liquidity-support buybacks of longer-dated government bonds.

Meanwhile, higher Oil prices continue to add upside risks to inflation as tensions in the Middle East intensify. Iran says it attacked US bases in Jordan and US military targets at Al Minhad Air Base in the United Arab Emirates after US forces bombed two rocket launchers on Iran’s Larak Island. The UAE has denied that Al Minhad Air Base was attacked. West Texas Intermediate (WTI) Oil rises around 3.5% on Monday and trades near $85.60 per barrel at the time of writing.

In the near term, expectations that the Fed's interest rates will stay higher for longer remain a key hurdle for Gold’s recovery, even as central-bank buying and geopolitical tensions provide underlying support. Upcoming US economic data will be closely watched for fresh clues about the Fed’s monetary policy path, with the ISM Purchasing Managers Index (PMI) surveys and Nonfarm Payrolls (NFP) report among the key risk events this week.

Technical analysis: Momentum weakens after rejection near $4,700

XAU/USD maintains a slightly bearish near-term bias following the latest leg lower, with the metal falling back below the 200-day Simple Moving Average (SMA) at $4,529. The Relative Strength Index (RSI) on the daily chart has eased from overbought territory to around 55, pointing to fading bullish momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) has slipped marginally below its signal line, adding to signs of weakening upside pressure.

On the downside, initial support is located at the 100-day SMA at $4,370, followed by the 50-day SMA at $4,211. A sustained break below these levels could expose the horizontal floor near $4,000. On the upside, the 200-day SMA at $4,529 acts as immediate resistance, followed by the horizontal barrier at $4,700.

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

TD Securities’ macro team, including Andrew Kelvin and Jayati Bharadwaj, expects the Bank of Canada (BoC) to adopt a dovish tone and provide limited guidance as trade tensions with the US rise. They see the BoC as sidelined, leaving the Canadian Dollar (CAD) exposed as a funding currency, but still doubt USD/CAD can hold above 1.40 and keep a 1.39 year-end forecast.

Canadian Dollar vulnerable as funding

"BoC will take center stage in the midst of rising trade tensions w/ the US; we look for a dovish tone from the Committee & limited guidance to keep options open."

"BoC meeting likely to take focus after markets look to the Bank to give updates in their thinking after US tariffs."

"Sidelined BoC leaves CAD vulnerable as a funding currency, w/ NOK/ MXN better supported by carry & cleaner macro backdrops."

"Even so, we struggle to see sustained USD/CAD trading above 1.40 in a bearish USD environment & maintain our 1.39 YE forecast."

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