Forex News
Elias Haddad at Brown Brothers Harriman argues the Dollar can keep benefiting from widening US-G6 rate differentials and higher US real yields. However, tightening by other major central banks limits policy divergence, suggesting the DXY index may struggle to sustain a break above its June 24 high at 101.80, even though US growth outperformance and foreign demand for US assets remain supportive.
DXY faces constrained upside
"USD can continue to benefit from widening US-G6 interest rate differentials and rising US longer-term real yields."
"Still, tightening by other major central banks limits policy divergence with the Fed and suggests DXY could struggle to sustain an overshoot of its June 24 high at 101.80."
"Even so, US economic growth outperformance and strong foreign appetite for US securities can override that upside USD constraint."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- WTI Oil rallies nearly 3.5% on Monday to session highs at $94.80 after the rejection of another peace proposal.
- Trump said that Tehran's peace plan was not acceptable and threatened to resume bombings after midterm elections.
- IRan reiterated on Sunday that they will not soften the conditions to reopen the Strait of Hormuz.
Oil appreciates firmly on Monday, following US President Donald Trump's refusal of Tehran’s latest proposal to cease hostilities and reopen the Strait of Hormuz. The US benchmark West Texas Intermediate (WTI) Oil barrel is trading at $94.60 at the time of writing, up nearly 3.5% on the day so far.
Is back to square one in the Middle East as Trump rejected a seven-day ceasefire proposal and vowed to resume attacks on Iran after the US midterm elections. Trump also said that the US was “winning tremendously” in the war and that “massive amounts of Oil” are passing through the key Strait of Hormuz.
Reports by the Kpler ship-tracking firm show that Oil traffic through Hormuz increased to 12.8 million barrels per day in September, the highest level since the war started on February 28. These figures, however, are far below the average of 20 million barrels per day crossing the waterway before the beginning of the war on February 28, and, obviously, not enough to ease concerns of a global supply shortage.
Iran claims complete control of Hormuz
Iranian foreign Minister, Abbas Araghchi said that the country is prepared for a “doomsday” war with the US, but he also said that his country is open to “real diplomacy.” Beyond that, A top Iranian military official said that Tehran has “complete control” of the Strait of Hormuz, and that they will “act decisively in the North of the Oman Sea and the east of the Strait of Hormuz and do not allow anyone to cross.”
Analysts at Deutsche Bank highlight that “even though US-Iran talks could resume this week, there was little sign of a breakthrough over the weekend and bond yields and oil have climbed again this morning.”
The bank notes that tensions remain elevated after “Iran reiterated on Sunday that it would not soften its conditions for reopening the Strait of Hormuz,” with Foreign Minister Abbas Araghchi insisting that Tehran would not back down from demands including “sanctions relief, access to frozen assets and an end to US blockade measures.”
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- BoE's Dave Ramsden sees increasing upside risks to the UK inflation outlook.
- Energy, food prices and supply-chain pressures remain key inflation risks.
- Further inflation pressures could create a case for higher interest rates.
Bank of England (BoE) Deputy Governor Dave Ramsden said on Monday that risks to the inflation outlook have become increasingly tilted to the upside, according to Reuters.
Ramsden said he remains focused on external pressures from energy prices, weather and Artificial Intelligence (AI) supply chains, alongside domestic risks from food prices and potential second-round effects.
The BoE policymaker added that if upside inflation pressures continue to build, there could be a case for raising the bank rate. However, Ramsden does not expect the central bank to consider further Quantitative Easing (QE) anytime soon.
Ramsden flags upside inflation risks, keeping GBP supported
BoE’s Ramsden scores 8.4/10 on FXS Speechtracker, notably above the historic 7.1/10 baseline, signalling a stronger-than-usual policy impact. The focus on external inflation pressures from energy, weather and AI-related supply chains, alongside domestic indirect effects in food prices and potential second-round effects, marks a clear hawkish tilt.
By stating that risks to the inflation outlook have shifted to the upside and that continued upside pressures could justify increasing Bank Rate, Ramsden reinforces expectations that the BoE may need to keep policy tight or even re-tighten. This hawkish bias is supportive for GBP, especially against the Euro and Dollar, as markets reassess the probability of renewed rate hikes or a prolonged high-rate stance.
Market reaction
The British Pound (GBP) shows no significant reaction to Ramsden’s hawkish comments. GBP/USD remains higher, gaining 0.21% on Monday to trade around 1.3250 at the time of writing.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
BBH’s Elias Haddad highlights that the Dollar is broadly firmer, but intervention warnings from Japanese officials are supporting the Japanese Yen. Japan’s top currency diplomat stresses a “very clear” joint message from Tokyo and Washington on Yen weakness, and BBH expects USD/JPY to trade within a 155.00–160.00 range in the near term as these risks constrain moves.
Yen supported by intervention threat
"USD is broadly firmer, but intervention risk keeps JPY on the front foot."
"Japan’s top currency diplomat Atsushi Mimura said markets should heed the “very clear” message Tokyo and Washington sent last week on yen weakness."
"We expect USD/JPY to hold within a 155.00-160.00 range in the near term."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Deutsche Bank’s Jim Reid and team note that the US Dollar was the strongest-performing G10 currency last week as Treasury yields surged and markets repriced a more hawkish Federal Reserve. The Dollar Index gained, while Gold prices fell as higher real and nominal yields pressured non-interest-bearing assets. The report also highlights broader credit spread widening alongside resilient equities.
Dollar gains as yields surge
"When it came to other assets, the surge in Treasury yields and the hawkish Fed repricing meant the US Dollar was the strongest-performing G10 currency."
"Indeed, the Dollar Index was up +0.81% last week (-0.25% Friday)."
"Meanwhile, Gold prices fell -2.14% (+0.23% Friday), as higher real and nominal yields put downward pressure on precious metals as a non-interest-bearing asset."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Kit Juckes at Societe Generale notes that EUR/USD forecasts have been repeatedly revised down as Dollar strength persists. While consensus has moved from 1.20 to 1.16 and Societe Generale now sees 1.15, client discussions suggest markets are even more Dollar-bullish. Strong US data and inflation could push EUR/USD toward new lows in the near term.
Forecasts cut as pair grinds lower
"At the start of this year, consensus forecasts expected EUR/USD to reach 1.20. We projected 1.14. Now, the consensus has moved down to 1.16, while our forecast stands at 1.15 (and I'm regretting the change)."
"The impression we get from client meetings is that the market is, overall, considerably more dollar-bullish than even those forecasts suggest. Elevated oil and other commodity prices, robust US economic data, and a more risk-averse global environment have bludgeoned bearish dollar views."
"Higher inflation and resilient real-economy data could propel the Dollar Index to a near-2026 high (just 0.7% away) or push EUR/USD to a new low (only 0.5% away)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Deutsche Bank’s Jim Reid notes that global equities, including the S&P 500, held up well despite a notable rise in bond yields and hawkish rate expectations. The S&P 500 gained over 1% on the week and remains close to record highs, supported by optimism on growth and strong PMI data. Tech stocks, including the Magnificent 7, also contributed to the positive equity performance.
US stocks hold near highs
"Yet despite the rates selloff, the optimism on the growth side helped to sustain equities last week around the world."
"For instance, the S&P 500 was actually up +1.21% last week (+0.51% Friday), leaving the index within 1% of its record high."
"Meanwhile in Europe, the STOXX was up +0.50% (+0.35% Friday), and Japan’s Nikkei was up +2.07% (+1.30% Friday)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/USD wavers between 1.1360 and 1.1400 at one-month lows.
- Brent Oil prices have jumped above $100.00, adding pressure on Eurozone economies.
- The US Dollar remains buoyed amid high US Treasury yields, strong data and Fed tightening bets.
The Euro (EUR) shows marginal losses against the US Dollar (USD) on Monday, as the rejection of the latest peace proposal in the Middle East lifted Oil prices, while the high US Treasury yields amid bets of upcoming Federal Reserve (Fed) rate hikes keep supporting the Greenback. Against this background, the EUR/USD wavers between one-month lows at 1.1360 and the 1.1400 level.
Investors’ appetite for risk remains subdued at the start of the week as US President Donald Trump rejected Tehran’s latest proposal to pause the hostilities in the Middle East and reopen the Strait of Hormuz, which leaves the region in a highly uncertain scenario.
Oil prices have picked up following the news, with the barrel of Brent Crude climbing above the psychological $100.00 barrier, boosting inflationary pressures and posing additional pressure on already strained Eurozone economies.
Strong data, Fed hiking hopes are supporting the US Dollar
The US Dollar, on the contrary, remains supported by strong US macroeconomic data and rising Treasury yields, as the return of the 10- and 30-year notes crawls higher within multi-decade highs. This has prompted central bankers to consider higher neutral rates, recalling those in the last decade of the XX century.
Analysts at Societe Generale assess that "The short-term outlook for the Dollar is certainly not negative." In their view, "energy importers remain under pressure: the Yen has yet to benefit from tighter monetary policy, and the Euro has been unable to gain support from upgrades to growth expectations."
The longer-term outlook, however, is becoming less dollar-friendly, according to Societe Generale Experts. In a two- to ten-year period, the bank expects that "US politics and evolving global savings patterns start to bite. They note that the "midterm elections may make it difficult for President Trump to maintain the accommodative fiscal policies that have supported both the economy and the Dollar," while "the world's major savings economies are saving less than they once did, while the US is having to pay more to attract the investment it needs."
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
Rabobank’s RaboResearch Global Economics & Markets Global Daily frames a broad geopolitical risk backdrop, from Middle East tensions to US-China relations and potential great-power summits. Citing former US intelligence officials and its own 2027 outlook theme ‘War and Peace’, the institution warns that rising geopolitical and geoeconomic stresses are increasingly intertwined with financial markets, warranting significant concern for investors.
Geopolitics, conflict and market stress
"If you think that’s an exaggeration, the Financial Times just ran an interview with the former Biden Director of National Intelligence, which begins: “Just a few minutes into lunch with Avril Haines, and the conversation lands on the subject of the third world war.” She then says, “I do think that is a plausible scenario – if we don’t figure out how to develop a structure that manages the conflict.”"
"The underlying global issue is who is trying to develop what structures to manage our conflict and how - and for now that clearly involves conflict; and the who is folded into them, and willingly or unwillingly; and what the likelihood of success is, as geopolitical, geoeconomic, and market stresses rise in tandem all around us."
"It’s not for nothing that our 2027 Financial Markets Outlook theme is ‘War and Peace.’"
"On all fronts, it’s time for a great deal of concern. "
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Deutsche Bank’s Early Morning Reid highlights renewed upside in Brent Oil as US-Iran negotiations show little progress and Iran refuses to soften conditions on reopening the Strait of Hormuz. Brent is trading above $107 this morning after a modest weekly gain, with the bank linking recent moves to Middle East risks and evolving headlines around technical talks between US and Iranian officials.
Brent supported by geopolitical risk
"Talking of an end to the Iran conflict, even though US-Iran talks could resume this week, there was little sign of a breakthrough over the weekend and bond yields and oil have climbed again this morning."
"Iran reiterated on Sunday that it would not soften its conditions for reopening the Strait of Hormuz, with Foreign Minister Abbas Araghchi insisting that Tehran would not back down from demands including sanctions relief, access to frozen assets and an end to US blockade measures."
"10yr US yields are +3.8bps higher this morning with 2yr yields 4.6bps +higher. Brent is up +2.58% to $107.01."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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