Forex News

• US jobless claims beat forecasts, but the Dollar remains headline-driven.
• Fed officials signal rates could stay elevated amid uncertainty.
• UK local elections threaten fresh pressure on Starmer’s leadership.

GBP/USD advances by some 0.28% on Thursday as the US and Iran appear close to signing a peace deal that could reopen the Strait of Hormuz, while keeping issues like the nuclear program unresolved. At the time of writing, the pair trades at 1.3627, rising for a third consecutive day.

Pound rises as Hormuz reopening hopes pressure the Greenback

The mood in financial markets is positive, driven by news of a possible end to the conflict. Pakistani officials mentioned that the priority is a “permanent end to war.” Once achieved, the rest of the issues could be solved when direct talks resume between Washington and Tehran.

In the US, Jobless Claims data was solid, with Initial Jobless Claims for the week ending May 2 rising by 200K, down from 205K expected, up from the previous 190K number. Although the numbers are supportive of the US Dollar, the Greenback’s fate lies in resolving the Middle East conflict.

Other data showed that the US Challenger Job Cuts rose from 60.62K in March to 83.687K in April, according to Challenger, Grey & Christmas.

Regarding jobs data, most Federal Reserve (Fed) officials noted that the labor market, although not at maximum employment, remains stable. Cleveland Fed Beth Hammack stated that “interest rates will be on hold for quite some time,” citing significant uncertainty in the economic outlook. Hammack added that the Fed’s statement should have a neutral stance about whether the next move is a cut or a hike.

In the UK, the focus is on local elections, in which the Prime Minister’s Keir Starmer party is expected to lose sharply. This would increase pressure on the PM, who is under heavy criticism after nominating Peter Mandelson as the UK ambassador to the US. In the first batch of the release of the Epstein files, Mandelson’s name surfaced, exerting pressure on Starmer, who could be ousted by members of its own party.

Traders’ eyes shift to speeches by Federal Reserve officials and the release of Nonfarm Payrolls data on Friday, with expectations of 62K jobs in April. In the UK, the docket is absent, leaving traders adrift to US Dollar dynamics.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3607, holding a bullish near-term bias as spot advances well above the clustered simple moving averages around 1.3417 and continues to respect the rising trend-line support traced from 1.3035, last intersecting near 1.3492. The recent push through the prior descending resistance line, which most recently capped prices around 1.3436 and now acts as a reclaimed floor, reinforces the constructive tone, while the FXS Fed Sentiment Index edging up toward 132 suggests the broader backdrop remains supportive of continued sterling strength against the dollar.

On the downside, immediate support is seen at the recent breakout and intraday floor near 1.3607, ahead of the rising trend-line support around 1.3492. A deeper pullback would expose the former descending resistance line now turned support at roughly 1.3436, converging with the triple simple moving average cluster near 1.3417, where buyers would be expected to defend the wider uptrend as long as daily closes remain above that area.

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

Scotiabank strategists Shaun Osborne and Eric Theoret report the Euro (EUR) is modestly higher, extending a sentiment-driven recovery despite softer expectations for European Central Bank (ECB) tightening. Stronger German factory orders and resilient Eurozone retail sales have helped, but they stress that broader risk sentiment is the main driver. Technically, EUR/USD is bullish, with key support in the mid-1.16s and upside focus on 1.1825.

Bullish bias with clear upside targets

"The EUR is entering Thursday’s NA session with a modest 0.2% gain as it seeks to extend its recent sentiment-driven recovery."

"The outlook for relative central bank policy has softened somewhat, with a notable moderation in expectations for ECB tightening with June now priced for 19bpts and September just shy of 50bpts."

"The erosion of fundamental support has been offset by the improvement in the broader market’s mood, and sentiment remains the dominant driver in the current environment."

"The next major upside target is the 61.8% Fibo at 1.1825, and a break would pave the way for a full retracement and a push back above 1.20."

"We look to a near-term range bound between 1.1720 and 1.1820."

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

Beth Hammack, President of the Federal Reserve (Fed) Bank of Cleveland, said in an interview on a public radio station on Thursday that she sees a lot of uncertainty in the economic outlook. She added the Fed should be more neutral in its policy stance given this uncertainty.

Key takeaways:

I see a lot of uncertainty in economic outlook.

Fed should be neutral in policy stance outlook given uncertainty.

Everyone is feeling increase in gasoline prices.

Is worried about outlook for price pressures.

Higher prices are weighing on consumers' ability to spend.

Iran war can impact both sides of Fed's mandate.

There was a lot more consensus than it appears at Fed meeting.

Sees interest rates on hold for quite some time.

Sees low and stable unemployment right now.

Job market remains low hire, low fire environment.

Fed has been missing inflation target for years.

War means price pressures could be more persistent.

High inflation forcing more people toward trade offs.

Lowering interest rates more than justified will drive up inflation.

Fed tries to be as apolitical as possible.

Powell has done an excellent job at Fed.

'Excited' for new Fed chair Warsh when he arrives.

Is watching closely for how long Iran war lasts.

Inflation expectations are pretty well anchored right now.

High inflation could start weighing on demand.

Uncertainty over outlook should translate to policy uncertainty.

Can't put hard number on how long Fed should hold rates steady.”

• Reports suggesting the US and Iran are moving closer to a deal eased fears of prolonged disruptions in the Strait of Hormuz.
• BoJ Minutes showed policymakers discussed the possibility of further rate hikes if energy-driven inflation persists.
• US Initial Jobless Claims rose to 200K from 190K but remained below expectations.

The USD/JPY pair is currently trading around the 156.40 level, showing minimal change throughout the day. This stability comes as multiple reports indicate that the United States (US) and Iran are moving closer to a deal to resolve the over two-month-long conflict.

Such developments are helping to alleviate concerns about prolonged disruptions in the Strait of Hormuz, which in turn is pushing Oil prices lower. This softer geopolitical outlook has negatively impacted the US Dollar (USD) while supporting the Japanese Yen (JPY).

In addition, the Minutes from the recent Bank of Japan (BoJ) meeting, released on Thursday, revealed that policymakers discussed the potential need for further interest rate hikes if the energy shock related to the Hormuz closure continues and drives inflation higher. Several board members expressed concern that persistently high Oil prices and a weakened Yen could compel the BoJ to tighten monetary policy, reinforcing expectations of a more hawkish stance from the central bank.

In the US, Initial Jobless Claims rose to 200K for the week ending May 2, up from the previous reading of 190K, but still below market expectations of 205K to 206K. Meanwhile, Continuing Claims declined to 1.766 million, indicating that layoffs remain historically low and the labor market remains relatively resilient.

Short-term technical analysis:

On the four-hour chart, USD/JPY trades at 156.26, maintaining a bearish near-term tone as the pair holds below both the 20-period Simple Moving Average (SMA) at 156.93 and the 100-period SMA at 158.53. The short-term SMA has rolled over below the longer one, hinting at a softening trend backdrop, while the Relative Strength Index (RSI) around 39 suggests lingering downside pressure but without oversold extremes, allowing room for further weakness if sellers regain control.

On the topside, initial resistance is located at 156.44, followed by a nearby barrier at 156.54, ahead of the 20-period SMA at 156.93 and the more distant 100-period SMA at 158.53. On the downside, immediate support is seen at 156.17, with a secondary floor at 156.04. A clear drop through this support band would reinforce the bearish bias and expose lower levels on the four-hour horizon.

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

• USD/CHF falls to its lowest level since March 10 as hopes for a US-Iran peace deal pressure the US Dollar.
• Falling Oil prices ease inflation concerns and temper hawkish Federal Reserve expectations.
• Swiss inflation rises to 0.6% YoY in April, though it remains below the SNB’s 2% target.

The Swiss Franc (CHF) strengthens against the US Dollar (USD) on Thursday as renewed hopes for a possible US-Iran peace deal pressure the Greenback. At the time of writing, USD/CHF is trading around 0.7766, its lowest level since March 10.

Markets continue to monitor developments surrounding the US-Iran negotiations, awaiting further clarity after Iran confirmed it is reviewing the latest US-backed proposal aimed at ending the war in the Middle East. Meanwhile, US President Donald Trump struck a positive tone on the talks, telling reporters at the White House on Wednesday, “We’ve had very good talks over the last 24 hours, and it’s very possible that we’ll make a deal.”

The latest proposal reportedly includes Iran pausing nuclear enrichment, while the US would lift sanctions and release billions of US Dollars in frozen Iranian funds. Both sides are also expected to end the blockade around the Strait of Hormuz.

In reaction to the latest optimism, Oil prices plunged, and the US Dollar Index (DXY) has slid back toward pre-war levels. The DXY, which tracks the Greenback’s value against a basket of six major currencies, is trading around 97.88, down roughly 0.15% on the day.

Meanwhile, traders are reassessing the Federal Reserve’s (Fed) monetary policy path as the decline in Oil prices helps reduce inflation risks and tempers the hawkish expectations that had recently built in the market.

Fed officials remain cautious about resuming monetary policy easing. Speaking on Thursday, Cleveland Fed President Beth Hammack said the baseline outlook is for interest rates to remain on hold “for a long period.” Hammack also warned that the Iran conflict could affect both sides of the Fed’s mandate and noted that cutting interest rates beyond justified levels would risk boosting inflation.

On the data front, US Initial Jobless Claims rose to 200K in the week ending May 2, up from the previous week’s 190K reading but slightly below market expectations of 205K. Traders now await the Nonfarm Payrolls (NFP) report due on Friday for fresh clues on the Federal Reserve’s monetary policy outlook.

On the Swiss side, inflation picked up for a second consecutive month due to rising energy prices. Switzerland’s Consumer Price Index (CPI) accelerated to 0.6% YoY in April from 0.3% in March, marking the highest reading since late 2024. On a monthly basis, CPI rose 0.3% MoM. However, inflation remains well below the Swiss National Bank’s (SNB) 2% target, supporting the central bank’s current hold stance.

Commerzbank’s Dr. Ralph Solveen notes that German industry orders rose 5% in March, with core orders up 5.1% and gains broadly spread across sectors, indicating an economic recovery was underway before the Middle East conflict. He now expects higher energy prices and uncertainty from the war in Iran to dampen demand, with order figures likely to weaken and a slight GDP contraction possible in Q2 2026.

War shock threatens fragile German recovery

"New orders in the German economy rose by 5% in March compared with the previous month. Unlike in many of the previous months, big ticket orders played only a minor role in this increase. This suggests that the generally expected economic recovery had been already underway before the war in the Middle East began."

"Without the war in Iran, this would have painted a positive picture for the German economy: The significant increase in March would have greatly increased the likelihood that the core figure for order intake would end its more than two-year sideways trend and that demand for German industrial goods – also driven by stronger government demand – would finally pick up again."

"However, the war in Iran has caused energy prices to skyrocket and significantly increased uncertainty, which in turn has markedly dampened business sentiment. This will – at least as long as the war continues and the Strait of Hormuz remains closed – curb their demand for industrial goods. Consequently, we can expect order figures to deteriorate again in the coming months, and it is quite possible that the German economy will contract slightly in the second quarter following the growth seen around the turn of the year 2025/26."

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

National Bank of Canada (NBC) analysts highlight that Canada’s aggregate tariff burden still looks relatively low versus peers, but warns this advantage is eroding. They stress that headline averages mask significant sectoral and regional vulnerabilities, particularly in manufacturing, and that investors should assess tariff exposure through a detailed provincial and industry lens as the United States-Mexico-Canada Agreement (USMCA) review approaches.

Manufacturing exposed as tariff gap narrows

"While customs data reveal a globally favourable tariff rate applied to Canada vs other nations, this gap has narrowed."

"These data also fail to capture trade that has been shifted (or omitted entirely) as damage sets in."

"Sectoral exposures—particularly in manufacturing—continuing to see outsized negative impacts."

"Relatedly, we caution against complacency in regard to Canada’s national tariff hit."

"To this end, we stress the importance of looking at Canada’s tariff exposure through a regional / sectoral lens."

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

TD Securities strategist Bart Melek notes that the latest FOMC decision and the Iran-related Oil shock are pushing the Fed toward a neutral or even restrictive bias, delaying any rate cuts. Melek argues that elevated inflation expectations, a firm US Dollar and the risk of further hikes will keep yields high, undermining Gold in the near term before an eventual policy pivot.

Neutral to restrictive bias delays cuts

"The most recent FOMC decision to hold the overnight rate steady came with four Federal Reserve officials voting against a post-meeting statement that signaled the next interest rate move would be lower, suggesting to the gold market that the US central bank is shaping expectations for a neutral bias to take root."

"There is also a risk that if this oil shock continues into June, the next Fed move could very well be a hike, rather than the widely expected series of cuts anticipated before the Iran conflict started."

"With Strait of Hormuz-driven inflation pressures firmly embedded in market and Fed psychology for quite some time, a rate cut is very unlikely in the near term. Crude oil would need to stabilize some $5–10 below its current levels for inflation pressures to begin reversing."

"Indeed, as the continuation of this conflict suggests even higher crude prices, incoming Fed Chair Kevin Warsh is also unlikely to cut rates anytime soon."

"This means that rates across the curve are likely to remain elevated, with a risk of increasing into restrictive territory should energy prices spike further."

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