Forex News
RaboResearch Global Economics & Markets discusses the Bank of England’s decision to keep Bank Rate at 3.75% with a 7–2 split, noting that two members preferred a 25bp hike. The sharp fall in energy prices suggests inflation may peak below earlier projections. However, upside risks to energy and potential second-round effects keep the MPC cautious. RaboResearch now expects no further rate hikes in 2026.
BoE holds as energy risks reassessed
"As expected, the Bank of England held rates at 3.75%, with a 7–2 vote split as Huw Pill and Megan Greene favoured a 25bp hike."
"The sharp decline in energy prices has increased the likelihood that inflation will peak well below the most benign scenario outlined in the April Report."
"Even so, the MPC continues to judge that risks to energy prices remain skewed to the upside. It also remains too early to assess whether second-round effects will materialise."
"Given that current economic conditions do not appear particularly conducive to such effects, we have removed our call for a rate hike. The market still prices 31bp by year-end."
"We now expect Bank Rate to remain on hold for the remainder of the year."
(This article was created with the help of an Artificial Intelligence tool and corrected at 17:15 GMT to note that RaboResearch now expects no further rate hikes in 2026, not 2024.)
National Bank of Canada (NBC) discusses USD/CAD, noting recent moves and the bank’s expectations for the pair. The report highlights key support and resistance levels and outlines scenarios under which USD/CAD could break out of its current range. The analyst provides a directional bias over the coming sessions without adding new catalysts beyond those already mentioned.
USD/CAD outlook with key levels
"We continue to expect USD/CAD to trade within a broad range in the near term, with key support and resistance levels likely to contain price action unless there is a significant surprise from upcoming data releases."
"A sustained break below support would open the door to further Canadian Dollar strength, while a move above resistance could signal a renewed period of USD outperformance against the Canadian Dollar."
"Our base case scenario remains for range trading over the coming days, but we acknowledge that volatility could increase if economic data or central bank communication materially alters interest rate expectations."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Nomura economists Josie Anderson, George Buckley, Andrzej Szczepaniak and David Seif note that Norges Bank kept its policy rate at 4.25% in June but delivered hawkish guidance and a higher rate path. They now expect a 25bp hike to 4.50% in Q3, most likely in August, and still project gradual easing from 2027 as the policy rate remains restrictive.
Norges Bank guidance turns more hawkish
"Norges Bank left its policy rate unchanged at 4.25% at its June meeting, as we and consensus expected. Its guidance was that “it will likely be necessary to raise the policy rate further at one of the forthcoming monetary policy meetings.” It also increased its policy rate projection (Figure 1)."
"The projection now implies a 25bp policy rate hike to 4.50% in Q3. However, the projection is not clear on whether Norges Bank is more likely to hike in August or September. The projection reaches a peak of 4.55% in Q4 2026 and Q1 2027, suggesting the possibility of a third hike this year."
"We bring forward our expectation of the next policy rate increase to August from September. This forecast change is for several reasons, including: 1) the upward revision to the policy rate projection, 2) continued concerns from policymakers about sticky inflation even after the May policy rate increase, 3) the note in the minutes that some policymakers argued in favour of raising the policy rate and 4) the May rate rise highlights the Bank’s willingness to move decisively following a hawkish policy rate projection."
"However, one risk to our forecast that could suggest a later policy rate rise is that the projections in the Monetary Policy Report were based on information in the period to 12 June, and energy prices have moved lower since then. However, Norges Bank said that the overall picture presented in the Reportwould not have been changed materially."
"Looking further ahead, we maintain our forecast of a 25bp policy rate cut in September 2027 and expect that Norges Bank will gradually lower its policy rate beyond that in the medium term. This is because we believe that at its current level or higher, Norges Bank’s policy rate is restrictive, and is therefore exerting downward pressure on economic activity and inflation."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Philip Lane says further ECB rate hikes remain justified even under a milder economic scenario.
- The ECB could look through temporary shocks if they are not expected to have a lasting impact on inflation.
- Lane warns that food prices are likely to keep rising despite lower Oil prices.
The European Central Bank (ECB) remains committed to maintaining a restrictive monetary policy stance in order to contain the inflationary impact of the energy shock, even under a milder economic scenario, according to Chief Economist Philip Lane comments reported by Reuters. Lane stated that further rate hikes still make sense, while emphasizing that the ECB could be willing to look through temporary shocks if they are not long-lasting.
Key takeaways
Comfortable that hiking makes sense even under milder scenario.
Open minded to looking through shocks if they are not long lived.
Even if Oil is falling, we think food will keep going up.
Hike aims to contain spread of energy shock.
Market reaction
Markets have largely ignored Lane’s remarks, with EUR/USD trading around 1.1470 at the time of writing on Thursday, down 0.28% on the day.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
- Initial Jobless Claims decreased to 226K vs. the previous week.
- Continuing Jobless Claims went up to 1.810M.
According to a report from the US Department of Labour (DOL) released on Thursday, the number of US citizens submitting new applications for unemployment insurance shrank to 226K for the week ending June 13. The latest print came in a tad above initial estimates (225K) and was slightly lower than the previous week’s 230K (revised from 229K).
Additionally, the 4-week moving average went up by 4K, bringing it to 223.25K from the revised average of the previous week (219.25K).
The report also indicated that Continuing Jobless Claims increased by 24K to 1.810M for the week ending June 6.
What do US Initial Jobless Claims figures mean for the US Dollar?
The Greenback extends its post-Fed gains and navigates the area of fresh yearly highs around 100.80 when gauged by the US Dollar Index (DXY) on Thursday.
The move higher in the US Dollar (USD) comes in response to rising bets of rate hikes by the Federal Reserve (Fed) later in the year, particularly in the wake of the hawkish hold on Wednesday.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
- USD/CAD rises 0.21% on Thursday and trades around 1.4130 at the time of writing.
- The US Dollar remains supported after a hawkish Fed meeting, despite the preliminary US-Iran agreement.
- Lower Oil prices emphasise downside pressure on the Canadian Dollar.
USD/CAD trades around 1.4130 on Thursday, up 0.21% on the day, as the US Dollar (USD) maintains a positive tone following the Federal Reserve’s (Fed) monetary policy decision. The pair continues to hold above the 1.4100 level, supported by a reassessment of US interest rate expectations.
The Fed left its benchmark interest rate unchanged within the 3.5%-3.75% range, in line with market expectations. However, updated economic projections showed that roughly half of Federal Open Market Committee (FOMC) members expect at least one additional rate hike this year. During his first press conference as head of the central bank, Fed Chair Kevin Warsh reaffirmed his commitment to restoring price stability, highlighting the resilience of the labor market and persistent underlying inflation pressures.
This more restrictive policy outlook continues to support the Greenback, even as safe-haven demand eases following the announcement of a preliminary memorandum of understanding between the United States (US) and Iran aimed at ending hostilities in the Middle East. According to Rabobank, improving geopolitical prospects and a potential full reopening of the Strait of Hormuz could reduce demand for safe-haven assets, but the impact of the Fed’s hawkish shift is currently outweighing those factors for the US Dollar.
On the Canadian side, the Canadian Dollar (CAD) is weighed down by lower Oil prices. West Texas Intermediate (WTI) is hovering below $75 per barrel, down more than 0.90% on Thursday at the time of press. This factor is generally negative for the commodity-linked currency, given the importance of energy exports to the Canadian economy.
At the same time, investors remain focused on the global growth outlook and the potential consequences of higher US interest rates. A further rise in US Treasury yields could continue to favor the US Dollar against the Canadian Dollar, even as overall market sentiment improves.
Canadian Dollar Price Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.33% | 0.47% | 0.16% | 0.16% | 0.11% | 0.13% | 0.56% | |
| EUR | -0.33% | 0.16% | -0.15% | -0.17% | -0.23% | -0.25% | 0.22% | |
| GBP | -0.47% | -0.16% | -0.32% | -0.33% | -0.37% | -0.39% | 0.05% | |
| JPY | -0.16% | 0.15% | 0.32% | 0.02% | -0.06% | -0.08% | 0.38% | |
| CAD | -0.16% | 0.17% | 0.33% | -0.02% | -0.08% | -0.09% | 0.37% | |
| AUD | -0.11% | 0.23% | 0.37% | 0.06% | 0.08% | -0.02% | 0.44% | |
| NZD | -0.13% | 0.25% | 0.39% | 0.08% | 0.09% | 0.02% | 0.47% | |
| CHF | -0.56% | -0.22% | -0.05% | -0.38% | -0.37% | -0.44% | -0.47% |
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 Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
Forex Market News
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