Forex News

Rabobank’s Senior FX Strategist Jane Foley discusses the Japanese Yen (JPY), noting that expected endorsement from the United States (US) Treasury for recent Ministry of Finance (MoF) FX intervention should support the currency in the near term. However, Foley argues USD/JPY will only convincingly move lower if Japan’s fundamentals strengthen further and the Bank of Japan (BoJ) continues tightening policy, alongside a dovish Federal Reserve (Fed) outlook.

Yen support hinges on policy trajectory

"The visit of US Treasury Secretary Bessent to Japan this week is widely expected to bring an endorsement of the MoF’s recent FX intervention."

"Confirmation that the US Treasury has supported the recent steps taken by the MOF to support the JPY would likely keep it underpinned in the near-term."

"Further out, however, the market will need greater reassurance regarding a strengthening in Japan’s fundamentals for USD/JPY to convincingly turn lower. This would almost certainly include a continued tightening of monetary policy in Japan."

"In any case the market already sees a strong chance that the BoJ will hike rates again in June, after three policy makers dissented in favour of higher rates at the April policy meeting."

"Expectations that the US Treasury will endorse the MoF’s recent FX intervention in favour of the JPY is likely to offer support to the currency near-term. In addition, Reuters has reported that the MoF has spent a relatively moderate JPY10 trn in its recent intervention activity. This may worry JPY bears that the government has more up its sleeve."

"That said, if expectations regarding the potential for further BoJ rate hikes starts to waiver, the JPY could again be exposed. Our forecast of a move to USD/JPY 152 on a 6-month view assumes the BoJ’s rate hiking cycle continues. It also assumes a dovish Fed."

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

• GBP/USD recovers from intraday lows as Middle East tensions continue to drive market volatility.
• The US Dollar remains supported after Trump rejected Iran’s latest peace response.
• Technically, GBP/USD maintains a mildly bullish bias while holding above the 200-day SMA.

GBP/USD recovers some ground after opening the week with a bearish gap as geopolitical headlines surrounding the Middle East continue to stir volatility across financial markets. At the time of writing, the pair is trading around 1.3614 after bouncing from an intraday low near 1.3553, though it remains down around 0.14% on the day.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 98.00 after hitting an intraday high near 98.15. The US Dollar’s (USD) downside remains limited as hopes for a near-term resolution to the US-Iran war faded after US President Donald Trump rejected Iran’s response to a US-backed proposal aimed at ending the conflict, calling it “totally unacceptable” in a post on Truth Social.

Rising political uncertainty in the United Kingdom could also act as a near-term headwind for the British Pound (GBP) following the Labour Party’s heavy losses in the recent local elections. Prime Minister Keir Starmer is now facing a growing leadership challenge within his party.

Traders are now bracing for a busy slate of economic data releases that could drive fresh volatility in GBP/USD. In the United States, attention will turn to the Consumer Price Index (CPI) report due on Tuesday, followed by the Producer Price Index (PPI) data on Wednesday. In the United Kingdom, investors will closely watch Gross Domestic Product (GDP) figures along with Industrial and Manufacturing Production data scheduled for release on Thursday.

Technical Analysis:

On the daily chart, GBP/USD retains a mildly bullish bias as price holds above the 200-day Simple Moving Average (SMA) at 1.3424 and the nearby horizontal support at 1.3500. The Relative Strength Index (RSI) around 59 suggests positive but not overextended momentum, while the Moving Average Convergence Divergence (MACD) indicator remains in shallow positive territory, hinting that upside pressure is still present but not accelerating.

On the topside, initial resistance is located at the horizontal barrier near 1.3650, where a clear break would open the way for a more convincing continuation of the advance. On the downside, immediate support is seen first at 1.3500, with the 200-day SMA at 1.3424 providing a deeper layer of structural demand should a corrective pullback unfold.

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

• The Canadian Dollar remains supported by the surge in Oil prices linked to Middle East tensions.
• A stronger-than-expected US jobs report provides limited support to the US Dollar.
• Markets remain focused on the Strait of Hormuz conflict and its potential impact on global inflation.

USD/CAD trades on a flat note around 1.3670 on Monday, down modestly by 0.05% on the day at the time of writing. The US Dollar (USD) finds some support after Friday’s stronger-than-expected US employment report, but gains in the Canadian Dollar (CAD) are limiting the pair’s upside amid higher Oil prices.

The Bureau of Labor Statistics (BLS) reported that the US economy added 115K jobs in April, compared with 185K in March after revision, beating market expectations of 62K. Meanwhile, the Unemployment Rate remained steady at 4.3%, in line with consensus forecasts. The data reinforced expectations that the Federal Reserve (Fed) could remain cautious regarding additional monetary easing.

MUFG noted that the rebound in the US Dollar is being supported both by persistent geopolitical tensions and by the stronger-than-expected Nonfarm Payrolls (NFP) report. The bank also believes that the latest developments favor the Fed keeping interest rates unchanged.

However, support for the Greenback remains limited by the rally in Crude Oil prices, which continues to underpin the Canadian Dollar. West Texas Intermediate (WTI) price climbs toward $94.60 per barrel after US President Donald Trump rejected Iran’s latest proposal aimed at ending the conflict with Israel and the United States (US).

Israeli Prime Minister Benjamin Netanyahu warned on Sunday that the conflict with Iran was “not over,” fueling fears of renewed escalation in the Middle East. Persistent tensions surrounding the Strait of Hormuz continue to raise concerns over global energy supplies and support commodity-linked currencies such as the Loonie.

OCBC nevertheless noted that the US Dollar remains highly sensitive to shifts in global risk sentiment and Oil price dynamics, even after stronger US economic data. The bank expects the US Dollar Index (DXY) to remain broadly rangebound in the near term.

HSBC reports that the Norwegian Krone (NOK) has gained alongside other risk-on currencies versus the Dollar, supported by improved sentiment and domestic policy. Norges Bank surprised markets on 7 May with a 25bp hike to 4.25%, its first since 2023, but HSBC’s economists see a prolonged hiking cycle as unlikely, contrasting this with the continued wait-and-see stance of regional peers.

Norges Bank diverges from regional peers

"In addition to the broader shift in risk appetite, both the AUD and NOK appear to have benefited from domestic policy developments."

"The Norges Bank surprised markets on 7 May by raising its policy rate by 25bp to 4.25%, marking its first hike since 2023."

"As the Norwegian central bank indicated that its policy outlook has not changed materially, our economists view a prolonged hiking cycle as unlikely."

"In contrast, regional peers, including the European Central Bank, the Bank of England and the Riksbank, still adopt a wait-and-see approach."

"While recent price action is broadly consistent with these developments, it is important to monitor any sustained energy disruption that could trigger a renewed “risk-off” shift and strengthen the USD."

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

MUFG’s Lee Hardman notes the US Dollar (USD) has rebounded, lifting the Dollar Index (DXY) back above 98.000 as stalled Middle East peace talks and a stronger April Nonfarm Payrolls (NFP) report underpin demand. Hardman highlights risks from a prolonged Strait of Hormuz disruption, firmer US labour data, and expectations that the Federal Reserve (Fed) will keep rates on hold.

Peace impasse and jobs data back Dollar

"The US dollar has staged a modest rebound at the start of this week helping to lift the dollar index back above the 98.000-level which has provided good support over the past month."

"The US dollar has derived support overnight from reports that the US and Iran have both rejected each other’s latest peace proposals putting a dampener on investor optimism that a deal could be reached soon to end the conflict and re-open the Strait of Hormuz."

"The latest developments continue to highlight the risk of a more prolonged closure of the Strait of Hormuz which would be disruptive for the global economy and financial markets."

"At the same time, the US dollar has been supported in part by the release of the stronger than expected nonfarm payrolls report for April."

"Overall, we believe the latest developments favour the Fed leaving rates on hold."

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

BNP Paribas economists project Eurozone Gross Domestic Product (GDP) growth slowing from 1.5% in 2025 to 1.0% in 2026 and 1.3% in 2027, with inflation rebounding to 3.0% and 3.3%. Activity is expected to withstand the energy shock thanks to investment in defence, AI and electrification. They anticipate two 25 bp ECB rate hikes in 2026, lifting the deposit rate to 2.5%.

Growth slows as ECB turns tighter

"Eurozone growth would slow due to spillovers from the Middle East conflict."

"GDP growth, which reached 1.5% in 2025, would slow down to 1.0% in 2026 and 1.3% in 2027, while inflation would rebound to 3.0% in 2026 and 3.3% in 2027 (compared to 2.1% in 2025)."

"Activity would nevertheless withstand the energy shock, supported by investment in defence, AI, and electrification, which should continue to boost intra-EU trade."

"As inflation rebounds, two 25-basis-point hikes in the ECB’s policy rate would take place in 2026 – with the first hike expected in June – pushing the deposit facility rate to 2.5%."

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

Commerzbank reports that GBP/USD advanced despite a major United Kingdom (UK) political shock from local elections. Labour suffered heavy council losses while Reform UK and the Greens gained ground, underscoring a more fragmented political landscape. Even so, GBP/USD holding steady near 1.3600, suggesting resilient Pound (GBP) demand against the US Dollar (USD).

Sterling holds firm after local elections

"The UK elections last Thursday delivered a major political shock and reinforced the shift toward a fragmented multi-party system."

"Prime Minister Keir Starmer’s Labour Party suffered heavy losses in local elections across England, while Nigel Farage’s Reform UK and the Green Party made significant gains."

"Labour lost more than 1,200 council seats and control of dozens of councils, marking its worst local election performance for a governing party in over 30 years."

"The Reform UK party was the biggest winner and won more than 1,300 council seats."

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

ING’s Chris Turner says EUR/USD has held up thanks to a softer Dollar and strong Asian AI-related risk sentiment, but Eurozone activity data remain weak. He argues that expectations for European Central Bank (ECB) hikes this summer are preventing a drop toward 1.15. With high Oil prices and US inflation risks, Turner sees limited scope for EUR/USD to break above 1.18 and greater downside risk.

ECB support offsets soft Euro data

"EUR/USD has been holding up quite well, largely on the back of the recent pro-risk, softer dollar environment."

"The outlook for the euro has been less encouraging, however, where the activity data has been poor, and it is only the prospect of European Central Bank hikes this summer that is preventing EUR/USD from dropping back to 1.15."

"With oil prices staying high, expect the ECB to continue to talk tough and speeches by Christine Lagarde and Philip Lane this Wednesday may firm up the view that the ECB will hike 25bp on 11 June. That is currently priced with an 82% probability."

"Unless there is a breakthrough on a peace deal this week, we struggle to see EUR/USD breaking above 1.18 and see greater risk of sub 1.1700 driven by higher US prices and more hawkish Fed pricing."

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

OCBC’s FX Christopher Wong notes US Dollar Index (DXY) traded slightly softer despite a strong US jobs report, as markets focus more on geopolitics, Oil and Fed repricing. He highlights modest downside risks with key support at 97.50/60 and further levels at 97.10 and 96.75, while resistance is seen around 98.10/30 and 98.70. Forecasts keep DXY broadly rangebound into 2027.

Dollar pressured by risk sentiment shifts

"While payrolls [NFP] matter, the USD appears more sensitive to geopolitical risk, oil and the associated inflation/Fed repricing channel."

"Markets are unlikely to price in a material reset in US-China relations, but a softer rhetoric, tariff restraint or clearer negotiating path could still be sufficient to support risk appetite and weigh on the USD."

"DXY traded slightly softer last week."

"Key support around 97.50/60 levels (double bottom, 61.8% fibo retracement of 2026 low to high) is key."

"Break out puts next support closer to 97.10, 96.75 (76.4% fibo) Resistance at 98.10/30 levels (50% fibo, 21 DMA), 98.70 (38.2% fibo)."

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

• The Australian Dollar remains subdued as risk aversion supports the US Dollar.
• China’s inflation accelerates in April, reinforcing demand expectations across Asia.
• The RBA maintains a hawkish stance while markets focus on Donald Trump’s visit to China.

AUD/USD trades around 0.7245 on Monday at the time of writing, virtually unchanged on the day after opening the week with a bearish gap. The pair recovers its initial daily losses, but the Australian Dollar (AUD) remains weighed down by renewed risk aversion supporting the US Dollar (USD).

Market sentiment remains fragile after United States (US) President Donald Trump and Iran rejected each other’s latest proposals aimed at ending the war in the Middle East. According to Bloomberg, Trump described Iran’s latest proposal as “totally unacceptable,” while Iranian officials insisted on a broader settlement including the security of shipping routes through the Strait of Hormuz. This geopolitical backdrop continues to fuel safe-haven demand and support the Greenback.

The US Dollar Index (DXY) therefore holds onto its daily gains, while US Treasury yields also rise following stronger-than-expected US labor market data. The Bureau of Labor Statistics reported on Friday that Nonfarm Payrolls (NFP) increased by 115K in April, above the market consensus of 62K, although the figure slowed from the 185K increase recorded in March. The Unemployment Rate remained steady at 4.3%, in line with expectations.

In Asia, macroeconomic data released in China on Monday nevertheless provides underlying support for the Australian Dollar. China’s Consumer Price Index (CPI) rose 1.2% YoY in April, following a 1% increase in March and above the 0.8% forecast.

These figures reinforce the economic outlook in China, Australia’s largest trading partner, and help limit downside pressure on the Aussie. Investors are also monitoring Donald Trump’s visit to China from May 13 to May 15, during which several sensitive topics are expected to be discussed with Chinese President Xi Jinping, including Middle East tensions, Taiwan, artificial intelligence and critical minerals.

The Australian Dollar also continues to benefit from the hawkish tone recently adopted by the Reserve Bank of Australia (RBA). The Australian central bank raised its policy rate to 4.35% last week for the third consecutive time this year, while signaling that inflation remains too high. According to CNBC, the RBA’s projections now suggest that the policy rate could reach 4.7% by the end of the year, with no rate cuts expected before 2028.