Forex News

BNY reports that Bundesbank President Joachim Nagel has signaled a likely European Central Bank rate hike in June unless the outlook improves, reinforcing a hawkish bias. Despite this, FX options show 1‑ and 3‑month EUR volatility below long-term averages, suggesting markets do not expect a major EUR/USD breakout. Energy-driven inflation and Iran-related supply shocks remain key risks.

ECB hawkish tone but calm options market

"EUR volatility: EUR remains bid today after testing three-week lows, as the ECB meeting clearly points to a June rate hike risk. ECB President Christine Lagarde confirmed that the decision to hold rates was unanimous, though a hike had been discussed."

"Meanwhile, the ECB’s Joachim Nagel has cautioned that the central bank might need to tighten policy as early as June. What is interesting is that the options market in FX has 1m and 3m volatility below the long-term average."

"This suggests few see any breakdown or breakout for EURUSD in the quarter ahead, despite the rate policy uncertainty in the U.S. and the EU linked to the ongoing energy supply shock from the Iran conflict. Any shift in the FOMC stance or U.S. expectations on rates or hedging will be the new driver for risk."

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

BNY’s Bob Savage highlights that suspected FX intervention has driven a sharp Japanese Yen rebound, with the Ministry of Finance signaling readiness to act in both currency and crude oil futures. The focus is now on key USD/JPY levels around 155–158 as authorities seek to counter Yen weakness.

Authorities eye key Yen levels and oil

"The new story is about the FX intervention to support JPY yesterday and potentially today; however, that did not move markets much other than to reset the currency against its peers."

"JPY intervention: The BoJ likely spent $34.5bn intervening to move JPY from 160 to 156 yesterday, in the first intervention since July 2024. “I won’t comment on what we’ll do ahead. But I will tell you that Japan’s Golden Week holidays ​have just started,” Atsushi Mimura told reporters when asked whether Tokyo could intervene in the currency market."

"The focus for action is now on the 155 and 158 marks after yesterday’s surprise action. JPY’s relationship to CNY and KRW and the easing in USD buying in APAC will be watched into next week."

"Japanese Deputy Finance Minister Atsushi Mimura has said the ministry is “ready to act regarding crude oil futures transactions.” This latest warning of financial market intervention came as the Japanese yen strengthened further in late Tokyo trading on Friday after an earlier pause, extending gains triggered by suspected government intervention."

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

• GBP/JPY rebounds modestly after earlier sell-off likely triggered by suspected intervention by Japanese authorities.
• Technically, the cross holds a bullish bias above key moving averages, though weakening momentum signals fading upside strength.
• The 100-day SMA offers immediate support, while 213.50 acts as the first upside hurdle.

GBP/JPY stages a modest rebound on Friday after coming under selling pressure earlier in the day amid suspected intervention by Tokyo for a second straight day to curb excessive weakness in the Japanese Yen (JPY). At the time of writing, the cross is trading around 213.42, recovering from an intraday low of 211.81 and poised to end the week in negative territory for the first time in four weeks.

However, there has been no official confirmation of intervention by Japanese authorities so far, though officials issued a “final” warning on Thursday after USD/JPY briefly moved past the 160 level, a threshold that has previously triggered action. This move spilled across Yen crosses, with GBP/JPY posting a sharp pullback from a multi-year high near 216.60 to around 210.45 the previous day.

Although underlying fundamentals, including wide interest rate differentials between the Bank of Japan (BoJ) and other major central banks, continue to weigh on the Yen, the latest leg lower suggests near-term downside pressure on the cross as momentum indicators turn negative.

Technical Analysis:

In the daily chart, GBP/JPY holds a constructive bias while consolidating above its key trend filters. The 100-day Simple Moving Average (SMA) and the 200-day SMA sit comfortably below the spot, suggesting underlying demand despite the recent pullback.

However, momentum has cooled, with the Relative Strength Index easing toward the mid-40s and the Moving Average Convergence Divergence (MACD) slipping into negative territory, hinting that upside attempts may lack follow-through in the very near term.

On the topside, immediate resistance is located at the horizontal barrier near 214.50, where a daily close above would reopen the path toward the recent peak of 216.60 and signal renewed bullish impulse.

On the downside, initial support is provided by the 100-day SMA at 211.89, with a break there exposing deeper retracement toward the 200-day SMA at 206.74, where buyers would be expected to defend the broader uptrend.

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

• AUD/USD trades near 0.7200, holding steady despite volatility linked to geopolitical risks.
• Investors largely expect a rate hike from the Australian central bank next week.
• The US Dollar remains broadly under pressure, limiting downside in the pair.

AUD/USD trades around 0.7200 on Friday at the time of writing, virtually unchanged on the day and holding near recent highs, as markets adopt a wait-and-see approach ahead of the Reserve Bank of Australia (RBA) monetary policy decision scheduled for Tuesday.

The Australian Dollar (AUD) remains slightly supported against its major peers, with investors expecting this key event. According to a Reuters poll, a strong majority of economists expect a 25 basis point rate hike, which would bring the policy rate to 4.35%. These expectations are supported by persistent inflationary pressures in Australia, with the annual Consumer Price Index (CPI) coming in at 4.6% YoY in March, still well above the central bank’s target.

Market participants will also closely watch Governor Michele Bullock’s comments for further guidance on the policy outlook, particularly as energy-related risks linked to tensions in the Middle East and uncertainty surrounding the Strait of Hormuz could continue to fuel inflationary pressures.

At the same time, the US Dollar (USD) is struggling to gain traction despite a geopolitical backdrop that usually supports safe-haven demand. Markets expect the Federal Reserve (Fed) to keep interest rates unchanged through the end of the year, although some officials, including Neel Kashkari, have highlighted the possibility of further hikes in the event of a significant inflationary shock driven by energy prices.

Geopolitical tensions still provide intermittent support to the Greenback, particularly following reports that the US administration is considering military options regarding Iran. Meanwhile, diplomatic developments suggesting that Tehran has submitted a new proposal to the United States (US) on Thursday have temporarily weighed on the US Dollar.

Investors now turn their attention to the release of the US ISM Manufacturing Purchasing Managers Index (PMI) later in the day, a key indicator for assessing economic momentum.

European Central Bank (ECB) Governing Council member Gabriel Makhlouf said on Friday that without a clear timeline for the end of the conflict in the Middle East, he is concerned about a "higher-for-longer" energy price scenario, per Reuters.

Key takeaways

"Inflation expectations need to be closely monitored for signs of de-anchoring."

"I will be paying close attention to indirect effects such as cost-push inflation in production, transportation, and services."

"Potential second-round effects via wages will take longer to show up, given the staggered nature of wage-setting."

Market reaction

EUR/USD holds its ground in the American session and trades in positive territory above 1.1750.

In a statement published on Friday, Federal Reserve Bank of Cleveland President Beth Hammack explained her decision to dissent against the Fed keeping an easing bias in the policy statement, saying that a "clear easing bias" is no longer appropriate given the current outlook.

Key takeaways

"Inflation pressures are broad-based, energy is driving up prices."

"Economy has been resilient so far in 2026."

"Seeing upside inflation risk, downside job market risk."

"Uncertainty around economy, policy path has risen."

"A wide range of views is the cornerstone of Fed process."

"Job market is near full employment."

Market reaction

The US Dollar (USD) stays on the back foot in the American session on Friday. At the time of press, the USD Index was down 0.25% on the day at 97.85.

Citing Iranian sources, several news outlets reported on Friday that Iran has prepesented a new proposal to end the war and a response to the United States' (US) amendments through Pakistani mediators on Thursday.

Market reaction

With the immediate reaction to this headline, the US Dollar (USD) weakened against its rivals. At the time of press, the USD Index was down 0.23% on the day at 97.88. Meanwhile, US stock index futures continue to trade mixed, with the S&P 500 Futures rising 0.15% and the Nasdaq Futures losing about 0.2% on the day.

Minneapolis Federal Reserve President Neel Kashkari explained on Friday that he dissented at the April policy meeting because the uncertainty around the Strait of Hormuz means the Fed should acknowledge the risk of rate hikes in its statement.

Key takeaways

"A large enough price shock could put inflation expectations at risk, potentially requiring a series of rate increases for the Fed to keep credibility in defending its 2% inflation target."

"The price shock from a prolonged closure of the strait could put inflation expectations at risk, require a strong policy response."

"Even the bening scenario where Strait of Hormuz opens soon would leave inflation so high rates would need to stay on hold for an extended period."

"Prior to war, had seen inflation likely to decline and warrant another rate cut this year; situation had not changed enough in March to modify the policy statement.

Market reaction

The US Dollar struggles to gather strength following these comments. At the time of press, the USD Index was down 0.2% on the day at 97.90.