Forex News

Deutsche Bank’s Galina Pozdnyakova, Jim Reid and Luke Templeman highlight that next week’s main macro focus will be global flash PMIs and several key inflation releases. They note particular attention on the US May PCE report, alongside the Ifo survey in Germany, Tokyo CPI in Japan, and CPI reports in Canada and Australia.

Flash PMIs and global CPI releases

"The global flash PMIs will be amongst the main data highlights next week."

"In the US, the focus will also be on the May PCE report."

"Elsewhere, key releases include the Ifo survey in Germany, Tokyo CPI in Japan and CPI reports in Canada and Australia."

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

Nordea analysts expect the Dollar to stay supported in coming months as the Federal Reserve maintains a relatively hawkish stance and US data remain firm. They argue that US growth and inflation dynamics justify higher yields versus peers, limiting Dollar downside. However, they still see a gradual Dollar depreciation over the medium term as global growth broadens and other central banks catch up.

Fed policy and data back Dollar strength

"In FX, we see the USD supported in the near term by relatively strong US data and a hawkish Fed, but we still expect a gradual depreciation over the medium term as growth outside the US improves and other central banks continue their hiking cycles."

"We expect the Fed to keep rates higher for longer than markets currently price, which should keep US yields elevated and support the dollar against most major currencies in the coming quarters."

"Risks to our USD view are two-sided, as a sharper-than-expected slowdown in US activity could trigger earlier Fed cuts and weigh on the dollar, while a renewed inflation surge or further upside surprises in US data could extend the period of dollar strength."

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

• USD/CAD rises to its highest level since April 2025 as weak Canadian Retail Sales and lower Oil prices weigh on the Loonie.
• The Canadian Dollar faces another headwind from diverging Fed and BoC monetary policy outlooks.
• Markets price in a 70% chance of a Fed rate hike in September, according to CME FedWatch data.

USD/CAD trades on the front foot on Friday despite a modest pullback in the US Dollar (USD), as weaker-than-expected Canadian Retail Sales data weighs on the Canadian Dollar (CAD). At the time of writing, the pair trades around 1.4170, its highest level since April 2025.

Statistics Canada reported on Friday that Retail Sales rose 0.5% in April, down from a 0.9% increase in March and slightly below the 0.6% consensus forecast. Retail Sales excluding automobiles increased just 0.1%, missing forecasts of 0.7%, while March's reading was revised down to 1.2% from 1.4%.

The CAD is also facing pressure from diverging monetary policy outlooks between the Bank of Canada (BoC) and the Federal Reserve (Fed). At this week's policy meeting, the Fed reiterated its commitment to returning inflation to its 2% target, while nine of 19 policymakers projected at least one rate hike this year.

The hawkish tilt comes as higher Oil prices have pushed US inflation higher, with May Consumer Price Index (CPI) accelerating to 4.2%, its highest level since April 2023.

Following the meeting, markets priced in 70% chance of a September rate hike, according to CME FedWatch data, providing fresh support for the Greenback. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 100.81 after touching 101.13 earlier in the day, its highest level since May 2025.

By contrast, inflation pressures in Canada remain relatively contained. At last week's meeting, the Bank of Canada (BoC) said US tariffs argue for lower rates, although persistently high energy prices could justify "consecutive increases in the policy rate."

However, with Oil prices retreating following the US-Iran truce, the case for rate hikes has weakened. Lower crude prices are also adding pressure on the commodity-linked Loonie, given Canada's status as a major Oil exporter. West Texas Intermediate (WTI) Crude trades around $75.50 per barrel, its lowest level since March 5.

• Silver posts a third consecutive daily decline and remains on track for a notable weekly loss.
• Markets continue to strengthen expectations for higher US interest rates following the Fed’s latest meeting.
• Optimism surrounding a ceasefire between Israel and Hezbollah limits demand for safe-haven assets.

Silver (XAG/USD) trades around $64.85 on Friday at the time of writing, down 1.31% on the day. The white metal remains under pressure for a third consecutive day as investors reassess the outlook for US monetary policy and developments in the Middle East.

Market sentiment continues to be influenced by the hawkish tone adopted by the Federal Reserve (Fed) this week. At its June meeting, the US central bank left interest rates unchanged but signaled that several policymakers still support an additional rate hike before year-end. This stance has led traders to reinforce expectations for higher interest rates for longer, reducing the appeal of non-yielding assets such as Silver.

According to the CME FedWatch tool, markets are now assigning a high chance to a rate hike in the coming months. Newly appointed Fed Chair Kevin Warsh also reiterated the central bank’s commitment to returning inflation to its 2% target, adding to expectations of a more restrictive monetary policy stance.

On the geopolitical front, the traditional safe-haven support for precious metals has weakened after Reuters reported that Israel and Hezbollah agreed to a ceasefire starting Friday afternoon. The development has helped improve risk appetite and reduced defensive demand for Silver.

Inflation concerns also remain in focus due to volatility in energy prices and risks surrounding global Oil supply. However, these factors have not been sufficient to offset the negative impact of expectations for tighter US monetary policy.

Silver, therefore, remains biased to the downside in the near term, with investors closely monitoring upcoming US economic data and any signals that could either confirm or challenge expectations of further Federal Reserve tightening.

ING’s Francesco Pesole highlights that Andy Burnham’s by-election win paves his way to become UK Prime Minister, with betting markets expecting a transition by late summer. The absence of a political risk premium in Pound assets suggests investors see limited fiscal disruption. ING maintains a generally bullish stance on EUR/GBP, citing no further Bank of England hikes while flagging fiscal headlines as an upside risk.

Burnham path to power and Pound pricing

"In the coming days, we might already see some cabinet resignations aimed at pressuring PM Keir Starmer to step down and speed up a transition to Burnham. The alternative is a lengthier leadership challenge. Anyway, betting markets – and likely the investor community – have a very high conviction that Burnham will become PM by the end of the summer."

"The lack of any political risk premium in the pound over the past month suggests markets have grown increasingly assured that Burnham won’t upset the gilt market with his fiscal plans. Still, the bar has been low since 2022 for GBP and gilts to react negatively to fiscal headlines, and we are adding that as an upside risk in our generally bullish view on EUR/GBP. Still, our view rests primarily on our call for no Bank of England hikes, with yesterday’s rather uneventful meeting reinforcing our conviction."

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

Citing a senior US official on Friday, Reuters reported that Israel and Hezbollah have agreed to a ceasefire at 4 p.m. local time on Friday.

"We understand that after the exchange of fire earlier today, Israel and Hezbollah are now in a ceasefire," the official said and explained that negotiators for the US and Qataris worked out the deal with help from Iran.

Market reaction

The US Dollar Index inched slightly lower with the immediate reaction to this headline and it was last seen losing 0.05% on the day at 100.75.

UOB Global Economics & Markets Research reports that Oil prices stabilized after comments from US Vice President JD Vance confirmed tankers carrying over 12 million barrels had crossed the Strait of Hormuz. Brent closed at $79.85 and WTI at $76.60. Markets remain sensitive to any renewed disruptions or escalation risks around the key shipping chokepoint.

Hormuz flows calm supply concerns

"US financial markets will be closed today (19 Jun) in observance of the Juneteenth federal holiday. However, focus will be on the reopening of the Strait of Hormuz, with markets likely to stay sensitive to any disruptions or escalation risks. Against this backdrop, developments on the geopolitical front, alongside moves in yields and the US dollar, will remain key for near-term direction."

"Oil prices steadied on Thu after US Vice President JD Vance said tankers with more than 12 million barrels crossed the Strait of Hormuz overnight. Brent crude futures, the international benchmark, gained 30 cents to close at $79.85/bbl. West Texas Intermediate futures lost 19 cents to settle at $76.60/bbl."

"Gold prices edged lower on Thu, pressured by hawkish policy signals from the Fed and a stronger US dollar, while the US-Iran ceasefire deal that dialed back inflation concerns and sent oil markets lower."

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

UOB Global Economics & Markets Research reports that GBP/USD fell sharply after the Bank of England left rates unchanged at 3.75%, before trimming losses to trade near 1.3236. The BOE decision saw a 7–2 vote, with two members preferring a hike to 4.00%. UK labour data showed slightly lower unemployment and still-firm wage growth, complicating the policy outlook.

Sterling soft after split BoE decision

"The Bank of England (BOE) held the Bank rate unchanged at 3.75% on Thu, as policymakers continue to balance the need to address above-target inflation with lackluster economic growth. The decision to hold was backed by seven of the nine Monetary Policy Committee (MPC) members at the May meeting. BOE chief economist Huw Pill and Megan Greene, an external member of the rates-setting MPC, were the two dissenting voices, casting votes to hike the BOE’s “base rate” by 25 bps to 4.00%."

"The US dollar extended gains on Thu to its highest in more than a year after a hawkish hold from the Fed triggered bets on rate hikes. The US dollar index (DXY) surged and closed at a one-year high at 100.85 (+0.76%). EUR/USD extended its sharp decline from the previous session to close at 1.1456 (-0.37%). GBP/USD plummeted by 0.69% to 1.3205 following the BOE’s decision, before paring losses to trade around 1.3236."

"The UK’s unemployment rate edged lower to 4.9% in the three months to Apr, from 5.0% in Mar. Wage growth remains relatively firm, with regular pay rising 3.4% y/y, above expectations; and total pay closer to 4.4% y/y."

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