Forex News

According to UOB Global Economics & Markets Research, EUR/USD extended its recent decline as the US Dollar index hit a one-year high following the Fed’s hawkish hold. The pair closed at 1.1456, with Euro sentiment also shaped by comments from ECB Chief Economist Philip Lane on a potentially higher neutral rate and an ongoing energy-related price shock from the Middle East.

Euro slides as DXY hits one year high

"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%)."

"Speaking at an event on Thu, European Central Bank (ECB) Chief Economist Philip Lane said the neutral rate of interest could be as high as 2.5%, suggesting another hike will not yet act as a brake on the economy. Lane described the outlook as “stable,” while observing that the price shock caused by the snarl-up in energy supplies from the Middle East isn’t yet over."

"Risk sentiment improved modestly on Thu as markets continued to digest the Fed’s hawkish tilt alongside resilient US data. Firm labour and spending signals reinforced the higher-for-longer narrative, keeping front-end yields elevated and the US dollar supported."

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

DBS Group Research’s Chang Wei Liang points out that an interim US–Iran agreement has reopened the Strait of Hormuz, allowing traffic to resume while talks continue. He notes that Brent has fallen to around USD76, which should help temper inflation and provide some support to oil‑sensitive Asian currencies, including those previously pressured by higher energy import costs.

Middle East deal helps cool Oil prices

"US President Trump and Iranian President Pezeshkian have signed an interim MoU to end the Middle East conflict, reopening the Strait of Hormuz to all traffic while negotiations towards a final agreement continue."

"Admittedly, disagreement remain over nuclear and other key issues, but the deal signals a clear switch from US military pressure to diplomacy."

"Brent prices have now declined to around USD76, which should temper inflationary pressures and support oil-sensitive Asian currencies."

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

MUFG’s Derek Halpenny notes the US Dollar has extended gains after a record hawkish shift in the Fed’s dot plot, even as Oil remains sharply lower over the past month. He highlights IEA projections of an oversupplied crude market into 2027 and argues US inflation is likely peaking, with Fed rate hikes still seen as unlikely. MUFG expects EUR/USD to gain later in 2026.

Fed dots, Oil and EUR/USD prospects

"The US dollar (DXY) has advanced further to a level not seen since May 2025 with the substantial hawkish shift from the Fed this week continuing to reinforce positive momentum. In the three days since the Fed meeting, the dollar is 1.5% stronger. The momentum is being helped by the postponement of the signing of the MoU in Switzerland after Iran pulled out, accusing Israel of breaching the deal by attacking Lebanon."

"Over the short-term, the US dollar can certainly extend further. The shift in the dots was the most significant since the dots were first published in 2012. This largest ever hawkish shift in the dots came at a time when the risks to inflation have receded markedly given the plunge in crude oil prices."

"The IEA Monthly Report released this week also highlights the prospects of an over-supplied market potentially driving prices further lower. The drop over the last month can also be explained by the fact that traffic through the Strait of Hormuz was already picking up notably in May/June. The IEA estimated that shipments through the SoH, supported in part by ship-to-ship transfers in the Gulf of Oman, increased from 9.6 mb/d in May to around 12 mb/d in early June."

"If the deal between the US and Iran is done and holds, the disinflation impetus from energy could be very considerable by year-end and into 2027. Inflation in the US is likely at around the peak so the scenario of the Fed having to hike rates still looks very unlikely to us."

"We understand the positive momentum for the dollar following the record hawkish shift in the dots but it still doesn’t really tally that it leads to a rate hike. On the other hand, the ECB could well see the benefit of hiking again. The difference between the ECB and the Fed is the policy setting level and the mandate."

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

ING strategists Francesco Pesole, Frantisek Taborsky and Chris Turner note that the Dollar has held post-Fed gains, keeping USD/JPY elevated in intervention territory. They argue this is unlikely to mark a new broad Dollar bull cycle, but see scope for further near-term strength as markets price in more Fed hikes. ING highlights today’s US holiday as a potential window for Japanese FX intervention, with upside risks toward 162–163 if authorities stay sidelined.

Holiday liquidity keeps intervention risk elevated

"The dollar’s momentum remained strong for a full session after Wednesday’s hawkish surprise. Overnight, DXY tested levels above 101.00, on track to have its best week since April 2024. We aren’t at all convinced this is the start of a broader USD appreciation cycle."

"The US-Iran peace deal removes a bullish argument for the dollar, and our macro team still thinks markets are overestimating the chances of a Fed hike. But in the near term, the dollar may enjoy post-Fed enthusiasm for a bit longer, with markets probably keen to fully price two hikes by December at the first strong data print (39bp currently priced in)."

"In the coming days, focus will turn to Fedspeak and how strongly FOMC members are willing to back the hawkish dot plot. With forward guidance removed, markets have more room to reprice aggressively as US data are released, increasing the risk of volatility in both rates and FX."

"Today’s US holiday creates a lower-liquidity backdrop, a window during which Japanese authorities have previously shown a preference to intervene. USD/JPY is already deep into intervention territory after breaking above the 2024 highs yesterday. A lack of intervention today would leave scope for speculators to push towards 162-163 given the supportive USD environment."

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

UOB Global Economics & Markets Research highlights that Gold eased as hawkish Fed signals and a stronger US Dollar pressured the metal. An interim US–Iran ceasefire reduced inflation fears and contributed to softer Oil, further dampening Gold’s appeal as an inflation hedge. Spot Gold slipped 0.6% to $4,232.01, while US futures fell 3.1% to $4,245.90 per ounce.

Safe haven loses ground after Fed pause

"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."

"Spot gold was down 0.6% at $4,232.01/oz. US gold futures fell 3.1% to settle at $4,245.90/oz."

"US Treasuries advanced on Thu, led by the longer-end of the curve in a bull flattening move which unwound a small portion of Wed’s post-Fed slide. Advance came as stocks also pushed higher following an interim peace deal between the US and Iran eased some inflationary fears."

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

DBS Group Research strategist Chang Wei Liang warns that GBP/USD could stay volatile after easing towards 1.32, as Labour’s Burnham leads the Makerfield by‑election. He argues that Burnham’s left‑leaning stance and potential challenge to PM Starmer raise fiscal uncertainty that could hurt Gilts and the Pound, even as he seeks advice from prominent economists to bolster policy credibility.

Burnham leadership risks cloud UK outlook

"GBP/USD could see further volatility after easing towards 1.32, as Labour’s Burnham leads in the Makerfield by-election."

"Widely regarded as one of Labour’s most popular figures, Burnham is expected to challenge PM Starmer for the party leadership once he enters parliament."

"He is known for advocating left-leaning policies, and it remains unclear whether he can successfully navigate the fiscal rules that have limited Starmer’s policy agenda, particularly in defence and taxation."

"Such political uncertainty could trigger a sell-off in Gilts and weigh on GBP."

"That said, Burnham is reportedly seeking guidance from well-known economists such as Andy Haldane and Jim O’Neill to bolster policy credibility."

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

MUFG’s Derek Halpenny says the Swiss Franc underperformed after the SNB left rates at zero, but only minor inflation forecast revisions underline expectations of persistently low Swiss inflation. The SNB reiterated its readiness to intervene against excessive strength, while MUFG sees limited upside for global yields and expects Fed, ECB and BoE rate cuts next year, constraining further CHF weakness.

SNB stance and yield-driven franc moves

"The focus has been very much on the Fed meeting on Wednesday and the BoE meeting yesterday, but the SNB also met yesterday and as expected left the key policy rate unchanged at zero percent. The franc underperformed much of G10 and was the third worst performing with only NOK and SEK performing worse. There was certainly no sense of urgency communicated by the SNB in relation to having to respond to any upside inflation risks."

"The very limited adjustments to forecasts underlines the prospects of continued low inflation in Switzerland, which has been a source of demand for the franc given the lower risk of an inflation induced decline in real yields that is a much higher risk in the euro-zone, the UK and the US. The SNB also reiterated that “if necessary” it would be willing to intervene to ensure excessive currency strength is avoided that would undermine achieving the SNB’s price stability goal. President Schlegel was keen to play down the idea that the inclusion of the words “if necessary” implied there was less willingness to intervene to sell the franc."

"However, the adjustments to the inflation projections, even though minor, does reduce somewhat the appetite of the SNB to revert to negative rates if required. The rise in yields globally since the conflict began has had an impact on weakening the franc. Since the start of the conflict the franc is the second worst performing G10 currency although some of that move also reflects the easing of geopolitical risks and the fact that the inflation shock stemming from the Middle East conflict is turning out to be smaller than initially feared."

"However, we suspect the upside scope for global yields from here is relatively limited. We do not expect the Fed to hike rates this year and yesterday changed our call for the BoE to the policy rate remaining unchanged this year (from +50bps) while the ECB at most will raise rates just once further. Front-end yields therefore look overdone relative to the monetary action that will likely be delivered."

"Next year we expect the Fed, ECB and BoE to cut rates which suggests to us that the window for higher global yields to weaken the franc from here is relatively narrow."

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

ING’s FX team, led by Francesco Pesole, has updated its EUR/USD projections, now targeting 1.18 by year-end. They expect moderate Dollar depreciation in the third and fourth quarters, helped by a dovish Fed relative to market pricing and fading energy sensitivity. ING’s models show short-term fair value near 1.160, while Euro bulls are seen defending levels above 1.140.

ING lifts Euro forecast versus Dollar

"We have published a new baseline and two alternative forecasts for EUR/USD, along with our updated scenarios for oil, gas, inflation and rates in the US and eurozone. We do see some upside risks for Brent after a potentially overdone selloff, but still expect it to stay below 90$/bbl in the third quarter, allowing FX to keep desensitising from energy prices. In line with our dovish Fed call (no hikes) relative to pricing, we are expecting USD depreciation in the third and fourth quarters, albeit at a moderate pace."

"Our new year-end target for EUR/USD is 1.18."

"We are in an environment of rapidly shifting correlations, with oil prices becoming an almost irrelevant driver and Fed rate expectations aggressively taking over. That reduces the explanatory power of valuation models, although it’s still worth mentioning that ours returns a 1.160 short-term fair value for EUR/USD. But for now, EUR bulls will likely be content if the pair holds above 1.140."

"In other European markets, we had two rate holds in Switzerland and Norway yesterday. We still expect the Swiss National Bank to keep rates at 0.0% for at least another two years, while we forecast a 25bp Norges Bank rate hike in August."

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

• EUR/USD has bounced up to 1.1460 but remains about 0.9% down on the week.
• The US Dollar is pulling back from recent highs in thin-volume trading
• Rising hopes of Fed rate hikes are likely to keep US Dollar dips limited.

The Euro (EUR) trades practically flat against the US Dollar (USD) on Friday, changing hands at 1.1460 after bouncing up from three-month lows at 1.1420. The pair, however, remains on track for a 0.9% weekly decline, as rising bets of Federal Reserve (Fed) rate hikes have sent the US Dollar surging across the board.

US Dollar bulls are taking a breather amid the Juneteenth bank Holiday in the US. The Euro seems unable to take off from recent lows despite investors’ enthusiasm about the US-Iran peace deal and the decline in Oil prices. The market sees that lower energy prices will ease pressure on the European Central Bank to keep hiking rates, while, in the US, the Federal Reserve’s (Fed) hawkish stance has underpinned support for the Greenback.

Rising Fed tightening bets are boosting the USD

The Fed left interest rates on hold earlier this week, with the interest rate projections showing that nearly half of the committee members anticipate at least one rate hike this year. Beyond that, the new Chairman, Kevin Warsh, confirmed his commitment to bring inflation to target, altogether boosting bets of some monetary tightening later this year.

In the macroeconomic front, US data has continued showing resilience in the face of the Middle East conflict. Data released earlier this week showed that US Retail Sales rose beyond expectations in May, and the Philadelphia Fed Manufacturing Survey highlighted a strong recovery in June.

In the Eurozone, the German Producer Prices Index (PPI) showed a 2.2% yearly growth in May, above the previous month’s 1.7% year-on-year increase but below the 2.5% expected reading. The monthly increase slowed down to 0.3% from 1.2% in April, suggesting that the impact from the energy shock might be wearing off.