Forex News

Brown Brothers Harriman’s (BBH) Elias Haddad notes that the US Dollar Index (DXY) is likely to overshoot the upper end of its 96.00–100.00 range as resilient United States (US) economic activity and a positive net energy balance support a more restrictive Federal Reserve (Fed). Strong foreign demand for US securities underpins the Dollar, although shrinking trade deficits may structurally weigh on USD over time.

DXY seen overshooting established range

"In our view, the dollar index (DXY) looks likely to overshoot the upper end of its nearly one year 96.00-100.00 range. The US has a positive net energy balance and resilient US economic activity backs a more restrictive Fed. Indeed, the Atlanta Fed GDPNow model estimates annualized real GDP growth of 4.0% in Q2 vs. 2.0% in Q1."

"Moreover, underlying demand for USD remains strong. The US Treasury International Capital (TIC) data showed that in the twelve months to March, foreign investors accumulated $1553bn of long-term US securities (treasury bonds & notes, corporate bonds, equities, gov’t agency bonds). While down from the record high of $1680bn in January and the lowest since October 2025, the amount still dwarfs the -$700bn accumulated US trade deficit over the same period. "

"Nevertheless, we expect foreign appetite for US long-term securities to dwindle over time. The Trump administration’s effort to narrow the US trade deficit means fewer dollars will flow overseas, reducing the need for those funds to be recycled back into US securities. That’s pure balance of payments mechanics and is a structural drag on USD."

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

Barbara Lambrecht and Volkmar Baur at Commerzbank highlight diverging trends in Chinese metals. Aluminium output hit a record daily rate in April, driven by strong margins and breaching the official annual cap, yet domestic inventories have doubled to a six‑year high as demand lags.

Chinese production strength, demand concerns

"However, aluminium production stood out positively: in April, primary aluminium production was 3.1% higher than the previous year, following 2.7% in March. Daily production even reached a new record high of 129,000 tons."

"High margins – thanks to rising aluminium prices and favourable alumina prices – are driving production beyond the government’s annual production cap of 45 million tons. By way of comparison, production in April, extrapolated to the full year, stood at 47 million tons."

"Although China was able to significantly increase its aluminium exports in April against a backdrop of high production, inventories are nevertheless rising as domestic demand is not keeping pace. According to figures from the research group Shanghai Metal Markets, domestic inventories have doubled this year, reaching a six-year high of 1.37 million tons."

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

Philip Wee of DBS Group Research explains how Oil prices shape the Bank of England’s (BoE) policy outlook. The baseline assumes Oil around USD108 supports manageable second-round inflation effects and may require one or two rate hikes. An optimistic scenario sees a pause if prices fall on a diplomatic resolution to the Iran conflict, while a prolonged conflict and higher Oil would force a more hawkish response.

Energy path drives BoE policy choices

"Meanwhile, the OIS market has priced in a 58% chance of a Bank of England hike before the Fed at the July 30 meeting. BoE Chief Economist Huw Pill was the lone dissenter at the last meeting, calling for a prompt rate hike sooner rather than later."

"Under its baseline scenario, the BoE projects modest and manageable second-round effects on inflation from elevated energy prices around USD108 per barrel, which would lift CPI inflation to 3.7% by the end of 2026, close to 3.75% bank rate, and may require 1-2 hikes by late autumn to return inflation to the 2% target."

"Alternatively, the BoE’s optimistic scenario allows for a rate pause if oil prices recede on a diplomatic resolution to the Iran conflict."

"However, if a prolonged conflict materialises and lifts oil prices to new highs, the BoE will likely act to avoid falling behind the curve on inflation as it did in 2022."

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

• The New Zealand Dollar weakens against the US Dollar and loses 0.65% on Tuesday.
• Hopes for a deal between the US and Iran are slightly easing geopolitical tensions, but the Greenback remains supported.
• Investors are now awaiting the Federal Reserve meeting minutes for fresh clues on the interest rate outlook.

NZD/USD trades around 0.5835 on Tuesday at the time of writing, down 0.65% on the day as the New Zealand Dollar (NZD) faces renewed selling pressure against the US Dollar (USD). Despite encouraging signs surrounding discussions between Washington and Tehran, the Kiwi is failing to benefit from an improvement in market sentiment.

Markets are closely monitoring the latest comments from United States (US) President Donald Trump, who said there is a "very good chance" that a deal with Iran could be reached following what he described as positive progress in negotiations. Trump also stated that he had suspended an immediate military action to allow more room for diplomatic discussions, while maintaining the possibility of a large-scale intervention if no acceptable agreement is reached.

However, investors remain cautious about the prospect of a lasting resolution to tensions. Ongoing disagreements over Iran’s nuclear program and reports of explosions on Iran’s Qeshm Island continue to fuel geopolitical uncertainty, supporting demand for the US Dollar.

Meanwhile, higher Oil prices continue to fuel global inflation expectations and reinforce expectations of a more restrictive monetary policy stance from the Federal Reserve (Fed). Markets have gradually scaled back expectations for monetary easing this year, providing additional support to the Greenback.

In New Zealand, producer inflation data is nevertheless providing potential support for the New Zealand Dollar. The first-quarter Producer Price Index (PPI) Input came in at 1.4% QoQ, above expectations of 0.8%, after contracting by 0.5% in the previous quarter. Rising inflationary pressures at the producer level could strengthen speculation of a more restrictive stance from the Reserve Bank of New Zealand (RBNZ).

Investors are now awaiting the release of the Federal Open Market Committee (FOMC) minutes on Wednesday, which could provide further guidance on the future path of US interest rates.

Scotiabank strategists Shaun Osborne and Eric Theoret note the Canadian Dollar (CAD) keeps a defensive tone as USD/CAD grinds higher despite firm domestic yields and crude. Their fair value estimate has slipped back toward 1.35, highlighting renewed overvaluation in the pair.

CAD stays defensive

"The CAD retains a defensive undertone, unable to resist the grind higher in the USD despite relatively firm domestic yields, firm crude and relatively steady risk appetite today."

"Our fair value estimate for USD has dipped fractionally back towards the 1.35 area this morning (1.3504), stretching the USD’s apparent overvaluation back towards the more extreme divergence seen in April."

"Neutral/bullish—The USD continues to pressure the 50% retracement resistance of the March 31/May 1 decline from 1.3967 to 1.3550 at 1.3758."

"A further squeeze higher remains an obvious risk in the short run as short-term trend dynamics turn more USD-bullish."

"We look for resistance around 1.3800/15, with a firmer technical block on dollar gains likely to emerge in the upper 1.38s/low 1.39s. Support is 1.3715/25."

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

ING analysts Warren Patterson and Ewa Manthey say Oil remains volatile as Iran-related risks and supply disruptions in the Persian Gulf keep prices in wide ranges. They highlight a fresh US waiver allowing Russian Oil floating at sea to be sold for another 30 days, which should help Asian buyers. Chinese refinery runs and apparent Oil demand have weakened, partly reflecting inventory drawdowns.

Oil swings on Iran risks and waivers

"The oil market continues to trade in wide ranges, and it remains extremely sensitive to Iran-related headlines amid current supply disruptions."

"Prices whipsawed after more aggressive rhetoric from President Trump coming into this week, followed by reports that the US offered a temporary sanction waiver on Iranian oil until an agreement between the US and Iran is reached."

"The US extended a waiver that expired over the weekend, allowing the sale of Russian oil floating at sea for another 30 days. It allows sales until 17 June, with the aim of stabilising oil markets amid significant losses in the Persian Gulf."

"Refineries in April processed 13.35m b/d of crude oil, down 5.8% year-on-year and the lowest level since August 2024."

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

• Gold trades on the defensive as firm US Dollar demand and higher Treasury yields weigh on bullion.
• Rising Oil prices are pushing inflation expectations higher, leading markets to price in a greater chance of a Fed rate hike later this year.
• Technically, XAU/USD remains under pressure as sellers defend the 50-day and 100-day SMAs.

Gold (XAU/USD) trades on the back foot on Tuesday as traders closely monitor developments surrounding the US-Iran negotiations and amid a broad macroeconomic background linked to the prolonged conflict that continues to weigh on the precious metal. At the time of writing, XAU/USD is trading around $4,482 after hitting an intraday low of $4,464 earlier in the day, its lowest level since March 30.

US President Donald Trump said on Monday that he had halted an immediate planned military attack on Iran after requests from Gulf leaders to allow peace negotiations to continue. In a post on Truth Social, Trump said ongoing negotiations could lead to a deal that would be “very acceptable” for the United States and the Middle East, adding that the agreement would ensure “no nuclear weapons for Iran.”

However, Trump also warned that he had instructed the US military to remain prepared for a “full, large-scale assault” on Iran at a moment’s notice if an acceptable agreement is not reached.

Investors remained cautious over whether a lasting peace deal could actually be reached as disagreements over Iran’s nuclear programme continue to complicate negotiations.

While geopolitical uncertainty would typically support bullion, Gold remains down nearly 15% since the war began, as markets increasingly focus on the inflationary impact of surging Oil prices amid the continued disruptions around the Strait of Hormuz.

Higher crude Oil prices are already pushing inflation higher across major economies, reinforcing expectations that central banks, particularly the US Federal Reserve (Fed), may need to raise interest rates. According to the CME FedWatch Tool, traders are now pricing in nearly a 50% probability that, by the end of the year, the Fed will have increased rates by at least 25 basis points. This is a significant increase compared with the 35% probability seen a week ago.

Rising inflation concerns have triggered a broad sell-off in global bond markets in recent days, pushing sovereign bond yields sharply higher. On Tuesday, the benchmark US 10-year Treasury yield hovers near 4.60%, close to its highest level in one year.

Elevated Treasury yields increase the opportunity cost of holding non-yielding assets such as Gold.

Meanwhile, the US Dollar (USD) remains supported by hawkish Fed expectations and persistent uncertainty surrounding the US-Iran talks, further limiting upside momentum in bullion by making the precious metal more expensive for foreign buyers.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading around 99.33, hovering near more than one-month highs.

Looking ahead, a relatively quiet US economic calendar on Tuesday leaves markets focused on Fed commentary and upcoming releases, including the Fed meeting minutes on Wednesday, preliminary May Purchasing Managers Index (PMI) data on Thursday and the University of Michigan Consumer Sentiment survey on Friday.

Technical Analysis: XAU/USD bearish bias intact as RSI softens and ADX signals weak trend

On the daily chart, XAU/USD holds a soft bearish bias, trading below the nearer-term moving averages while staying well above the longer-term trend floor. The 200-day Simple Moving Average (SMA) at $4,358 sits comfortably underneath the price and suggests the broader uptrend remains intact.

The Relative Strength Index (RSI) is around 40 points, indicating waning bullish momentum without oversold conditions, while the Average Directional Index (ADX) is near 19, hinting at a weak, consolidative trend rather than a strong directional move.

On the topside, initial resistance is aligned at the 50-day SMA near $4,705, followed by the 100-day SMA around $4,793, with a stronger barrier further up at the horizontal resistance zone near $4,850.

On the downside, immediate protection is seen around the nearby horizontal support at $4,500, ahead of the more substantial medium-term demand area at the 200-day SMA near $4,358. A clear break below this latter level would significantly deepen the bearish tone, while recovery above the clustered short- and medium-term SMAs would ease downside pressure.

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

BNP Paribas economists argue Europe is under pressure from China’s industrial surge but is leveraging investment cycles in defence, electrification and artificial intelligence to adapt. They highlight that Europe is redirecting exports, retaining strengths in high value-added services and advanced manufacturing, while pursuing the ‘One Europe, One Market’ agenda to deepen the internal market and secure supply chains over the coming years.

Europe leans on new growth hubs

"China’s rise is undermining major sectors of European industry. However, as the German economy illustrates most clearly, Europe is shifting, driven by investment cycles in defence, electrification and artificial intelligence. It is redirecting its exports and managing to maintain strong positions, particularly in high value-added services, where exports to China are trending upwards."

"While a recalibration of competition rules is needed in relation to China, the challenge for Europe is not to engage in a tariff war that would backfire on its own exporters and drive up the cost of its imports of critical inputs. The challenge is to accelerate the transformation of its industrial base."

"For this purpose, Europe can rely on new growth hubs, as Spain, Portugal and some Central European economies are currently benefiting from lower production costs. It can draw on a lower-carbon electricity mix (renewables and nuclear accounted for 71% of electricity generation in 2025). The challenge now is to harness these assets in a coherent and structured manner."

"By capitalising on ongoing structural cycles – defence, artificial intelligence and energy transition – Europe is cushioning part of the ‘Chinese shock’, whilst remaining heavily dependent on industrial inputs from China. Europe’s resilience strategy will be based on three complementary pillars: shifting industrial focus towards the most promising sectors, strengthening the internal market and harmonising policies, and securing supply chains."

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