Forex News

Scotiabank strategists Shaun Osborne and Eric Theoret report EUR/USD trading in the mid-1.15s with modest gains versus the US Dollar (USD), supported by euro area Gross Domestic Product (GDP) and a return to trade surplus. Recovering yield spreads underpin the Euro (EUR), with their narrow fair value estimate at 1.1641, above spot. Short-term technicals are described as bullish, with support near 1.1500 and resistance around 1.1580 and the 200-day moving average.

Fundamentals and technicals align higher

"The EUR is entering Friday’s NA session with a 0.2% gain vs. the USD, pushing into the mid-1.15s while also underperforming most of the G10 currencies in an environment of broad-based USD weakness."

"The second euro area Q2 GDP release was in line with expectations, printing 0.4% Q/Q to deliver a 1.0% Y/Y pace of growth. The trade balance returned to a surplus in June, ending a short-lived deficit that emerged from March to May."

"Yield spreads are offering fundamental support and extending their latest recovery with a push through the mid-July high to reach levels last seen in mid-May. Our narrow fair value estimate based solely on the 2Y Germany-US yield spread has climbed to a fresh high of 1.1641, offering upside relative to spot."

"We see scope for additional sentiment and positioning-related gains, given that the options market continues to fade its premium for protection against EUR weakness while bearish CFTC data highlight vulnerability given the fundamental improvement in spreads."

"Bullish – the RSI is back above 60, suggesting renewed bullish momentum. The recent consolidation range has offered support at 1.1500 and resistance closer to 1.1580. We see broader support at the 50 day MA (1.1466), and additional resistance around the 200 day MA (1.1630). "

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

• EUR/GBP has spent Friday's session in a narrow range in the mid-0.8500s, barely changing on the day.
• Eurozone Q2 GDP and employment matched forecasts, giving neither the Euro nor the Pound an edge.
• With the data out of the way, the market is waiting for clearer signals from the Middle East war.

EUR/GBP has traded in a tight range around the mid-0.8500s on Friday, little changed on the day. The latest Eurozone figures came in close to forecasts, and they did nothing to push the pair out of the range it has held all week.

Eurozone Gross Domestic Product (GDP) grew 0.4% in the second quarter, matching expectations, with the annual rate at 1%. Employment rose 0.1% on the quarter, also as forecasted. Nothing in the release surprised, and the numbers are backward-looking, so the reaction was slight.

The pair has been going sideways for several sessions with the Euro (EUR) steadying after an earlier run of losses. United Kingdom (UK) data earlier in the week also landed close to forecasts, which left the Pound (GBP) without a clear lead of its own. With both sides matching expectations, little has separated them.

The Middle East war keeps a hand on energy prices, and through them on the inflation picture the European Central Bank (ECB) is weighing. Until that situation gets clearer, traders have little reason to commit to a direction.

Short-term technical analysis:

On the 4-hour chart, EUR/GBP trades at 0.8548. The cross is hovering just under a cluster of nearby resistance with the 100-period Simple Moving Average (SMA) at 0.8557 capping the topside together with horizontal barriers at 0.8549 and 0.8550. Price holds marginally above the 20-period SMA at 0.8545, which, alongside the latest relative strength index (RSI) reading near 49, suggests a consolidative, range-bound bias rather than a clear directional move.

On the downside, immediate support is seen at the 20-period SMA and horizontal level around 0.8545, ahead of a lower floor at 0.8541. On the topside, EUR/GBP would need to reclaim the nearby resistances at 0.8549 and 0.8550 to challenge the 100-period SMA at 0.8557, a break above which would be needed to re-open a more constructive short-term outlook.

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

MUFG analysts focus on several ASEAN indicators for regional currencies. They flag Singapore’s July non-oil domestic exports after June’s strong 20.7% year-on-year rise, and expect Malaysia’s CPI to stay contained at 1.9% year-on-year. Thailand’s Q2 GDP is seen slowing, reinforcing cyclical underperformance and weighing on THB, while Bank Indonesia is expected to keep its policy rate at 5.75% as the Rupiah stabilizes.

Exports, inflation and GDP shape FX

"Across ASEAN, Singapore's July non-oil domestic exports will be closely watched after June's strong 20.7%yoy increase."

"Malaysia's inflation data should confirm that price pressures remain relatively contained, with CPI expected to hold at 1.9%yoy."

"Elsewhere, Thailand's Q2 GDP is expected to slow."

"A weaker growth profile would reinforce concerns over Thailand's cyclical underperformance and may continue to weigh on THB relative to regional peers."

"Indonesia's Bank Indonesia meeting is likely to be a non-event, with market consensus expecting the BI rate to remain unchanged at 5.75%."

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TD Securities’ Robert Both expects Canadian headline CPI to rise to 2.9% year-on-year in July, driven by higher gasoline and food prices, while ex. food/energy components stay muted. Core measures CPI-trim and CPI-median are projected around 1.85%, below Bank of Canada forecasts, reinforcing a benign underlying inflation backdrop and supporting continued focus on core rather than Oil-driven headline moves.

Headline and core inflation outlook

"Headline CPI is forecast to firm by 0.1pp to 2.9% y/y in July as prices rise 0.4% m/m, fueled by higher gasoline prices after their sharp pullback in June."

"The July CPI report should also confirm another benign month for underlying inflation pressures with CPI-trim/median forecast to hold at 1.8/1.9% y/y or 1.6% on a 3m annualized basis."

"We also look for the ex. food/energy (xFE) measure to hold stable at 1.7% y/y and CPI diffusion indicators are not expected to show any large increase for the breadth of inflation pressures."

"A 1.8/1.9% print for CPI-trim/median would have core CPI tracking slightly below BoC projections from the July MPR (2.0% over Q3), despite headline CPI tracking above BoC forecasts for 2.5%."

"We look for headline CPI to firm by 0.1pp to 2.9% y/y in July as prices rise by 0.4% m/m on positive contributions from food and energy products, as travel services provide an offset."

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

ING’s Lynn Song expects Bank Indonesia to keep its benchmark rate unchanged at 5.75% this week, prioritizing Rupiah stability while avoiding an immediate hike. The report highlights BI’s growing reliance on non-rate tools such as SRBI yields and FX intervention. Leadership transition at BI is seen reducing the likelihood of an August move, with continuity the key message.

BI seen holding benchmark rate steady

"We expect Bank Indonesia to hold the benchmark rate at 5.75% on Wednesday."

"BI’s unexpected July hold showed that policymakers are increasingly balancing rupiah stability against the need to support growth."

"While exchange-rate stability remains the main priority, BI appears more willing to use non-rate tools, including Bank Indonesia Rupiah Securities (SRBI) yields and FX intervention, rather than raising borrowing costs immediately."

"The ongoing BI leadership transition also lowers the probability of an August move, as Acting Governor Destry Damayanti is likely to use her first meeting to signal continuity rather than deliver a surprise hike."

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

Scotiabank strategists Shaun Osborne and Eric Theoret observe USD/JPY trading near 159, with modest Japanese Yen (JPY) gains offering reassurance to the Ministry of Finance (MoF) after recent weakness. They highlight material efforts to counter Yen depreciation via coordinated Bank of Japan (BoJ) and Federal Reserve (Fed) actions. With BoJ considering a possible hike in the fall and Q2 GDP due next week, they flag policy commentary as key, seeing resistance above 159.50 and support just above 158.50.

MoF reassurance and BoJ hike risk

"The yen is up a modest 0.2% vs. the USD, trading in tandem with the EUR while showing relative underperformance against most of the G10 currencies."

"The modest gains are likely providing considerable reassurance to key officials at the Ministry of Finance, given ongoing concerns about the yen’s downward trajectory."

"Efforts to push back against JPY weakness have been material, with coordinated action from both the BoJ (on behalf of the MoF) and the Fed (on behalf of the US Treasury)."

"The BoJ outlook remains critical as policymakers consider the possibility of a hike this fall. Near-term domestic risk lies with the release of Q2 GDP data early next week, and we remain attentive to policymakers’ comments on their plans for near-term tightening."

"For USD/JPY, we see resistance above 159.50 and support just above 158.50."

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Commerzbank’s Barbara Lambrecht observes that despite falling LME Copper stocks and trimmed output guidance from a major producer, the recent Copper rally is losing momentum. She points to a retreat in China’s Yangshan import premium from multi-year highs as a cautionary sign, while also flagging upcoming International Copper Study Group data and US tariff decisions as potential drivers.

Tight stocks but softer demand indicators

"For the copper market, the monthly report from the International Copper Study Group - which is typically published between the 20th and 24th of each month - is expected to be relevant. This report includes supply and demand figures for the first half of the year and could shed light on recent price trends. Most recently, the price of copper rose following the Democratic Republic of Congo’s announcement that it would restrict exports of copper concentrate."

"LME copper stocks are continuing to fall – for the 40th consecutive day now – and, at just over 200,000 tons, are at their lowest level since February. At the same time, a major copper producer, ranked among the world’s top ten, has had to revise its production forecast slightly downwards due to weather conditions. Nevertheless, the rally on the copper market appears to have run out of steam somewhat."

"The import premium for copper at the Chinese port of Yangshan – regarded as an indicator of China’s demand for copper imports – calls for caution. It had climbed to USD 115 per ton last month, its highest level since 2022, and has now slipped back below USD 100. This signals a slowdown in the most important consumer market for copper."

"Today, an event is scheduled at the White House to discuss progress on domestic supply of critical minerals. In that context, a decision could also be made regarding US copper tariffs, which has been pending since the end of June."

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

Nordea strategists see the Norwegian Krone (NOK) broadly stable over the next six months after July’s EUR/NOK decline, driven by higher Oil prices and Norges Bank’s increased NOK purchases. They stress two-sided risks tied to Middle East developments and Oil, but expect a somewhat stronger NOK in 2027 as a weaker US Dollar (USD) and supportive global risk sentiment gradually push EUR/NOK lower.

Oil risks and dollar backdrop

"Following the appreciation in July, we expect the NOK to remain more or less unchanged over the next six months."

"In fact, we continue to see considerable risks in both directions."

"Looking further ahead, we continue to see scope for a somewhat stronger NOK in 2027."

"If our expectation of a weaker dollar next year materialises, this should therefore provide support for the NOK."

"Overall, our base case is for a more or less unchanged NOK over the next six months, followed by some appreciation during 2027."

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

MUFG analysts Lin Li, Michael Wan, Lloyd Chan and Khang Sek Lee note that upcoming US economic data will be crucial for the US Dollar outlook. They highlight that softer PPI and labour market figures have trimmed near-term Fed tightening expectations, but inflation remains above target and December hike odds are still elevated. Industrial production and PMI surveys will guide views on how restrictive Fed policy must stay.

Fed path hinges on activity data

"In the coming week, US economic data could help determine whether the recent moderation in US PPI and labour market data translates into a softer USD outlook or merely a temporary pause in the dollar's strength."

"Following weaker July payrolls and softer producer prices, markets have modestly pared back near-term Fed tightening expectations."

"However, with inflation still well above the Fed's 2% target and December hike odds remaining elevated, upcoming US activity data including industrial production and PMI surveys will be closely watched."

"Stronger-than-expected activity data could reinforce the view that the Fed needs to keep policy restrictive for longer."

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

• EUR/JPY advances to around 184.15 on Friday as investors assess the monetary policy outlook in Europe and Japan.
• Markets widely expect the European and Japanese central banks to raise interest rates in September.
• Eurozone growth is confirmed at 0.4% in the second quarter, following stagnation in the previous quarter.

EUR/JPY rises 0.15% on Friday and trades around 184.15 at the time of writing. The pair remains supported despite growing expectations that Japan could raise interest rates as soon as September, while investors also anticipate further monetary tightening in the Eurozone.

On the European side, markets widely expect the European Central Bank (ECB) to raise interest rates at its September meeting, which would mark its second hike this year. Risks surrounding Eurozone inflation remain tilted to the upside, keeping the prospect of further monetary tightening alive and providing support to the Euro (EUR).

The latest growth figures also provide a relatively supportive backdrop for the single currency. Eurostat's second estimate confirms on Friday that Eurozone Gross Domestic Product (GDP) expanded by 0.4% QoQ in the second quarter, in line with the preliminary estimate released in July and following no growth in the previous quarter.

On an annual basis, Eurozone GDP grew by 1% in the second quarter, matching the preliminary estimate and accelerating from an upwardly revised 0.5% increase in the previous quarter. The figures suggest that economic activity in the Eurozone is regaining some momentum, while the ECB also has to contend with persistent upside inflation risks.

However, the Japanese monetary policy outlook limits EUR/JPY's upside potential. Expectations are growing that the Bank of Japan (BoJ) could raise interest rates as soon as its September meeting. Reuters reported on Friday, citing three sources familiar with the central bank's thinking, that the BoJ could raise rates as soon as next month and subsequently consider a faster pace of monetary tightening.

These expectations support the Japanese Yen (JPY), while the possibility of further intervention in the foreign exchange market also remains under scrutiny. Japan's Ministry of Finance said that the United States (US) and Japan jointly intervened in late July to counter “excessive volatility and disorderly movements” in the Japanese Yen observed in recent months.

With monetary tightening expectations strengthening simultaneously in the Eurozone and Japan, EUR/JPY therefore remains caught between support for the Euro from expectations of an ECB rate hike and support for the Japanese Yen from prospects of a faster normalization of BoJ monetary policy.

Eurozone rate path divides as ECB hawks meet dovish pushback

Analysts at Nordea note that “the ECB’s message at the July meeting was still in line with further rate hikes to come,” and reiterate that they “continue to expect three more 25bp increases, taking the deposit rate to 3%, but revised the expected path of these hikes last month from consecutive to quarterly moves.” Their “updated baseline assumes 25bp rate hikes in September, December and March 2027,” reflecting a slower but still distinctly hawkish trajectory. Nordea cautions that geopolitical developments could materially reshape the outlook, arguing that “a quick and durable peace in the Middle East could reduce the pressure on the ECB to hike further, while a more notable escalation and longer-lasting disruption to energy markets could lead to faster and potentially more rate increases.” Even under this moderated hiking pace, they add that “we still see room especially for longer bond yields to climb, supported by ample bond supply, Eurosystem reductions in bond holdings and higher inflation-risk premia.”

Commerzbank takes a more cautious view on the extent of further tightening. Strategists there state that, “like the market, we expect a second rate hike in September, but—contrary to market expectations—we do not anticipate any further (third) rate hike beyond that.” In their assessment, “with a deposit rate then expected to be 2.5%, a level would be reached that Governing Council members view as the upper limit of the neutral interest rate—one that neither stimulates nor slows the economy and leads to medium-term inflation.” Looking further ahead, Commerzbank expects the policy stance to eventually reverse, judging that “toward the end of 2027, the ECB is likely to lower interest rates again,” as “inflation should gradually decline over the course of the coming year and come close to reaching the inflation target.”

Yen underperforms as Japan data bolster BoJ hike expectations

Analysts at ING highlight that, “despite some sharp moves in Japanese money markets this week, the Yen is failing to find any lasting support.” They argue that “the big story is that the Japanese government might be more tolerant of a faster tightening cycle by the BoJ,” with markets now assigning “close to a 75% chance that the BoJ hikes 25bp in September.” ING notes that this repricing has already seen “two-year US:Japan swap differentials narrow nearly 40bp since mid-July,” underscoring how policy expectations are shifting even as USD/JPY remains elevated.

Economists at DBS add a fundamental backdrop to this market narrative, projecting that Japan’s “GDP growth is expected to post an on-trend rate of 0.8% QoQ saar, albeit lower than the 1.8% recorded in 1Q.” In their view, “overall, the data will likely strengthen the case for an early rate hike by the Bank of Japan at its September meeting.” However, DBS cautions that “an actual move would still hinge on market dynamics, including USD/JPY movements and the outcome of the September FOMC meeting,” suggesting that both domestic conditions and US policy signals will be critical in determining the BoJ’s next step.