Forex News

BNY's Geoff Yu highlights that Sintra offered limited clarity on Euro area growth, but an emerging split within the European Central Bank (ECB) over further tightening points to easier financial conditions. He notes resilient Euro labor markets and improving inflation, with today’s U.S. non-farm payrolls seen as crucial for determining whether this labor-driven narrative and asset rotation back into Europe can extend across the Atlantic.

Eurozone policy, labor and rotation

"Sintra is unlikely to have left markets much wiser on Europe’s growth outlook, but the increasingly visible split within the ECB over the path of further tightening points to an easing in financial conditions. Any reduction in borrowing costs must now be matched by faster structural reform, and Germany has finally delivered some positive news by agreeing a long-delayed package of tax cuts and economic reforms."

"Europe’s productivity and competitiveness challenges remain structural, but the bar is now so low that even incremental policy progress could support rotation back into European assets."

"Attention now turns to today’s non-farm payrolls ahead of the long U.S. holiday weekend. Labor market resilience is largely priced in, but markets remain wary of upside surprises that could revive expectations of a stronger Fed response."

"For all the focus on supply-side risks stemming from the Gulf conflict, the future of the USMCA and the global semiconductor race, labor remains the variable to which central banks react most strongly. The euro area has delivered resilient labor markets alongside improving inflation dynamics throughout much of Q2; today’s U.S. data will determine whether that narrative can extend across the Atlantic."

"Euro area unemployment came in at 6.2% in May, which was unchanged m/m and down slightly vs. 6.3% a year earlier. The EU rate was 5.9%, also stable m/m and down from 6.0% in May 2025. Eurostat estimated an unemployment count of 10.986 million in the euro area and 13.163 million in the EU."

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

MUFG’s Michael Wan notes the US Dollar strengthened as lower Eurozone CPI, comments from Kevin Warsh, and anticipation of US Non-Farm Payrolls supported the currency. He highlights Warsh’s push to change Federal Reserve communication, potential increases in US rate volatility, and a bias for the Dollar to stay supported in the very near term pending clearer US macro data.

Dollar supported as Fed shifts loom

"Overall the US Dollar was stronger with the combination of lower than expected CPI in Europe, mixed comments from Kevin Warsh, and ahead of non-farm payrolls numbers out later today."

"For the Fed, we saw a range of comments from Warsh in the Sintra Forum which partly reiterated what was mentioned during his first FOMC meeting, with a commitment to achieving price stability coupled with a desire to change the Fed’s communication strategy to focus less on forward guidance and spoon-feed the market less."

"Nonetheless, he also mentioned that the Fed should not fear strong productivity-led growth, and that it would be a mistake to raise rates during an AI-led productivity boom because that boom would allow the supply of goods and services to catch up with demand and keeping inflation in check even with a stronger economy."

"FX may as such also follow through with greater US rates volatility, with the bias towards the Dollar being supported in the very near-term until we get better clarity on the macro data and dynamics in the US."

"From a markets perspective, our bias is to think that rates will become more volatile moving forward and that the yield curve may become steeper, or at the very least the back-end of the US curve may not have space to fall much given his desire to reduce the size of the Fed’s balance sheet over time."

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

Dev Ashish at Societe Generale notes that MXN price action was relatively muted after the United States-Mexico-Canada Agreement (USMCA) extension decision, indicating investors largely expected the outcome. Ashish stresses that while trade flows and supply chains should remain intact near term, autos, metals and manufacturing projects linked to nearshoring may be postponed as firms await clarity on rules of origin and content thresholds.

Muted FX reaction but growth risks

"The US decision not to proceed with a 16-year extension of the USMCA, opting instead for annual reviews through 2036, extends investment uncertainty in Mexico, even though trade flows are unlikely to be materially affected in the near term."

"Markets have largely priced in this outcome. MXN price action following the announcement has been relatively muted, suggesting investors broadly expected the US to withhold an immediate extension."

"The absence of new tariff measures means trade flows and supply chains should remain largely unaffected in the near term, although future tariff threats cannot be entirely ruled out."

"Autos, metals, manufacturing and nearshoring-related projects could face postponements as firms wait for greater clarity on future rules-of-origin requirements and North American content thresholds."

"Broadly, the situation can be best characterized as an investment- and growth-negative uncertainty shock rather than a trade-crisis shock."

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

• GBP/JPY eases from a two-month high as traders speculate on possible Japanese intervention.
• Markets remain alert for signs of intervention as Japan's Finance Ministry declines to comment.
• Technically, GBP/JPY maintains a bullish bias while holding above key moving averages.

GBP/JPY trades under pressure on Thursday as the Japanese Yen (JPY) strengthens across the board amid speculation that Japanese authorities may have intervened in the foreign exchange market after the Yen fell to a 40-year low against the US Dollar (USD) earlier this week.

At the time of writing, the cross is trading around 215, retreating from the two-month high of 216.08 touched during the Asian session.

According to Reuters, it was not immediately clear what drove the Yen's sharp rebound, and Japan's Ministry of Finance declined to comment. Some traders and strategists speculated that authorities had conducted a rate check.

Traders remain alert to the possibility of intervention by Japanese authorities. However, the downside in GBP/JPY could remain limited as investors continue to take advantage of Japan's relatively low interest rates compared with other major economies, supporting carry trades. From a technical perspective, the broader trend also remains tilted to the upside.

Technical Analysis:

In the 4-hour chart, GBP/JPY holds a mildly bullish bias as it stays above the 100-period simple moving average (SMA) at 214.25 and the 200-period SMA at 214.19. The pair is also trading just over the horizontal support at 215, suggesting near-term demand on dips, while the Relative Strength Index (RSI) at 52 leans slightly positive and the Average Directional Index (ADX) at 31 hints at a moderately established trend rather than a volatile reversal phase.

On the topside, immediate resistance is seen at the horizontal barrier at 216, where a clear break would open the way for a continuation of the broader advance. On the downside, initial support is located at 215, followed by the clustered moving average zone between the 100-period SMA at 214.25 and the 200-period SMA at 214.19, before a deeper floor emerges at 213.

On the daily chart, GBP/JPY maintains a bullish near-term bias as it holds above both the 100-day and 200-day simple moving averages (SMAs) at 213.02 and 210.03 respectively. The pair is trading under the horizontal resistance at 216.00, while a mid-50s Relative Strength Index (RSI) suggests constructive momentum and the subdued Average Directional Index (ADX) around 13 hints at a trend that is firm but not strongly directional.

On the downside, initial support appears at 214.50, where a horizontal level underpins the latest advance, followed by the 100-day SMA at 213.02 and the 200-day SMA near 210.03. On the topside, a break above 216.00 would open the way for further gains, with the existing moving average structure reinforcing the broader supportive backdrop as long as price holds above 213.02.

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

• EUR/JPY depreciated more than 100 pips on Thursday, amid an alleged Tokyo intervention
• The Yen appreciated across the board without any fundamental reason to explain the move.
• The Euro has found support at 183.75, although momentum indicators remain bearish.

The Euro (EUR) accelerated its decline against a strong Japanese Yen (JPY), which has rallied across the board on Thursday, without any clear reason to explain the move. The EUR/JPY pair has found support at the 183.75 area, after a knee-jerk reaction from Tuesday’s highs at 185.86, with momentum indicators on intraday charts showing strong bearish momentum.

The Yen saw a sudden spike during Thursday’s early European session, which raised speculation that Japanese authorities stepped in to support the JPY, which had fallen to 40-year lows against the US Dollar earlier this week. Yen’s unexpected recovery has put investors on edge, fearing further interventions on Friday, as the lower trading volumes amid the July 4 holiday in the US might provide an optimal chance to optimise the impact of these actions.

Asked about the Yen's move, both the Japanese Finance Minister Satsuki Katayama and Japan’s top currency diplomat, Atsushi Mimura, have declined to make any comment. Japan has never confirmed any earlier interventions.

Technical Analysis: Euro seems to have significant support at 183.75

EUR/JPY trades at 184.17, after bouncing from the 78.6% Fibonacci retracement of the late-June rally. Momentum indicators, however, highlight a strong bearish bias, with the four-hour Relative Strength Index (14) hovering near 37, while the Moving Average Convergence Divergence (MACD) indicator holds in negative territory.

On the topside, the 61.8% retracement of the mentioned bullish cycle, at the 184.20 area, is keeping bulls in check so far, closing the path towartds the previous support area between 184.65 and 184.85 (June 30, July 1 lows) and the two-week high, at 185.86 hit on Tuesday.

On the downside, a further decline below session lows at the 183.75 area would expose the 24 June low at 183.17. Below here, the 127.2% Fibonacci retracement level, at 182.45, seems a plausible target.

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