Forex News

• AUD/USD advances after the announcement of an extension of the ceasefire between the US and Iran.
• Tensions in the Middle East remain elevated as the US naval blockade in the Strait of Hormuz continues.
• Expectations of further interest rate hikes from the RBA support the Australian Dollar against the Greenback.

AUD/USD trades in positive territory on Wednesday, around 0.7160 at the time of writing, up 0.12% on the day. The Australian Dollar (AUD) benefits from a modest improvement in market sentiment after US President Donald Trump announced the extension of the ceasefire with Iran, supporting risk-sensitive assets.

The US president stated that Washington is extending the military truce while awaiting a “unified proposal” from Tehran to resume negotiations. Despite the extension, tensions in the region remain elevated as the United States (US) continues to enforce a maritime blockade on Iranian vessels transiting the Strait of Hormuz, a strategic route for global Oil trade. Uncertainty also persists regarding Iran’s participation in a new round of negotiations, with some sources suggesting talks could take place as soon as Friday.

On the US Dollar (USD) side, comments from Federal Reserve (Fed) Chair nominee Kevin Warsh provided some support for the Greenback. During his Senate hearing, Warsh stressed the independence of monetary policy, stating that he had made no commitments to the White House regarding potential interest rate cuts.

However, monetary policy expectations remain a key driver for markets. A Reuters poll of economists suggests the Fed could keep its policy rate within the current 3.50%-3.75% range at least through September, amid persistent inflation pressures, although a majority of economists still expect at least one rate cut before the end of the year.

In Australia, expectations of tighter monetary policy provide additional support to the Australian Dollar. The Reserve Bank of Australia (RBA) recently warned that the surge in Oil prices linked to the Middle East war could push inflation toward 6%. In this context, markets now see nearly a 77% chance of a rate hike at the next meeting after Deputy Governor Andrew Hauser reiterated the central bank’s commitment to anchoring inflation.

Investors now turn their attention to economic activity indicators, with the release of the preliminary S&P Global Purchasing Managers Index (PMI) readings from both Australia and the United States, which could offer fresh clues on economic momentum in the two economies and shape short-term monetary policy expectations.

• Safe-haven demand tied to Strait of Hormuz risk keeps the US Dollar supported.
• Falling long-tenure US Treasury yields cap upside momentum, keeping gains in check.
• BoJ’s cautious stance continues to weigh on the Yen, sustaining upside bias.

The USD/JPY climbed near the 159.30 price region on Wednesday, consolidating around recent highs as markets digest fresh developments in the Middle East and shift monetary policy expectations.

Recent headlines from the Middle East are once again influencing foreign exchange flows. Reports of new attacks on ships in the Strait of Hormuz have increased demand for safe-haven assets like the US Dollar (USD), helping it regain strength after earlier weakness. However, the market response has not been entirely consistent as alternating reports of ceasefires and ongoing uncertainty continue to cause sharp intraday fluctuations in sentiment.

Simultaneously, US Treasury yields have decreased, limiting the Greenback’s upward momentum and preventing a stronger breakout in the USD/JPY pair.

On the Japanese side, the Yen remains structurally weak. The Bank of Japan (BoJ) continues to express caution, with policymakers refraining from making any firm commitments to near-term rate hikes. This has delayed expectations for tightening and maintains favorable yield differentials for the US Dollar.

Short-term technical analysis:

On the four-hour chart, USD/JPY trades at 159.27. The pair holds a mild bullish bias as it trades above both the 20-period and 100-period Simple Moving Averages (SMAs), with the former at 159.01 and the latter at 159.15. This suggests an underlying bid on dips. The Relative Strength Index (RSI) around 55 leans slightly positive without signaling overbought conditions, hinting that buyers retain control but lack strong momentum for an immediate breakout.

On the topside, initial resistance is aligned at 159.37, where a horizontal barrier caps further gains in the near term. On the downside, immediate support is seen at 159.25, with additional layers of demand at 159.20 and near the 100-period SMA at 159.15, followed by 159.12 and the 20-period SMA at 159.01. A sustained break below this stacked support area would weaken the constructive tone, while a clear move above 159.37 would open the way for a more decisive bullish extension.

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

• Gold rebounds from one-week lows, but gains remain limited amid higher-for-longer rate expectations from the Federal Reserve.
• US President Donald Trump extends the ceasefire with Iran after stalled negotiations.
• Technically, XAU/USD remains capped below the 50-day SMA, with the 100-day SMA acting as immediate support.

Gold (XAU/USD) trims earlier gains on Wednesday as traders remain cautious amid ongoing uncertainty around the US-Iran conflict, despite US President Donald Trump extending the ceasefire with Iran just hours before it was due to expire. At the time of writing, XAU/USD is trading around $4,735, holding above a one-week low of $4,668 touched on Tuesday.

Trump extends ceasefire but keeps naval blockade in place

The ceasefire extension comes after Iranian leaders rejected negotiations “under the shadow of threats” and refused to attend the second round of peace talks expected in Pakistan. Donald Trump said the decision was made at the request of Pakistan’s leadership to allow time for Iran to present a unified proposal for negotiations.

However, the US has not lifted the naval blockade of Iranian ports. “I have therefore directed our Military to continue the Blockade… and will extend the Ceasefire until such time as their proposal is submitted, and discussions are concluded, one way or the other,” Trump said in a Truth Social post.

Trump said talks with Iran could take place as soon as Friday, according to the New York Post, while Iran’s Tasnim News Agency reported that Tehran has not yet decided whether to hold discussions on that day.

The ceasefire has done little to bring clarity, with both sides still far from any meaningful settlement. Iran has not formally accepted the extension, and with the naval blockade still in place, it remains unclear whether Tehran will return to the negotiating table.

Gold struggles as higher-for-longer rate outlook persists

While not a lasting solution in the Middle East crisis, the extension of the ceasefire has calmed immediate fears and supported a modest recovery in bullion. Since the US-Iran war began, Gold has behaved more like a risk-sensitive asset, with price action largely driven by moves in the US Dollar (USD) and Oil prices.

At the same time, fading expectations of Federal Reserve (Fed) interest rate cuts amid rising inflation risks from higher energy costs continue to act as a headwind, limiting any meaningful recovery in the Gold price, with the metal still down nearly 10% since the onset of the war.

Oil prices remain elevated, showing little reaction to the ceasefire news, as supply through the Strait of Hormuz remains largely restricted. Recent US data highlight the impact of higher energy costs, with Retail Sales rising by 1.7% MoM in March after a 0.7% increase in February, while the Consumer Price Index (CPI) jumped 0.9% MoM, accelerating sharply from 0.3% previously.

This backdrop supports expectations that the Fed may delay rate cuts and keep borrowing costs higher for longer. Looking ahead, the US economic calendar is relatively light on Wednesday, leaving traders focused on geopolitical headlines for fresh direction.

Technical analysis: XAU/USD holds above key SMAs but lacks bullish conviction

In the daily chart, XAU/USD holds above the 100-day Simple Moving Average (SMA) at $4,731 and the 200-day SMA at $4,236, keeping the broader trend underpinned, but it remains capped beneath the 50-day SMA at $4,882, which limits immediate topside traction. The Relative Strength Index (RSI) at 48 sits near neutral territory, while the Moving Average Convergence Divergence (MACD) indicator is positive, together suggesting balanced momentum after the recent pullback.

On the topside, initial resistance comes at the 50-day SMA near $4,882; a clear break above this barrier would open the way for a more convincing recovery phase. On the downside, immediate support is located at the 100-day SMA around $4,731, with a deeper floor at the 200-day SMA near $4,237.

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

• GBP/USD trades flat as traders balance geopolitics against UK inflation data.
• UK CPI remained elevated in March, keeping Bank of England hike bets alive.
• Markets now await Flash PMIs and jobless claims for fresh direction.

GBP/USD holds steady on Wednesday as geopolitical tensions remain high amid the lack of progress toward resuming negotiations between the US and Iran. An absent economic schedule in the US keeps traders leaning on the latest UK inflation figures, which showed the effects of the energy shock. At the time of writing, the pair trades at 1.3514, mostly unchanged.

Sterling holds firm as UK inflation offsets broader war concerns

US equities are trading in the green, yet an escalation of the conflict could weigh on stocks, prompting a flow towards safe-haven assets such as the US Dollar (USD). The Greenback has so far trimmed some of its earlier losses, according to the US Dollar Index (DXY).

The DXY, which measures the buck’s performance versus six currencies, is at 98.44, up 0.03%.

Tasnim news agency reported that Iran has no plans to negotiate with the US on Friday. Reuters, citing sources, said US President Donald Trump's extended ceasefire will only last 3-5 days, though it later corrected its headline to say there’s no timeline, and Trump announced he will wait for Iran’s proposal.

Data in the UK revealed that the Consumer Price Index (CPI) in March rose by 3.3% YoY, as expected, while excluding volatile items, the so-called Core CPI dipped from 3.2% to 3.1% YoY for the same period. Digging into the data, the Office for National Statistics (ONS) found that prices paid by factories exceeded estimates.

The Bank of England (BoE) projected that inflation would get closer to its 2% goal in April, before the Iran war. Since then, the BoE revised up its projection to 3.5%, while the IMF expected inflation to rise by 4%.

Even though the data suggests the BoE might need to raise rates, fears that the economy might slow sharply loom, with some analysts speculating on a stagflation scenario.

Money markets expect the BoE to hold rates unchanged for two meetings. However, for the July 29 meeting, odds for a 25 bps rate hike are near 48%, according to Prime Terminal data.

BoE Interest rates table

Ahead, the UK economic schedule will be light with the release of S&P Global Flash PMIs. Across the Atlantic, the US docket will also feature Flash PMIs and jobless claims data.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3495, holding a bullish near-term bias as it remains above the clustered 50-, 100- and 200-day simple moving averages (SMAs) around 1.3417. The pair is still trading below the former uptrend’s break level at 1.3855 and the origin of the prevailing descending resistance line near 1.3869, suggesting that while the broader structure remains capped, the underlying trend tone stays constructive while price holds over the multi-day SMA floor.

On the topside, initial resistance appears at the broken uptrend reference around 1.3855, followed closely by the descending resistance line projected from 1.3869, where a sustained break would be needed to reopen a more aggressive bullish phase. On the downside, the first notable support is provided by the dense 50/100/200-day SMA cluster near 1.3417, with a daily close below that zone likely to weaken the current positive bias and expose deeper corrective pressure.

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

Societe Generale’s Anatoli Annenkov expects the European Central Bank (ECB) to keep rates unchanged next week as focus shifts toward Euro Area growth and medium-term core inflation. The bank now anticipates 25 bp hikes in June and September, projecting core inflation at 2.6% in 2027, but stresses that downside growth risks and a fluid Middle East backdrop argue for a cautious, neutral-range policy stance.

ECB seen cautious with neutral stance

"We expect the ECB to keep rates unchanged next week, as the situation in the Middle East remains fluid and new economic data will be limited. Instead, it might repeat a similar outlook as in March, with a tilt towards the adverse scenario, and await the Eurosystem staff forecasts that will be prepared for the 11 June meeting."

"After the agile response at the March meeting, where the ECB made it clear it has learnt from the 2021-22 experience, we expect the focus next week to shift towards the growth impact and medium-term core inflation. This should dampen any urgency to hike, with a first hike more likely at the June meeting. We recently moved forward our two existing hikes to June and September due to rising concerns over core inflation."

"In June, we think the ECB will hike by 25bp, followed by another 25bp in September, against the background of rising upside risks to core inflation. This would come against the background of robust private sector balance sheets, a rising need for AI and energy investment and the German fiscal stimulus and would move the policy stance to the ECB’s upper range of neutral."

"For the ECB, it looks like we are currently close to the adverse scenario from March, with core inflation peaking at around 2.8% in 1Q27 (in line with our own forecast). This in turn, begs the question whether the ECB should be considering more hikes than the two hikes included in the baseline. For now, we think not, as the scenarios included assumptions of non-linearities and strong second-round effects based on the 2021-22 experience, which remain uncertain in the current economic context."

"We maintain our view that labour markets will remain tight in the coming years due to demographic trends and add to wage pressures, forcing the ECB to “lean” against these risks by staying in the upper range of its neutral estimates. We also note some measures by governments, such as the German tax-free employer bonus, which could add to the near-term upside risks to wage growth."

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

• EUR/GBP falls to three-week lows as the British Pound gains on firm UK inflation.
• UK CPI accelerates to 3.3% YoY and monthly inflation jumps to 0.7%.
• Technically, EUR/GBP trades with a bearish bias below 100- and 200-day SMAs.

EUR/GBP trades on the back foot on Wednesday as UK inflation data lifts the British Pound (GBP), pressuring the Euro (EUR), with the cross extending losses for the second consecutive day. At the time of writing, EUR/GBP is trading around 0.8680, its lowest level since March 31.

Data released by the UK’s Office for National Statistics showed that the headline Consumer Price Index (CPI) rose to around 3.3% YoY in March from 3% previously, while monthly inflation increased to 0.7% from 0.4%. The rise was mainly driven by higher energy and fuel costs amid ongoing Middle East tensions. However, core CPI eased slightly to 3.1% from 3.2%, suggesting underlying price pressures are not broad-based for now.

As inflation continues to trend above the Bank of England’s 2% target, policymakers may adopt a wait-and-see approach before considering any rate cuts, and could even raise rates if the energy shock leads to second-round inflation effects.

Meanwhile, Eurozone data added to downside pressure on the Euro, with preliminary Consumer Confidence for April falling to -20.6 from -16.3 previously, pointing to weakening household sentiment across the bloc amid ongoing geopolitical tensions and higher energy prices.

Technical Analysis:

In the daily chart, EUR/GBP trades with a bearish near-term bias as spot holds beneath both the 100-day Simple Moving Average (SMA) at 0.8698 and the 200-day SMA at 0.8704.

The pair’s slide below these medium- and long-term averages suggests rallies are likely to be capped while momentum indicators lean soft, with the Relative Strength Index (RSI) hovering below the 50 line and the Moving Average Convergence Divergence (MACD) slipping marginally into negative territory, hinting at waning upside pressure.

On the upside, EUR/GBP faces initial resistance at the overhead SMAs around the 0.8690-0.8705 region, with a break above opening the door toward the April high near 0.8742. On the downside, immediate support is seen around the 0.8680 level, with a break below exposing the 0.8650 region.

ING strategists Francesco Pesole, Frantisek Taborsky and Chris Turner note that the US Dollar (USD) was largely unmoved by Kevin Warsh’s Senate hearing, as he defended Federal Reserve independence and avoided clear policy guidance. They highlight resilient global equities as a key obstacle to a stronger Dollar and suggest US Dollar Index (DXY) may struggle to revisit 99.0 in the current risk environment.

Warsh hearing leaves Dollar directionless

"Warsh was firm enough on Fed independence to prevent any Treasuries‑USD sell‑off, while remaining sufficiently elusive on policy to avoid any impact on rate expectations."

"The dollar had a couple of fluctuations – mostly on the strong side – during Warsh’s testimony, but was left by and large untouched."

"A key missing link for a more durable dollar rebound remains the equity backdrop."

"In this environment of resilient risk sentiment, DXY may struggle to climb back toward 99.0."

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