Forex News

Member of the Executive Board of the European Central Bank (ECB), Isabel Schnabel, said that the interest rates will probably stay stable in the near future in the Faz Podcast on Monday.

Key takeaways

Rates will probably stay stable for quite some time.

I just believe there are more inflationary than disinflationary forces at work.

I didn't say rates should be raised. No rate hikes expected for the foreseeable future.

One should not expect a rate hike at present or in the foreseeable future."

• The Pound Sterling strengthens in light trading after confirmation of steady UK growth in the third quarter
• Gross domestic product data support the British currency despite persistent expectations of Bank of England easing in 2026
• The JPY remains supported by its safe-haven status and by prospects of gradual monetary policy normalization in Japan

GBP/JPY trades around 211.10 on Monday at the time of writing, up 0.10% on the day, in a context of reduced liquidity linked to public holidays across several financial centers. The pair benefits from renewed interest in the Pound Sterling (GBP) following the release of UK macroeconomic data in line with expectations, helping to offset the impact of speculation over further rate cuts in the medium term.

Data published by the Office for National Statistics (ONS) confirm that the UK economy posts quarterly growth of 0.1% in the third quarter, following 0.2% growth in the previous quarter. On an annual basis, Gross Domestic Product (GDP) rises by 1.3%, unchanged from the prior period. In terms of sectoral contributions, activity is supported by services and construction, while the production sector continues to weigh on overall growth. Although the figures point to some loss of momentum, they reinforce the idea of an economy showing resilience in the face of a tighter monetary environment.

From a monetary policy perspective, these data do not materially alter the near-term outlook for the Bank of England (BoE). The central bank delivered a 25-basis-point rate cut last week, while stressing that future decisions will depend closely on the evolution of inflation and economic activity. Following the recent easing in inflation, BoE Governor Andrew Bailey has adopted a more dovish tone, fueling expectations of further easing in 2026. Money markets now price in around 37 basis points of rate cuts next year, according to the Capital Edge rate probability tool.

At the same time, the Japanese Yen continues to benefit from specific supportive factors. The currency retains its safe-haven appeal amid persistent geopolitical tensions and concerns surrounding global fiscal conditions. Comments from Atsushi Mimura, Japan’s Vice Minister of Finance for International Affairs, have revived speculation about possible official intervention against moves deemed excessive in the foreign exchange market, helping to limit downside pressure on the Japanese Yen.

On the monetary policy front, the Bank of Japan (BoJ) recently raised its policy rate to 0.75%, the highest level in several decades, while keeping the door open to further tightening if growth and inflation evolve in line with forecasts. BoJ Governor Kazuo Ueda remains deliberately cautious on the timing and pace of additional hikes, emphasizing a strictly data-dependent approach tied to economic, price and financial conditions. According to an analysis from ING, further rate increases are expected, but not in the near term, with a potential timeline extending into 2026.

Japanese authorities have also continued to signal vigilance against what they describe as one-sided currency moves. Japan’s Finance Minister Satsuki Katayama recently stated that the country is fully prepared to act to stabilize the JPY, in coordination with existing bilateral agreements. This combination of factors helps cap gains in GBP/JPY, despite the support provided to the Pound Sterling by the latest UK macroeconomic data.

• WTI trades firmer as geopolitical tensions between the US and Venezuela provide modest support.
• Short-term technicals turn constructive, while the broader downtrend remains intact.
• Immediate resistance sits at $58.00-$59.00, reinforced by former support and the 21-day and 50-day SMAs.

West Texas Intermediate (WTI) Crude Oil edges higher on Monday as escalating tensions between the United States (US) and Venezuela add a modest geopolitical risk premium to Oil markets. At the time of writing, the US benchmark trades around $57.70, up nearly 2% on the day, extending its rebound after retesting year-to-date lows last week.

From a technical standpoint, the near-term outlook for WTI has turned slightly constructive, though the broader trend remains tilted to the downside, with prices down nearly 27% year-to-date.

On the daily chart, WTI is currently testing the $58.00-$59.00 zone, a former support zone now acting as resistance, aligned with the 21-day and 50-day Simple Moving Averages (SMAs). This confluence continues to cap immediate upside, with the $60.00 psychological level emerging as the next key hurdle should prices break higher.

On the downside, initial support is seen near $56.50, followed by the $55.00 round figure. A break below this area would reopen downside risks toward multi-year lows within the broader bearish structure.

Momentum indicators show early signs of improvement. The Relative Strength Index (RSI) hovers near the 50 mark after rebounding from near-oversold levels, while the Average Directional Index (ADX), around 22, is trending higher, suggesting that trend strength is gradually building.

The Moving Average Convergence Divergence (MACD) line remains below the Signal line and under zero, while the negative histogram contracts, suggesting fading downside momentum.

(This story was corrected on December 22 at 16:40 GMT to say in the first paragraph that WTI rebounded after retesting year-to-date lows last week, not sliding to year-to-date lows.)

• GBP/USD climbs 0.59% to 1.3450 after UK Q3 GDP grows 0.1% QoQ and 1.3% YoY.
• UK growth data supports the Sterling despite markets pricing additional Bank of England easing next year.
• Thin liquidity ahead of Christmas amplifies moves amid mixed signals from Fed officials on inflation.

GBP/USD rallies during the North American session on Monday, up by 0.59% after the latest data in the United Kingdom (UK) showed that the economy grew as expected amid thin liquidity trading as investors brace for the Christmas Eve holiday. At the time of writing, the pair trades at 1.3450 after bouncing off from a daily low of 1.3374.

Sterling rallies in holiday-thinned trading after steady UK growth offsets expectations of further BoE easing in 2026

The Office for National Statistics (ONS) revealed that the UK economy grew 0.1% on a quarterly basis in Q3 2025, as expected, and 1.3% YoY, unchanged from the previous period. The data drove GBP/USD above the 1.3400 threshold, even though market participants are speculating that the Bank of England (BoE) would continue to ease policy in 2026.

UK’s inflation eased last week, which influenced BoE Governor Andrew Bailey to join the dovish camp and cut rates. Since then, money markets have priced 37 basis points of easing for 2026, according to the Capital Edge Rate probability tool.

Across the pond, the US economic docket remains scarce with Fed policymakers crossing the wires. Cleveland’s Fed President Beth Hammack remained hawkish, saying that November’s CPI may have underestimated annual price increases because of data irregularities, while adding that the neutral interest rate may be above widely held assumptions.

Recently, Fed Governor Stephen Miran stated that CPI data showed irregularities due to the government shutdown. He added that “recent data aligns with my perspective on current economic conditions,” and that a further reduction in the policy rate “is likely in the future.”

GBP/USD Price Forecast: Technical outlook

The technical picture shows the GBP/USD pair is neutral to upward-biased after reclaiming the 200-day SMA on December 3. Since then, the pair has been fluctuating around the latter, but as of writing, reached a new monthly high of 1.3457, with buyers eyeing a test of the 1.35 figure before year’s end.

In that outcome, GBP/USD could test the October 1 high at 1.3527, followed by the 1.3600 mark. Conversely, if the pair slides beneath 1.3400, expect a test of the 100-day SMA at 1.3369, and of the 200-day SMA at 1.3352.

• The New Zealand Dollar attempts a rebound after hitting a two-week low
• Improved market sentiment supports cyclical currencies at the start of the week
• Geopolitical tensions and monetary policy uncertainty limit the scope of the recovery

NZD/USD trades around 0.5790 on Monday at the time of writing, up 0.60% on the day, after rebounding from the 0.5735 two-week low reached on Friday.

The modest improvement in risk appetite is lending some support to the New Zealand Dollar (NZD), a currency sensitive to global growth conditions, as Equity markets maintain a generally positive tone. The restrictive bias of the Reserve Bank of New Zealand (RBNZ) also continues to underpin the Kiwi. The central bank has indicated that the policy rate could remain at its current level for an extended period if economic developments evolve in line with expectations, limiting speculation about an early easing cycle.

However, the upside potential for NZD/USD remains constrained by shifting interest rate expectations. Despite stronger-than-expected Gross Domestic Product growth in the third quarter, markets have slightly scaled back the chance of a future rate hike, tempering enthusiasm for the New Zealand Dollar.

On the US side, demand for the US Dollar (USD) remains mixed. The US Dollar Index (DXY) is consolidating after its recent rebound, amid ongoing debate within the Federal Reserve (Fed) over the future direction of monetary policy. Several officials have emphasized the need to assess the impact of the rate cuts already delivered, while others warn of the risks of insufficient easing for the economy.

In addition, rising geopolitical tensions continue to support the Greenback through its safe-haven status, limiting gains in risk-sensitive currencies such as the New Zealand Dollar. Uncertainty surrounding international relations and regional conflicts is encouraging investors to remain cautious, especially as trading volumes stay relatively thin ahead of holiday periods.

Against this backdrop, NZD/USD manages to recover in the near term, but the lack of a clear catalyst and competing safe-haven flows suggest waiting for stronger signals before anticipating a sustained extension of the upside move.

• USD/JPY retreats toward 157.00 as Japan signals readiness to stabilise the Yen.
• Softer US Dollar lends additional support to the Yen amid a dovish Fed outlook.
• Markets look ahead to key US economic data releases due on Tuesday.

The Japanese Yen (JPY) trades firmer against the US Dollar (USD) on Monday, as Japanese officials stepped up verbal warnings against excessive currency moves, underscoring growing unease over the Yen’s recent weakness.

At the time of writing, USD/JPY trades near 156.95, easing back after climbing to near one-month highs on Friday following the Bank of Japan’s (BoJ) interest rate hike.

Over recent weeks, Japanese authorities have repeatedly signaled their readiness to act against “one-sided and excessive” currency moves. Speaking on Monday, Japan’s Finance Minister Satsuki Katayama said authorities are “absolutely ready” to take action, adding that Japan can act in line with the US-Japan joint accord and has a “free hand” to take bold measures to stabilise the Yen.

On the monetary policy front, the BoJ raised its policy rate by 25 basis points to 0.75%. Policymakers stressed that real interest rates are expected to remain significantly negative and that accommodative financial conditions will continue to support economic activity.

Looking ahead, the central bank said it will continue to raise the policy interest rate and adjust the degree of monetary accommodation if the outlook for economic activity and prices is realised, while keeping policy decisions data-dependent and aligned with developments in growth, inflation, and financial conditions.

Elsewhere, a softer US Dollar also offers a mild tailwind for the Yen on Monday, as dovish Federal Reserve (Fed) expectations keep the Greenback on the back foot. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 98.26, easing after climbing to a one-week high on Friday.

Markets are currently pricing in two rate cuts in 2026. However, policymakers remain divided on the need for further easing after delivering cumulative cuts of 75 basis points this year. Speaking on Monday, Fed Governor Stephen Miran said recent economic data should “push people in a dovish direction,” warning that failing to adjust policy lower could raise the risk of a recession. Miran added that he has yet to decide whether he would support a 25 or 50 basis point cut at the January meeting.

In contrast, Cleveland Fed President Beth Hammack, a 2026 FOMC voter, said in a Wall Street Journal interview on Sunday that she sees no need to adjust interest rates in the coming months, citing persistent inflation risks and suggesting the policy rate could remain in the 3.50%-3.75% range into the spring.

Attention now turns to a busy slate of US economic releases due on Tuesday, including the ADP Employment Change four-week average, the delayed preliminary Q3 Gross Domestic Product (GDP) report, Durable Goods Orders, Industrial Production, and the Conference Board’s Consumer Confidence survey.

Federal Reserve (Fed) Member of the Board of Governors Stephen Miran said that the last few months have seen data consistent with his view of the world and that he doesn’t see a recession in the near term. He declared in an interview for Bloomberg TV on Monday.

Key Quotes

There were some anomalies in last week's inflation data from government shutdown.

Last few months we've had data in accord with my view of the world.

I don't see a recession in the near term.

If we don't adjust policy down we do face rising risk of a recession.

Think we ultimately will adjust policy rate down.

Tax refunds next year will provide a bit of stimulus.

Need for me to dissent for 50 basis points diminishes over time as we cut rates.

If no one is confirmed in my seat by January 31, I assume I will stay in my seat.

You have to give Powell credit for wrangling 3 rate cuts out of the FOMC.”

• Gold jumps to fresh record highs as escalating geopolitical tensions lift safe-haven demand.
• Dovish Fed expectations and a softer US Dollar continue to underpin the broader bullish bias
• Technically, XAU/USD maintains a bullish bias above rising moving averages despite an overbought RSI.

Gold (XAU/USD) surges to fresh record highs on Monday, as escalating geopolitical tensions bolster safe-haven demand. At the time of writing, XAU/USD is trading around $4,424, up about 2% on the day, after breaking above the October 20 peak near $4,381.

The precious metal is on track for its strongest annual performance since 1979, with prices up nearly 67% year to date. The rally has been fuelled by a dovish Federal Reserve (Fed) stance, broadly weaker US Dollar (USD), sustained central-bank buying and record inflows into Gold-backed ETFs.

Looking ahead, markets continue to anticipate further monetary policy easing by the Fed into 2026, as recent data indicate cooling inflationary pressure and a softer US labor market. A lower interest-rate environment typically supports non-yielding assets such as Gold.

As markets drift toward the year-end and liquidity thins with major data releases largely drying up, Gold may consolidate in the near term or see mild profit-taking after the recent surge before attempting another push into uncharted territory.

However, a handful of US economic releases on Tuesday may still provide short-term direction, with attention on the ADP Employment Change four-week average, the delayed preliminary Q3 Gross Domestic Product (GDP) report, Durable Goods Orders, Industrial Production, and Consumer Confidence.

Market movers: Rising geopolitical tensions and Fed signals keep markets cautious

• On the geopolitical front, renewed Iran-Israel tensions are reinforcing risk-off sentiment. Reports suggest Iran may use large-scale military drills as a potential cover for offensive operations. Israeli officials have also warned that Tehran may be reconstituting nuclear enrichment facilities previously targeted by US strikes in June. Meanwhile, Israeli Prime Minister Benjamin Netanyahu is expected to brief US President Donald Trump on possible options to strike Iran’s missile program again.
• Tensions between the US and Venezuela have also escalated sharply. US forces have intercepted and pursued another oil tanker near Venezuelan waters after seizing two tankers last week. The latest action follows an order by President Donald Trump to impose a blockade on sanctioned Oil tankers entering and leaving Venezuela.
• US-led Ukraine peace talks showed mixed progress over the weekend amid ongoing conflict. US, European, Ukrainian, and Russian envoys held discussions in Miami, with US special envoy Steve Witkoff describing the talks as “productive and constructive,” particularly around the development of a 20-point peace plan and potential security guarantees for Kyiv. Still, no major breakthrough emerged, as Moscow continues to hold firm on territorial demands.
• On the monetary policy front, markets are currently pricing in two Fed rate cuts in 2026. However, Fed officials remain divided on the need for additional monetary easing following cumulative cuts of 75 basis points (bps) this year. Cleveland Fed President Beth Hammack, a future 2026 FOMC voter, signaled in a Wall Street Journal interview that she sees no need to adjust interest rates for several months ahead, arguing that inflation remains a key concern even after recent easing moves and suggesting the central bank could hold the policy rate in its current 3.50%-3.75% range into the spring.
• A softer US Dollar is providing additional tailwind by making the metal cheaper for overseas buyers. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 98.46, easing after climbing to a one-week high on Friday.

Technical analysis: XAU/USD holds bullish bias despite overbought RSI

XAU/USD resumes its broader uptrend, climbing back into uncharted territory after navigating a healthy period of correction and consolidation, defying earlier concerns about an overstretched rally.

On the daily chart, Gold continues to trade comfortably above its 21-day Simple Moving Average (SMA) near $4,244 and the 50-day SMA around $4,154, both of which slope higher and reinforce the bullish bias. As long as prices hold above these dynamic supports, dips are likely to attract buyers.

The Relative Strength Index (RSI) stands near 77, firmly in overbought territory, suggesting strong upside momentum, though also signalling scope for short-term consolidation or shallow pullbacks. Meanwhile, the Average Directional Index (ADX) rises to 29.53, reinforcing the bullish backdrop.

(This story was corrected on December 22 at 14:40 GMT to say in the first paragraph that Gold's price peak near $4,381 was on October 20, not 21)

• Silver posts strong gains at the start of the week and reaches a new all-time high above $69.
• A weaker US Dollar and expectations of further Federal Reserve rate cuts support precious metals.
• Geopolitical tensions and thinner year-end liquidity reinforce demand for non-yielding assets.

Silver (XAG/USD) extends its bullish momentum on Monday and trades around $69.05 at the time of writing, up 2.75% on the day, after hitting a fresh all-time peak at $69.47 earlier in the day. The white metal benefits from strong follow-through buying after several weeks of steady gains, supported by a macroeconomic and geopolitical backdrop that remains favorable for safe-haven assets.

The rally in Silver unfolds in an environment with persistent expectations of monetary easing in the United States (US). Markets continue to price in additional rate cuts by the Federal Reserve (Fed) into 2026, as recent data point to gradually easing inflationary pressures and a softer US labor market. A lower interest-rate environment reduces the opportunity cost of holding non-yielding assets, providing structural support for precious metals.

The softer US Dollar (USD) is another key driver. A weaker Greenback makes Silver more attractive to overseas investors. The US Dollar Index (DXY), which tracks the value of the Greenback against a basket of major currencies, trades around 98.35, easing slightly after reaching a one-week high late last week. This pullback in the US Dollar adds to Silver’s upside momentum, already underpinned by solid investment demand.

On the geopolitical front, tensions remain elevated and continue to encourage a cautious investor stance. Renewed frictions between Iran and Israel have revived concerns over a potential regional escalation, while rising tensions between the United States and Venezuela, particularly around Oil exports, add to global uncertainty. Meanwhile, diplomatic efforts related to the war in Ukraine are progressing slowly, with no decisive breakthrough, keeping geopolitical risk at an elevated level.

As markets move closer to year-end, declining liquidity could lead to periods of consolidation or mild profit-taking after the recent surge. Still, several US macroeconomic releases due on Tuesday, including the four-week average of the ADP Employment Change, the preliminary third-quarter Gross Domestic Product report, Durable Goods Orders, Industrial Production, and Consumer Confidence, could provide short-term direction for Silver.

Overall, as long as expectations of accommodative monetary policy, US Dollar weakness, and geopolitical uncertainty persist, the fundamental bias for Silver remains constructive, despite the risk of temporary pauses following the print of new record highs.