Forex News

OCBC’s Sim Moh Siong highlights that crude briefly surged toward USD120/bbl on Iranian attacks before easing as US officials signalled supply support and Israel suggested faster de-escalation. The bank has lifted its Brent outlook, expecting prices to hold near USD100/bbl through mid-year before gradually easing toward USD70/bbl by early 2027, with prolonged shipping disruptions posing upside supply risks.

Brent outlook raised on supply risks

"Crude prices briefly jumped toward USD120/bbl after a series of Iranian attacks on regional energy infrastructure."

"We lifted our Brent outlook, expecting prices to hold around USD100/bbl through mid-year before gradually easing toward USD70/bbl by early 2027."

"Prolonged shipping paralysis is forcing Gulf producers into output shut-ins, heightening the risk that temporary disruptions evolve into more persistent supply losses."

"Even with mitigation measures, up to 10mb/d of available offsets fall short of covering a sustained Strait closure."

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

OCBC’s Christopher Wong reports that Gold has come under pressure as rising global yields and renewed inflation risks reduce expectations for near-term rate cuts, prompting ETF outflows and stress-driven liquidation. Despite this, he argues the broader structural backdrop remains supportive and still expects Gold to resume its medium-term uptrend, though trading is likely to remain choppy in the near term.

Higher yields weigh on Gold prices

"Gold prices fell sharply as rising global yields and renewed inflation risks—driven by higher energy prices—reduced expectations for near-term rate cuts."

"Investors continued to pare back gold-backed ETF holdings, adding to the downside."

"The metal has also been prone to bouts of liquidation during periods of market stress, even as geopolitical uncertainties remain elevated."

"Despite the near-term pressure, the broader structural backdrop remains supportive."

"We still expect gold to resume its medium-term uptrend, though prices may struggle for sustained momentum in the near term, with trading likely to stay choppy."

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

• GBP/USD corrects after its rally, despite a clearly more restrictive policy signal.
• The Bank of England surprises with a unanimous vote and sharply higher inflation forecasts.
• The US Dollar edges higher as expectations of prolonged Fed policy stability increase.

GBP/USD retreats on Friday, trading around 1.3380 at the time of writing, down 0.39% on the day, after Thursday’s strong rally following the Bank of England (BoE) decision. The corrective move comes as the US Dollar (USD) regains some traction, despite a broader backdrop shaped by a hawkish repricing of global monetary policy.

The Bank of England kept its rate unchanged at 3.75%, as expected, but surprised markets with a unanimous 9-0 vote, versus expectations of a 7-2 split in favor of a hold. This shift is particularly notable given the previous narrow 5-4 decision. The tone is clearly more hawkish, with BoE Governor Andrew Bailey stating that the central bank stands ready to act if inflation proves more persistent.

The Monetary Policy Committee (MPC) sharply revised its third-quarter inflation forecast higher to around 3.5%, up from 2% previously, mainly driven by rising energy prices linked to the Middle East war. Several members adopted a more hawkish stance, including Catherine Mann, who now sees the possibility of a prolonged hold or even a rate hike, while traditionally dovish Swati Dhingra also acknowledged that rates may need to rise.

On the US side, the Federal Reserve (Fed) held rates at 3.50%-3.75% and still projects one rate cut this year. However, Chair Jerome Powell highlighted elevated uncertainty linked to the Iran conflict. The dot plot also showed a growing number of officials no longer expecting rate cuts this year, lending support to the US Dollar.

The US Dollar Index (DXY) is rebounding toward 99.50 on Friday after hitting a daily low near 99.00 on Thursday, supported by rising expectations that the Fed will keep rates steady for longer, with chances of a hold by year-end now seen at 71.8% according to the CME FedWatch tool. This dynamic is capping the upside in GBP/USD in the short term, despite the BoE-driven support.

According to MUFG, the sharp repricing of UK rate expectations has led to a notable rise in yields, supporting the Pound Sterling (GBP), although the move may be somewhat overdone. The bank warns that a deterioration in risk sentiment, particularly if Middle East tensions escalate further, could weigh on Equities and reduce this support.

Meanwhile, ING believes that the market’s aggressive repricing toward further BoE tightening is likely excessive. The bank notes that, despite the hawkish shift, Oil price dynamics remain a key driver for GBP/USD, as energy influences both inflation expectations and global risk sentiment.