Forex News

Scotiabank strategists Shaun Osborne and Eric Theoret note the Euro (EUR) is consolidating in a tight range around the mid-1.15s as markets await the Federal Open Market Committee (FOMC). They note Eurozone Industrial Production data had little impact on sentiment, while implied volatility suggests a modest move is priced. Their technical view points to a pause before renewed EUR/USD losses toward the 1.1450–1.1475 area if support breaks.

Range trade before potential decline

"The EUR is holding a tight range ahead of the FOMC. Eurozone July Industrial Production fell 0.1% in the month, slightly better than forecasts of a 0.2% drop. The data had no impact on EUR sentiment."

"Overnight EUR vol has firmed modestly, implying a breakeven move in spot of about 50 pips. That’s a bit below recent peaks suggesting markets may have largely priced in a hawkish Fed outcome."

"EUR/USD short-term technicals: Neutral/bearish—Spot is consolidating in a tight range around the mid-1.15s."

"Short-term price patterns suggest a pause in the EUR’s recent softness, ahead of renewed losses."

"EUR weakness below 1.1515/20 targets a further decline to 1.1450/75. Resistance is 1.1565/75"

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

Rabobank’s Senior FX Strategist Jane Foley notes the US Dollar (USD) has outperformed G10 peers on expectations the Fed will deliver around 100 bps of tightening over 12 months, but warns this may be excessive. They see scope for USD softness if the Fed underdelivers, yet highlight ongoing support from safe haven flows and US energy exporter status, keeping EUR/USD near 1.16 over 1–3 months.

Fed expectations and safe haven support

"The dollar is the best performing G10 currency on a 5-day view, bolstered by the expectation that the Fed is likely to announce a 25 bps rate hike at today’s policy meeting. Indeed, on a 12 month view the market is priced for almost 100 bps of rate hikes. This suggests that if the Fed doesn’t match the market’s hawkish expectations today, the USD could fall back."

"On balance, it is Rabobank’s house view that the market has priced in too much Fed policy tightening into next year and that the risks are skewed towards today’s FOMC undermining the market’s conviction on rate hikes going forward. While we expect that the USD will struggle in the sessions ahead, we don’t anticipate that the USD will come under heavy pressure and maintain our forecast that EUR/USD is unlikely to stray too far from the 1.16 area on a 1-to-3-month view."

"While a paring back of Fed rate hike hopes would increase the USD’s vulnerability, the greenback is still likely to draw some support from the US’s position as a net energy exporter and from its safe haven status. The latter may have been damaged by concerns over the large budget deficit in the US, but the lack of alternative safe havens means that the USD is likely to continue benefitting from these flows."

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

Brown Brothers Harriman’s (BBH) Elias Haddad notes GBP/USD is trading heavy near its 200-day moving average as United Kingdom (UK) gilts stabilize. August Consumer Price Index (CPI) slightly exceeded the Bank of England's (BoE) projections, but he still expects the BoE to hold rates at 3.75%. Haddad argues aggressive market pricing reflects energy shocks and sees Sterling vulnerable to a dovish BoE repricing as the UK economy runs below capacity.

Hot CPI but BoE likely on hold

"GBP/USD is trading heavy, just above its 200-day moving average at 1.3455, while the selloff in gilts eased. UK August CPI report largely matched consensus but was hotter than the BoE’s projections."

"The BoE is widely expected to keep the policy rate at 3.75% for a sixth straight meeting tomorrow given contained UK inflation pressures and ongoing labor market slack. In the next twelve months, the swaps curve implies 100bps of BoE rate hikes to 4.75%."

"Nonetheless, the BoE may not need to tighten as much as markets expect. The UK economy is already operating below capacity, Bank Rate at 3.75% is near the top of the BoE’s estimated 2% to 4% neutral range, and fiscal policy will likely turn more restrictive. Bottom line: GBP is vulnerable to a dovish BoE repricing."

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

• AUD/USD trades in a narrow range as investors await the Federal Reserve’s interest-rate decision.
• Markets almost fully price in a 25-basis-point Fed rate hike, shifting attention to the dot plot and Kevin Warsh’s remarks.
• Hawkish Reserve Bank of Australia expectations could limit losses in the Australian Dollar.

AUD/USD trades in a narrow range on Wednesday as investors hold back from taking strong positions ahead of the Federal Reserve’s (Fed) monetary policy announcement. At the time of writing, AUD/USD trades around 0.7134, little changed on the day.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, holds near two-week highs around 99.67.

The Fed will announce its decision at 18:00 GMT, followed by Fed Chairman Kevin Warsh’s press conference at 18:30 GMT. Markets almost fully price in a 25-basis-point (bps) rate hike, which would lift the federal funds target range to 3.75%-4.00%. If delivered, it would be the first rate increase since July 2023.

With the expected move already reflected in market pricing, attention will turn to the updated Summary of Economic Projections, including the dot plot, and Warsh’s post-meeting remarks.

Inflation remains the Fed’s main concern as policymakers stay committed to returning it to the central bank's 2% target. However, much of the recent upside pressure has come from elevated Oil prices caused by the war in the Middle East. Markets will therefore watch whether the Fed presents the expected hike as a one-time response to the energy-driven rise in inflation or signals that more increases are likely.

The US Dollar’s reaction could depend more on these future policy signals than on the rate hike itself. A hawkish message pointing to additional tightening could strengthen the Greenback and push AUD/USD lower. Conversely, a quarter-point increase accompanied by cautious or data-dependent guidance could weigh on the US Dollar and help the pair recover.

Even so, losses in the Australian Dollar (AUD) could remain limited as the Reserve Bank of Australia (RBA) maintains a hawkish stance. The Australian central bank kept its cash rate unchanged at 4.35% in August but warned that another increase was possible if inflation failed to ease.

As of September 15, the October 2026 ASX 30-Day Interbank Cash Rate Futures contract was trading at 95.455, implying a 78% probability that the RBA will raise the cash rate by 25 bps to 4.60% at its September 29 meeting. A rate hike would keep interest-rate differentials supportive of the Australian Dollar.

Scotiabank strategists Shaun Osborne and Eric Theoret report USD/CAD is steady near 1.39 as markets await the Federal Reserve (Fed) and the Bank of Canada’s (BoC) summary of deliberations. They note the BoC is likely to sound more hawkish after firmer inflation data and still-accommodative policy. Technically, they see USD/CAD pressing resistance, with a break above 1.3950 opening the way toward the 1.40–1.4150 area.

Resistance test and BoC risk

"The CAD is essentially flat on the day as markets await the Fed. The BoC summary of deliberations on the September 2nd policy decision at 13.30ET is likely to reflect the hawkish tone struck by Governor Macklem at the post-meeting press conference."

"The Bank’s focus on inflation risks relative to growth uncertainty caused by trade friction may have sharpened following this week’s inflation data which suggest firmer underlying pressure on prices, despite the main releases largely meeting expectations"

"The Bank’s policy settings remain accommodative and concern about price pressures suggests a growing risk that the process of normalization may start late this year, per Scotia’s long-held rate forecast."

"PM Carney’s “Productivity Mega Deduction” announced yesterday which slashes the marginal effective tax on new business investment to 6.4% is not an immediate driver for the CAD. The cost is hefty—CAD36bn over five years—but it is a significant pro-investment move to boost investment and productivity over the medium-to-longer term."

"Bullish—The USD continues to pressure a broad resistance zone between the low/mid 1.39s, trend momentum is shifting to modestly USD bullish on the daily chart."

"A sustained push above 1.3950 opens the topside for a push higher, potentially to the 1.40/1.4150 zone. Support is distant at 1.3825/30."

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