Forex News

• EUR/GBP hits a three-week high on Tuesday as UK political turmoil weighs on the British Pound.
• The Euro struggles to gain traction amid concerns over the Eurozone’s exposure to Middle East-driven energy shocks.
• Technically, the cross remains capped below the 100-day and 200-day SMAs despite improving momentum indicators.

EUR/GBP holds firm on Tuesday after hitting a three-week high of 0.8697 earlier in the day, as traders assess rising political instability in the United Kingdom (UK) and stalled US-Iran negotiations. At the time of writing, the cross is trading around 0.8679, up roughly 0.25%

The British Pound (GBP) trades on the defensive across the board as pressure continues to mount on Prime Minister Keir Starmer following Labour’s heavy losses in the recent local elections. According to reports, 78 of Labour’s 403 MPs have called on Starmer to step aside, just short of the 81 MPs needed to trigger a formal leadership contest. Meanwhile, Starmer has publicly rejected calls to resign, stating that he will “get on with governing.”

At the same time, the Euro (EUR) is also struggling to gain meaningful traction as concerns over the economic fallout from the ongoing Middle East conflict continue to weigh on sentiment. The Eurozone’s heavy exposure to rising energy costs and supply disruptions linked to the Strait of Hormuz is fueling fears of slower growth and renewed inflationary pressure, leaving the upside in EUR/GBP limited in the near term.

Looking ahead, traders will focus on upcoming economic data from the Eurozone and the United Kingdom for fresh direction. On Wednesday, the Eurozone will release preliminary Q1 Employment Change and  Gross Domestic Product (GDP) figures, along with March Industrial Production data.

In the UK, monthly GDP data for March, preliminary Q1 GDP figures, as well as Industrial Production and Manufacturing Production data, are scheduled for release on Thursday.

Technical Analysis:

On the daily chart, EUR/GBP keeps a capped near-term tone as it holds below both the 100-day Simple Moving Average (SMA) and the 200-day SMA. The Relative Strength Index (RSI has recovered toward 54 and the Moving Average Convergence Divergence (MACD) has inched back into slightly positive territory, suggesting modest bullish momentum, yet these signals remain constrained by the overhead moving average barrier.

On the topside, initial resistance aligns with the 100-day SMA at 0.8685, followed by the 200-day SMA at 0.8703, with a stronger hurdle at the horizontal resistance level of 0.8730. On the downside, the key structural floor is seen at the 0.8600 horizontal support, where a break would reopen a deeper pullback despite the current attempt to stabilize.

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

ING’s Francesco Pesole highlights rising political uncertainty in the United Kingdom (UK) as calls grow for Prime Minister Keir Starmer’s resignation, with betting markets seeing a high chance he leaves office this year. He notes emerging political risk premium in EUR/GBP and warns sterling could face further pressure as markets assess leadership contenders and fiscal-rule credibility.

Sterling pressured by UK political turmoil

"The pound started coming under pressure yesterday afternoon (after a strong session) as calls for Starmer’s resignation intensified. For the first time in a long time, some political risk premium seems to be emerging in EUR/GBP."

"That is, however, still small according to our model, around 0.3% short-term overvaluation."

"The pound has plenty of additional room to build a negative premium, with markets likely to shift their focus to which candidate holds the best chance of replacing Starmer."

"Notably, sterling came under pressure recently following reports that Burnham could seek a parliamentary seat to advance a leadership bid, reflecting concerns that his views on abandoning the fiscal rule could undermine a key anchor of market confidence in UK public finances."

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

BNY’s Bob Savage reports India is considering emergency steps to protect foreign exchange reserves as higher Oil prices widen the current account deficit. Measures under discussion include fuel price hikes, import restrictions on Gold and electronics, and tighter hedging rules. The Reserve Bank of India (RBI) has already intervened to stabilise the Indian Rupee (INR) after it hit a record low, with reserves near $691bn.

Policy toolkit aimed at Rupee stability

"India is considering emergency measures to protect foreign exchange reserves amid rising oil prices and a widening current account deficit."

"Proposed steps include hiking fuel prices for the first time since the Iran conflict began, restricting non-essential imports such as gold and electronic goods, and encouraging public fuel conservation."

"Prime Minister Narendra Modi has urged citizens to avoid gold purchases for a year and to limit overseas travel."

"The Reserve Bank of India (RBI) has intervened to stabilize the rupee, which hit a record low, and may tighten currency hedging rules for importers."

"Foreign exchange reserves stood at $690.7bn as of May 1."

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

• USD/CAD rallies above 1.3700 and is set to test three-week highs at the 1.3715 area.
• Growing geopolitical risks and investors' cautiousness ahead of the US CPI release are boosting the USD.
• Higher Oil prices are cushioning the Canadian Dollar's reversal.

The Canadian Dollar (CAD) accelerates its decline against the  US Dollar (USD) on Tuesday, with the USD/CAD pair rallying above 1.3700 and set to test its highest levels in nearly a month, at 1.3714. A sour market mood amid saber-rattling in the Middle East and investors’ cautiousness ahead of the US Consumer Price Index (CPI) release are buoying the USD across the board.

Traders are on edge about the possibility of the resumption of hostilities between the US and Iran, which would complicate the reopening of the Strait of Hormuz even further.

US President Donald Trump affirmed earlier on Tuesday that the ceasefire is on “life support,” and CNN reported comments from the president’s aides suggesting that the resumption of major combat operations is back on the table. CNN also stated that the peace process is unlikely to make significant progress ahead of the meeting between Trump and Chinese President Xi Jinping later this week.

Later on the day, April’s US Consumer Price Index is likely to provide some distraction from geopolitics. Consumer inflation is expected to have surged to a 3.7% year-on-year rate, from 3.3% in March, amid the energy shock from Iran’s war. The core CPI is seen advancing at a more moderate pace of 2.7% YoY from 2.6% in March. 

The Canadian Dollar, on the other hand, is drawing some support from the higher Oil prices, in the absence of key Canadian economic data. Oil is Canada's main export, and the recent jump in Crude prices, with the WTI barrel trading above $98.00, hints at growing trade revenues and is keeping the Loonie from falling further.

Commerzbank strategists highlight concerns from India’s jewellery industry about a potential further setback in Indian Gold jewellery demand, which is important for the physical Gold market. They note that Prime Minister Modi has urged Indians to avoid Gold purchases for at least a year to protect foreign exchange reserves. Strategists also flag the risk of higher import duties if this appeal fails.

Indian jewellery demand faces fresh risks

"Despite the recovery in oil prices, gold has almost managed to hold on to the gains made in recent days."

"Meanwhile, India’s jewellery industry fears a further setback in Indian jewellery demand, which is crucial for the physical gold market: Over the weekend, Prime Minister Modi called on Indians to refrain from gold purchases for at least a year in order to preserve the country’s foreign exchange reserves."

"Although India purchased significantly less gold jewellery by tons – in the first quarter, this was almost 20% below the previous year’s level – gold purchases by value were the highest ever recorded in a first quarter due to high prices."

"It remains to be seen whether the appeal will have any effect. If not, the government could raise import duties again."

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

• USD/JPY jumps to near 157.60 as the US Dollar outperforms amid renewed US-Iran tensions.
• US Treasury Secretary Bessent confirmed a joint effort with Japan against forex volatility.
• Investors await the US CPI data for April.

The USD/JPY pair trades 0.26% higher to near 157.60 during the European trading session on Tuesday. The pair gains as the US Dollar (USD) outperforms its peers due to renewed tensions between the United States (US) and Iran.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, is up 0.4% to near 98.30.

Market participants doubt that the US and Iran will have a permanent resolution in the near term, as President Donald Trump stated on Monday that Iran’s proposal was a “stupid proposal” and Tehran’s decision regarding pursuing its nuclear ambitions remained absent. Trump added, “Ceasefire is on life support.”

During the day, the pair faced a knee-jerk reaction as the Japanese Yen (JPY) gained sharply after US Treasury Secretary Scott Bessent confirmed joint efforts with Japan against excessive volatility in currency markets. “We both believe forex volatility is undesirable,” US Treasury Secretary Bessent said.

Meanwhile, investors await the US Consumer Price Index (CPI) data for April, which will be published at 12:30 GMT. Investors will pay close attention to the US inflation data to get fresh cues regarding the Federal Reserve’s (Fed) monetary policy outlook.

USD/JPY technical analysis

USD/JPY trades higher at around 157.60, but is still keeping a bearish near-term tone as it holds below the 20-day Exponential Moving Average (EMA) at 157.99. The pair's sustenance under this short-term trend gauge, suggesting rallies remain capped for now, while the Relative Strength Index (RSI) around 47 hints at fading bullish momentum rather than outright oversold conditions.

On the topside, immediate resistance is located at the 20-day EMA near 158.00, and a daily close above this barrier would be needed to ease the current downside pressure. A decisive break above the 20-day EMA would allow the pair to extend the advance toward the April 28 low of 159.00. Looking down, key support levels are the May 11 low at 156.50 and the May 7 low at around 156.00.

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

Brown Brothers Harriman’s (BBH) Elias Haddad notes that the US Dollar (USD) is firmer as confidence in a swift reopening of the Strait of Hormuz fades, with USD outperforming most major currencies. Haddad expects US April Consumer Price Index (CPI) to print hotter on gasoline and rent effects, but highlights trimmed-mean measures near 2%. They see the Dollar Index DXY remaining anchored within its 96.00–100.00 range over coming months.

Dollar gains seen within broad range

"USD can extend recent gains in the near-term. Stabilizing US labor demand and anchored long-term inflation expectations tilt the macro narrative back toward Goldilocks rather than stagflation. Overall, we expect the dollar index (DXY) to remain anchored within its nearly one year 96.00-100.00 range in the next few months."

"US April CPI takes the data spotlight today (1:30pm London, 8:30am New York). Headline and core inflation are expected to quicken to 3.7% y/y (vs. 3.3% in March) and 2.7% y/y (vs. 2.6% in March), respectively. Higher gasoline prices and a one-off statistical upside boost to owners’ equivalent rent (26% of CPI basket) to correct for shutdown-related missing data from October 2025 are seen keeping inflation hot in April."

"As such, CPI less food, shelter & energy and the Cleveland Fed 16% trimmed-mean CPI will provide a cleaner read on the underlying US inflation backdrop. Both measures are running close to the Fed’s 2% target."

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