Forex News

• EUR/GBP erases back to the 0.8560 area but remains within the previous day's range.
• Eurozone HICP grew at a steady pace in August, but core inflation eased unexpectedly.
• In the UK, all eyes are on BoE Bailey's speech on Friday for confirmation of a rate hike in September.

The Euro (EUR) heads south against the British Pound (GBP) on Tuesday, weighed by somewhat softer inflationary pressures on the Eurozone and downbeat German Retail Sales figures. The EUR/GBP pair has pulled back to 0.8560 from session highs around 0.8575 but remains trapped within the last two days’ range, supported above 0.8555.

Data released by Eurostat earlier on Tuesday revealed that the preliminary Eurozone’s Harmonized Index of Consumer Prices (HICP) grew at a steady 3.3% year-on-year (Y-o-Y) pace in August, unchanged from July and in line with market expectations. Core inflation, however, slowed down to 2.4% Y-o-Y against expectations of a steady 2.5% reading.

Before that, the Eurozone HCOB Manufacturing PMI was revised down to a 52.7 reading in August, from previous estimations of 52.7, and German Retail Sales contracted 3.4% in July, their sharpest decline in more than four years, and a significant disappointment, as investors had anticipated a 0.4% increase.

In the UK, the calendar is thin on Tuesday, and the focus is on the Bank of England’s (BoE) Governor Andrew Bailey’s speech on Friday, looking for confirmation of the market’s expectations that the bank will hike interest rates at its monetary policy meeting on September 16.

Technical Analysis: Rangebound trading continues

EUR/GBP trades at 0.8562, holding a mildly capped tone, yet with momentum indicators entering bearish territory, as the 4-hour Relative Strength Index (14) dips below 50 while the Moving Average Convergence Divergence (MACD) indicator flatlines around the zero line,

Bears are likely to be tested at the area between 0.8555 and 0.8545 (August 25, 28 and 31 lows), although the key support level is the August 12 low, at 0.8531. A break below here will confirm a multiple top between 0.8575 and 0.8585 and shift the focus towards the July 20 and 21 lows at 0.8485 and 0.8490, respectively.

On the topside, last week's highs at 0.8578, and the late July highs around 0.8585 need to be broken to confirm a bullish extension, targeting late June lows just above 0.8600.

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

• WTI gains 1.76% on Tuesday, supported by renewed hostilities between the United States and Iran.
• Risks surrounding the Strait of Hormuz and Iranian oil infrastructure fuel concerns over potential supply disruptions.
• Strikes on Russian refineries add to tensions across global energy markets.

West Texas Intermediate (WTI) US Oil extends its rebound for a second consecutive day on Tuesday, gaining 1.76% on the day to trade around $86.95 at the time of writing. The Crude Oil benefits from a renewed geopolitical risk premium as fresh hostilities between the United States (US) and Iran raise concerns over global supply.

US forces struck two Iranian rocket launchers on Larak Island in the Strait of Hormuz on Sunday, marking the first US attack since late July. Tehran responded by targeting US facilities in Jordan, while US President Donald Trump warned that further military action remains possible and threatened to hit Iran hard.

Oil market concerns are also fueled by threats against Kharg Island, which plays a central role in Iranian Oil exports. Any disruption to these facilities could affect volumes available to the global market, keeping the risk premium elevated for WTI.

The situation in the Strait of Hormuz also remains in focus. Operational risks along this strategic shipping route were highlighted after a supertanker caught fire following a collision with two naval mines. Oil flows through the strait have not come to a complete halt, however, as several major Gulf producers, including Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, continue to ship part of their volumes.

Meanwhile, Ukrainian drone and missile attacks on Russian refineries are adding to concerns over refined-product supplies. Reduced Russian refining capacity, combined with risks to Middle Eastern supply, is supporting refining margins and intensifying concerns over the global availability of fuels.

Against this backdrop, developments in the conflict between the United States and Iran, along with the security of the Strait of Hormuz, remain the main short-term drivers for WTI. Any further escalation threatening Iranian oil infrastructure or causing additional disruption to maritime traffic could keep upward pressure on Crude Oil prices.

Middle East tensions drive yields higher as US signals limited response

Analysts at Deutsche Bank highlight that the latest move higher in yields has been driven primarily by “the weekend escalation in the Middle East that saw the US and Iran exchange strikes for the first time since late July.” They note that the political backdrop remains tense, with President Trump indicating that the US “would respond to Iran’s latest attacks against US facilities in the region,” even as he attempted to temper perceptions of a broader conflict by stressing that strikes against Iran will be limited and that “this is a relatively little war for us”.

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann highlight that EUR/USD has bounced strongly from 1.1573 after an excessive selloff, but momentum remains subdued. Intraday, the Euro (EUR) is expected to hold within 1.1595–1.1640. On a 1–3 week horizon, downside risks persist toward 1.1550, though oversold conditions suggest this major support may not be tested immediately. Longer-term targets remain at 1.1800 and 1.1850.

Euro recovery faces limited upside

"24-HOUR VIEW: EUR plummeted to a low of 1.1577 last Friday. When EUR was at 1.1585 yesterday, we highlighted that “the sharp decline appears excessive, but with no signs of stabilisation yet, EUR could decline further.” We pointed out that “the major support at 1.1550 is likely out of reach,” and we noted that “there is another support level at 1.1570.” However, instead of declining further, EUR rebounded strongly from 1.1573 to 1.1620. While EUR could continue to rebound today, given that there has been no clear increase in momentum, EUR should remain within a 1.1595/1.1640 range."

"1-3 WEEKS VIEW: Last Friday (28 Aug, spot at 1.1650), we indicated that EUR “appears to have entered a range-trading phase between 1.1600 and 1.1685.” After EUR subsequently fell below 1.1600, we highlighted yesterday (31 Aug, spot at 1.1585) that “the rapid increase in downward momentum suggests EUR could decline further.” We also highlighted that “oversold short-term conditions suggest the major support at 1.1550 may not come into view so soon.” While downward momentum has slowed somewhat with the subsequent strong rebound, only a breach of 1.1650 (no change in ‘strong resistance’ level) would indicate that 1.1550 is not coming into view."

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

MUFG’s Derek Halpenny notes the US Dollar has gained modestly after Fed Chair Warsh’s Jackson Hole speech, with US Dollar Index (DXY) up around 0.3% since Friday’s open and 2‑year Treasury yields sharply higher. Warsh’s emphasis on inflation not falling at sufficient speed shifts risks toward a hike, but the FOMC’s recent caution and upcoming NFP and CPI data could still justify holding rates, limiting aggressive Dollar buying.

Fed rhetoric and data-dependent risks

"The US dollar advanced 0.5% on Friday (DXY basis) in response to the speech by Fed Chair Warsh at Jackson Hole but some of that move retraced yesterday and the dollar’s gain since Friday’s open is now a more modest 0.3% with front-end yields across G10 also rising, in part on a renewed increase in energy prices following the renewed escalation in hostilities between the US and Iran."

"The more modest US dollar reaction makes sense from a number of perspectives. Firstly, as laid out below, every G10 central bank is meeting this month and some will be hiking, some may surprise and hike and some will remain on hold. But if energy prices remain elevated and/or grind higher the tone of rhetoric from most central bankers is likely to be hawkish and this could well be curtailing the appetite to buy the US dollar at this stage"

"Secondly, while Fed Chair Warsh was hawkish on Friday in Jackson Hole the gist of his speech was similar to his previous speeches – he talked tough on inflation and was clear that if inflation did not decline at “sufficient speed” that the Fed had “work to do”."

"But Warsh and the FOMC haven’t hiked at the previous two meetings under the leadership of Warsh and it remains the case that the Board of Governors have a more dovish tendency than the regional Presidents."

"So the decision remains a close call ahead of NFP and CPI and hence with front-end yields moving higher globally and with an elevated degree of uncertainty given the busy month of central bank meetings, the dollar buying has been curtailed."

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

Commerzbank’s Michael Pfister highlights that Brazil’s very high real interest rates have not prevented solid GDP growth, as expansionary fiscal policy has offset restrictive monetary conditions. With elections approaching and spending rising again, he warns that budget consolidation may be slow. Pfister argues that upcoming fiscal data, rather than monetary policy, will be key for the Brazilian Real in coming weeks.

Fiscal policy overshadowing monetary stance

"A remarkable phenomenon has been observed in Brazil for several quarters now. The key rate stands at 14%, while inflation has recently fallen to just under 4.5%. This is likely to correspond to one of the highest real interest rates worldwide."

"Higher levels of spending are reflected in improvements in most leading indicators of economic growth. In other words, the government has started spending more again, thereby offsetting some of the impact of restrictive monetary policy. A significant part of this development is likely to be linked to the approaching election at the beginning of October: the government has approved a large number of new spending measures in recent months."

"Market participants should be aware that it will take some time for the budget to return to balance. If growth proves to be stronger than expected, this would suggest that fiscal policy is overshadowing monetary tightening."

"Today’s GDP figures are thus less decisive for the real economy than the fiscal data due in the coming weeks. Above all, the outcome will depend on whether the government consolidates the budget after the election next month or continues to spend. In the short term, monetary policy is likely to play a rather secondary role for the real, as long as it primarily reacts to fiscal policy. We therefore continue to expect that the coming weeks will be more challenging for the real."

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

Silver prices (XAG/USD) fell on Tuesday, according to FXStreet data. Silver trades at $64.76 per troy ounce, down 2.69% from the $66.55 it cost on Monday.

Silver prices have decreased by 8.90% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 67.55 on Tuesday, up from 66.84 on Monday.

(An automation tool was used in creating this post.)

Societe Generale notes that the Polish Zloty strengthened while domestic bonds sold off as August inflation and second-quarter Gross Domestic Product (GDP) exceeded expectations and the government presented its 2027 budget. The draft foresees a 7.1% of GDP deficit and a tax overhaul shifting burden toward corporates, raising concerns about ratings risks and borrowing costs despite recent supportive macro data for EUR/PLN and POLGB yields.

Zloty firms as fiscal deficit looms

"In Poland, the zloty strengthened and domestic bonds sold off yesterday after inflation and GDP both exceeded expectations and the government unveiled details of its 2027 budget."

"Headline inflation accelerated to a 14-month high of 3.4% in August from 3.0% in July. Final 2Q GDP was revised up by 0.1pp to 1.0% qoq (3.9% yoy). The data lifted the 10y POLGB yield above 6.0% for the first time since January 2025."

"EUR/PLN retreated below 4.33 from the verge of 4.35. The draft budget projects a fiscal deficit of 7.1% of GDP, broadly unchanged from the expected 2026 level. It also includes a tax overhaul aimed at easing the burden on middle-income households through higher corporate taxation, delivering on a key campaign promise ahead of next year’s elections."

"PM Tusk had sought to keep the deficit below 7% but argued that doing so would come at the expense of economic growth. Rating agencies have previously warned that the absence of a credible fiscal consolidation plan could raise the risk of a downgrade and higher borrowing costs."

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

ING strategist Frantisek Taborsky reports that Polish inflation surprised to 3.4% on higher fuel prices, while food prices fell, and a busy data calendar looms for Central and Eastern Europe. He notes regional markets have shifted back into hawkish mode after recent Federal Reserve comments and geopolitical tensions, with Czech and Polish curves pricing multiple hikes, which should limit further CEE FX weakness.

Inflation data and rate expectations in CEE

"Regional markets are firmly back in hawkish mode following the Fed chair’s comments and renewed escalation in the US-Iran conflict. With UK markets closed yesterday and CEE trading subdued, some catch-up is likely today."

"Polish inflation surprised to the upside in August, rising from 3.0% to 3.4%, mainly due to higher fuel prices, as the statistics office likely did not account for the government’s VAT reduction in the latter part of the month. By contrast, food prices fell further, offering a dovish signal for inflation elsewhere in the region."

"On Thursday, the Czech Republic will release second-quarter wage data, where we expect growth to slow from the unexpectedly strong 8.1% recorded in the first quarter. Turkey’s August inflation is also due; we forecast only a modest decline from 1.8% to 1.6% month on month."

"On Friday, Czech inflation should rise from 1.7% to 1.9%, in line with the central bank's forecast, while the Czech Republic and Hungary will publish retail sales data."

"The Czech market is still pricing in almost four rate hikes and the Polish market nearly three, which should limit further weakening and could support gains today given further widening of rate differentials versus euro."

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

• Dow Jones futures slip as soaring energy costs renewed inflation fears and pushed Treasury yields higher.
• Traders increased bets on a September Federal Reserve rate hike following recent hawkish signals from Fed officials.
• Wall Street opened the week lower, with investors bracing for manufacturing data and Friday’s crucial August jobs report.

Dow Jones futures fall by 0.45% to trade near 53,000 during European hours on Tuesday. Meanwhile, S&P 500 futures decline by 0.5%, to trade around 7,660, while Nasdaq 100 futures lose 0.83% to trade around 29,270.

US stock futures slid as investors absorbed a sudden surge in oil prices driven by renewed conflict in the Middle East. The resulting spike in energy costs has reignited inflation fears, driving Treasury yields upward and firming market expectations for a Federal Reserve (Fed) interest rate hike in September.

Traders rapidly increased their bets on a rate increase following recent comments from Fed officials, who signaled that further tightening remains on the table until inflation moves convincingly back toward the central bank's 2% target.

This pre-market pressure follows a weak start to the trading week on Wall Street, where all three major indices closed lower on Monday. The Dow Jones led the declines with a 0.7% drop, while the S&P 500 and Nasdaq Composite fell 0.33% and 0.12%, respectively.

Markets remain on edge as investors brace for a dense slate of economic data that will offer fresh clues about the trajectory of monetary policy. Key reports on U.S. manufacturing and services sector activity are expected later today, setting the stage for Friday's critical August Nonfarm Payrolls report.