Forex News

UOB’s Quek Ser Leang and Lee Sue Ann note GBP/USD dipped to 1.3407 on Monday before rebounding to finish almost unchanged at 1.3456. Intraday, they see the British Pound (GBP) confined between 1.3425 and 1.3485. On a 1–3 week view, earlier downside momentum has faded and price action is now seen as part of a 1.3390–1.3510 range, though a weekly close below 1.3300 would be more negative.

Pound consolidates after failed downside break

"24-HOUR VIEW: Yesterday, GBP dropped to a low of 1.3407 and then rebounded to close at largely unchanged at 1.3456 (+0.02%). The price action provides no fresh clues. Today, GBP could trade between 1.3425 and 1.3485."

"1-3 WEEKS VIEW: We turned negative on GBP last Thursday (28 May, spot at 1.3420). We indicated that it “could edge lower to 1.3370,” but we pointed out that “at this stage, it is unclear whether there is sufficient momentum for a continued decline below this level.” After GBP dropped to 1.3368 and rebounded, in our latest update from last Friday (29 May, spot at 1.3445), we highlighted that “while the likelihood of a continued decline below 1.3370 has diminished considerably, only a breach of 1.3480 (‘strong resistance’ level) would indicate that the downside risk has dissipated.” GBP subsequently broke above 1.3480 (high of 1.3485). Downward momentum has faded, and the current price movements are likely part of a range-trading phase between 1.3390 and 1.3510."

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

The Japanese Yen (JPY) continues to face intense pressure as global energy shocks and geopolitical tensions weigh heavily on Japan's economic outlook. The conflict in Iran and the closure of the Strait of Hormuz have kept fossil fuel prices elevated, severely impacting the resource-scarce nation's trade balance. Despite steady steps toward monetary policy normalization by the Bank of Japan (BoJ), widening interest rate differentials with Western central banks are expected to cap the Yen's near-term recovery.

Geopolitical friction and elevated energy costs weigh on the Yen

Analysts at Commerzbank emphasize that the macroeconomic environment remains highly unfavorable for the Japanese currency over the short term. High Oil prices do not lift market expectations for the BoJ the same way they boost expectations for the Federal Reserve or the European Central Bank, which actively widens the interest rate gap to the Yen's disadvantage.

The Japanese yen will therefore continue to be weighed down by the situation in Iran in the coming months. As long as uncertainty persists regarding the long-term security architecture in the Middle East, prices for fossil fuels are likely to remain high, which will weigh on the Japanese economy’s foreign trade balance.

Growth slowdown persists despite gradual monetary normalization

Shifting the focus to domestic growth, BNP Paribas highlights that the Japanese economy is cooling due to these sustained energy headwinds. Even though the country’s central bank is projected to steadily raise interest rates through 2027 to manage persistent inflation that has overshot targets, economic output is taking a visible hit.

The energy shock is set to impact the strong momentum of the Japanese economy negatively.

Banks point toward a prolonged period of weakness for the Japanese Yen

The analysts anticipate a prolonged period of pressure and consolidation for the Japanese Yen before any structural recovery takes place. Commerzbank expects the Yen to remain heavily weighed down over the coming months, noting that a meaningful turn in the currency will depend on the resolution of the Middle East conflict and a subsequent drop in Oil prices. Concurrently, BNP Paribas projects that the currency will stabilize at a historically weak level around 160 against the US Dollar, as the negative drag of a domestic economic slowdown limits the supportive impact of the BoJ's gradual interest rate hikes.

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

Rabobank’s Senior Market Strategist Stefan Koopman argues that higher energy and raw material costs, along with supply chain delays, are set to lift Euro area goods inflation in coming months. Koopman says the European Central Bank (ECB) will raise rates next week to signal vigilance but must be cautious as demand weakens, while Eurostat’s flash HICP and consumer expectations remain above the 2% target.

Rising costs versus weakening demand

"Higher prices for inputs, packaging and logistics will push up euro area goods inflation in the months ahead."

"The PMI suggests that order books are already starting to stall after an initial boost from front‑loading and precautionary bookings."

"This points to a clear trade‑off."

"Perhaps more market moving will be Eurostat’s flash estimate of May HICP. Headline inflation is expected to rise to 3.2% year on year from 3.0% in April, driven by higher household energy bills and stronger airfares and package holidays. Core inflation may also edge up to 2.4% from 2.2%."

"In our view, slightly softer inflation in Germany and France than economists had expected is unlikely to deter ECB policymakers from tightening at the June 11 meeting."

"The ECB will raise rates next week to signal vigilance, but it will also need to stay cautious about how far it goes as demand starts to weaken."

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

• Dow Jones futures edge lower after an overnight Wall Street rally pushed major stock indexes to fresh record June highs.
• Tech stocks spearheaded the market surge, catching a strong bid following the debut of a highly anticipated PC chip.
• Traders turn cautious after Iran's Tasnim news agency reported that Tehran suspended indirect negotiations with the United States.

Dow Jones futures decline 0.20% below 51,050, while S&P 500 futures lose 0.11% to near 7,600. Meanwhile, Nasdaq 100 futures fall 0.14%, trading near 30,520 during the European hours on Tuesday, ahead of the US regular opening.

US stock futures edge lower following an overnight rally on Wall Street that pushed major indexes to fresh record highs to kick off June. During Monday's regular US session, the Dow Jones crept up 0.09%, while the S&P 500 and Nasdaq 100 advanced 0.26% and 0.42%, respectively. This broad market surge was primarily spearheaded by technology stocks, which caught a strong bid following the debut of a highly anticipated new PC chip.

US futures struggle amid increased risk aversion due to ongoing geopolitical uncertainties. Iran's Tasnim news agency indicating that Tehran has halted indirect negotiations with the United States. Iran and its "Resistance Front" allies, spanning Yemen, Lebanon, and Iraq, have established an agenda to completely block the critical Strait of Hormuz and activate additional fronts, including the Bab el-Mandeb Strait, as a means to punish Israel and its supporters.

Axios reported on X that Iran deployed additional naval mines in the strait last week. These combined developments pose a severe obstacle to a swift resolution of the crisis, which has already effectively shut down the Strait of Hormuz, a vital chokepoint for global oil and liquefied natural gas supplies.

Deutsche Bank’s Jim Reid and colleagues outline a baseline scenario in which a US-Iran agreement this month reopens the Strait of Hormuz, allowing Brent Oil to retreat toward $86 per barrel in Q4 2026. They warn that a prolonged closure could push Brent towards $150, with stagflationary risks and recession in Europe, though global GDP is only slightly trimmed.

Hormuz scenarios drive crude outlook

"In the outlook, our baseline expectation is that a US-Iran deal is reached this month that allows shipping through the Strait of Hormuz to resume, with Brent crude falling back to $86/bbl in Q4."

"However, if the Strait of Hormuz experiences a prolonged closure, that would push Brent towards $150/bbl, hitting global growth and pushing Europe into recession."

"The resulting increased caution in oil markets saw Brent crude jumping to as high as $97.79bbl following the Tasnim report before settling at $94.98/bbl."

"When adjusting for the roll in the monthly benchmark from July to August, this marked the biggest daily jump for the front-end contract (+4.24%) in four weeks."

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

• GBP/JPY breaks above 215.00, reaching its highest levels in more than one month.
• Comparatively low Japanese yields and uncertainty about the BoJ's policy are hammering the JPY.
• Japanese Finance Minister Katayama suggested that Tokyo is ready to intervene again.

The British Pound (GBP) keeps marching higher against an ailing Japanese Yen (JPY) on Tuesday. The pair has surpassed the 215.00 line for the first time since April 30, with the USD/JPY reaching levels right below 160.00, which is considered the limit of tolerable JPY weakness for the Japanese financial authorities.

The Pound is drawing some support from a moderate optimism about a negotiated end to Iran’s war, following news of a ceasefire in Lebanon. The Yen, on the contrary, remains depressed, crushed by the wide gap between Japanese Bond (JGB) yields and those of the world's major economies, and uncertainty about the Bank of Japan's monetary policy path.

Japanese Finance Minister Satsuki Katayama reiterated on Tuesday that Tokyo authorities are always ready to take the necessary steps regarding currencies, issuing a verbal warning to speculators, with no significant impact so far.

Technical Analysis: The next upside target is on the 215.50 area

GBP/JPY trades at 215.21, in a clear bullish trend from mid-May lows at the 211.30 area. The 4-hour Relative Strength Index (RSI) approaches overbought territory, hinting at strong but stretched upside momentum. Likewise, the Moving Average Convergence Divergence (MACD) line remains in positive territory with a positive histogram, reinforcing the constructive tone.

On the upside, the 161.8% retracement of the late May pullback, around 215.50, might offer some resistance ahead of the April 30 high, at 216.60. Bears, on the contrary, are likely to be challenged at a previous top, around 214.50, ahead of the 200-period Simple Moving Average (SMA) now a few pips above 214.00.

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