Forex News

Brown Brothers Harriman's (BBH) Elias Haddad notes EUR/USD is consolidating above 1.1600 with resistance at 1.1682, near the 200-day moving average, as European Central Bank's (ECB) Schnabel signals a June rate hike. Swaps price nearly 90% odds of a 25 bps move, but BBH stresses that tightening in a low-growth, high-inflation Eurozone is not supportive for the Euro and sees scope for EUR/USD to drift toward 1.1400.

Euro rallies capped as growth lags

"ECB Executive Board member Isabel Schnabel signals June hike bias. Schnabel said “Given the size and the persistence of the current shock, looking through is no longer an option in my view…From today’s perspective, I think a rate hike in June will be needed.”"

"The swaps curve implies nearly 90% odds of a 25bps ECB rate hike to 2.25% at the June 11 meeting."

"Rate hikes in a low growth, high inflation environment, is not bullish for EUR but should help cushion the downside."

"We see room for EUR/USD to edge lower towards support at 1.1400, reflecting a stronger US growth outlook relative to the Eurozone."

"EUR/USD is consolidating above 1.1600 and faces immediate resistance at 1.1682. the 200-day moving average."

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

• Silver remains under pressure as renewed Middle East tensions support the US Dollar and hawkish Fed expectations.
• Elevated Oil prices fuel inflation concerns, with markets pricing in nearly a 40% chance of a Fed rate hike in December.
• Technically, XAG/USD maintains a consolidative bearish bias while holding below the 100-day SMA.

Silver (XAG/USD) trades on the back foot on Tuesday, pressured by a firmer US Dollar (USD) and hawkish Federal Reserve (Fed) expectations amid ongoing tensions in the Middle East. At the time of writing, XAG/USD is trading around $76.43, down nearly 2.0% on the day.

Market sentiment turned cautious after fresh US military strikes in southern Iran on Monday reduced hopes that the conflict in the Middle East would end anytime soon. Although diplomatic talks between Washington and Tehran remain ongoing, lingering uncertainty surrounding the negotiations continues to keep the US Dollar well supported.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.15 after briefly slipping below the 99.00 mark on Monday.

Meanwhile, elevated Oil prices continue to fuel inflation concerns globally, reinforcing expectations that the Federal Reserve (Fed) may keep interest rates higher for longer. According to the CME FedWatch Tool, traders are currently pricing in nearly a 40% chance of a 25 basis point (bps) rate hike at the December meeting.

Higher interest rate expectations tend to weigh on non-yielding assets such as Silver, while the technical outlook also points to a consolidative bearish bias.

Technical Analysis:

On the daily chart, XAG/USD holds a neutral near-term bias, trading above both the 50-day and 200-day Simple Moving Averages (SMAs) at $75.87 and $66.37, yet still below the 100-day SMA at $81.42, which caps recovery attempts for now.

The Relative Strength Index (RSI) at 48.11 sits near the midline, hinting at lacklustre directional conviction, while the Moving Average Convergence Divergence (MACD) remains slightly negative, suggesting fading bullish momentum after the recent pullback.

On the topside, initial resistance is located at the 100-day SMA around $81.42, with a stronger barrier at the horizontal level near $90.00. On the downside, immediate support emerges at the 50-day SMA at $75.87. A clear break lower would expose the 200-day SMA near $66.37, ahead of more distant horizontal support at $55.00.

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

Societe Generale analysts Kunal Kundu and Galvin Chia argue that India faces rising inflation and external risks as higher Oil prices and a weaker Rupee (INR) interact. They highlight the Reserve Bank of India’s (RBI) shift in stance, the risk of an inflation–FX loop, widening external deficits, and a narrowing India–United States (US) yield buffer that could justify calibrated tightening to stabilise the currency.

RBI weighs inflation, FX and Oil risks

"RBI kept the repo rate at 5.25% with a neutral stance in April 2026, despite prior 125 bps easing, acknowledging rising risks from energy prices, supply disruptions, and market volatility."

"The policy stance has shifted from “looking through” supply shocks to selectively “leaning against” risks to inflation expectations in a weaker global growth environment."

"Currency depreciation alongside the oil shock risks a self-reinforcing inflation–FX loop, where higher import costs lift inflation, tighten financial conditions, and amplify currency weakness."

"India’s high oil dependence (~90% imports) makes the currency a key transmission channel, with external balances deteriorating rapidly, as reflected in April’s $28.4bn trade deficit."

"The vulnerability has broadened to external financing, with the CAD likely to widen toward ~2% of GDP (and potentially beyond), increasing reliance on capital inflows and making depreciation more destabilising."

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

BNP Paribas expects the United Kingdom economy to slow in 2026, with growth at 0.7% after 1.4% in 2025 and renewed inflation pressures from the Iran conflict. Monetary policy is projected to tighten by 50 basis points in 2026, keeping 10-year gilt yields elevated. In FX, the bank anticipates GBP/USD stabilising around 1.35 by Q4 2026 and through 2027.

Pound seen steady versus Dollar

"Economic activity is expected to slow down in 2026, with growth limited to 0.7% after 1.4% in 2025; following a forecasted +0.4% q/q in Q1, the average quarterly pace would fall to around +0.1%."

"This slowdown would occur against a backdrop of renewed inflationary pressures triggered by the war in Iran: inflation would reach 3.6% y/y before easing only gradually to 3.3% y/y in 2027, remaining well above BoE's target."

"In this context, and contrary to the initially envisaged easing scenario, monetary policy would shift toward a tightening of 50 basis points in 2026."

"10y gilt yields will remain elevated in 2026, before falling to 4.30% in 2027 on reduced net supply, a decline in political risk premia and a market starting to eye BoE rate cuts."

"We anticipate stabilisation of the yen and the GBP against the dollar in 2026 (USD/JPY 160 and GBP/USD 1.35 by Q4 2026) and 2027."

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

BNY’s Bob Savage highlights that the New Zealand Dollar enters the upcoming RBNZ meeting on a weak footing, with a notable lack of recent flows and a large NZD outflow linked to unrolled swap positions. He notes that doubts over the RBNZ rate path and relatively weak NZD carry versus history could see long positions trimmed if growth risks persist.

NZD pressured by flows and carry

"NZD heads into tomorrow’s RBNZ decision on a very soft footing. To make matters worse, there were barely any flows last week; Friday’s outflow was then exceptional at close to -2.5 scored flow. This was the biggest outflow since April 2018, due to a large net long position (in swap) which was not rolled over."

"While it did not produce a clear FX impact, the size of the flow is significant and points to a large net exposure reduction. If such positions purely follow developments in rate differentials, it should not come as a surprise if the market is continuing to harbor doubts over the current trajectory of rates."

"Although three more are in the price for the rest of the year, increasing hesitation on the RBNZ’s part could lead to gradual reductions in any existing long positions, especially if underlying assets are not expected to perform well given the current risks to growth."

"Given the overall flow trends since early March, NZD has broadly held on despite global risk aversion, but two attempts to put together a good purchase run in late April and mid-May have both faltered."

"If the U.S. now starts to shift gears on rates, it will be hard to see high-beta G10 names perform well, especially as NZD’s carry is far weaker than historical norms."

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

MUFG analysts note the US Dollar’s mixed performance as markets reassess Fed policy amid stronger inflation data and rising yields. They highlight the 2-year Treasury yield hitting new highs and see scope for further upside in US rates. However, they stress that FOMC communication has not fully endorsed aggressive hike pricing, leaving the Dollar sensitive to upcoming PCE and Fed speeches.

Rates repricing underpins Dollar tone

"The US dollar performance last week was mixed and this week with optimism elevated over the potential for a peace deal in the Middle East, the US dollar performance remains somewhat muted."

"A retracement of the optimism is a risk and higher volatility would add further support for the dollar over the short-term."

"But the OIS market has a hike fully priced only by December now and we still see dangers of market pricing drifting further forward."

"The US rates market has scope to move further higher."

"Evidence of a pickup in inflation in April from the latest CPI, PPI, and import price reports has encouraged US rate market participants to price in a higher probability of the Fed delivering multiple rate hikes."

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

• USD/CHF gains ground as geopolitical tensions in the Middle East keep the US Dollar supported.
• Iran warns it “will respond,” accusing the United States of violating the ceasefire in the Hormozgan region.
• Markets continue to price in higher-for-longer Federal Reserve expectations amid elevated Oil prices.

USD/CHF trades with a mild positive bias on Tuesday as renewed military escalation between the United States (US) and Iran supports the US Dollar (USD), pressuring the Swiss Franc (CHF). At the time of writing, the pair is trading around 0.7850, up 0.30% on the day and snapping a four-day losing streak.

American forces carried out “defensive strikes” in southern Iran on Monday, targeting missile facilities and Iranian boats allegedly attempting to deploy naval mines near the Strait of Hormuz. Meanwhile, Iran’s Islamic Revolutionary Guard Corps (IRGC) claimed it had downed a US MQ-9 Reaper drone after it entered Iranian airspace.

In a statement shared by Iran’s IRIB broadcaster, Iran’s Foreign Ministry accused the United States of violating the ceasefire in the Hormozgan region and warned that Tehran “will respond and will not hesitate to defend itself.”

Despite the renewed military escalation, diplomatic efforts between Washington and Tehran continue. US Secretary of State Marco Rubio said on Tuesday that negotiations over a potential deal with Iran could “take a few days,” while stressing that the Strait of Hormuz “has to be open” and “will be open one way or another.”

The Strait of Hormuz remains largely closed, keeping a geopolitical risk premium embedded in global Oil prices and fueling inflation concerns worldwide. Inflation in the United States has accelerated sharply since the war began, reinforcing expectations that the Federal Reserve (Fed) may keep interest rates higher for longer, with traders increasingly pricing in the possibility of another rate hike by the end of the year.

In Switzerland, inflation rose to its highest level in 16 months in April, though it remains within the Swiss National Bank’s (SNB) 0%-2% target range. The SNB is expected to maintain its current policy stance, as the inflationary impact from higher Energy prices has been partly offset by the strength of the Swiss Franc, which helps make US Dollar-denominated commodities such as Oil cheaper in local currency terms.

Although SNB Vice Chairman Martin Schlegel said last week that the central bank maintains an “elevated willingness” to intervene in foreign exchange markets if necessary.

On the data front, traders will closely monitor the US Conference Board (CB) Consumer Confidence report later on Tuesday, followed by Switzerland’s ZEW Survey – Expectations data for May on Wednesday and the US Personal Consumption Expenditures (PCE) inflation report on Thursday.

Deutsche Bank economists flag Thursday’s US personal income and spending report, including core PCE, as the key data for the Federal Reserve. They expect core PCE to rise 0.3% month-on-month, with consumption momentum cooling. The note highlights Governor Waller’s hawkish comments and argues that prior “insurance” cuts have left the fed funds rate below standard policy rule settings.

Core PCE and Waller comments shape outlook

"In the US, the clear focal point is Thursday’s April personal income and spending report (Thursday), which contains the Fed’s preferred inflation gauge."

"Our economists expect core PCE inflation at around +0.3% month-on-month, unchanged from March, with the year-on-year rate edging higher."

"On the real economy side of the same report (Thursday), our economists expect momentum to cool after a very strong March, with personal consumption growth slowing back to around +0.3% month-on-month and personal income rising by roughly +0.4%."

"This comes after a hawkish speech from Waller on Friday."

"Staying with the Fed, last Friday, our Chief US economist, Matt Luzzetti, wrote an interesting piece entitled “overinsured” where he discusses how the Fed has delivered 175bps of rate cuts in this cycle even as inflation has remained well above target, framing the last round as “insurance” or “risk management” cuts in response to elevated downside labour market risks."

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