Forex News

ING economists Deepali Bhargava and Lynn Song project India’s consumer inflation to edge up to 4.2% year-on-year in June, while wholesale inflation moderates to 9%. They highlight that lower Brent prices should ease wholesale costs, but persistent retail fuel prices, firmer food inflation and sticky core pressures keep overall inflation risks tilted to the upside over the coming months.

Wholesale easing, consumer prices stay sticky

"We expect India’s consumer price inflation to edge slightly higher to 4.2% year-on-year in June, while wholesale price inflation is likely to moderate to 9%."

"Softer Brent crude prices should pull wholesale prices lower, but persistent retail fuel costs, gradually firming food inflation and sticky core pressures point to a mild uptick in consumer inflation."

"The gradual pass-through of wholesale prices to retail prices, meanwhile, is expected to support underlying inflation pressures."

"Overall, inflation risks remain tilted to the upside, as El Niño-related weather disruptions threaten food costs."

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

• The Canadian Dollar strengthens after Canada's June employment report beats expectations.
• USD/CAD heads for its first weekly loss in six weeks.
• Next week's US inflation data could shape expectations for the Fed's interest rate path.

The Canadian Dollar (CAD) strengthens against the US Dollar (USD) on Friday after stronger-than-expected Canadian employment data. At the time of writing, USD/CAD is trading around 1.4160 after falling to a more than two-week low of 1.4136.

Statistics Canada reported that the economy added 18.2K jobs in June, exceeding market expectations of 10K. However, the reading was sharply lower than the 87.8K increase recorded in May. The Unemployment Rate eased to 6.5% from 6.6%.

As labor market conditions remain uneven, the Bank of Canada (BoC) is likely to maintain a wait-and-see approach, with policymakers expected to leave interest rates unchanged in the coming months while monitoring inflation risks, particularly those stemming from higher energy prices.

Energy-driven inflation risks are back in focus after Oil prices rose earlier this week following renewed hostilities in the Middle East. Higher crude lifted the commodity-linked Canadian Dollar, putting USD/CAD on track for its first weekly loss in six weeks.

However, Oil prices are paring earlier gains as diplomatic efforts to de-escalate tensions in the Middle East continue. Reuters reported that Qatari mediators are in Iran for talks aimed at creating conditions for broader negotiations.

Meanwhile, the US Dollar remains firm as traders reassess developments in the Middle East, while expectations of a Federal Reserve (Fed) interest rate hike later this year continue to underpin the Greenback, limiting further downside in USD/CAD.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading around 100.90 after rebounding from an intraday low of 100.60.

Traders now await next week's US Consumer Price Index (CPI) data, due on Tuesday, for fresh clues on the Fed's monetary policy path.

Societe Generale analysts Dev Ashish and Brendan McKenna note that Mexico’s June inflation data surprised to the downside, with headline and core measures moving close to Banxico’s target range. They argue that weak economic activity is weighing on services and core goods prices, reinforcing disinflation. The softer inflation profile strengthens the case for a more dovish Banxico stance, though the policy rate is still expected to stay at 6.50% near term.

Disinflation bolsters easing expectations

"June inflation surprised decisively to the downside, with headline CPI falling to 3.37% yoy and core inflation to 4.03% yoy. More importantly, the second bi-weekly reading showed headline at 3.18% yoy and core at 3.94% yoy, bringing both measures close to or within Banxico’s target range and providing the strongest evidence yet that underlying inflation pressures are easing."

"Services (excluding housing and education) inflation is finally moderating, falling to 4.40%, while core goods inflation eased to 3.45%. This suggests that weak economic activity is beginning to weigh on domestic pricing power, supporting Banxico’s long-held expectation that demand weakness would eventually drive disinflation."

"Non-core inflation remains highly supportive, with falling prices of seasonal food items and livestock likely to push headline inflation even lower through July-August. We would not rule out some bi-weekly headline readings temporarily falling below Banxico’s 3.0% target."

"We now expect headline inflation to end 2026 at 3.69% yoy and 3.62% yoy in 2027, while core inflation moderates to around 3.46% next year. Future disinflation should increasingly be driven by core components, particularly services."

"The data strengthen the case for a more dovish Banxico, but not necessarily for immediate rate cuts. We retain our call for the policy rate to remain at 6.50%, though we now see a 40% probability of a 3Q26 cut and a potential 50bp easing cycle by 1H27 if inflation continues to surprise lower and the growth backdrop remains weak."

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

• Qatari negotiators are holding talks with Iranian officials in an effort to reduce regional tensions.
• Discussions are being coordinated with the United States and aim to preserve broader diplomatic negotiations.
• The implementation of the US-Iran memorandum of understanding and navigation disputes in the Strait of Hormuz are at the center of the talks.

Qatar has dispatched negotiators to Iran for meetings with Iranian officials in a renewed diplomatic effort to de-escalate tensions and create conditions for broader negotiations to continue, according to a Reuters report citing a source familiar with the matter.

The discussions are being conducted in coordination with the United States and focus on preventing a further deterioration in relations after the recent escalation between Washington and Tehran.

According to Reuters, the talks are intended to address the implementation of the United States-Iran memorandum of understanding, as well as the issues that triggered the latest rise in tensions. Among the key topics under discussion are disputes over navigation in the Strait of Hormuz, a strategically important shipping route for global energy markets.

The diplomatic initiative could be closely watched by financial markets, as any progress toward easing tensions in the Gulf region may help reduce geopolitical risk premiums across energy markets and broader risk-sensitive assets.

Oil prices remain supported following the announcement, with West Texas Intermediate (WTI) trading around $72 at the time of writing on Friday, up 0.42% on the day.

• WTI US Oil prices are correcting despite persistent geopolitical risks in the Middle East.
• Qatar-led diplomatic efforts are fueling hopes of de-escalation between Washington and Tehran.
• Supply concerns remain supported by ongoing disruptions in the Strait of Hormuz and stronger Oil demand projections from the International Energy Agency.

West Texas Intermediate (WTI) Oil trades around $72 at the time of writing on Friday, up 0.42% on the day, but remains in a consolidation phase after reaching a more than two-week high earlier this week. Investors are assessing mixed signals from the Middle East, balancing ongoing military tensions against renewed diplomatic efforts.

Market sentiment improved slightly after a US official confirmed that technical talks with Iran remain ongoing despite US President Donald Trump's comments that the memorandum of understanding with Tehran was no longer in effect. Reuters also reported that Qatari negotiators are in Iran to meet with Iranian officials in an effort to de-escalate tensions and create conditions for broader negotiations to continue, in coordination with the United States (US). According to a source cited by Reuters, the talks are focused on implementing the US-Iran memorandum of understanding and addressing the disputes that triggered the recent escalation, including navigation issues in the Strait of Hormuz.

Despite the diplomatic progress, the geopolitical risk premium remains in place. Strikes between the United States and Iran continue, keeping concerns over potential energy supply disruptions alive. Meanwhile, Rabobank noted that Oil traffic through the Strait of Hormuz remains significantly below normal levels, while war risk insurance costs continue to rise, factors that could limit further downside in Oil prices.

On the fundamental side, the latest projections from the International Energy Agency (IEA) also provide support for the market. The agency expects global Oil demand to increase by 1.2 million barrels per day YoY in the fourth quarter. The IEA also forecasts a significant increase in global Oil supply this year if transit conditions improve, while lowering its outlook for Russian Oil production due to attacks on the country's energy infrastructure.

Investors also remain focused on the outlook for the Federal Reserve (Fed). Interest rates staying higher for longer could weigh on global economic growth and limit Oil demand, although developments in the Middle East continue to be the main driver of Oil prices in the near term.

OCBC strategists Christopher Wong and Sim Moh Siong note that the New Zealand Dollar (NZD) outperformed after stronger manufacturing data and hawkish Reserve Bank of New Zealand (RBNZ) commentary reinforced expectations for further tightening. They remain constructive on NZD but highlights that upside from yield support may be constrained near term. Markets are pricing the RBNZ as the most hawkish G10 central bank, with around 80bp of additional tightening by mid-2027.

NZD strength meets yield headwinds

"NZD outperformed after stronger-than-expected manufacturing data and hawkish RBNZ commentary strengthened expectations for further policy tightening. New Zealand's manufacturing PMI rose to 59.7 in June, its highest level since July 2021."

"We remain constructive on NZD. However, the scope for NZ yields to move materially higher in the near term may be limited until there is clearer evidence of stronger domestic growth and a more supportive energy backdrop."

"As a key driver of the currency, relative yield support could therefore become less compelling in the short run."

"The RBNZ is already the most hawkishly priced central bank in the G10. Markets are pricing around 80bp of additional tightening by mid-2027, taking the OCR to about 3.3%, broadly in line with the RBNZ's estimate of the neutral rate at 3.25%."

"Looking ahead, key data releases include New Zealand's 2Q26 CPI on 21 July and the 2Q26 employment report on 5 August."

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

Royal Bank of Canada (RBC) analysts Abbey Xu and Rachel Battaglia report that June spending by RBC Canadian cardholders remained relatively stable, with core retail sales up modestly. Discretionary goods led gains, while essential spending including gasoline also contributed. Excluding gasoline, essential spending improved, and households appear cautiously optimistic into summer despite higher energy prices and selectivity on larger discretionary purchases.

Card data show steady retail momentum

"Growth in RBC Canadian cardholder spending held relatively stable in June as consumers continued to balance higher costs for essentials while selectively spending on seasonal experiences such as sporting events."

"Our estimate of core retail sales from cardholder transactions (excluding purchases of gasoline and autos) edged up 0.5% in June on a three-month average, similar to May, suggesting spending momentum remained positive despite ongoing budget pressures from higher energy prices."

"Spending on discretionary goods led the way, posting the strongest gain among major categories on a three-month average."

"Excluding gasoline, essential spending rose 0.5% on a three-month average, a welcome improvement after earlier signs of easing."

"The breadth of spending increases across categories points to households maintaining a cautiously optimistic view heading into the summer even as they remain selective about bigger-ticket discretionary purchases."

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

• GBP/JPY heads for a third weekly gain amid broad-based Yen weakness and Pound strength.
• Japan's Finance Minister calls for greater domestic pension fund investment in Japanese financial assets.
• GBP/JPY maintains a bullish technical outlook while holding above key moving averages.

GBP/JPY trades under pressure on Friday after comments from Japan's Finance Minister Satsuki Katayama boosted the Japanese Yen (JPY). At the time of writing, the cross is trading around 217.10, down 0.30% on the day.

Katayama said the government would encourage domestic pension funds, including the Government Pension Investment Fund (GPIF), to increase their holdings of Japanese financial assets.

However, the remarks did little to reverse the Yen's broad-based weakness, leaving GBP/JPY pinned near levels last seen in 2008 and on track for a third consecutive weekly gain.

Meanwhile, the British Pound (GBP) remains the strongest-performing G10 currency in recent weeks, supported by Bank of England (BoE) interest rate hike bets and easing political uncertainty in the United Kingdom.

From a technical perspective, GBP/JPY maintains a bullish bias on the daily chart, holding above the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), reinforcing the broader uptrend.

The cross also remains above the horizontal support at 216.50, while the Relative Strength Index (RSI) stands at 62.54, remaining in bullish territory. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator stays in positive territory at 0.33, suggesting upside momentum remains constructive.

On the upside, immediate resistance is located at the 218.00 horizontal barrier. A sustained break above this level could pave the way for an extension of the broader uptrend.

Initial support is seen at 216.50, followed by the 50-day SMA at 214.31 and the 100-day SMA at 213.51. The 200-day SMA at 210.57 provides the next major support if a deeper corrective pullback unfolds.

Commerzbank economists Dr. Jörg Krämer and Bernd Weidensteiner argue that the AI-driven investment surge in US high-tech and IT is substantial but not yet excessive compared with past booms. They see early signs of faster US productivity, elevated equity valuations and profit expectations, and warn of potential corrections, yet conclude the AI boom and associated stock market strength are likely to persist for now.

AI boom, valuations and bubble risk

"The introduction of artificial intelligence has triggered an investment boom, particularly in the United States. The sheer scale of the resources being deployed increases the risk of a bubble. This could trigger a setback in the stock markets. We have assessed the risks and concluded that the boom is likely to continue for the time being."

"Furthermore, while stocks are expensive, they are valued lower than they were at the peak of the dot-com bubble. The price-to-earnings ratio of stocks in the S&P 500 Index, based on expected earnings over the next twelve months, currently stands at 20, compared to 25 at the beginning of 2000. We therefore do not yet view the current valuation as a cause for alarm."

"Even though we don’t expect this to happen in 2026 or 2027, an investment boom usually ends in a crisis. What might that look like? Economic history offers a blueprint in the form of the dot-com bubble in the second half of the 1990s."

"To date, a large portion of these investments has been financed from cash flow; it is only recently that companies have increasingly turned to loans. Overall corporate debt has been declining relative to GDP for years. An end to the AI boom would therefore be unlikely to trigger a banking crisis; rather, as in 2001, it would primarily result in a slump in stock prices."

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

• The Unemployment Rate in Canada dropped to 6.5% in June.
• USD/CAD remains on the defensive around the 1.4150 region on Friday.

Statistics Canada reported on Friday that the Unemployment Rate decreased to 6.5% in June, below market expectations and the previous print of 6.6%.

Additionally, the Net Change in Employment increased by 18.2K jobs, adding to the 87.8K gain in the prior month. In addition, the participation rate held steady at 65%, and wages are growing at a 3.7% annual pace, up from May’s 3.2% annual gain.

Market reaction

In the wake of the release, the Canadian Dollar (CAD) maintains a positive bias, dragging USD/CAD to the mid-1.4100s, or fresh monthly lows.

This section below was published as a preview of the Canadian labour market report at 08:00 GMT.

• The Canadian Unemployment Rate is expected to hold steady in June.
• The BoC is expected to keep its policy unchanged at its July 15 event.
• The Canadian Dollar has moved into a consolidative phase vs the US Dollar.

Markets are anticipating a fairly stable report when Statistics Canada releases its Labour Force Survey on Friday. While the Net Change in Employment is predicted to rise by 10K in June, adding to the 87.8K gain in May, the Unemployment Rate is forecast to stay at 6.6%.

Despite the report's tone, the Bank of Canada (BoC) should keep the bar pretty high for changing its policy direction. Indeed, the central bank is expected to keep its policy unchanged at its July 15 meeting, following five consecutive ‘on hold’ decisions since it last lowered rates in October 2025.

The June meeting reinforced the view that the BoC is firmly in wait-and-see mode. That said, policymakers seem willing to look through temporary shocks as long as underlying price pressures remain contained, even as they continue to monitor inflation risks, especially from higher energy prices. With the economy still showing signs of slack, the bank sees little need to change course for now. Moreover, future policy decisions will remain data-dependent, with the bar for another rate hike still appearing relatively high.

So far, market participants expect nearly 15 basis points of tightening from the BoC by year-end, down from around 35 basis points a month ago.

What can we expect from the next Canadian jobs report?

Consensus among analysts sees Canada’s Unemployment Rate at 6.6% last month. Additionally, investors forecast the economy will add around 10K jobs in June. It is worth recalling that Average Hourly Wages rose at an annualised 3.2% in May, suggesting some cooling in wage inflation.

When is the Canadian unemployment rate released, and how could it affect USD/CAD?

In Canada, traders will closely watch Friday’s jobs report, due at 12:30 GMT. A stronger print could give the Canadian Dollar (CAD) a quick lift, but don’t expect fireworks.

USD/CAD has been trading in a consolidative mood since late June, always close to its yearly peaks near 1.4250.

Pablo Piovano, Senior Analyst at FXStreet, points out that further gains in USD/CAD now appear limited by the 1.4250 zone, forcing spot to recede a tad and revisit the mid-1.4100s once again.

“In case the selling pressure gathers traction, the pair’s next relevant support is expected at the provisional 55-day SMA near 1.3900, while the loss of this region exposes a move toward the critical 200-day SMA near 1.3850, all preceding the interim 100-day SMA near 1.3820. A deeper and sustained retracement from here should see the next contention at the May floor at 1.3549 (May 1)," Piovano adds.

On the upside, Piovano sees the next hurdle at the YTD peak of 1.4248 (June 24 and 25). The break above the latter could prompt the pair to attempt a move toward the April 2025 ceiling at 1.4414 (April 1).

“Momentum favours extra gains,” he adds, noting that the Relative Strength Index (RSI) is hovering around 63 and the Average Directional Index (ADX), just over 52, suggests the underlying trend remains pretty solid.