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Commerzbank’s Tatha Ghose reports that Hungary’s MNB kept rates at 6.25%, citing Iran-related inflation risks but acknowledging room to cut after a strong Forint rally. With improved inflation dynamics and EUR/HUF strength, he expects a couple of cuts in coming months, sees a 50 bp move as more likely than 25 bp, and forecasts EUR/HUF around 360 next quarter.

Rate cuts seen with stable forint

"The forint's post-election appreciation, gaining over 7% year-to-date and making it the clear top performer in CEE, combined with notable improvement in underlying inflation indicators (seasonally-adjusted month-on-month changes in core HICP) are strong enough that MNB will likely find room for a couple of rate cuts in coming months."

"Hungary's National Bank (MNB) kept its key interest rate flat at 6.25% yesterday, a widely anticipated decision consistent with its communicated guidance to wait-and-see until updated June projections were available. This cautious approach is necessitated by increased inflationary risks stemming from the Iranian conflict and high global energy prices."

"However, the MPC acknowledged the clear rate cutting room created by a significant forint rally (which MNB chief, Mihaly Varga, attributed to a decline of risk premia – which may be correct, but just to be clear, it is an exogenous rally produced by the election outcome)"

"Deputy Governor Zoltan Kurali had previously signalled that a stronger forint could enable rate cuts, pending evaluation of updated inflation forecasts in the June Inflation Report. Varga basically repeated the same view yesterday. MNB is satisfied with the improved inflation outlook, now described as “more moderate” (despite current global energy price concerns)."

"The forward market is discounting a 25bp rate cut in 3-6 months – we think that 50bp is more likely. We do not anticipate a negative impact on the exchange rate from 50bp lower interest rates. We expect EUR/HUF to trade around the 360.0 level over the coming quarter."

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

• Gold price declines to near $4,475 even as oil prices plunge to near $89.00.
• Oil prices face a sharp sell-off despite growing concerns over the US-Iran deal.
• Fed’s Kashkari stated that the rising inflation has become a greater concern than job market worries.

Gold price (XAU/USD) is down 0.7% to near $4,475 during the European trading session on Wednesday. The precious metal faces selling pressure even as oil prices have tumbled.

As of writing, the WTI Oil price is down 3.8% to near $89.00.

Bullions have been underperforming in the past few months, as elevated oil prices due to the Middle East war prompted the United States (US) inflation and forced traders to pare dovish Federal Reserve (Fed) bets for the year.

Oil prices have declined despite increased concerns regarding the United States (US) and Iran reaching a permanent deal.

The US-Iran deal uncertainty has escalated as Iran has condemned so-called US “defensive strikes” and the Islamic Revolutionary Guard Corps (IRGC) has threatened retaliation. On Monday, the US Central Command launched strikes on Iran, which were described as "self-defense", aiming to “protect troops from threats posed by Iranian forces", BBC reported.

The downside move in the Gold price appears to be a shift in Fed policymakers’ concerns towards high inflation rather than weak job market conditions. Earlier in the day, Minneapolis Federal Reserve (Fed) Bank President Neel Kashkari said that the major concern for the central bank now is higher US inflation than deteriorating labor market conditions; however, the central bank needs to pay attention to both.

According to the CME FedWatch tool, the odds of the Fed holding interest rates at their current levels this year are 52.3%, while the rest favor at least one interest rate hike this year. This is a sharp turnaround from two interest rate cuts anticipated before the onset of the war.

Technically, the scenario of hawkish Fed bets or persistent hold on interest rates bodes poorly for non-yielding assets, such as Gold.

Gold technical analysis

XAU/USD trades significantly lower at around $4,475 at press time. The near-term tone of the yellow metal is bearish as it holds below the 20-day Exponential Moving Average (EMA), which is at $4,586.85.

The downside tone is also reinforced by a subdued Relative Strength Index (RSI) at 39, which sits in bearish territory without yet signaling outright oversold conditions, hinting that sellers still retain control while immediate recovery attempts are likely to be capped beneath the nearby EMA barrier.

On the topside, initial resistance is defined by the 20-day EMA at $4,586.85, and a daily close above this dynamic hurdle would be needed to ease downside pressure and open the way for a more sustained bounce towards the May 14 high at $4,718.82. Looking down, the Gold price could slide towards the March 26 low at $4,351.23 if it holds below the May 20 low at $4,453.72.

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

TD Securities reports that the RBNZ kept the OCR at 2.25% in a split decision, with Governor Breman’s casting vote preserving the hold. However, the Monetary Policy Statement and updated OCR track point to a pre-emptive hiking cycle starting in July, with a series of 25 bps moves projected to take the cash rate to 3.25% by February 2027, broadly matching TD’s own forecast path.

Split board but hawkish rate track

"The RBNZ left the OCR at 2.25% at today's MPS meeting but signaled a series of rate hikes is likely at upcoming meetings. The decision to hold was a finely balanced with Governor Breman casting the deciding vote to hold. The deciding vote was required given that three RBNZ Board members voted to keep the cash rate on hold at 2.25% while the three external Board members voted to hike 25bps."

"Indeed, the Summary of the record of meeting notes the Committee discussed the "risks" of higher term inflation feeding through to medium term inflation, but the Board nonetheless flagged it intends to act preemptively to ensure that "…higher costs do not lead to elevated inflation over the medium term, while avoiding unnecessary economic volatility"."

"Looking at the Bank's OCR track, it points to the Bank hiking 25bps at its July and September meetings (taking the cash rate to 2.75%), pausing in Oct and then hiking 25bps at its Dec and Feb'27 meetings taking the cash rate to 3.25%. Our forecast also has the RBNZ taking the cash rate to 3.25% by its Feb'26 meeting, the only difference being the RBNZ signaling a pause in Oct given the earlier start to hikes (Jul) vs our forecast of later start to hikes (Sep) but four consecutive rate hikes to follow."

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

• USD/JPY extends gains on Wednesday and reaches one-month highs right below 159.50.
• BoJ Governor Ueda warned about second-round effects from inflation.
• Investors will be looking at Tokyo CPI data later this week, to confirm a rate hike in June.

The Japanese Yen (JPY) keeps drifting lower against the US Dollar (USD) on Wednesday. The USD/JPY pair ticks higher for the fourth consecutive day, reaching fresh one-month highs at 159.45, and nearing the key 160.00 level, considered the limit of tolerable Yen weakness for Japanese authorities.

The market has ignored hawkish comments by Bank of Japan (BoJ) Governor Kazuo Ueda, who expressed his concerns about the second-round effects of inflation if the energy shock threatens wages, expectations, and price-setting behaviour.

These comments support the view that the central bank will raise interest rates at its June 15 meeting. The positive impact on the Yen, however, has been offset by investors’ concerns about the Japanese economy’s exposure to high Crude prices and the relatively lower Japanese Government Bond (JGB) yields.

Markets will be attentive to a string of Japanese macroeconomic data on Friday, with particular interest in the Tokyo Consumer Prices Index figures, to confirm June’s BoJ decision. Core inflation figures are expected to have remained growing at a steady pace in May, while the Unemployment Rate is seen unchanged, and retail sales are expected to have eased in April.

The US Dollar, on the other hand, remains supported by the hawkish repricing of the Federal Reserve’s stance. Recent data has eased concerns about the US labour market, prompting investors to ramp up bets of an interest rate hike before the year's end. US Personal Consumption Expenditures (PCE) Price Index figures, due on Thursday, will be carefully analysed to contrast these views and are likely to set the US Dollar’s near-term direction.

• The Indian Rupee ticks higher against the US Dollar as oil prices decline.
• Iran alleges that the US is violating the ceasefire.
• FIIs turned out to be net sellers on Tuesday, offloading the stake worth Rs. 2,407.87 crore.

The Indian Rupee (INR) trades marginally higher against the US Dollar (USD) in the opening session on Wednesday. The USD/INR pair ticks lower to near 95.70 as oil prices fail to hold their Tuesday’s recovery move, with market participants remaining confident that the United States (US) and Iran are close to reaching a deal.

At press time, the WTI Oil price trades 1.8% lower to near $90.80. Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, attract bids following a sharp correction in oil prices.

US-Iran negotiations continue despite US defensive attacks on Iran

On Tuesday, Iran’s Islamic Revolutionary Guard Corps (IRGC) threatened retaliation after the US carried out strikes on southern Iran, which were described as “self-defense” by the US Central Command. The Iranian Foreign Ministry condemned the US attacks, calling them a “gross violation” of the ceasefire.

However, negotiations between the US and Iran regarding an end to the Middle East war and the reopening of the Strait of Hormuz, a vital passage to almost 20% of global energy supply, continue through mediators.

An Iranian official said on Tuesday that the unfreezing of Iran's funds is the last serious sticking point with the United States (US) being resolved through Qatar mediation, Fars agency reported. However, there had been no official confirmation.

Earlier this week, US Secretary of State Marco Rubio said that the Strait of Hormuz has to be open “one way or the other," and finalizing the deal with Iran may take a few days.

FIIs remained net sellers on Tuesday

There seems to be a mixed sentiment of Foreign Institutional Investors (FIIs) toward the Indian stock market for the entire month. Overseas investors have been seen turning out net sellers on alternative days, with no clear pattern. On Tuesday, FIIs offloaded their stake worth Rs. 2,407.87 crore after increasing by Rs. 821.75 crore on Monday.

US Dollar wobbles ahead of US PCE Inflation data

The US Dollar trades in a tight range around 99.00 as investors await clear signals from the US and Iran regarding the progress in negotiations toward a permanent deal.

On the domestic front, investors await the US Personal Consumption Expenditure Price Index (PCE) data for April, which will be released on Thursday. Investors will pay close attention to the US PCE inflation data to get fresh cues on the Federal Reserve’s (Fed) monetary policy outlook.

The US core PCE inflation – which is the Fed’s preferred inflation gauge – is estimated to have grown at an annualized pace of 3.3%, faster than 3.2% in March, with monthly figures growing steadily by 0.3%.

Technical Analysis: USD/INR recovers from 20-day EMA

USD/INR trades slightly lower at around 95.70 as of writing. The pair holds a constructive bullish bias as spot remains above the 20-period Exponential Moving Average (EMA) at 95.4387.

The EMA’s upward slope hints that the recent advance is still supported, while the Relative Strength Index (RSI) near 56 suggests positive but not overbought momentum, allowing room for further gains if buyers stay in control.

On the downside, initial support is located at the 20-day EMA around 95.44, where a break would signal fading short-term momentum and expose a deeper corrective move towards 95.00. Looking up, the pair would attempt to return to the all-time high around 97.00 if it manages to recover above the May 22 high at 96.37.

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

Societe Generale analysts highlight that AUD/USD has pulled back toward its 50-day moving average after an interim high near 0.7280. Softer Australia Consumer Price Index (CPI) and weaker employment have reduced odds of further Reserve Bank of Australia (RBA) hikes, leaving support at 0.7070 and resistance around 0.7220–0.7280, with a breach of support risking a deeper decline toward 0.6975 and 0.6850/0.6830.

Key 50-day average under scrutiny

"AUD/USD has pulled back toward the 50-DMA after carving out an interim high near 0.7280 in May."

"It will be important to observe whether the pair can hold above this moving average. The recent pivot low of 0.7070 is the first support."

"A breach of this could trigger a deeper decline toward the next projection at 0.6975 and perhaps even towards the lower limit of a multi-month channel at 0.6850/0.6830."

"The recent pivot high of 0.7280 is a near-term hurdle."

"Spot mildly offered after below forecast April CPI dims RBA hike prospects. Support 0.7070, resistance 0.7220."

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

Deutsche Bank analysts note Brent Oil retraced about half of Monday’s sharp fall as optimism over a potential US-Iran deal faded slightly, before slipping again in early trading. They highlight how shifting expectations around an Iran agreement and associated supply risks are driving two-way moves in Oil, with prices still several dollars below Friday’s close.

Iran deal swings drive Brent volatility

"On Iran, we’ve seen little definitive news flow this week, leaving a sense that a deal might not yet be as imminent as hoped over the weekend. However it seems talks remain on track despite the targeted US strikes we mentioned yesterday. Iran’s Tasnim news agency reported that Tehran wants half of its $24bn in frozen assets to be released upon reaching a deal, with the topic in focus during the visit by Iran’s chief negotiator Ghalibaf to Qatar, which ended yesterday. "

"From the US side, Secretary of State Marco Rubio said that “it’ll take a few days” to agree specific language in the draft agreement, emphasising the US demand for the Strait of Hormuz “to be open, unimpeded, without tolls”. There was also some immediate uncertainty over Hormuz, with the WSJ reporting that the US Navy was now assisting vessels through the strait but US Central Command later denying that it has restarted escorting ships."

"This has helped global sentiment mostly hold up over the past 24 hours, even as lingering questions over the prospects for a US-Iran deal led Brent crude (+3.58%) to pare back about half of Monday’s decline."

"This backdrop saw oil markets trim some of Monday’s optimism that a deal could be imminent, and Brent crude (+3.58%) reversed about half of Monday’s -7.15% decline."

"Brent is back down -1.57% at $98.02/bbl this morning though, leaving it around $5.50 below Friday’s close ($103.54)."

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

MUFG’s Derek Halpenny notes USD/JPY is broadly stable as Japanese Government Bond demand improves and crude Oil declines support lower JGB yields. He highlights stronger super-long JGB auction metrics and broader domestic buying. Halpenny argues that, given persistent inflation risks and a weak Yen, the Bank of Japan is very likely to hike in June, with around 19bps already priced.

Yen steady as JGB demand improves

"The evidence of improving underlying demand for JGBs at recent auctions is also evident in the flow data."

"It’s too soon to conclude that domestic buying of the long-end will pick up more consistently but there are early signs that underlying demand will improve."

"Given the current favourable risk backdrop globally, the improved prospects of some form of peace deal and the continued weakness of the yen, we see it as very likely that the BoJ will hike at the next meeting in June."

"So, with a June BoJ rate hike well priced, a hike is unlikely to be the catalyst for a sudden revival of the yen from current weak levels although it would certainly help curtail yen selling through the 160-level, especially given the credible threat of intervention."

"USD/JPY is close to unchanged, reflecting the general stability in foreign exchange bar the New Zealand dollar which is the top performing G10 currency today following the RBNZ meeting, which signalled the need for more rate hikes than previously thought and for action to come sooner – a rate hike at the next meeting in July is now very likely and close to fully priced."

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

• The US Dollar consolidates around 99.00 halfway through the weekly range.
• Contradictory news from Iran is keeping investors on edge this week.
• US PCE Price Index data, due on Thursday, might set the Greenback's near-term direction.

The US Dollar (USD) is trading sideways against its main peers on Wednesday. The US Dollar Index (DXY), which measures the value of the Dollar against a basket of peers, flatlines around 99.00 at the time of writing, halfway through the weekly range, with investors awaiting clarity from Iran’s war.

Tehran accused the US of a grave violation of the ceasefire and vowed retaliation after attacks in southern Iran, which were considered “defensive” by US authorities. On Wednesday, Iranian officials said that these attacks validate their distrust of America and the resolution to stand firm on their demands.

Hopes of a negotiated end to the conflict, however, remain alive as Iranian leaders analyse the latest peace proposal from the US. On Wednesday, a spokesperson for the Islamic Revolutionary Guard Corps (IRGC) said that the renewal of hostilities against the US remains an unlikely option, but warned that they stand ready to react against any attack.

On the macroeconomic front, US Consumer Confidence data showed a slight deterioration in May, amid higher inflation from the war in Iran and a more pessimistic view about employment. Investors, however, are likely to await Thursday’s Personal Consumption Expenditures (PCE) Price Index figures to shed some more light on the Federal Reserve (Fed) rate path, and set the US Dollar’s near-term direction.