Forex News

Rabobank’s FX Strategy team at RaboResearch Global Economics & Markets discusses how the Dollar initially benefited from safe haven flows during the Iran war, but has since softened as a ceasefire memorandum eased market tensions and tempered Fed hike expectations. They maintain a mildly constructive EUR/USD profile over coming months, while highlighting strong technical resistance and ongoing uncertainty around the Strait of Hormuz and Fed policy.

Rabobank maintains cautious EUR/USD optimism

"Despite the softer tone of the USD today, we would expect strong technical resistance to be provided by the 200 day and 50-day smas in the EUR/USD1.1673/77 area."

"Indeed, while the market has started to pare back its expectations for Fed rate hikes, pricing of ECB tightening has also been reined back this morning. This should temper the impact of changing Fed rate hike expectations on EUR/USD."

"For a while Rabobank’s has forecast that EUR/USD would likely move from the 1.15 area on a 1-month view to 1.16 on a 3-month outlook before edging up to the 1.17/1,18 area on a 6-to-9-month horizon. This outlook is based on the expectation that safe haven demand would likely fade on a 3-month view and that interest rate differentials would then favour the EUR."

"That said, have also maintained that a move to EUR/USD1.20 was unlikely this year given the growth constraints facing the Eurozone and the relative resilience of the US economy. For now we adhere to these forecasts but will look to review them later in June, dependent on the news flow regarding the ceasefire deal."

"That said, it is Rabobank’s view that Fed chair Warsh would prefer to keep policy on hold through to the remainder of the year, and an extension of the ceasefire and any progress to a re-opening of the Strait does speak to that outlook."

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

HSBC Asset Management’s Investment Weekly highlights how higher Oil prices, China’s export surge and US AI investment are reshaping the global macro backdrop. The report says these forces are driving a hawkish shift at central banks including the ECB, Bank of Japan, Bank of England and Federal Reserve. Despite spikier inflation, HSBC believes supernormal profits and manageable funding costs can still support risk assets through 2026.

Central banks react to two shocks

"The Fed is widely expected to keep rates unchanged and to remove any bias towards easing this year from its statement and projections."

"Overall, spikier inflation and a rise in hawkish central bank thinking reinforce the complicated macro landscape."

"While episodic volatility is a risk, supernormal profits and a manageable cost of capital mean that markets can continue performing well through the rest of 2026."

"While risk assets saw further volatility, hopes of geopolitical de-escalation supported performance last week."

"These forces are creating a difficult environment for central banks and have, so far, driven a hawkish pivot."

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

• EUR USD remains steady above 1.1600 after hitting 10-day highs at 1.1622.
• News of a US-Iran peace agreement has sent Oil prices to three-month lows, boosting the euro across the board.
• Hawkish comments by ECB officials have provided additional support to the pair.

The Euro (EUR) maintains its positive tone against the US Dollar (USD) on Monday, with the EUR/USD pair trading near 10-day highs above 1.1600. The positive market sentiment amid the US-Iran peace deal and the lower Oil prices has offset the weak Eurozone Industrial Production and Trade Balance data seen earlier on the day.

Factory output grew at a mere 0.1% pace in the Eurozone in April, according to data by Eurostat,  down from an upwardly revised 0.4% reading in March and below the 0.3% growth expected by the markets. Beyond that, the Trade Balance shifted to a EUR 1 billion deficit, from a nearly EUR 5 billion surplus in March, also against the market consensus of a EUR 7.8 billion positive balance.

Iran peace hopes boost risk appetite

The impact of these figures on the Euro, however, has been limited. Investors’ appetite for risk remains strong amid reports that Washington and Tehran reached a memorandum of understanding that will end a three-month war and allow for the reopening of the key Strait of Hormuz. Brent Oil prices have dropped by nearly $4 from last week’s closing levels, hitting fresh three-month lows right above $82.00 and easing some pressure on the Crude-importing Eurozone economies.

Also on Monday, European Central Bank (ECB) policymakers Martins Kazaks and Joachim Nagel have shown their concerns about the ongoing inflationary pressures, feeding hopes of further monetary tightening. These comments have provided additional impetus to the Euro.

In the US, Industrial Production and the New York Federal Reserve’s (Fed) Manufacturing Index will reclaim some attention later on the day, although the highlight of the week will be Wednesday’s Fed decision. The bank is widely expected to leave interest rates on hold, but investors will have the central bank’s interest rate and economic projections and the first press release of Kevin Warsh as the bank’s chairman to assess changes to the bank’s guidance under the new chief.

• The Japanese Yen faces selling pressure against its peers despite risk-on sentiment and hopes of a BoJ interest rate hike on Tuesday.
• The US-Iran deal finalization has lifted market sentiment.
• The uncertainty over BoJ’s monetary policy outlook has dampened the Yen’s appeal.

The Japanese Yen (JPY) trades lower against its major currency peers during the European trading session on Monday, while the USD/JPY pair is marginally lower at around 160.15 after recovering its early losses.

The Asia-Pacific currency underperforms even as market sentiment remains risk-on due to the finalization of the peace framework between the United States (US) and Iran, which will be signed on Friday in Switzerland.

At press time, S&P 500 futures are up almost 1.3%, reflecting strong demand for riskier assets.

On the domestic front, firm expectations that the Bank of Japan (BoJ) will raise interest rates by 25 basis points (bps) to 1% on Tuesday are also failing to lift the Japanese Yen.

It seems that uncertainty surrounding the BoJ’s monetary policy guidance by Deputy Governor Shinichi Uchida after Tuesday’s policy announcement, who will brief the media on behalf of recently hospitalized Governor Kazuo Ueda, is limiting the Yen’s upside.

The BoJ is unlikely to support further tightening of monetary conditions in the remaining year, as higher energy prices due to Middle East tensions have exposed greater risks to Japan’s fiscal policy.

Also, the Japanese government’s intentions to loosen its fiscal policy in an attempt to provide relief to households from the burden of high inflation are also weighing on the Japanese Yen. Analysts at Nomura Securities said in a note, “The BoJ doesn't want to go too much ahead of the government policy stance, only to become a scapegoat."

USD/JPY technical analysis

USD/JPY trades marginally lower at around 160.14 at press time, keeping a bullish near-term bias as it holds above the 20-day exponential moving average (EMA) at 159.69. The pair remains underpinned by this rising EMA, while the Relative Strength Index (RSI) on the daily chart around 58 suggests firm but not overstretched upside momentum, hinting that buyers retain control for now.

On the downside, initial support is aligned with the 20-day EMA near 159.70, where a break would signal fading upside pressure and open the door to a deeper corrective pullback towards the May 20 low at 158.60. On the upside, the April 30 high at 160.73 will remain a key barrier for US Dollar bulls.

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

• The Australian Dollar gains as markets welcome a framework agreement between Washington and Tehran.
• The US Dollar weakens, supporting AUD/USD, while Oil prices fall sharply.
• Investors now turn their attention to the Reserve Bank of Australia's monetary policy decision on Tuesday.

AUD/USD trades around 0.7070 at the time of writing on Monday, up 0.35% on the day, benefiting from renewed risk appetite after the United States (US) and Iran announced a framework agreement aimed at ending their conflict.

Markets reacted positively to statements from both sides. US President Donald Trump said that the Strait of Hormuz would be reopened as part of the agreement, while Iranian officials confirmed the existence of a negotiation framework that is expected to be finalized in the coming days. According to several media reports, the ceasefire in place since April will be extended to allow further talks between the parties.

The development has reduced demand for safe-haven assets and weighed on the US Dollar. The US Dollar Index (DXY) falls around 0.3% to trade near 99.50 at the time of press, while US equity index futures rise between 1% and 2% during the European session. At the same time, Oil prices decline sharply, with the West Texas Intermediate (WTI) barrel losing around 5% as investors anticipate lower risks to global energy supplies.

The weaker Greenback supports risk-sensitive currencies such as the Australian Dollar (AUD). Markets have also scaled back expectations for further tightening by the Federal Reserve (Fed), as concerns about an inflationary shock linked to the Middle East conflict ease following the agreement announcement.

Investors are now focusing on the Reserve Bank of Australia (RBA) monetary policy decision scheduled for Tuesday. The Australian central bank is widely expected to leave its cash rate unchanged at 4.35%, with traders having significantly reduced expectations of another rate increase in the near term.

Market participants will also closely watch comments from Governor Michele Bullock regarding the inflation outlook and the future direction of monetary policy. Australia's May Consumer Price Index (CPI) data, due on June 24, could provide the next major catalyst for interest rate expectations.

• The Indian Rupee soars against the US Dollar on the finalization of the US-Iran deal.
• Plunging oil prices due to the reopening of the Strait of Hormuz, as per the post from US President Trump.
• The selling pressure from overseas investors in the Indian stock market slowed down in the last two trading days.

The Indian Rupee (INR) trades strongly against the US Dollar (USD) in India's afternoon trading hours on Monday. The USD/INR pair plunges to near 94.60 as oil prices have nosedived, following the announcement that the United States (US) and Iran have reached a permanent peace deal.

In India’s opening trading hours, the MCX Crude Oil contract expiring on June 18 is down 5.5% to near 7,630, the lowest level seen in almost two weeks.

The appeal of currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, improves significantly when oil prices fall like a house of cards.

US-Iran finalizes MoU, Trump announces Hormuz reopening

On Sunday, both the US and Iran confirmed that they have finalized a Memorandum of Understanding (MoU).

Iran’s Supreme National Security Council confirmed Sunday that Tehran had finalized an MoU, saying all military operations on all fronts, including Lebanon, would cease “immediately and permanently”, CNBC reported.

US President Donald Trump also said in a post on Truth Social, “I hereby fully authorize the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorize the immediate removal of the United States Naval blockade.”

Meanwhile, Pakistan Prime Minister (PM) Shehbaz Sharif has stated in a post on X, formerly known as Twitter, that the finalized MoU between the US and Iran will be signed on June 19 in Switzerland.

FIIs selling remain lower in last two trading days

Although Foreign Institutional Investors (FIIs) have remained net sellers in all trading days so far in June, a slowdown in the pace of selling pressure is observed in the last two trading days. So far this month, FIIs have offloaded their stake worth Rs. 46,430.42 crore, an average selling of Rs. 4,643 crore in 10 trading days. In the last two trading days, the average selling by overseas investors was Rs. 1,534.63 crore.

India’s WPI Inflation rises strongly

On the domestic front, India’s Wholesale Price Index (WPI) Inflation data for May has arrived significantly higher at 9.68% Year-on-Year (YoY) from 9.1% estimates and April's reading of 8.3%.

Theoretically, higher inflation at the factory level boosts expectations for the Reserve Bank of India’s (RBI) interest rate hikes in the near-term. However, the impact is expected to be limited as oil prices have started declining, a scenario that would anchor inflation expectations.

Technical Analysis: USD/INR stabilizes below 20-day EMA

USD/INR tumbles to near 94.60 on Monday. The near-term bias of the pair turns bearish as it extends distance with the 20-day exponential moving average (EMA), which is at 95.33, on the downside.

The pair’s slide away from that dynamic barrier keeps the short-term trend under pressure, while the Relative Strength Index (RSI) near 42 leans lower, suggesting sellers retain control despite not yet reaching oversold territory.

On the topside, initial resistance is defined by the 20-day EMA at 95.33, where a sustained break higher would be needed to ease the current downside pressure and open the way for a deeper corrective bounce towards 96.00. Looking down, the pair could slide to the May 7 low at 94.03 if it drops below the May 29 low at 94.46.

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

MUFG’s Lee Hardman notes that the US Dollar has extended losses after the US and Iran reached an interim agreement to end conflict and reopen the Strait of Hormuz. The deal is expected to ease global economic risks and support a further reversal of prior Dollar gains, especially if the Fed under Kevin Warsh keeps rates on hold and avoids a hawkish surprise.

Dollar softens on Middle East deal

"The US Dollar has continued to weaken at the start of this week driven by the announcement over the weekend that the US and Iran have finally reached an interim agreement to end the conflict and reopen the Strait of Hormuz."

"For the US Dollar more broadly, the deal should encourage a further reversal of gains recorded during the conflict although market participants will be wary of building short positions ahead of the FOMC meeting on Wednesday given the risk of a hawkish policy update."

"The US rate market has already moved to scale back Fed rate hike expectations, but there is room for US yields and the US Dollar to fall further if Kevin Warsh does not provide a hawkish policy surprise this week."

"The main risk to our view is that he indicates that the Fed is actively considering raising rates."

"The deal should help to reduce the risk of a more disruptive outcome for the global economy and financial markets."

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

Brown Brothers Harriman (BBH) expects the Riksbank to keep its policy rate at 1.75% for a sixth consecutive meeting and to lean against market pricing for a 25 bps hike by year-end. With benign inflation and spare capacity, the updated forecast is likely to signal an extended hold, which the bank sees as a headwind for the Swedish Krona.

Extended Riksbank hold pressures SEK

"The Riksbank is widely expected to keep the policy rate at 1.75% for a sixth consecutive meeting (Thursday). We expect the Riksbank to lean against market pricing for a 25bps hike by year-end which is a headwind for SEK."

"The updated Riksbank forecast is likely to continue signaling no change in rates through Q4 2026, though it may bring forward the first full 25bps hike to late 2027 from Q1 2028. Sweden’s benign inflation backdrop alongside ample spare capacity in the economy argue for an extended Riksbank hold."

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

Brown Brothers Harriman expects the Bank of England to hold at 3.75% with a 7–2 vote and sees the first fully priced 25 bps hike in November. They argue BoE tightening in a weak growth, high inflation environment is not bullish for the Pound and forecast GBP/USD falling to 1.3100, with UK political risks potentially amplifying downside.

UK policy and politics pressure Pound

"The BoE is widely expected to keep the policy rate at 3.75% for a fourth straight meeting (Thursday). A 7-2 vote split is anticipated, compared with an 8-1 split at the last April 30 meeting. Megan Greene is seen joining Huw Pill in supporting a 25bps hike."

"BoE rate hikes in a sluggish growth, high inflation environment, is not bullish for GBP but should help cushion the downside. We expect GBP/USD to fall to 1.3100, reflecting a stronger US growth outlook relative to the UK."

"The UK political backdrop can amplify a GBP decline, with Thursday’s Makerfield by-election a key event risk. Polls show Andy Burnham leading Reform UK by anywhere from 3 to 12 points, potentially clearing a path for his return to parliament and a leadership challenge to Prime Minister Keir Starmer. A Burnham-led Labour government will likely lead to more spending and borrowing, worsening UK fiscal credibility."

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

Silver prices (XAG/USD) rose on Monday, according to FXStreet data. Silver trades at $70.69 per troy ounce, up 3.91% from the $68.03 it cost on Friday.

Silver prices have decreased by 0.55% 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 61.37 on Monday, down from 62.03 on Friday.

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