Forex News

• The Indian Rupee opens strongly against the US Dollar as fresh de-escalation in US-Iran tensions weakens oil prices.
• India’s Fiscal Budget is expected to widen to 4.8% of GDP this year amid the Middle East crisis.
• Investors await India’s CPI data for May, which is seen arriving higher at 4% YoY.

The Indian Rupee (INR) rises sharply higher higher against the US Dollar (USD) on Friday. The USD/INR pair tumbles to near 95.12 on reports that the United States (US) and Iran will sign a Memorandum of Understanding (MoU) in Geneva on Sunday, resulting in a significant decline in oil prices.

In India's afternoon trading hours, the MCX Crude Oil contract expiring on June 18 trade 3.8% lower to near 8,020, the lowest level seen in over seven weeks.

The appeal of currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, improves when oil prices come under pressure.

US and Iran to sign MoU on Sunday

A Bloomberg report showed in the day that the US and Iran are edging closer to signing an agreement to reopen the Strait of Hormuz as the Group of Seven (G7) world leaders are set to meet next week.

Financial market participants were already confident that the US and Iran would reach an agreement, as US President Trump said in an event at the Oval Office on Thursday that he canceled planned military strikes on Iran, as negotiators from both sides are on “final elements of the deal”. Trump added, “Discussions and final points have been, in both concept and great detail, approved by all parties involved.” He further added that both parties will be signing the deal soon, and “Time and place of signing to be announced shortly.”

The US-Iran deal hopes have also resulted in a significant increase in Indian bourses. Nifty 50 ends the day with 2% gains to near 23,623.

India’s Fiscal Deficit to widen to 4.8% of GDP this year

According to a report from Bloomberg, India is preparing for a wider-than-expected budget deficit this year, as the war in Iran drives up energy subsidy costs and adds pressure on government finances. However, it has not been confirmed by Indian authorities.

Authorities are willing to let the deficit widen by as much as 0.5% to 4.8% of Gross Domestic Product (GDP) compared with the 4.3% goal set in February.

India’s CPI data arrives higher at 3.93%

India's Consumer Price Index (CPI) data for May has arrived at 3.93% Year-on-Year (YoY), higher than 3.48% in April, but misses the 4% estimate. The inflation data will likely have a limited impact on market expectations for the Reserve Bank of India’s (RBI) monetary policy outlook, if oil prices remain lower, a scenario that will anchor inflation expectations.

FIIs keep paring stake in Indian stock market

So far in June, Foreign Institutional Investors (FIIs) have remained net sellers on all trading days of June, offloading their stake worth Rs. 64,641.43 crore. Overseas investors have been paring their stake in the Indian stock market due to uncertainty over India Inc.’s earnings projections in the wake of Middle East conflicts.

Technical Analysis: USD/INR sees more downside towards 94.00

USD/INR trades sharply lower at around 95.12, keeping a bearish near-term tone as spot holds beneath the 20-day Exponential Moving Average (EMA) at 95.41.

The failed push above the downtrend resistance line, which now comes in around 95.96, leaves the pair capped, while the Relative Strength Index (RSI) near 47 hints at fading momentum rather than an imminent reversal.

On the topside, immediate resistance is seen at the 20-day EMA near 95.41, with the descending resistance trend line around 95.96 acting as a stronger barrier if bulls attempt a rebound. On the downside, initial support is aligned with the broken-uptrend area around 94.79, and a sustained break below this zone would reinforce the bearish structure and expose deeper losses toward the May 7 low at 94.03.

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

• GBP/USD appreciates to the1.3430 area after bouncing near 1.3300 on Thursday.
• Reports of advances in the US-Iran negotiations have offset the impact of rather downbeat UK macroeconomic data.
• UK GDP contracted 0.1% in April as Industrial Production stalled.

The British Pound (GBP) maintains a moderately positive tone against the US Dollar (USD) on Friday, as investors’ optimism about a US-Iran peace deal has offset rather uninspiring UK data. Bulls are testing the key 200-day SMA at 1.3415 at the moment, after bouncing from lows just above 1.3300 on Thursday.

The pair is drawing support from US President Donald Trump’s comments claiming a breakthrough in the US-Iran negotiations, which, in his words, may lead to a peace agreement in the “coming days”. Iran has shown a more contained enthusiasm, although a government spokesperson affirmed in local media that a deal “is closer than ever before.”

UK economy contracted in April

Earlier in the day, data from the UK National Statistics Office showed that the Gross Domestic Product (GDP) contracted at a 0.1% pace in April, following a 0.3% increase in March. Beyond that, Industrial Production stalled, against market consensus expectations of a 0.1% increase, while, on the positive side, Manufacturing Production rose 0.4% against expectations of a 0.2% decline. 

In the US, Producer Price Index (PPI) data released on Thursday showed that prices at factory gates accelerated to a 6.5% yearly rate, its fastest pace in three-and-a-half years. The Core PPI, however, remained steady at a 4.9% year-on-year growth, against market expectations of a 5.4% reading, hinting that spillover from the energy shock might have been contained and pushing back hopes of Federal Reserve (Fed) rate hikes.

Later on Friday, the US Michigan Consumer Sentiment Index is expected to show that US buyers’ optimism remains near historic lows, amid the high cost of living. The risk of this release is skewed to the downside for the US Dollar.

Societe Generale analysts reports USD/BRL has been rebounding from an interim low near 4.88 and is approaching the 200-DMA and a descending trend line around 5.25. They stress the need to see if a base and trend reversal can form, with resistance at 5.32/5.34 and downside risk if 4.99 fails.

Rebound tests major technical barriers

"USD/BRL has staged a steady rebound after carving out an interim low around 4.88 last month. It is now inching toward the confluence of the 200-DMA and a multi-month descending trend line near 5.25."

"It will be important to monitor whether the pair can form a base and gradually transition into a trend reversal. The March high around 5.32/5.34 is likely to act as a key resistance zone."

"There would be a risk of resumption in downtrend if the pair fails to defend the recent pivot low around 4.99."

"The Bovespa slipped below 170k for the first time since late January. FPIs sold BRL3.42bn of Brazilian equities this month to 9th June."

"BCB president Galípolo asserted the domestic economy is holding up well on a relative basis in the face of Middle East conflict and US tariff concerns. Brazil plans to issue sovereign bonds in China, after tapping euro market earlier this year."

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

Iran’s IRNA news agency releases the major terms of the Memorandum of Understanding (MoU) discussed with the United States (US). Earlier a report from Bloomberg showed that the MoU will be signed in Geneva on Sunday.

US-Iran key MoU terms

Iran makes no commitment regarding the transfer of management of the Strait of Hormuz.

The future administration of the Strait will be resolved as a regional matter through dialogue and joint decision-making between Tehran and Oman.

No agreement is made regarding the nuclear file in the current memorandum.

Nuclear talks will take place within a 60-day period after signing.

Market reaction

No major action in the Oil price after the release of the major US-Iran terms; however, it is already down on the US-Iran MoU hopes. At press time, the WTI Oil price trades 2.65% lower to near $83.00.

Nordea’s Jan von Gerich expects Kevin Warsh’s first FOMC meeting on 17 June to deliver a more neutral policy stance, with earlier projected rate cuts likely removed from the dot plot and some hike calls appearing. He thinks Warsh will seek consensus and credibility rather than appeasing political pressure, and any communication changes will be signalled rather than implemented immediately.

Dot plot seen shifting away from cuts

"After the ECB’s rate hike, the focus will now shift to the FOMC next week, with the decision out on Wednesday 17 June."

"Will Warsh try to forge consensus and side with more neutral or even slightly hawkish views, strengthening his credibility, or will he dissent at his first meeting to appease the President’s expectations and seriously dent his credibility right from the start?"

"We think the former approach is more likely."

"The statement itself is likely to adopt a more neutral stance on further rate moves, while the dot plot of the individual rate forecasts of FOMC participants will probably no longer include the rate cuts that were in the profile for this year in March."

"Some calls for hikes are actually also likely to creep into the dot plot."

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

Deutsche Bank’s European economists highlight that the ECB delivered its first rate hike since 2023, lifting the deposit rate to 2.25% and pairing it with hawkish messaging from President Lagarde. The bank maintains a forecast for another hike to 2.50% in September and sees a higher probability of rates reaching 2.75% than stopping at 2.25%.

ECB path seen extending beyond September

"Aside from the Middle East news, the big story yesterday was the first ECB rate hike since 2023, with a 25bp move that lifted their deposit rate to 2.25%."

"Moreover, there were some hawkish undertones, as Lagarde described the hike as "completely warranted and justified”, even in the ECB’s milder scenario, and noted how the inflation shock was becoming broader in nature."

"Indeed, the ECB lifted their inflation projections, and now expect headline inflation to average 3.0% in 2026 (prev. +2.6%) with core inflation projected to stay above 2% all the way to 2028 (+2.2%)."

"Our own European economists are sticking to their view of one more rate hike to 2.50% in September with their economic forecasts being softer than the ECB's."

"Interestingly they say that another hike to 2.75% is more likely than stopping here at 2.25%."

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

• WTI trades around $82.90 on Friday, down 2.54% on the day at the time of writing.
• Crude Oil prices fall sharply after reports suggesting a US-Iran deal could be signed as early as this weekend in Geneva.
• The prospect of the Strait of Hormuz reopening is reducing the geopolitical risk premium embedded in Oil prices.

West Texas Intermediate (WTI) extends its decline for a second consecutive day on Friday, trading around $82.90 at the time of writing as investors unwind defensive positions following fresh signs of easing tensions in the Middle East.

According to a Bloomberg report, officials from the United States (US), Iran and the Group of Seven (G7) believe an agreement aimed at reopening the Strait of Hormuz could be signed as early as this weekend in Geneva. Several sources indicated that a memorandum of understanding is likely to be adopted initially before a final agreement is reached.

The development follows comments from US President Donald Trump, who stated that a peace agreement with Iran could be finalized within the coming days. According to reports from Iranian media, Tehran is also expected to support the proposed text after Washington accepted several conditions put forward by the Islamic Republic.

The prospect of reopening the strategic shipping route is weighing on Crude Oil prices by reducing concerns about prolonged disruptions to global energy supplies. The Strait of Hormuz is a critical transit point for Crude Oil and Liquefied Natural Gas (LNG) exports from the Middle East to international markets.

Despite the optimism, some market participants remain cautious. A full normalization of energy flows could take time, as shipping lanes may need to be secured, infrastructure restored and production facilities affected by recent regional tensions brought back online.

Maritime tracking data nevertheless show that several LNG tankers have already departed the area heading toward Asia, suggesting that operators are beginning to anticipate an improvement in navigation conditions.

This week's sharp decline therefore reflects a rapid unwinding of the geopolitical risk premium that had supported Oil prices in recent weeks. Investors are now awaiting official confirmation of an agreement between the United States and Iran, which could further strengthen expectations for a normalization of global energy flows.

India’s Consumer Price Index data for May has come in at an annualized pace of 3.93% in May, slower than 4% estimates, but higher than the previous reading of 3.48%.

No major movement seen in the Indian Rupee, following the release of India’s CPI data for May. Currently, the global market is responding to headlin relating to the United States (US)-Iran Memorandum of Understanding (MoU), which is expected to be signed by the weekend in Geneva.

As of writing, the USD/INR pair trades lower 0.8% lower to near 95.00 as the Indian Rupee is performing strongly due to plummeting oil prices.

What does India’s higher CPI growth means for USD/INR?

Unlike the developed nations, whose currencies are significantly influenced by their inflation data, the impact of India’s CPI data remains limited on the Indian Rupee.

Technically, accelerating inflationary pressures will likely prompt expectations of an interest rate hike by the Reserve Bank of India (RBI) in the near term. In the monetary policy announcement last week, RBI Governor Sanjay Malhotra stated that the central bank would need to act if inflation growth starts generalizing.

However, the impact of the higher inflation data would fizzle out if the US and Iran sign the MoU, assuming that the move will lead to a sharp decline in oil prices and eventually anchor inflation expectations.

Technical Analysis: USD/INR falls toward upward-sloping border of Symmetrical Triangle pattern

USD/INR trades sharply lower at around 95.12, keeping a bearish near-term tone as spot holds beneath the 20-day Exponential Moving Average (EMA) at 95.41.

The failed push above the downtrend resistance line, which now comes in around 95.9636, leaves the pair capped, while the Relative Strength Index (RSI) near 47 hints at fading momentum rather than an imminent reversal.

On the topside, immediate resistance is seen at the 20-day EMA near 95.41, with the descending resistance trend line around 95.96 acting as a stronger barrier if bulls attempt a rebound. On the downside, initial support is aligned with the broken-uptrend area around 94.79, and a sustained break below this zone would reinforce the bearish structure and expose deeper losses toward the May 7 low at 94.03.

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

• Gold price clings to Thursday’s gains around $4,220 on US-Iran deal hopes.
• An MoU between the US and Iran will likely be signed by the weekend.
• The Gold price is expected to extend its recovery to near the 20-day EMA.

Gold price (XAU/USD) holds onto Thursday’s strong recovery move to near $4,220 during the European trading session on Friday. The precious metal reflects strength amid intensified hopes that the United States (US) and Iran will sign a Memorandum of Understanding (MoU) by the weekend.

A Bloomberg report has stated that the US and Iran will sign an MoU in the G7 Summit in Geneva by Sunday, a move that will lead to an immediate opening of the Strait of Hormuz, a vital passage to one-fifth of global energy supply.

The Gold price underperformed in the last few months, as oil prices rallied due to the Hormuz closure that led global inflation higher and forced traders to price out dovish expectations for global central banks.

Theoretically, easing dovish expectations for central banks bode poorly for non-yielding assets, such as Gold.

Gold technical analysis

XAU/USD trades firmly near $4,215.34, but maintains a bearish near-term bias as spot holds well beneath the 20-day Exponential Moving Average (EMA) at $4,398.58. The persistent placement of price below this short-term trend gauge suggests rallies remain corrective for now, while the Relative Strength Index (14) near 36 stays in bearish territory but above oversold, hinting that downside pressure is present yet not exhausted.

On the topside, the 20-day EMA at $4,398.58 is the first meaningful resistance that bulls would need to reclaim to ease immediate downside pressure and open the door to a more sustained recovery. Looking down, the psychological level of $4,000 is the immediate support level. A downside move below the same would open the door for further downside towards $3,900.

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