Forex News
Commerzbank's Dr. Jörg Krämer and Bernd Weidensteiner expect the European Central Bank (ECB) to leave rates unchanged next week but still project a June hike if the Strait of Hormuz remains blocked and inflation risks persist. They highlight rising input and selling prices in PMI data, gradually higher consumer inflation expectations, and potential wage pressures, while also noting that weak growth indicators could limit the overall tightening path.
ECB balances inflation risks and weak growth
"The ECB is expected to keep interest rates unchanged next week. However, a rate hike is not entirely off the table, especially if second-round effects continue to drive inflation over the long term. Following the last monetary policy meeting, ECB President Christine Lagarde cited indicators that the ECB will be monitoring."
"However, we still consider an interest rate hike in June to be likely, especially if the stalemate around the Strait of Hormuz continues, which yet remains completely blocked. After all, memories of the 2022 surge in inflation are still fresh. Some of the indicators cited by ECB President Lagarde at the last press conference also point to increased inflation risks."
"Given the inflation risks mentioned above, we expect the ECB to raise interest rates in June, provided the Strait of Hormuz is not fully and permanently reopened by then. However, we do not go as far as the financial markets, which expect not just one but roughly two and a half rate hikes by the end of the year. This is because other indicators cited by President Lagarde point to certain downside risks for inflation."
"The ECB is likely to raise interest rates slightly due to inflation risks. However, there is unlikely to be more than one rate hike, as oil prices are expected to fall again once the war ends and doves dominate the ECB Governing Council."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Gold steadies above $4,700 but remains on track for a weekly loss as prospects of higher-for-longer interest rates weigh.
- US Dollar softens as hopes for future US-Iran talks improve on diplomatic signals.
- XAU/USD trades below a moving average cluster on the 4-hour chart, keeping downside pressure intact.
Gold (XAU/USD) edges higher on Friday, erasing earlier losses as the US Dollar (USD) eases modestly, with geopolitical headlines surrounding US-Iran tensions driving price action. Despite the intraday rebound, upside remains capped amid persistent macro headwinds.
At the time of writing, XAU/USD is trading around $4,730 after hitting an intraday low of $4,657, down nearly 2.0% so far this week.
The US Dollar (USD) softens after reports that Iran’s Foreign Minister Abbas Araghchi is expected in Islamabad on Friday night, according to Al Arabiya. Iran’s state news agency IRNA said the visit is for talks with Pakistani officials, not with the US for now. Still, the news has slightly improved hopes for future talks, offering some support to Gold.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 98.50, easing from a one-week high of 98.94 touched on Thursday.
However, Gold remains on track to end the week in negative territory as escalating tensions in the Strait of Hormuz push Oil prices higher, fueling inflation fears and reinforcing expectations that central banks, particularly the Federal Reserve (Fed), will keep interest rates higher for longer. West Texas Intermediate (WTI) crude is up over 10% this week, hovering near $93 per barrel.
While the ceasefire extension announced by US President Donald Trump has eased fears of immediate escalation, the US-Iran standoff over the Strait of Hormuz continues to weigh on market sentiment. Tehran has accused the US naval blockade of violating the ceasefire and described it as a key obstacle to negotiations. Iranian leaders have signaled they will not participate in peace talks “under the shadow of threats.”
Speaking to reporters in the Oval Office on Thursday, Trump said, “We’ll see what happens, we have no pressure,” adding that “Iran is under time pressure, not us.” He warned that if no agreement is reached, fighting could resume, saying, “I’ll finish it up militarily,” and added that US ships are “locked and loaded, and ready to go.”
With the Strait of Hormuz remaining under a dual blockade, markets are likely to stay driven by geopolitical headlines, with elevated Oil prices continuing to feed into inflation expectations. This, in turn, is expected to keep the US Dollar and yields supported, limiting any meaningful recovery in Gold as markets continue to price in a higher-for-longer rate outlook.
On the data front, the University of Michigan’s Consumer Sentiment Index fell to 49.8 in April from 53.3 in March. The Consumer Expectations Index also declined to 48.1 from 51.7, pointing to a weaker outlook. Meanwhile, 1-year inflation expectations surged to 4.7% from 3.8% in March, while the 5-year outlook rose to 3.5%, marking the highest level since October 2025.
Technical analysis: Bearish bias holds below the moving average cluster
On the 4-hour chart, XAU/USD retains a bearish near-term bias as it continues to trade below key moving averages. The 100-period Simple Moving Average (SMA) at $4,748 and the 200-period SMA at $4,747, along with the 50-period SMA at $4,775, form a tight resistance cluster just overhead, reinforcing the broader downside tone.
Momentum indicators align with this view, with the Relative Strength Index (14) hovering near 44 in mildly negative territory and Moving Average Convergence Divergence (MACD) histogram still below the zero line, even as its negative reading moderates, hinting at waning but persistent selling pressure.
On the upside, any recovery is likely to remain capped below the moving average cluster between $4,750 and $4,775, where a sustained break above this zone could ease immediate downside pressure. On the downside, the $4,700-$4,650 zone is acting as immediate support, with a break below this area opening the door for deeper losses.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
The US Attorney for the District of Columbia, Jeanine Pirro, said Friday that her office is closing the criminal investigation of Federal Reserve Chair Jerome Powell, increasing the chances of a future confirmation of Kevin Warsh to become the next chief of the US central bank.
Pirro said on an X post that the Fed’s inspector general, an internal watchdog, had been asked to investigate cost overruns in the headquarters project, which had been the purported basis for her criminal probe of Powell. “I expect a comprehensive report in short order and am confident the outcome will assist in resolving, once and for all, the questions that led this office to issue subpoenas,” she stated.
“Accordingly, I have directed my office to close our investigation as the IG undertakes this inquiry,” Pirro added.
Earlier, ABC News broke the story and reported that “Senior DOJ officials have contacted senators in recent days, including Republican Sen. Thom Tillis. who sits on the Senate Banking Committee, informing them of the plan to drop the probe and refer the matter regarding alleged cost overruns at the Fed’s Washington headquarters to the bank’s internal watchdog.”
Since January, Republican Senator Tillis has said he would not approve Warsh to become the next chair unless the DoJ dropped the investigation into Powell. The US Senate is in charge of confirming the next Fed Chair, whose term begins in June 2026.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Scotiabank strategists Shaun Osborne and Eric Theoret note that stronger-than-expected United Kingdom (UK) Retail Sales, driven largely by fuel purchases, have supported the Pound (GBP), though broader UK data still point to a softer growth outlook. Short-term GBP/USD technicals are described as neutral to bullish, with a developing base pattern and clearly defined support and upside levels that could guide near-term price action.
Pound supported by data and pattern
"UK Retail Sales rose a stronger than expected 0.7% in March, largely reflecting purchases of fuel as prices rose in response to conflict in the Middle East."
"While UK data reports this week overall have been constructive, the Bank of England’s “Decision Maker Panel” survey of UK businesses also released today points a relatively soft picture for growth ahead. However, inflation expectations continue to nudge higher (nearing 4% and the highest since late 2023)."
"Neutral/bullish—Intraday price gains in Cable suggest some upward momentum is developing after the pound formed a base (via a bullish “morning star” pattern) on the intraday chart earlier. Support is 1.3450/60. Gains through 1.3495/00 may extend to 1.3555."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
ING analysts Frantisek Taborsky and Zoltán Homolya expect central bank of the Hungary, Magyar Nemzeti Bank (MNB) to keep its base rate unchanged at 6.25% throughout 2026. They argue that ongoing geopolitical uncertainty, elevated energy prices and Hungary’s specific vulnerabilities leave no room for rate cuts. Even with some supportive market moves, they see the central bank maintaining a hawkish, wait‑and‑see stance.
MNB seen on prolonged policy hold
"The continuing high level of uncertainty surrounding the war in the Middle East suggests that the NBH will keep interest rates unchanged at 6.25%. While it is true that the economy is better placed to absorb the impact of higher energy prices than in 2022, the persistence of high levels of geopolitical uncertainty certainly limits monetary policy flexibility."
"As a starter, a rate cut is definitely out of the question for April, and this is a high-conviction call. We expect the central bank to adopt a hawkish tone in an attempt to influence FX market stability, keeping the EUR/HUF at lower levels. We expect the Bank to demonstrate maximum flexibility in order to convince market players and present an image of strength, calmness, patience and caution."
"Based on the updated baseline scenario for energy markets and major central banks, which is more pessimistic than before, we forecast that Hungarian inflation will continue to accelerate for the remainder of the year. We expect it to average 3.5% in the second quarter, rise above the tolerance band in the second half of the year and average 4.3% in the final quarter. Given that energy prices remain higher than before and due to their impact on Hungary, we currently see no scenario indicating an interest rate cut this year."
"However, if the worst-case scenario materialises, inflation would rise significantly, exceeding 6% during the third quarter. The NBH could not ignore this and would be forced to raise interest rates."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
TD Securities economists, including Julie Ioffe and colleagues, expect the Bank of England to keep Bank Rate at 3.75% in a unanimous decision, maintaining a wait-and-see stance. They highlight resilient UK GDP and labour data, stronger inflation projections due to higher energy prices, and see the MPC emphasising scenario analysis as inflation stays above target in 2026 while growth softens later.
BoE seen on prolonged policy hold
"We expect the Bank of England to remain on hold, leaving Bank Rate at 3.75% in another unanimous vote. Last meeting showed a broad desire to wait and see, which was construed as hawkish at the time, but has since been clarified by MPC members as a measured approach to monitoring how the conflict will pass through to domestic prices beyond energy."
"We also see limited changes to the statement, acknowledging that "CPI inflation will be higher in the near term" and that "the MPC is alert to increased risk ... through second-round effects"."
"All told, the projections are almost certain to point to higher inflation across Years 1 & 2, while GDP growth is a little stronger initially and a little weaker further out. Year 2 inflation is likely to now be slightly above 2% (was 1.8%), and the risk is that Year 3 inflation nudges upward a bit to above the February forecast of 2.0%."
"A big question will be whether the MPC decides to emphasise scenarios much like some other central banks have done in recent projection exercises. This is something they've put increasing emphasis on in recent MPRs, so it wouldn't surprise us to see ECB-like scenarios of more severe energy price pressures, meaning more persistently high inflation and weaker GDP growth."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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