Forex News

BNY Markets’ John Velis and David Tam examine upcoming Federal Open Market Committee (FOMC) minutes from Kevin Warsh’s first meeting as Chair. They argue that a more restrained communication style could make the minutes more market-relevant, with hawkish-leaning markets vulnerable to a less hawkish tone. The authors warn that silence or reticence may be interpreted as a deviation from perceived Federal Reserve views.

Warsh’s style and market perception

"During an otherwise quiet data week, the FOMC will release the minutes for the June meeting, Warsh’s first."

"Ironically, even if the text itself is even more parsimonious and sterile than usual, the Fed’s shift toward a more restrained communication style could make these minutes more market-relevant, given that we did NOT get the typical raft of post-meeting Fedspeak."

"On balance, the minutes may not actually be overtly dovish, but the absence of much hawkishness on the other side of the debate could catch a market that’s already leaning hawkish by surprise."

"Until markets fully calibrate to the new, more spartan communication style, we believe there’s a risk the absence of clear communication will be interpreted as a rejection of the Fed’s current market view, whatever that view is today."

"While markets will parse the minutes for clues about the Fed’s reaction function, we’ll be watching for clues about the markets’."

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

• GBP/USD edges down to near 1.3380 as the US Dollar ticks higher.
• The FOMC minutes will likely influence the Fed’s interest rate expectations.
• A smooth UK leadership transition appears to be supporting the British Pound.

The British Pound (GBP) ticks lower to near 1.3380 against the US Dollar (USD) during the European trading session on Tuesday. The GBP/USD pair edges down as the US Dollar gains slightly; however, the Cable is broadly upbeat.

At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% higher to near 100.90.

The US Dollar is expected to trade cautiously as investors await the Federal Open Market Committee (FOMC) minutes of the June policy meeting, which will be released on Wednesday. Investors will closely read FOMC minutes to get fresh cues regarding the Federal Reserve’s (Fed) monetary policy outlook.

In the United Kingdom (UK), firm hopes that ongoing fiscal principles will continue despite the leadership transition are supporting the British Pound. Andy Burnham, the newly elected Member of Parliament and Mayor of Greater Manchester, is the front-runner for UK leadership after Prime Minister (PM) Keir Starmer’s resignation.

GBP/USD technical analysis

GBP/USD trades at around 1.3380 at press time. The Cable has shown a stalwart rally after attracting significant buying interest near 1.3140 two weeks back. The pair holds a constructive near-term tone as it remains above the 20-day Exponential Moving Average (EMA) at 1.3320.

Momentum is mildly positive, with the Relative Strength Index (14) at 55.7, hinting that buyers retain control without the market appearing overstretched.

On the topside, the next key hurdle is the downward-sloping resistance trend line, which comes in around 1.3526 and caps the broader recovery. On the downside, initial support is seen at the 20-day EMA at 1.3320 ahead of the June low near 1.3140.

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

National Bank of Canada ’s (NBC) Stéfane Marion and Kyle Dahms note the US Dollar (USD) is trading near its 2026 high as sticky United States (US) inflation and wider rate differentials underpin the currency. They see USD support persisting near term but question imminent Fed tightening given softer payrolls and stretched speculative positioning. Their broad USD index forecast gradually declines from 120.8 to 115.9 by Q2 2027.

Dollar rally supported but stretched

"The greenback has extended its rally, hovering near its 2026 high as sticky U.S. inflation and wider rate differentials continue to support the currency. But with June payrolls softer, the household survey weaker, and speculative USD positioning now stretched, we are not convinced that Fed tightening is imminent. USD support should persist in the near term, but the rally looks increasingly crowded beyond Q3."

"That repricing has reinforced the dollar’s interest-rate advantage and helps explain why the greenback has gained ground against every major currency in the past month."

"We are less convinced, however, that the Fed is preparing to tighten policy imminently. June’s employment report showed nonfarm payrolls increasing by only 57K, well below consensus expectations, while prior months were revised down by a cumulative 74K. The household survey was weaker still, reporting a 507K decline in employment and a sharp drop in full-time positions."

"This confirms that the market has embraced the stronger-dollar narrative, but it also means that part of the move may already be reflected in investor positioning. As a result, the USD could become more vulnerable to softer inflation data, further signs of labour-market cooling, or any reduction in expectations of Fed tightening. Our view is therefore that the dollar remains well supported in the near term, but the combination of modest job growth and increasingly stretched positioning against extrapolating the recent rally beyond Q3."

"This interpretation is consistent with the considerable gap between the Federal Reserve’s own projections and those of private-sector economists. While half of FOMC participants anticipate higher rates this year, only around 10% of forecasters expect an increase. We share that skepticism: persistent inflation argues against rate cuts, but the modest uptrend in job creation suggests policymakers have time to wait before tightening further."

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

Deutsche Bank strategists note that the S&P 500 reached a three-week high as chip stocks rebounded, led by gains in the Philly semiconductor index and Broadcom after its expanded Apple partnership. However, most S&P 500 constituents declined, suggesting the rally was narrow, while renewed selling in Asian tech raises the risk of a reversal.

Chip rally lifts index despite weak breadth

"Before all that, markets put in a decent performance yesterday, with a generally quiet session as the US reopened after the holiday. On paper the headlines were pretty decent, with the S&P 500 (+0.72%) hitting a 3-week high thanks to a rebound in chip stocks, closing back within 1% of its record high."

"But under the surface, things weren’t quite as robust as they seemed. For instance, most of the S&P’s constituents actually fell on the day, as it was primarily the chip rally that lifted the index higher. Moreover, some of that US strength was just a post holiday catch-up to last Friday’s global performance. So over in Europe (which was open on Friday), the STOXX 600 fell -0.35% instead, and the 10yr bund yield (+1.3bps) rose as well. "

"Whilst rates were subdued, things were a bit more eventful on the equity side, with the Philly semiconductor index (+2.17%) recovering after last week’s decline. That included a decent gain for Broadcom (+3.73%), which followed the news that they’d be partnering with Apple (+1.31%) on developing new custom chips, with an expanded partnership that will now go through 2031."

"One theme in the pack is how astonishing moves in the South Korean equity market have been over the last year. This morning the extreme volatility continues with the KOSPI down -8.03%, with Samsung Electronics -9.3% lower, despite reporting a 19-fold increase in quarterly profit."

"The other KOSPI heavyweight SK Hynix is down -10.0% following the official launch of the marketing process for its planned US listing. Other tech heavy Asian markets are also lower with the Nikkei down -1.84%."

"Nasdaq futures are -1.03%, dragging the S&P equivalent -0.30% lower too. Elsewhere, the CSI and the Shanghai Composite are -0.83% and -1.04% respectively. Additionally, the Hang Seng (-0.42%) and the S&P/ASX 200 (-0.44%) are trading moderately lower."

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