Forex News

Societe Generale’s United Kingdom (UK) economists highlight political uncertainty around Andy Burnham’s potential Labour leadership challenge and its policy implications, but still expect limited radical change. On monetary policy, they note Megan Greene’s likely vote for a June rate hike, yet forecast the BoE to keep rates on hold. They see April Gross Domestic Product (GDP) up 0.1% month-on-month before growth slows later in 2026.

BoE hold expected despite hawkish voices

"Last week in the UK, Manchester Mayor Andy Burnham confirmed that he would seek to challenge Starmer in a leadership contest if he wins the Makerfield by-election."

"One poll suggests Burnham would win the 18 June Makerfield by-election with 49% of the vote vs 39% for Reform."

"Burnham also confirmed that he would not call a snap general election if he became leader."

"MPC member Megan Greene indicated in both an FT article and a speech this week that she would likely vote for a rate hike at the June meeting, joining Pill, who voted for a hike in April."

"However, we expect these members to remain in the minority and for the BoE to keep rates on hold in June."

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

BNY’s Bob Savage flags that Euro area Sentix sentiment remains in downturn territory, with Germany still classified in recession despite modest improvement. German manufacturing orders fell sharply in April, driven by autos and machinery, even as sales showed some resilience. Spain’s housing prices remain strong, while EUR/USD is little changed, reflecting offsetting regional dynamics.

Soft German data offset by Spanish housing

"Germany’s Sentix investor confidence index for June 2026 showed that sentiment remained weak despite a second monthly improvement in the euro area."

"The report still classed the euro area as in downturn and Germany in recession."

"Germany’s manufacturing orders in April 2026 fell 3.8% m/m on a real, seasonally and calendar adjusted basis, while rising 1.6% from a year earlier, according to Destatis."

"Spain’s housing price index for Q1 2026 rose 12.9% y/y, unchanged from the previous quarter, according to the National Statistics Institute."

"Prices increased in every autonomous community and city, led by Aragon and Murcia at 15.6%, while Catalonia, Navarra and the Basque Country posted the smallest gains."

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

ING’s Chris Turner sees the US Dollar (USD) underpinned by hawkish Federal Reserve repricing and a risk-off tone in equities ahead of key United States (US) Consumer Price Index (CPI) and Producer Price Index (PPI) data. With the Fed in blackout before the June FOMC, he expects limited pushback against tighter pricing and anticipates US Dollar Index (DXY) staying firm, potentially testing resistance around 100.25/65 as cyclical drivers dominate.

Hawkish repricing and tech-led risk-off

"At some point, that expected tightening will be too aggressive, but we cannot see that story being unwound this week. This is because it is another week for US price data, where the May headline CPI reading is expected to push through 4% year-on-year, and PPI final demand should remain near 6% YoY. We are now also in a Fed communication blackout period ahead of the 17 June FOMC meeting, meaning there is little to no scope for the Fed doves to push back against this pricing."

"In fact, we see the dollar staying bid into that FOMC meeting, given the market expects the central bank to remove its implicit easing bias."

"An unwind of risk assets and especially an unwind of emerging market positions is normally dollar-positive. This probably adds weight to US Treasuries as well, given that emerging market nations (and presumably Japan again sometime) will be liquidating Treasuries for FX intervention operations."

"One further source of dollar selling this week could come from Korea's National Pension Service. In exceptional times, it can increase its benchmark 15% hedge ratio on foreign assets and has said that it is doing so today."

"DXY should stay bid and looks biased to test resistance in the 100.25/65 area. The dollar's recent strength is a reminder that cyclical rather than structural factors continue to dominate."

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

UOB’s Quek Ser Leang and Lee Sue Ann note that EUR/USD plunged to a three‑month low around 1.1520 after breaking several key supports. In the near term, they see scope for a further drop toward 1.1490, while over the next 1–3 weeks, the pair is expected to continue weakening toward 1.1445, with resistance now capped around 1.1575/1.1600.

Momentum points to further Euro losses

"24-HOUR VIEW: Our view of range-trading last Friday was incorrect, as EUR nose-dived during the early NY session, breaking a couple of firm support levels on the way. EUR closed at 1.1519, down sharply by 0.78%. While the sharp and rapid decline appears excessive, there are no signs of stabilisation yet. Today, as long as 1.1575 (minor resistance is at 1.1535), EUR could drop toward 1.1490. That said, any further decline is unlikely to reach 1.1445 for now. "

"1-3 WEEKS VIEW: After holding the view that “EUR is neutral, and it is likely to trade between 1.1590 and 1.1685” for more than a week, we indicated last Thursday (04 Jun, spot at 1.1605) that “downward momentum is increasing, and if EUR breaks and holds below 1.1590, it would increase the risk of a decline toward the significant support at 1.1555.” We added, “the likelihood of EUR breaking clearly below 1.1590 will remain intact as long as 1.1655 (‘strong resistance’ level) is not breached.” Last Friday, EUR not only broke below 1.1590, but also breached 1.1555, plunging to a low of 1.1516. Given the sharp boost in downward momentum, EUR is likely to continue to weaken toward 1.1445. On the upside, the ‘strong resistance’ level is now at 1.1600 instead of 1.1655. In the near-term, 1.1575 is already a firm resistance level."

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

Brown Brothers Harriman’s Elias Haddad (BBH) highlights downside risks for the Pound as UK GDP is expected to contract in Q2 and markets price further Bank of England (BoE) hikes due to second-round inflation effects. Haddad forecasts GBP/USD lower and warns that domestic politics, including the Makerfield by-election and potential leadership challenges, could exacerbate any Pound undershoot.

Soft growth and political risk pressure Sterling

"UK April GDP is due Thursday. Real GDP is expected to fall -0.1% m/m vs. +0.3% in March and track below the Bank of England’s (BOE) baseline Q2 forecast of +0.1% q/q. PMI data indicate UK real GDP could contract by -0.2% q/q in Q2."

"Nevertheless, the swaps curve implies 64bps of BOE rate hikes to between 4.25% and 4.50% in the next twelve months because of upside risk to second-round effects in price and wage-setting stemming from the energy shock. A first full 25bps BOE rate rise is priced-in for the September 17 meeting."

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

"The UK political backdrop can amplify a GBP undershoot. Attention is increasingly shifting to the June 18 Makerfield by-election."

"Recent polls show Andy Burnham with a 10-point lead over Reform UK, 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.)

TD Securities economists Oscar Munoz and Eli Nir expect May US CPI to show moderating but still-elevated core inflation, with core CPI seen rising 0.23% m/m and 2.8% y/y, while headline CPI is expected to climb to 4.2% y/y. They flag shelter normalization, firmer airfares and oil-related upside risks as key drivers.

Core CPI seen moderating but sticky

"We look for core inflation to advance to 0.23% m/m in May, largely owing to shelter normalization following its temporary boost to prices in the last report. The ongoing oil shock should not only manifest in further strength in energy prices, but also in core services through firmer airfares. The core goods ex-vehicles segment should provide the bulk of the increase in goods prices, offset by another decline in used vehicles."

"We project the core CPI rose to 2.8% on a y/y basis, with headline inflation moving north by another 0.4pp to 4.2%—a three-year-high. We see the risks to our forecasts skewed to the upside in the event pass-through from jet fuel prices to airfares is larger than what we are assuming."

"We look for goods prices to advance at a subdued 0.13% m/m in May, remaining in line with its three-month average. As has been the case in recent reports, the core goods ex-vehicles segment should provide the bulk of the increase in prices, with gains in household goods, apparel and other goods acting as key drivers. Another decline in used vehicle prices likely acted as an offset."

"The ongoing oil-price shock and lingering tariff passthrough should result in the core segment nearing its peak for the year at 3.0% y/y in June—though the ongoing Iran conflict provides upside risks to our forecast. While we project m/m normalization in the final quarter of the year, core inflation is unlikely to achieve meaningful progress on a y/y basis in 2026."

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

BNY's Bob Savage reports that Brent and WTI surged around 4–5% as Iran–Israel missile exchanges raised fears of supply disruption and higher global inflation. Savage notes EU natural gas also climbed, while OPEC+ members agreed a modest 188,000 b/d production increase from July 2026 with flexibility to adjust. The balance between conflict risk and incremental supply will guide Oil pricing near term.

Middle East tensions drive crude higher

"WTI up 4.7% to $94.80, Brent up 4.7% to $97.50 – both reflect Iran/Israel missile exchanges and doubts about President Trump’s 60-day ceasefire negotiations."

"EU natural gas also moved higher, up 5% to €51.2, the most in three weeks, linked to the same fears of ongoing supply disruption."

"Draws could rise further to around 11 mb/d in June."

"Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman said they will implement a combined oil production hike of 188,000 b/d in July 2026."

"The group said the move reflects a cautious approach to supporting market stability amid evolving market conditions, while retaining full flexibility to increase, pause or reverse the phased withdrawal of cuts, including those announced in November 2023."

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

DBS Group Research notes that the Reserve Bank of India and government unveiled coordinated steps to attract foreign capital and support India’s external position. Measures include widening the Fully Accessible Route for G-secs, liberalising FPI debt taxation, boosting non-resident equity investment, and offering concessional forex swaps and FCNR(B) incentives, which could stabilise the Rupee and lift reserves if sizeable inflows materialise.

Capital inflow push to back Rupee

"The RBI and the government announced a host of coordinated measures to boost inflows and support the capital account math."

"These ticked all boxes to spur dollar inflows, which is likely to result in reserves accretion and stabilise the currency, signaling all hands are on deck."

"Ability to attract inflows upwards of $40-50bn will have a meaningful impact on the external balances, with our FY27 BOP estimate at ~$65bn (assuming oil at $85-90bl)."

"Facility under which full hedging costs will be provided (by the RBI) till Sep26 for Authorised dealers (ADs) to raise fresh 3–5-year FCNR (B) deposits."

"This scheme mirrors the move back in 2013 (discounted swap; attracted $26bn in deposits and $34bn on wider concessional swap facilities) to draw in non-resident deposits but will necessitate a higher subsidy by the RBI in the context of higher US rates currently vs 2013."

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

• The Euro has bounced up from 1.1505 lows but remains nearly 0.9% down from Friday's highs.
• Trump's calls for an immediate ceasefire between Israel and Iran have eased risk aversion.
• Eurozone Sentix Confidence Index and German Factory Orders depict a grim economic outlook.

The Euro (EUR) turned positive against the US Dollar (USD) in the daily charts heading into the US session opening on Monday as the EUR/USD bounced to 1.1540 after hitting three-month lows at 1.1499. US President Donald Trump's calls to end the hostilities in the Middle East have soothed investors and contributed to trimming some of the recent USD gains.

Trump affirmed earlier on Monday that final negotiations on "peace" are proceeding, and that getting in this way is subject to "ignorance or stupidity". The US President called for an immediate ceasefire of the hostilities between Israel and Iran after the rivals exchanged attacks, ramping up concerns of an all-out war and sending Oil prices higher.

In the Eurozone, the Sentix Investors’ Confidence Index ticked up in June, yet within levels consistent with a dismal investors' mood and, anyway, below the average numbers seen before the US-Israel attack on Iran. Earlier on the day, German Industrial Orders dropped well beyond market expectations, clouding the Eurozone outlook further and adding pressure on the EUR. 

On Friday, the US Labour Statistics Office revealed that Nonfarm Payrolls rose by 172K in May, beating expectations of an 85K rise, while April’s figures were upwardly revised to 179K from previous estimates of a 115K increase. These numbers confirm that employment creation is gathering pace in the US in 2026, after a weak 2025 year, and boost hopes that the Federal Reserve will tighten its monetary policy later this year, which has sent the US Dollar higher across the board.

Technical Analysis: looking like a dead cat's bounce

EUR/USD trades at 1.1540, yet with the near-term bias looking strongly bearish. The 4-hour Relative Strength Index (RSI) at around 38 and the negative Moving Average Convergence Divergence (MACD) both hint that downside momentum is still dominant despite a mildly oversold tone.

Initial support is aligned at April's bottom, around the 1.1500 area, ahead of the March 19 and 30 lows around 1.1430. Further depreciation below those levels seems unlikely today.

Upside attempts, on the contrary, are likely to find significant resistance at the previous channel bottom near 1.1580. In the unlikely case that those levels are breached, Thursday's and Friday's highs, near 1.1650, and the late Mat high at 1.1685, will be targeted next.

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

• The New Zealand Dollar advances after Iran announced the end of its military operations against Israel.
• Easing risk aversion weighs on the US Dollar and supports risk-sensitive currencies.
• Expectations of a Reserve Bank of New Zealand rate hike in July continue to underpin the Kiwi.

NZD/USD trades around 0.5830 on Monday at the time of writing, up 0.62% on the day after rebounding from a two-month low touched during the Asian session. The New Zealand Dollar (NZD) benefits from a weaker US Dollar (USD) as market sentiment improves amid signs of de-escalation in the Middle East conflict.

The move gained momentum after Iran’s armed forces announced the end of their military operations against Israel, while warning that any renewed Israeli attacks on Lebanon would trigger a stronger response. The statement came as US President Donald Trump said discussions toward a ceasefire between the two sides were underway. These developments reduced demand for safe-haven assets and put downward pressure on the Greenback.

The US Dollar Index (DXY), which measures the US Dollar against a basket of major currencies, falls toward the 99.90 area after recently reaching a two-month high near 100.20. The decline in the US Dollar offsets the impact of Friday’s solid US employment report. Nonfarm Payrolls (NFP) increased by 172K in May, while the Unemployment Rate remained unchanged at 4.3%, confirming the resilience of the US labor market.

Investors are now turning their attention to the release of the US Consumer Price Index (CPI) data on Wednesday. The inflation figures are expected to play a key role in shaping expectations for the monetary policy outlook of the Federal Reserve (Fed), as markets continue to assess the path of interest rates in the coming months.

On the New Zealand side, the New Zealand Dollar remains supported by expectations of tighter monetary policy from the Reserve Bank of New Zealand (RBNZ). Traders continue to price in the possibility of a rate hike as soon as July, with the Official Cash Rate expected to peak near 3.5% next year.

Market participants will also monitor China’s trade balance and inflation data, as well as New Zealand’s Business Purchasing Managers Index (PMI) figures later this week. These releases could provide fresh insight into the regional economic outlook and influence the direction of NZD/USD.