Forex News

Christopher Wong at OCBC writes that the Malaysian Ringgit weakened during Thursday’s Asian session on a firmer US Dollar and higher US Treasury yields after the FOMC, with USD/MYR briefly trading above 4.10 in an orderly move. He notes some pressure eased as the Dollar and yields retreated and Oil pulled back. Wong expects cautious MYR trading if US yields and the Dollar rise again, but sees room for recent weakness to reverse as post-Fed moves settle and domestic fundamentals remain supportive.

USD/MYR overbought as fundamentals support

"MYR weakened on Thursday Asian time zone amid firmer USD and higher UST yields post-FOMC. USD/MYR briefly traded above 4.10, although the move remained orderly and there was little sign of Malaysia-specific stress."

"That said, some pressure eased overnight as the USD and UST yields came off their highs, while oil also pulled back. Near term, MYR may trade cautious if UST yields and the USD push higher again."

"But as the post-Fed rates move starts to settle, there should be room for some of the recent weakness to reverse, with domestic fundamentals still broadly supportive."

"Bullish momentum on daily chart intact but RSI rose into overbought conditions. Lack of follow-through to the upside may see USD/MYR turn lower and close the earlier post-holiday gap."

"Support at 4.0870, 4.0730 levels (50 DMA). Resistance here at 4.10, 4.12 levels"

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

Scotiabank strategists Shaun Osborne and Eric Theoret highlight that the British Pound (GBP) is only marginally firmer versus the US Dollar (USD) despite stronger-than-expected August retail sales. They argue Thursday’s hawkish Bank of England (BoE) hold may cap near-term gains, even as UK politics remain supportive with continued confidence in the government’s fiscal responsibility. Technically, the broader uptrend from June persists, but GBP/USD must hold above the mid/lower-1.33s to preserve ascending support.

Pound struggles to build on data

"The pound is entering Friday’s NA session with a marginal gain and seeing little of the strength that should be following the release of stronger than expected retail sales data for August. The print was solid, and came in well above expectations of a modest contraction in consumer spending. The data follow Thursday’s hawkish hold from the BoE, which may have left limited scope for material near-term strength."

"In politics, the narrative remains constructive as market participants and media signal ongoing confidence in the government’s efforts to maintain their commitment to fiscal responsibility."

"Bearish/neutral—the RSI is bearish, having reached the oversold threshold at 30. The medium-term trend from June remains bullish however spot will need to remain above the mid/lower-1.33s in order to maintain the trend of ascending support."

"We look to near-term support around 1.3320 and see limited near-term resistance ahead of 1.3480."

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

• US 10-year yield returns to 5% after Fed hike.
• BoJ joins tightening wave as global inflation risks persist.
• October and December Fed hike odds keep yields elevated.

US Treasury yields rise on Friday, boosted mainly by the Federal Reserve’s (Fed) decision to increase rates on Wednesday, while the Bank of Japan (BoJ) added its name to the list of major central banks focused on preventing inflation from getting out of control.

Treasury yields climb as Fed and BoJ hikes reinforce inflation fears

The yield on the US 10-year Treasury note is up over six basis points to 5%, shy of Tuesday’s 5.041%, the highest since 2007.

Uncertainty around the Middle East conflict pushed Oil prices higher, increasing the risk of upside inflation. Consequently, major central banks are stepping in to raise interest rates.

On Friday, the Bank of Japan, in a 7-2 vote, increased interest rates by 25 basis points to 1.25%, its highest level in 31 years. Meanwhile, on Wednesday, the Federal Reserve unanimously opted for a rate hike of the same size as the BoJ, the first increase in three years, recognising that inflation is well above the Fed’s 2% goal.

The jump in US bond yields is moving in tandem with traders pricing in further Fed rate hikes. For the end of 2026, money markets priced in 34 basis points of tightening. The odds of a hike in October are 55%, and in December, 90%, according to Prime Terminal.

US Industrial Production remained flat from July to August at 0% MoM, falling short of July’s 0.2% and the expected 0.3% growth.

Next week, the US economic schedule includes speeches from Federal Reserve officials, jobs reports, S&P Flash PMIs, and Durable Goods Orders.

US 10-year Treasury yield – Daily Chart

Rabobank strategists Bas van Geffen and Elwin de Groot highlight that sharply higher Oil and natural gas forecasts will lift headline Eurozone inflation by about 0.5 percentage points in 2026 and 2027. They now see inflation peaking around 4.4% year-on-year in early 2027, with core inflation only modestly higher, and expect sluggish disinflation to keep the ECB deposit rate near 2.50% until at least 2028.

Higher energy lifts headline inflation

"These revisions have a significant impact on our inflation forecasts. Based on these higher prices for oil products and natural gas, our inflation models predict 0.5 percentage point stronger headline inflation across this year and next."

"We now expect inflation to peak at 4.4% y/y in January and February, after which base effects should gradually lessen the impact of energy prices on the inflation rate. This takes our inflation forecasts to 3.1% for 2026 and 3.5% for 2027."

"Whereas we revised our headline inflation forecast significantly, we only see 0.1pp higher core inflation. This is mostly due to the direct and indirect effects of higher energy prices, as well as the assumption that the war in the Middle East will lead to somewhat higher supply chain pressures in coming months."

"If economic activity stays resilient through the fourth quarter and energy inflation remains high, employees could demand higher pay increases to compensate for the loss of purchasing power. With inflation likely to peak around 4.5% early next year, that risk is non-negligible."

"Having said that, we do believe that core inflation will be sluggish on the way down. We therefore think that the ECB will leave the deposit facility rate at the upper end of the neutral range for some time, and rate cuts below 2.50% will probably not happen before 2028."

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