Forex News

Danske Research Team notes that EUR/USD has extended its rebound towards 1.1600 as European yields remain elevated while US Treasury yields stabilize after the recent spike. The team argues markets are pricing too many ECB rate hikes, suggesting scope for European rates to move lower, while upcoming FOMC Minutes remain the key catalyst for further direction.

EUR/USD recovers as yields stabilize and ECB bets shift

"It was an ugly cocktail for European assets yesterday with equities moving lower, European yields rising as the curve bear-flattened and commodities tracking higher. While risk sentiment remains sour in Asia, US yields have steadied in overnight trading and the 10Y UST yield has dropped from an intraday high of 4.75% yesterday to 4.69%. In our Yield Outlook released yesterday, we conclude that markets expect too many ECB hikes and see room for European rates to move lower."

"In Germany, the ZEW economic sentiment surprised to the upside in August, with expectations rising to 34.2 (cons.: 30.0, prior: 26.3), while the assessment of the current situation improved to -61.1 (cons.: -69.3, prior: -77.6). The current situation is now almost back at the levels seen before the war in Iran, although expectations remain somewhat lower."

"The data follows a string of upside growth surprises in the euro area. Growth is also increasingly supported by fiscal stimulus."

"In the euro area, final July HICP inflation is due and is expected to confirm the flash estimate at 2.9% y/y for headline inflation and 2.5% y/y for core inflation."

"In the US, the minutes from the FOMC's July meeting are released this evening. Markets are looking for a more detailed sense of the committee's thinking beyond Kevin Warsh's limited forward guidance. Three participants voted in favour of a hike, and since then, several others have flagged willingness to support a hike if warranted by incoming data."

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

• USD/CAD pulls back below 1.3880 with bulls capped below 1.3900.
• Higher Oil prices and the pause in new US tariffs have provided a fresh boost to the Loonie.
• US Dollar bears are looking at the 200-day SMA, around 1.3850.

The US Dollar (USD) resumes its broader bearish trend with the Canadian Dollar (CAD) drawing support from higher Oil prices and a deal with the US to pause 50% tariffs on Canadian exports. The USD/CAD pair returns to levels below 1.3880, following rejection at the 1.3900 area, with bears eyeing the support zone at 1.3850.

US and Canada reached a last-minute deal earlier on Wednesday to delay imposing new tariffs on a wide range of Canadian goods for three days, as negotiations towards a trade agreement advance.

Beyond that, Oil prices, Canada’s main export, keep growing as the US-Iran peace process remains stalled and markets brace for an extended closure of the Strait of Hormuz. Brent Oil appreciated beyond 6% over the last three days, returning to the $90.00 area, which hints at higher trade revenues for Canada.

Technical Analysis: Support at the 200-day SMA is on focus

USD/CAD trades at 1.3876, retaining a mildly bearish near-term bias with momentum indicators in the daily chart deeply into bearish territory. The daily Relative Strength Index (RSI) hovers near 32, just above oversold levels, and the Moving Average Convergence Divergence (MACD) is well below zero, highlighting solid downside pressure.

Dips have been supported at the confluence of the 200-day Simple Moving Average (SMA) and the bottom of the descending channel, in the 1.3850 area, but the rejection at 1.3900 confirmed that bears are in charge. Further down, the next target would be the late May lows in the 1.3770 area.

On the topside, the 1.3900 level should be broken to ease bearish pressure and clear the path towards a previous support area and the channel top, near the 1.4000 level.

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

Derek Halpenny at MUFG notes that UK July CPI came in broadly as expected, with the headline rate rising to 2.9% mainly on higher utility bills, while services inflation eased. Combined with labour data showing modest wage growth and weak employment demand, he argues the Bank of England is likely to stay divided, with future moves hinging on Middle East-driven energy prices.

UK inflation, labour and BoE risks

"The July CPI data has just been released in the UK and was widely as expected, with the annual rate accelerating from 2.6% to 2.9% largely due to the rise of utility bills reflecting the 13% increase in the OFGEM price cap due to rising energy prices."

"The good news was that services prices fell as expected from 3.6% to 3.4% which paints a favourable picture of domestically generated inflation. The headline increase of 2.9% is a little higher than the 2.8% expected from the BoE but that’s close enough to view this data as broadly neutral from a markets perspective. The BoE assumes a peak of 3.2% in Q4."

"The data followed the employment data yesterday that showed slightly stronger headline wage growth although the private sector ex-bonus earnings increase slowed from 2.9% to 2.8%. With demand for labour still weak (PAYE employment fell 13k) the data still paints a picture of easing inflationary risks coming from the UK labour market."

"Combining the jobs and inflation data, this data is unlikely to alter the dial much in terms of BoE thinking. The MPC will remain divided and the risks ahead will still be determined more by the external Middle East factor driving energy prices with domestic conditions still likely viewed as offsetting those risks."

"If there is no resolution to getting the Strait of Hormuz reopened and energy prices rise further from here and stay elevated then the BoE may well have to hike by year-end. If energy prices fall, the BoE will be able to hold off."

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

Deutsche Bank strategists note that global equities endured another difficult session as rising yields and higher Oil reinforced a stagflationary backdrop. US indices, led by chip stocks and the NASDAQ, extended declines, while the STOXX Europe 600 posted its fifth consecutive drop. Asian markets followed with sharp losses in semiconductor-heavy benchmarks, and futures point to further weakness in US and European stocks.

Stagflation backdrop weighs on stocks

"For equities, the stagflationary backdrop meant it was another difficult session, with fresh declines on both sides of the Atlantic. In the US, that saw the S&P 500 (-0.69%) lose ground for a third consecutive session, with chip stocks as the biggest driver of the declines. In fact, the Philly semiconductor index (-4.98%) had its worst day of August so far."

"The NASDAQ (-1.33%) also underperformed, while the Mag-7 (-0.88%) was led lower by Meta (-4.42%). But the weakness was also broad-based, with the equal-weighted S&P 500 down -0.45%. Meanwhile in Europe, the STOXX 600 (-0.69%) posted a 5th consecutive decline for the first time in 2026 so far, alongside losses for the DAX (-0.80%) and the CAC 40 (-0.82%) as well."

"Overnight in Asia, there’s been a similar theme, with the selloff in chip stocks contributing to sizeable losses for the major indices. South Korea’s KOSPI (-5.44%) has seen the biggest declines this morning, but there’s also been sharp moves for the Nikkei (-2.85%), the CSI 300 (-2.41%) and the Shanghai Comp (-1.96%)."

"The main exception to that pattern has been the Hang Seng (+0.24%), with a modest advance. But equity futures are pointing to further declines today in the US and Europe, with those on the S&P 500 (-0.11%) and the DAX (-0.17%) both moving lower."

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

• Gold stages a modest recovery from a fresh weekly low amid the emergence of some USD selling.
• Oil-driven inflation risks remain supportive of elevated US bond yields and should limit USD losses.
• Traders await FOMC Minutes for interest-rate cues before placing directional bets on the bullion.

Gold (XAU/USD) climbs back above $4,350 during the first half of the European session, reversing a part of the previous day's heavy losses. The US Dollar (USD) attracts some sellers and, for now, seems to have stalled this week's goodish recovery from a two-month low, which, in turn, is seen as a key factor supporting the commodity. Bulls, however, might opt to wait for more cues about the US Federal Reserve's (Fed) future policy path before placing fresh directional bets on the non-yielding yellow metal.

Hence, the focus will remain glued to the release of FOMC Minutes amid inflationary jitters stemming from rising energy prices due to the Middle East crisis. In fact, crude oil prices climb to a nearly three-week high amid the US-Iran standoff over the Strait of Hormuz. President Donald Trump has asserted that the US is not engaged in talks with Iran and that the naval blockade of Iranian ports remains in full force. Furthermore, Trump posted a map on Truth Social depicting the strategic Strait of Hormuz as the new US territory.

Meanwhile, Iranian Parliament Speaker Mohammad Bagher Ghalibaf said the critical waterway would remain closed until the US fulfills conditions agreed to a June memorandum of understanding. This keeps the geopolitical risk premium in play and supports crude oil prices, fueling inflation concerns and lifting the longer-end 30-year US bond yield to its highest level since June 2007. Furthermore, CME Group's FedWatch Tool indicates that traders are still pricing in around a 68% chance of a Fed rate hike by the year-end.

Analysts at ING highlight that the US Dollar index (DXY) has “rebounded from the range lows at 99.40,” underlining that “the Dollar is not quite ready to make a sustained break lower just yet.” They point to “higher energy prices and rising 30-year Treasury yields” as the two key factors providing near-term support, noting that “both of these, should they extend, could put a September hike from the Fed back on the agenda.”

On the energy side, ING observes that “news that Washington seemingly has little interest in extending the 60-day ceasefire with Iran has seen oil and gas prices creep higher again.” While “in which direction the next big leg for energy prices emerges is anyone's guess,” the bank stresses that “higher energy is a Dollar positive – both through US energy independence and the Fed's reaction function.”

Apart from this, persistent geopolitical uncertainties might hold back bearish traders from placing fresh bets on the safe-haven Greenback, warranting some caution before positioning for any further appreciation in the Gold price.

XAU/USD daily chart

Technical Analysis

From a technical perspective, the XAU/USD pair has been struggling to find acceptance above the 50% retracement level of the April-June decline and remains well below the 200-day Simple Moving Average (SMA). This keeps the near-term bias tilted bearish despite the metal consolidating near recent highs.

Meanwhile, the Moving Average Convergence Divergence (MACD) remains above zero, though it has slipped back toward the signal, and the Relative Strength Index (RSI) at 59.24 stays in positive territory. This suggests that bullish momentum is still present but vulnerable to further corrective pressure while the Gold price fails to reclaim the aforementioned resistance levels.

Overhead, the 50% retracement at $4,406 is the first hurdle, with the longer-term SMA at $4,509 and the 61.8% Fibonacci retracement at $4,519.36 reinforcing a broader ceiling. On the downside, initial support emerges at the 38.2% Fibo. retracement at $4,292, guarding the pullback before the 23.6% retracement at $4,152 and the structural floor around $3,925.

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

Here is what you need to know on Wednesday, August 19:

Major currency pairs struggle to make directional moves midweek as investors await the next catalyst. Eurostat will publish revisions to July inflation data in the European session and the Federal Reserve (Fed) will release the minutes of the July policy meeting later in the day.

The UK's Office for National Statistics (ONS) reported on Wednesday that annual inflation, as measured by the change in the Consumer Price Index (CPI), climbed to 2.9% in July from 2.6% in June, coming in line with analysts' expectations. In this period, the core CPI rose by 2.6%, matching June's print. Meanwhile, the Producer Price Index - Input declined by 1.7% on a monthly basis, compared to the market forecast for a no change. After closing marginally lower on Tuesday, GBP/USD edges higher in the European morning and trades at around 1.3550.

The US Dollar (USD) benefited from the risk-averse market atmosphere on Tuesday, with the USD Index ending the day with small gains. Early Wednesday, the USD Index struggles to hold its ground and stays in the red near 99.50, while US stock index futures remain flat.

Dollar support persists as FOMC minutes eyed and DXY stays rangebound

Analysts at ING highlight that the “unresolved conflict in the Middle East is keeping energy prices bid and partially contributing to the rise in long-end yields.” They note that longer-dated US Treasuries “actually found a little demand on yields above 5.30% yesterday, but risks still look skewed to the upside here,” underscoring lingering upward pressure at the back end of the US curve.

For today, ING says the market’s attention will centre on “tonight's release of the FOMC minutes for the July meeting.” They remind clients that “the vote was 9-3 for unchanged rates and the event proved a dovish one for the short end of the US curve and the Dollar, while the long end sold off,” a pattern that could shape expectations for the Fed’s next steps.

US President Donald Trump said late Tuesday that no talks were underway or scheduled with Iran. Meanwhile, Iran's foreign ministry spokesperson Esmaeil Baghaei rejected the UAE's claim that Iran was behind missiles launched against the Gulf country a day earlier. Oil prices stay relatively calm early Wednesday, with the barrel of West Texas Intermediate (WTI) trading little changed on the day, at around $84.50.

USD/CAD edges lower and trades below 1.3900 after posting moderate gains on Tuesday. US President Trump announced early Wednesday that they have paused 50% tariffs against Canada for a three-day period following overnight negotiations with Canadian Prime Minister Mark Carney.

EUR/USD gains traction in the European morning on Wednesday and trades near 1.1600.

European Central Bank (ECB) policymaker said on Wednesday that it is essential to keep inflation expectations anchored but added that he sees no clear sinds of second-round effects.

After posting minimal gains for two consecutive days, USD/JPY turns south on Wednesday and declines toward 159.00.

Yen outlook hinges on BoJ path as markets ramp up September hike bets

Strategists at OCBC note that markets are now "increasingly pricing in a September BoJ rate hike, with implied odds rising to around 80% from 50% at the start of August." They argue that if the BoJ "accelerates policy normalisation and the JPY sheds its status as a low-yielding funding currency, the currency should strengthen over time." For now, OCBC says, "we maintain our end-2026 USDJPY target of 163" but the team adds that they "could become more constructive on the JPY if the BoJ signals a more aggressive rate hiking path or if Japan actively encourages capital repatriation, including through institutions such as the GPIF."

Gold lost nearly 2% on Tuesday and erased the previous week's gains. The precious metal stages a rebound in the European morning on Wednesday and trades above $4,350.

• Indonesian Rupiah holds ground as the BI decided to keep its interest rate at 5.75% in August.
• The US Dollar weakens as market expectations for a US interest rate hike next month ease.
• CME FedWatch tool suggests traders are now pricing in just a 32.8% chance of a rate hike in September.

USD/IDR depreciates after registering modest gains in the previous day, trading around 17,870 during the European hours on Wednesday. The pair holds losses as the Indonesian Rupiah (IDR) remains stronger following the release of the interest rate decision by the Bank Indonesia (BI).

Bank Indonesia kept its benchmark interest rate unchanged at 5.75% for a third consecutive meeting in August, matching market forecasts. The decision follows the sudden resignation of former governor Perry Warjiyo last month and the appointment of Senior Deputy Governor Destry Damayanti as interim chief, which sparked concerns over the central bank's independence from political pressure.

Additionally, the USD/IDR pair loses ground as the US Dollar (USD) weakens amid easing expectations of a US interest rate hike next month. Recent economic data showed that US Retail Sales dropped in July for the first time in nine months, compounding concerns after unexpected job losses last month and tame CPI inflation figures.

While the Fed left interest rates unchanged at its last meeting, three officials dissented in favor of a rate hike, prompting traders to look to the upcoming minutes for deeper insight into the division within the central bank. According to the CME FedWatch tool, traders now price in just a 32.8% chance of a rate hike at the Fed’s September meeting, down significantly from 51.2% a month earlier.

US Treasury yields reverse course as recent rally stalls

Analysts at Deutsche Bank highlight that the recent market move in rates broke with the broader pattern, noting that “the main exception to this pattern yesterday was US Treasury yields, which initially looked set for new highs before falling back.” This reversal came after weaker US housing and industrial data prompted the Atlanta Fed to trim its Q3 GDPNow estimate, allowing yields to retreat from their recent peaks and contributing to a softer tone for the Dollar.

Michael Pfister at Commerzbank reports that new 50% US tariffs on selected Canadian goods have been delayed by three days as an agreement is reportedly close, prompting only a modest Canadian Dollar (CAD) rebound amid uncertainty over the deal’s durability. He stresses that for a stronger CAD recovery, the new accord must prove robust and not be quickly questioned, given the slow domestic economic rebound.

Trade deal uncertainty and CAD recovery

"New US tariffs of 50% on certain Canadian goods were due to come into force today. But a few hours ago, the US President postponed them by three days, as an agreement has been reached and more time is needed to finalise it."

"The Canadian dollar reacted with relief to the announcement, although the movement was fairly muted. Market participants are presumably uncertain whether the deal will actually go ahead, and if so, what form it will take."

"Even if an agreement is ultimately reached, the focus in the coming weeks is likely to be on how robust the deal is. After all, although the USMCA was approved by the US President during his first term in office, he has criticised the trade agreement repeatedly in recent months."

"For the Canadian dollar to recover more strongly, the new agreement must not be called into question again after just a few weeks. In such a scenario, the slow recovery of the Canadian real economy is likely to continue"

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