Forex News

Elias Haddad at Brown Brothers Harriman argues the Dollar can keep benefiting from widening US-G6 rate differentials and higher US real yields. However, tightening by other major central banks limits policy divergence, suggesting the DXY index may struggle to sustain a break above its June 24 high at 101.80, even though US growth outperformance and foreign demand for US assets remain supportive.

DXY faces constrained upside

"USD can continue to benefit from widening US-G6 interest rate differentials and rising US longer-term real yields."

"Still, tightening by other major central banks limits policy divergence with the Fed and suggests DXY could struggle to sustain an overshoot of its June 24 high at 101.80."

"Even so, US economic growth outperformance and strong foreign appetite for US securities can override that upside USD constraint."

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

• WTI Oil rallies nearly 3.5% on Monday to session highs at $94.80 after the rejection of another peace proposal.
• Trump said that Tehran's peace plan was not acceptable and threatened to resume bombings after midterm elections.
• IRan reiterated on Sunday that they will not soften the conditions to reopen the Strait of Hormuz.

Oil appreciates firmly on Monday, following US President Donald Trump's refusal of Tehran’s latest proposal to cease hostilities and reopen the Strait of Hormuz. The US benchmark West Texas Intermediate (WTI) Oil barrel is trading at $94.60 at the time of writing, up nearly 3.5% on the day so far.

Is back to square one in the Middle East as Trump rejected a seven-day ceasefire proposal and vowed to resume attacks on Iran after the US midterm elections. Trump also said that the US was “winning tremendously” in the war and that “massive amounts of Oil” are passing through the key Strait of Hormuz.

Reports by the Kpler ship-tracking firm show that Oil traffic through Hormuz increased to 12.8 million barrels per day in September, the highest level since the war started on February 28. These figures, however, are far below the average of 20 million barrels per day crossing the waterway before the beginning of the war on February 28, and, obviously, not enough to ease concerns of a global supply shortage.

Iran claims complete control of Hormuz

Iranian foreign Minister, Abbas Araghchi said that the country is prepared for a “doomsday” war with the US, but  he also said that his country is open to “real diplomacy.” Beyond that, A top Iranian military official said that Tehran has “complete control” of the Strait of Hormuz, and that they will “act decisively in the North of the Oman Sea and the east of the Strait of Hormuz and do not allow anyone to cross.”

Analysts at Deutsche Bank highlight that “even though US-Iran talks could resume this week, there was little sign of a breakthrough over the weekend and bond yields and oil have climbed again this morning.”

The bank notes that tensions remain elevated after “Iran reiterated on Sunday that it would not soften its conditions for reopening the Strait of Hormuz,” with Foreign Minister Abbas Araghchi insisting that Tehran would not back down from demands including “sanctions relief, access to frozen assets and an end to US blockade measures.”

• BoE's Dave Ramsden sees increasing upside risks to the UK inflation outlook.
• Energy, food prices and supply-chain pressures remain key inflation risks.
• Further inflation pressures could create a case for higher interest rates.

Bank of England (BoE) Deputy Governor Dave Ramsden said on Monday that risks to the inflation outlook have become increasingly tilted to the upside, according to Reuters.

Ramsden said he remains focused on external pressures from energy prices, weather and Artificial Intelligence (AI) supply chains, alongside domestic risks from food prices and potential second-round effects.

The BoE policymaker added that if upside inflation pressures continue to build, there could be a case for raising the bank rate. However, Ramsden does not expect the central bank to consider further Quantitative Easing (QE) anytime soon.

Ramsden flags upside inflation risks, keeping GBP supported

BoE’s Ramsden scores 8.4/10 on FXS Speechtracker, notably above the historic 7.1/10 baseline, signalling a stronger-than-usual policy impact. The focus on external inflation pressures from energy, weather and AI-related supply chains, alongside domestic indirect effects in food prices and potential second-round effects, marks a clear hawkish tilt.

By stating that risks to the inflation outlook have shifted to the upside and that continued upside pressures could justify increasing Bank Rate, Ramsden reinforces expectations that the BoE may need to keep policy tight or even re-tighten. This hawkish bias is supportive for GBP, especially against the Euro and Dollar, as markets reassess the probability of renewed rate hikes or a prolonged high-rate stance.

Market reaction

The British Pound (GBP) shows no significant reaction to Ramsden’s hawkish comments. GBP/USD remains higher, gaining 0.21% on Monday to trade around 1.3250 at the time of writing.

BBH’s Elias Haddad highlights that the Dollar is broadly firmer, but intervention warnings from Japanese officials are supporting the Japanese Yen. Japan’s top currency diplomat stresses a “very clear” joint message from Tokyo and Washington on Yen weakness, and BBH expects USD/JPY to trade within a 155.00–160.00 range in the near term as these risks constrain moves.

Yen supported by intervention threat

"USD is broadly firmer, but intervention risk keeps JPY on the front foot."

"Japan’s top currency diplomat Atsushi Mimura said markets should heed the “very clear” message Tokyo and Washington sent last week on yen weakness."

"We expect USD/JPY to hold within a 155.00-160.00 range in the near term."

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

Deutsche Bank’s Jim Reid and team note that the US Dollar was the strongest-performing G10 currency last week as Treasury yields surged and markets repriced a more hawkish Federal Reserve. The Dollar Index gained, while Gold prices fell as higher real and nominal yields pressured non-interest-bearing assets. The report also highlights broader credit spread widening alongside resilient equities.

Dollar gains as yields surge

"When it came to other assets, the surge in Treasury yields and the hawkish Fed repricing meant the US Dollar was the strongest-performing G10 currency."

"Indeed, the Dollar Index was up +0.81% last week (-0.25% Friday)."

"Meanwhile, Gold prices fell -2.14% (+0.23% Friday), as higher real and nominal yields put downward pressure on precious metals as a non-interest-bearing asset."

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

Kit Juckes at Societe Generale notes that EUR/USD forecasts have been repeatedly revised down as Dollar strength persists. While consensus has moved from 1.20 to 1.16 and Societe Generale now sees 1.15, client discussions suggest markets are even more Dollar-bullish. Strong US data and inflation could push EUR/USD toward new lows in the near term.

Forecasts cut as pair grinds lower

"At the start of this year, consensus forecasts expected EUR/USD to reach 1.20. We projected 1.14. Now, the consensus has moved down to 1.16, while our forecast stands at 1.15 (and I'm regretting the change)."

"The impression we get from client meetings is that the market is, overall, considerably more dollar-bullish than even those forecasts suggest. Elevated oil and other commodity prices, robust US economic data, and a more risk-averse global environment have bludgeoned bearish dollar views."

"Higher inflation and resilient real-economy data could propel the Dollar Index to a near-2026 high (just 0.7% away) or push EUR/USD to a new low (only 0.5% away)."

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

Deutsche Bank’s Jim Reid notes that global equities, including the S&P 500, held up well despite a notable rise in bond yields and hawkish rate expectations. The S&P 500 gained over 1% on the week and remains close to record highs, supported by optimism on growth and strong PMI data. Tech stocks, including the Magnificent 7, also contributed to the positive equity performance.

US stocks hold near highs

"Yet despite the rates selloff, the optimism on the growth side helped to sustain equities last week around the world."

"For instance, the S&P 500 was actually up +1.21% last week (+0.51% Friday), leaving the index within 1% of its record high."

"Meanwhile in Europe, the STOXX was up +0.50% (+0.35% Friday), and Japan’s Nikkei was up +2.07% (+1.30% Friday)."

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