Forex News

• USD/CAD trades around 1.3975 on Thursday, up 0.23% on the day as demand for the US Dollar strengthens.
• Concerns over a potential collapse of the US-Iran ceasefire continue to drive safe-haven flows.
• The Bank of Canada maintains a cautious tone as markets monitor inflation risks and geopolitical tensions.

USD/CAD advances toward 1.3975 on Thursday at the time of writing, up 0.23% on the day, with the US Dollar (USD) benefiting from renewed safe-haven demand amid persistent tensions in the Middle East.

Market sentiment remains fragile as investors question the durability of the ceasefire between the United States (US) and Iran. The exchange of attacks between the two countries in recent days has fueled fears of a renewed regional escalation. According to the Wall Street Journal, US President Donald Trump stated that recent US military operations were a response to Tehran’s downing of a US Apache helicopter rather than the start of a broader conflict. Meanwhile, CNN reported that diplomatic talks between Washington and Tehran remain on track, although this has not been enough to fully restore risk appetite.

This cautious environment is supporting the US Dollar, with the US Dollar Index (DXY) rebounding toward 100.05 at the time of press. More growth-sensitive currencies, including the Canadian Dollar (CAD), are struggling to benefit from an environment dominated by geopolitical uncertainty.

The Greenback is also supported by expectations of a more restrictive monetary policy stance from the Federal Reserve (Fed). Data released on Wednesday showed that Consumer Price Index (CPI) inflation accelerated to 4.2% YoY in May, its fastest pace in more than three years and more than double the Fed’s 2% target. The report reinforced expectations that the central bank could raise interest rates later this year, pushing US Treasury yields higher.

In Canada, the Bank of Canada (BoC) left its policy rate unchanged at 2.25% at its June meeting. Governor Tiff Macklem noted that persistently elevated energy prices could require additional policy tightening, while also acknowledging that further US trade restrictions could weigh on growth and justify additional easing. Deutsche Bank noted that the central bank is keeping its options open amid heightened uncertainty, while Rabobank argued that a technical recession and weak investment activity limit the scope for rate hikes.

This divergence between the Federal Reserve (Fed), which remains focused on elevated inflation, and the Bank of Canada (BoC), which is increasingly concerned about economic growth, continues to provide fundamental support for USD/CAD. Investors now await upcoming US Producer Price Index (PPI) data and any new developments regarding Iran to assess the pair’s near-term direction.

Brown Brothers Harriman’s (BBH) Elias Haddad notes the US Dollar (USD) is firm as United States (US) data show stalled disinflation and sticky inflation measures drifting away from the Federal Reserve’s (Fed) 2% target. Haddad expects USD to edge higher, supported by improving US labor demand and a more restrictive Fed stance, with attention turning to May Producer Price Index (PPI) and key services components.

USD supported by sticky inflation backdrop

"USD is firm. We expect USD to edge higher as the US macro backdrop of improving labor demand and sticky inflation back a more restrictive Fed policy stance."

"Yesterday, US May CPI data showed that the disinflation trend has stalled. In line with consensus, headline CPI inflation quickened to 4.2% y/y (vs. 3.8% prior), the highest since April 2023, on higher gasoline prices. Core CPI also matched consensus at 2.9% y/y (vs. 2.8% prior), but the monthly rise was -0.1ppt less than expected at 0.2% m/m (vs. 0.4% prior)."

"Importantly, the CPI measures which filter out extreme price swings, like the core services less housing CPI, Atlanta Fed sticky CPI, Cleveland Fed 16% trimmed mean CPI, and Cleveland Fed median CPI are moving further away from the Fed’s 2% target."

"US May PPI is up next (1:30pm London, 8:30am New York). Watch out for PPI Services less Trade, Transportation, and Warehousing as it partially feeds into core services less housing PCE."

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

ING’s Chris Turner argues that with a 25bp ECB hike and further tightening already priced, the Euro faces a high bar for gains. Markets discount about 75bp of tightening through early next year. Without a clear hint of another hike in July, he sees limited scope for higher EUR swap rates, with EUR/USD capped near 1.1565/75 and vulnerable towards 1.1500 on strong US PPI.

Euro struggles with aggressive pricing

"The market expects a hawkish ECB meeting today, including a 25bp hike in the deposit rate to 2.25% and plenty of hawkish rhetoric."

"This means that today's hike is fully priced into money markets, with another 25bp hike priced by September."

"Pricing a 75bp tightening cycle in response to a stagflationary shock may be as far as pricing can go at the moment."

"Unless the ECB hints that it might need to hike again in July (8bp is priced so far), the prospects for higher short-term EUR swap rates to lift the euro today look limited."

"Short-term resistance at 1.1565/75 may be enough to contain the EUR/USD upside today."

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

• The Indian Rupee faces intense selling pressure against the US Dollar due to a strong recovery in oil prices.
• FIIs continue to squeeze their stake in the Indian stock market.
• India’s CPI in May is seen higher at 4% YoY from 3.48% in April.

The Indian Rupee (INR) tumbles at open against the US Dollar (USD) on Thursday, with the USD/INR pair rising to near 95.75. The pair gains as a sharp recovery in oil prices due to fears surrounding the collapse of the ceasefire between the United States (US) and Iran has weakened the Indian Rupee.

In India’s morning session, the MCX Crude Oil contract expiring on June 18 is up 0.7% to near 8,787. The contract surged 3.6% on Wednesday even after recovering significant losses.

The appeal of currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, diminishes in a high oil price environment.

US confirms attacks don't mean the restart of an all-out war

On late Wednesday, the US Central Command (CENTCOM) confirmed that it launched additional “self-defense strikes” on multiple targets in Iran as retaliation against Tehran’s "unwarranted and continued aggression”. This came after the US CENTCOM launched a series of attacks on Iran’s air defense, ground control stations, and surveillance radar sites near the Strait of Hormuz on Tuesday in response to Iran shooting down the US Apache helicopter.

Additional military operations from Washington were already anticipated as US President Donald Trump said in an interview with Fox News that he is close to ordering new strikes against Iran for taking too long in finalizing a deal.

Before remarks pointing to ordering fresh strikes against Iran, US President Trump also said in a post on Truth Social that Iran has to pay the price for taking too much time in reaching a deal.

However, the ceasefire between the US and Iran announced in April appears not to have collapsed yet as US President Trump has told aides to deliver a message to Iran via Qatar that the attacks did not mean a “restart of all-out war,” and were only in response to the helicopter downing, The Wall Street Journal (WSJ) reported.

FIIs sentiment towards Indian stock market remains dull

Overseas investors continue to pare their stake in the Indian stock market as higher oil prices keep weighing on India Inc.’s earnings projections. So far in June, Foreign Institutional Investors (FIIs) have remained net sellers on all trading days and have offloaded their stake worth Rs. 62,654.34 crore.

India’s CPI data awaited

On the domestic front, the major trigger for the Indian Rupee will be the Consumer Price Index (CPI) data for May, which will be published on Friday. Investors will closely monitor the data to get fresh cues regarding the Reserve Bank of India’s (RBI) monetary policy outlook.

In the policy meeting last week, the RBI kept the Repo Rate unchanged at 5.25%, as expected, and warned that the central bank would need to act “if inflation gets generalized”.

India’s CPI data is expected to arrive higher at 4% Year-on-Year from 3.48% in April.

Technical Analysis: USD/INR stays close to 20-day EMA

USD/INR trades higher at around 95.75 at press time. The near-term trend of the pair appears to be sideways in an overall bullish structure amid the Symmetrical Triangle formation. The pair remains close to the 20-day exponential moving average (EMA), which is at 95.4886, indicating a sideways trend.

The Relative Strength Index (RSI) at 53.79 is near neutral but slightly positive, hinting that upside pressure persists, even as the pair consolidates beneath the descending resistance trend structure derived from prior highs.

On the topside, initial resistance is seen at the bearish trend-line break area near 96.03, where a clear daily close above would open the way for a more sustained recovery towards the all-time high at 97.08. On the downside, immediate support sits at the 20-day EMA at 95.49, with the next, more structural, floor at the rising trend-line region around 94.77; a break below this latter level would weaken the current constructive tone and expose deeper retracements.

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

• The British Pound faces slight selling pressure ahead of the UK's monthly GDP data for April.
• The UK economy is expected to have contracted 0.1% in April.
• Fears of US-Iran ceasefire collapse have improved demand for safe-haven assets.

The British Pound (GBP) trades cautiously against its major currency peers during the European trading session on Thursday, down 0.1% to near 1.3350 against the US Dollar (USD). The British currency is marginally down ahead of the United Kingdom (UK) monthly Gross Domestic Product (GDP) data for April, which will be released on Friday.

The Office for National Statistics (ONS) is expected to report that the GDP growth contracted by 0.1% after expanding 0.3% in March. The scenario of UK economic contraction would undermine expectations of Bank of England (BoE) interest rate hikes despite inflationary pressures remaining higher in the wake of elevated energy prices.

On Friday, investors will also focus on the Manufacturing and Industrial Production data for April, which are expected to have remained mixed. Month-on-Month Industrial Production is estimated to have grown by 0.1% after declining 0.2% in April. In the same period, the Manufacturing Production is seen contracting at a 0.2% pace.

Meanwhile, fears of the United States (US)-Iran ceasefire collapse have also dampened the appeal of riskier currencies, resulting in an improvement in the US Dollar’s safe-haven demand. In the European trade, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, has turned slightly positive to near 100.12 after recovering early losses.

Investors doubt the US-Iran ceasefire would last long, following attacks traded between both nations in the past few days. However, US President Donald Trump has stated that military operations conducted by Washington were a response to Tehran for shooting down the US Apache helicopter, and not a restart of an all-out war, the Wall Street Journal (WSJ) reported.

Next week, the British Pound will be facing high volatility due to a UK data-packed week and the BoE monetary policy announcement.

• Gold edges higher following a $400 sell-off, but remains capped below $4,100 so far.
• Rising tensions in Iran and higher expectations of Fed hikes are weighing on precious metals.
• XAU/USD has reached oversold levels at lows right above the $4,000 psychological level.

Gold (XAU/USD) trades with minor gains on Thursday but remains struggling below $4,100, amid geopolitical uncertainty and rising bets on Federal Reserve (Fed) rate hikes. The precious metal, however, has reached oversold levels after a $400 selloff over the last three days and might find support at the $4,000 psychological area.

Geopolitical tensions remain a headwind for a significant Gold recovery. The US and Iran exchanged attacks for the second consecutive day, and US President Donald Trump threatened to hit the country harder if Tehran refuses to sign a deal. The CNN reported that US-Iran negotiations are still on track, citing diplomatic sources, but the market sentiment remains weak.

On Wednesday, US Consumer Price Index (CPI) figures confirmed that yearly inflation accelerated to the highest level in more than three years in May, reaching levels more than twice the Federal Reserve’s (Fed) 2% target. These figures have endorsed the Market view that the central bank will be forced to hike rates later in the year, which sent US yields jumping and the US Dollar up with them.

Technical Analysis: Gold might find support at the $4,000 area

XAU/USD trades at $4,092, amid a strong downside bias, holding well beneath the 200-day simple moving average (SMA). The Relative Strength Index (RSI) in the daily chart is in oversold territory, hinting at an overextended decline as prices approach the $4,000 psychological area, although the Moving Average Convergence Divergence (MACD) remains deep in negative territory.

Immediate support is at the daily low of $4,023, ahead of mid-November 2025 lows, right above the mentioned $4,000 level. Further down, the late-October 2025 low, near $3,884, emerges as the next target.

Upside attempts, on the contrary, remain capped below the previous year-to-date low around $4,100. Bulls should breach this level and the bottom of the previous downtrend channel, now around 4,200, to ease downside pressure and test Tuesday's high at the previous support area near $4,360.

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

Michael Pfister at Commerzbank notes the Bank of Canada (BoC) kept rates at 2.25% and sees little impetus for near-term tightening given easing core inflation and a weak real economy. Market pricing now reflects only one hike by December. He argues monetary-policy pressure on the Canadian Dollar (CAD) should ease, leaving USD/CAD direction dependent on broader US Dollar moves.

BoC caution weighs on Canadian Dollar

"As expected, the Bank of Canada (BoC) kept its key interest rate at 2.25% yesterday. At the same time, policymakers gave little indication that this might change in the near future."

"We have argued for some time that, if at all, the BoC's first interest rate hike is unlikely to take place until December. The latest figures, however, now suggest that it might come even later, although there is still plenty of time until then."

"Market expectations have shifted in this direction in recent weeks too, with only one rate hike currently priced in by December. Pressure on the Canadian dollar from monetary policy is likely to ease somewhat accordingly."

"With the USMCA negotiations approaching and the real economy weakening, as well as political concerns, there are nevertheless still many problems. Those anticipating lower USD/CAD levels should therefore continue to hope for a weaker US dollar."

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

• AUD/USD is hovering a few pips above two-month lows at 0.6987.
• Escalating tensions in the Middle East keep risk appetite subdued and weigh on the Aussie.
• The US Dollar is drawing support from rising expectations of Fed rate hikes.

The Australian Dollar (AUD) has given away previous gains and is trading lower for the third consecutive day against a stronger US Dollar (USD) on Thursday. The uncertain situation in the Middle East continues to weigh on the risk-sensitive Aussie, while rising bets of Federal Reserve (Fed) rate hikes are buoying the Greenback.

Investors remain averse to risk as the US and Iran exchange attacks for the second consecutive day, with news from the region giving conflicting views. US President Donald Trump threatened earlier on Thursday with further attacks if Tehran does not sign a peace deal, while CNN reported that negotiations are still on track, citing diplomatic sources.

On the macroeconomic front, US Consumer Price Index (CPI) figures released on Friday showed the hottest yearly inflation levels in more than three years. These figures, coupled with the strong labour market report released last week, have boosted hopes that the US central bank will have to hike rates at least once this year, which is providing additional support to the USD.

In Australia, the calendar has been thin this week. Trade Balance data from China, a key partner, was supportive, but the positive impact on the Aussie was offset by weak Australian consumer confidence data and fears of an all-out war in Iran, which would extend the closure of the Strait of Hormuz.

Next week, the focus will shift to the Reserve Bank of Australia (RBA), which is expected to keep rates on hold and might shed some light on the next steps as weak Australian data have boosted speculation about rate cuts.