Forex News

• EUR/GBP is testing support at 0.8585 after failing to break above 0.8600.
• Eurozone final Q2 GDP has been revised up, but German Industrial Production disappointed.
• In the UK, Lloyds data revealed that house prices contracted against expectations in August.

The Euro (EUR) is trading lower against the British Pound (GBP) following mixed Eurozone macroeconomic figures on Monday. The EUR/GBP pair is testing support at a previous resistance area, at 0.8585 ahead of the US session opening, after failing to find acceptance above the 0.8600 area last week. 

In the Eurozone, data released by Destatis earlier on Monday revealed that the economy grew at a faster rate than previously thought in the second quarter, as the Gross Domestic Product (GDP) was revised up to 0.6% from the previously estimated 0.4% growth, which is a significant improvement from the first quarter’s 0.1% uptick. Year-over-year, Eurozone GDP has been revised to 1.2% growth from previous estimates of a 1% increase.

Earlier on the day, however, downbeat German Industrial Production figures cast doubt on the Eurozone's growth outlook and put negative pressure on the Euro. German factory output dropped 1.1% in July, against market expectations of a 0.3% increase, while June's reading was revised down to 0% from the 0.2% rise previously estimated.

In the UK, the Lloyds Housing Price Index, released earlier on Monday, showed that property prices contracted against expectations in August, but these figures failed to make any significant impact on the Pound.

Technical Analysis: Key support is at the 0.8565 area

EUR/GBP trades just above previous resistance, now turned support at 0.8585, with momentum indicators on intraday charts turning bearish. The Relative Strength Index (14) on the 4-hour chart has eased back toward 51, hinting at fading upside momentum, while the Moving Average Convergence Divergence (MACD) has slipped slightly negative, suggesting consolidation rather than a clear directional push.

A break below 0.8585 (July 30, August 19 highs) would expose the 0.8565 area where the trendline from mid-August lows crosses the September 2 trough. A break below here would negate the upside trend. On the topside, last week's high at 0.8607 is closing the path towards the June 29 and 26 peaks at 0.8632 and 0.8651, respectively.

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

(This story was corrected at 11:01 GMT to say that the EUR/GBP was rejected at 0.8600 last week, and not at 186.00 as previously stated.)

• USD/JPY resumes its downtrend on Monday and hits fresh six-month lows near 154.00.
• Market expectations of a faster BoJ tightening path have sent the Yen rallying across the board over the last few weeks.
• The pair is trading below the neckline of a large bearish Head & Shoulders pattern.

The Japanese Yen (JPY)  resumes its uptrend against the US Dollar (USD) on Monday, as the dust from a bright US Nonfarm Payrolls (NFP) report settles, and Japanese officials hint at some steepening of the Bank of Japan’s (BoJ) tightening cycle ahead. The USD/JPY pair has breached the support area around 155.15 to hit fresh six-month lows near 154.00 on Monday.

Analysts at Danske Bank note a marked shift in Japanese policy expectations, highlighting that in Japan, "Takuji Aida, economic adviser to PM Takaichi and seen as one of the most vocal opponents of BoJ rate hikes, now expects the Bank of Japan to raise rates at its 17-18 September meeting, followed by another hike by January next year."

"Aida warns that a faster tightening pace could weigh on the economy," affirm the Danske Bank experts in a note, which suggests that more rate hikes might be on the BoJ's pipeline.

NBIM shift underscores rotation from US Treasuries into Japan

Beyond that, Shreyas Gopal, Deutsche Bank’s FX analyst, has examined the implications of the Norges Bank Investment Management (NBIM) portfolio changes, concluding that the planned reallocation is “likely to, on net, result in a notable reduction in ownership of US Treasuries and a significant increase in allocation to Japanese government bonds.”

The report frames this shift as part of a broader reassessment of sovereign risk and diversification priorities, with the move into Japan’s government bond market seen as a potentially supportive medium-term factor for the Yen, even if the absolute flow size remains modest relative to global benchmarks.

Technical Analysis: USD/JPY highlights a large H&S formation

USD/JPY has pierced a support area a few pips above 155.00 on Monday, which is the neckline of a bearish Head & Shoulders (H&S) pattern on the daily chart, a common figure for trend shifts. Momentum indicators show the daily Relative Strength Index (RSI) (14) reaching oversold levels near 27, and the Moving Average Convergence Divergence (MACD) on the same timeframe heading lower at levels sub-zero. This reinforces the current downward momentum despite the risk of a corrective bounce.

The pair is now testing support at the February 24 low in the 154.00 area. Further down, the late January lows just above 152.00 will be targeted. The H&S's measured target is at the October 2025 low, at the 149.60 area. Upside attempts above the mentioned 155.15 area, on the other hand, are likely to meet resistance at the August 7 low, in the 156.60 area, and the August 20 low, near 158.00.

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

• EUR/JPY falls more than 1% on Monday, pressured by a sharp strengthening of the Japanese Yen.
• Markets now widely expect an interest rate hike in Japan at the September meeting.
• German Industrial Production disappoints in July, while Eurozone investor confidence improves significantly.

EUR/JPY falls 1.11% on Monday and trades around 179.45 at the time of writing. The sharp decline in the cross mainly reflects the strong appreciation of the Japanese Yen (JPY), supported by growing expectations of monetary policy tightening by the Bank of Japan (BoJ).

Investors now appear to have fully priced in a 25-basis-point interest rate hike at the next BoJ meeting, scheduled for September 17-18. Some analysts also see the possibility of a larger move aimed at containing inflation expectations and rising long-term bond yields.

Speculation about a potential intervention by Japanese authorities in the foreign exchange market provides additional support to the Japanese Yen. The combination of prospects for higher interest rates in Japan and intervention risks therefore benefits the Japanese currency and intensifies the downward pressure on EUR/JPY.

On the European side, the Euro (EUR) received mixed macroeconomic signals on Monday. Germany's Federal Statistical Office (Destatis) reported that German Industrial Production declined by 1.1% MoM in July, following stagnation in June, revised from the 0.2% increase initially reported. The reading came in well below the 0.3% growth expected by markets.

On an annual basis, German Industrial Production fell by 1.6% YoY in July, following a 0.5% contraction in June. The figures highlight the persistent difficulties facing the industrial sector of the Eurozone's largest economy.

Data from the rest of the region were more encouraging. The Eurozone Sentix Investor Confidence Index rose to 5.1 in September from 0.9 in August, signaling a significant improvement in investor sentiment.

Meanwhile, Eurozone growth was revised higher. Gross Domestic Product (GDP) expanded by 0.6% QoQ in the second quarter, compared with the previous estimate of 0.4%, marking its strongest quarterly growth rate since the second quarter of 2022. On an annual basis, growth is also revised higher to 1.2% YoY, from the previously estimated 1% and compared with 0.6% in the first quarter.

Despite these more encouraging developments for the Eurozone economy, EUR/JPY dynamics remain dominated on Monday by the strengthening of the Japanese Yen and expectations of imminent monetary tightening in Japan.

Brown Brothers Harriman’s (BBH) Elias Haddad expects Chile, Poland, Peru and Türkiye to keep policy rates unchanged at upcoming meetings. Haddad highlights that Chilean Peso (CLP) should trade stronger given copper, Polish Zloty (PLN) benefits from positive real rates and external balances, Peruvian Sol (PEN) may underperform if real rates stay negative, and tight policy in Türkiye is justified as disinflation stalls around 30% year-on-year.

Central bank holds and EM currency risks

"Chile’s central bank is widely expected to keep the policy rate on hold at 4.50% for a fifth straight meeting (Tuesday). The bank is in a good place to keep rates steady for some time. Two-year inflation expectation surveys remain close to its 3% inflation target and the policy rate is near the top of the bank’s 3.75%-4.75% neutral range estimate."

"USD/CLP should be trading much lower given the rally in copper prices, Chile’s main commodity export."

"National Bank of Poland (NBP) is widely expected to keep the policy rate at 3.75% for a fifth straight meeting (Wednesday). NBP delivered 200bps of cuts since July 2025 and the swaps curve implies 75bps of tightening to 4.50% in the next twelve months as inflation is gaining traction."

"Still, Poland’s positive real rates and favorable balance of payments backdrop continue to support PLN."

"Peru’s central bank (BCRP) is widely expected to keep rates unchanged at 4.25% for a 12th consecutive meeting (Thursday). PEN risks underperforming if the bank remains relaxed about above target inflation as it could keep real rates negative for longer."

"Türkiye central bank (CBRT) is widely expected to keep rates on hold at 37.00% for a fifth straight meeting (Thursday). The disinflationary process has stalled around 30% y/y and argues for continued tight monetary policy."

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

Commerzbank’s Tatha Ghose notes that Czech August CPI matched expectations and CNB forecasts, keeping inflation within target and allowing rates to stay unchanged on 17 September. However, underlying momentum is rising, with core and services inflation elevated, and the preconditions for a CNB rate hike intensifying, potentially bringing an end to the wait-and-see stance by November if core inflation and wages climb further.

Inflation momentum nudges CNB closer

"Czech August CPI picked up to 1.9%y/y from 1.7%y/y in July, exactly in line with market expectations and Czech National Bank’s (CNB’s) forecast. The usual year-on-year chart would therefore show inflation still within target, which allows CNB to keep rates unchanged at the 17 September meeting."

"On this framing, there would be no immediate need to respond with monetary policy. Latest wage data were also viewed to be dovish, which strengthens this narrative."

"But, in reality, the price level rose by 0.3%m/m, with fuel prices the main driver – up by an estimated 7%m/m – while food prices fell by 1.1%m/m and mitigated the headline effect."

"Core inflation likely remained at 3%y/y, and services inflation is still elevated at 4.5%y/y. In our preferred seasonally-adjusted month-on-month manner of examining inflation momentum, inflation is now exceeding the 2% target on annualised basis, even after exponential smoothing."

"This does not make a September rate hike any more likely, for sure. The Czech acceleration is still slower than the Polish one. But the direction is clear: the pre-condition for a rate hike is intensifying. If core inflation and wages were to drift higher in coming months too, CNB’s wait-and-see stance would come to an end by November."

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

Silver prices (XAG/USD) fell on Monday, according to FXStreet data. Silver trades at $65.90 per troy ounce, down 0.47% from the $66.21 it cost on Friday.

Silver prices have decreased by 7.29% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 66.94 on Monday, broadly unchanged from 66.91 on Friday.

(An automation tool was used in creating this post.)

RaboResearch notes that the ECB’s Transmission Protection Instrument provides a backstop for Eurozone government bonds during stress not justified by fundamentals. However, the report questions how robust this framework would be if simultaneous political turmoil hit major Eurozone economies, suggesting markets may need to reassess assumptions about Eurozone cohesion and the effectiveness of ECB interventions.

ECB backstop faces political stress test

"Germany, France, Italy, and Spain account for 60% of Eurozone GDP. Yes, there is a technocratic rules-based EU superstructure, and the ECB’s Transmission Protection Instrument that allows it to buy Eurozone government bonds during periods of market stress or disorderly conditions not justified by country-specific fundamentals. (Just imagine if the Fed under Warsh were to consider putting that kind of monetary policy in place in the current market environment: quelle horreur!) However, how comfortably could that trundle on if we were to see conflated trouble in the Big Four Eurozone political economies? But this isn’t a ‘European’ issue any more than it is a ‘US’ one."

"That’s as French far-left presidential candidate Melenchon, who wants more public spending, declared: “The ECB holds an enormous amount of French state debt. I propose to all the states of the eurozone to cancel this debt held by the ECB”. He added,“We are all members of the euro system, so this is a debt we owe to ourselves. The media establishment has tried to manipulate this reasonable proposal. It took us a few days of explanation to untangle their lies. That is now done. From now on, a poll shows that the French who support this proposal to cancel the debt are more numerous than those who oppose it.“ That’s on top of, “We will establish a public banking hub. Our country has a lot of money.”

"However, nationalist Le Pen is the election favourite. She promises a "golden rule" to keep fiscal deficits under 3% of GDP and a cost-cutting package - which includes €125bn from migration, “useless” public agencies, and France’s EU contribution; plus, she wants to roll back Macron’s pension reform so workers can retire at 62. Le Pen also favours a strategic rapprochement with Moscow, once the war is over, opposes economic sanctions, and aims to limit aid to Kyiv."

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

TD Securities economists Oscar Munoz and Eli Nir expect August Consumer Price Index (CPI) to prove subdued enough to keep the Federal Reserve (Fed) on hold in September, with the CPI-to-PCE translation also pointing to contained underlying inflation. They highlight Governor Waller’s preference to pause as long as the data allow, while warning that an upside inflation surprise could still trigger a rate hike.

Fed seen holding as data guide

"Governor Waller would rather keep rates on hold as long as inflation data allows him to do so. However, he emphasized the importance of the August CPI report."

"We expect CPI this week will prove subdued enough to keep the Fed on hold, but the PCE translation will be key."

"If our forecast materializes, core PCE would likely be a modest 0.18% m/m, with market-based an even more subdued 0.13%. This would be a welcome number for the more centrist members of the FOMC like Waller and Williams, and in our view, would be enough to keep the Fed on hold in September."

"We expect the Fed to remain on hold over our forecast horizon. Inflation should remain high for the rest of the year, and the labor market has stabilized, allowing the FOMC to shift focus to its inflation mandate."

"If the Fed were to move this year, we believe that move is more likely to be a hike than a cut."

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

United Kingdom (UK) Chancellor of the Exchequer John Healey signaled in a scheduled speech during the European trading session on Monday that the government will continue focusing on maintaining fiscal discipline, in an attempt to contain higher borrowing costs.

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Market reaction

No major reaction is seen in the British Pound (GBP) following remarks from UK Chancellor Healey. As of writing, GBP/USD trades 0.15% higher to near 1.3536.

Danske Bank’s Danske Research Team notes Brent crude trading near USD 97 as renewed US-Iran strikes around the Strait of Hormuz raise concerns over prolonged disruptions to Middle East energy flows. The bank highlights OPEC+’s decision to keep output policy unchanged and likely pause further increases in Q4, but stresses that actual supply control remains constrained by ongoing Iran-related disruptions.

Middle East risks keep Brent elevated

"In geopolitics, Brent crude is trading around USD 97/bbl this morning, extending last week's gains, as renewed US-Iran strikes on commercial shipping around the Strait of Hormuz raise concerns over prolonged disruptions to Middle East energy flows. In the Ukraine war, weekend talks by Witkoff and Kushner in Moscow and Kyiv sought to revive earlier peace proposals, but ended without a breakthrough."

"In commodities, OPEC+ kept oil output policy unchanged for October on Sunday."

"According to Reuters sources, the group is likely to pause further output increases in Q4 while it reviews 2027 quota baselines."

"More broadly, however, OPEC+'s ability to steer actual supply and prices remains limited as long as the Iran conflict continues to disrupt flows through the Strait of Hormuz."

"After an intraday low of USD 93 per bbl, the Brent oil futures contract has risen and currently trades around USD 97 per bbl, after the US and Iran exchanged attacks over the weekend."

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