Forex News
- EUR/USD holds modest gains as a softer US Dollar offers support.
- US-Iran tensions revive energy-driven inflation risks.
- Upcoming inflation data could shape the ECB's and the Fed's next policy moves.
EUR/USD holds modest gains on Thursday, supported by some softness in the US Dollar (USD) as markets assess renewed hostilities in the Middle East. At the time of writing, the pair trades around 1.1444, up 0.25% on the day.
The latest escalation between the United States (US) and Iran has failed to provide a strong boost to the US Dollar. At the same time, downside in the Greenback has remained limited, reflecting market uncertainty over whether the interim peace agreement between Washington and Tehran will hold or collapse.
The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades around 100.90 after touching an intraday low of 100.79.
Meanwhile, energy-driven inflation risks are back at the forefront as Oil prices rebound on growing security concerns around the Strait of Hormuz, a critical chokepoint that handles about 20% of global Oil flows.
As a result, traders are increasingly expecting central banks to tighten monetary policy. Markets anticipate another European Central Bank (ECB) interest rate hike later this year, while the CME FedWatch Tool shows a 63% probability of a Federal Reserve (Fed) rate hike at the September meeting.
Minutes from both the ECB's and the Fed's June meetings showed policymakers remained concerned about upside risks to inflation. Traders will closely watch next week's inflation data from both sides of the Atlantic as they look for fresh clues on the next policy moves.
New York Fed President John Williams said on Thursday, "Inflation is still far too high," adding that the Fed is "actively debating scenarios around inflation" and remains committed to bringing inflation back to its 2% target.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Christopher Wong notes that Korean Won strength remains largely flow-driven, with USD/KRW dropping below 1,500 on offshore fund repatriation and official vigilance. While bearish momentum persists, Wong expects the pullback to moderate and sees a sustained break below 1,500 as requiring a benign backdrop for the Dollar, Oil and equities.
Flow-driven strength faces key levels
"KRW continued to outperform, with USD/KRW falling from almost 1,560 at the start of the month to sub-1500 briefly yesterday before rebounding. The move looks flow-driven rather than risk or macro-driven."
"KRW strengthened despite a less friendly macro backdrop, including the oil spike, renewed geopolitical concerns and KOSPI underperformance. USD/KRW appears to have been weighed by inflows and repatriation of funds raised offshore, while official vigilance has also stayed high as Korea shifts into 24-hour trading of USD/KRW."
"For now, flow dynamics may keep KRW supported, but a sustained break below 1500 may still require the broader USD, oil and equity backdrop not to worsen further."
"Bearish momentum on daily chart remains intact while RSI shows tentative signs of turnaround from near oversold conditions."
"Support at 1495 levels (100 DMA), 1490 (50% fibo retracement of 2026 low to high). Resistance at 1511 (50 DMA), 1528/29 levels (21DMA, 23.6% fibo)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Federal Reserve (Fed) Bank of New York President John Williams said in the Future of Market Liquidity and Functioning Workshop in New York on Thursday that inflation remains “far too high,” while stressing that policymakers are actively debating different inflation scenarios as energy prices, artificial intelligence investment and productivity trends shape the outlook.
Key takeaways:
Inflation is still “far too high,” keeping the Federal Reserve focused on the risks to price stability.
Markets still expect Oil prices to decline over the next six to 12 months.
Monetary policy remains focused on how energy prices feed through into inflation.
AI investment is currently driving inflation, adding to demand and cost pressure.
The Fed is actively debating various inflation scenarios as uncertainty remains elevated.
Williams said the latest Fed Minutes captured a “collective reaction function,” reflecting how policymakers are assessing incoming data and risks.
In the longer run, Williams said AI investment should become a positive supply shock.
His base case is for broader AI adoption to boost productivity over time.”
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.17% | -0.08% | -0.16% | 0.02% | -0.18% | -0.89% | -0.19% | |
| EUR | 0.17% | 0.10% | -0.02% | 0.18% | 0.02% | -0.70% | -0.02% | |
| GBP | 0.08% | -0.10% | -0.11% | 0.08% | -0.08% | -0.79% | -0.11% | |
| JPY | 0.16% | 0.02% | 0.11% | 0.17% | 0.03% | -0.72% | -0.01% | |
| CAD | -0.02% | -0.18% | -0.08% | -0.17% | -0.16% | -0.88% | -0.19% | |
| AUD | 0.18% | -0.02% | 0.08% | -0.03% | 0.16% | -0.72% | -0.02% | |
| NZD | 0.89% | 0.70% | 0.79% | 0.72% | 0.88% | 0.72% | 0.69% | |
| CHF | 0.19% | 0.02% | 0.11% | 0.01% | 0.19% | 0.02% | -0.69% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
BNY’s Geoff Yu notes the International Monetary Fund (IMF) has trimmed its 2026 global growth forecast to 3.0%, with uneven impacts across energy exporters, tech economies and low-income importers, influencing global equities. The disinflation trend appears stalled as headline inflation is projected to re-accelerate before easing. Yu sees markets wrestling with stretched valuations, fading momentum and a shift from acceleration to consolidation.
IMF downgrades and stagflation concerns
"The International Monetary Fund has inched its 2026 global growth forecast down again to a sluggish 3.0%. Growth is projected to rebound to 3.4% in 2027, but that is still below the average of 3.5% seen in 2024 and 2025."
"Global headline inflation is seen rising from 4.1% in 2025 to 4.7% in 2026 before easing to 3.9% in 2027, suggesting the disinflation trend has stalled."
"Stagflation risks remain in prospect. The IMF has downgraded its global growth forecasts, while both the BoJ and New York Fed have warned that higher energy prices and tariffs will continue to feed through to inflation."
"We concur with the view that geopolitical tail risks are well-covered, but that alone is unlikely to support a market that is grappling with stretched valuations and fading momentum ahead of earnings season."
"Risks remain tilted to the downside, with renewed conflict, trade fragmentation and a technology correction the key threats."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/CAD trades little changed as both the US Dollar and the Canadian Dollar face headwinds.
- Lower Oil prices weigh on the commodity-linked Canadian Dollar.
- A softer US Dollar limits the pair's upside despite stronger-than-expected US Jobless Claims.
USD/CAD trades around 1.4170 on Thursday at the time of writing, virtually unchanged on the day, as weakness in the US Dollar (USD) offsets the negative impact of lower Oil prices on the Canadian Dollar (CAD).
The Canadian Dollar remains under pressure as Crude Oil prices extend their corrective pullback after the recent geopolitical-driven rally. Although tensions in the Middle East remain elevated after the United States (US) and Iran exchanged military strikes for a second consecutive day, traders appear to be unwinding part of their recent bullish Oil positions, weighing on the commodity-linked Loonie.
Still, downside pressure on the Canadian currency remains limited by expectations that the Bank of Canada (BoC) could resume tightening later this year. The central bank left its policy rate unchanged at 2.25% in June, while swap markets now price roughly a 60% chance of a rate hike before year-end, up from around 40% earlier this week.
Scotiabank strategists Shaun Osborne and Eric Theoret said that "the CAD has performed relatively well through the overnight volatility," adding that negative sentiment toward the Canadian Dollar continues to moderate despite recent market swings.
Meanwhile, the US Dollar also weakens on Thursday, preventing USD/CAD from moving higher despite stronger-than-expected US labor market data. The US Department of Labor reported that Initial Jobless Claims declined to 215K in the week ending July 4, below the previous week's revised 217K reading and the market forecast of 218K. Continuing Jobless Claims edged up slightly to 1.814M.
The positive labor market data provides some support to the Greenback by reinforcing the view that the US economy remains resilient. However, the US Dollar continues to ease as investors remain focused on broader market sentiment and geopolitical developments, leaving USD/CAD trapped in a narrow range around 1.4170.
Canadian Dollar Price Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.16% | -0.06% | -0.16% | 0.03% | -0.16% | -0.87% | -0.17% | |
| EUR | 0.16% | 0.11% | 0.00% | 0.18% | 0.02% | -0.68% | 0.00% | |
| GBP | 0.06% | -0.11% | -0.11% | 0.08% | -0.08% | -0.79% | -0.10% | |
| JPY | 0.16% | 0.00% | 0.11% | 0.18% | 0.04% | -0.70% | 0.00% | |
| CAD | -0.03% | -0.18% | -0.08% | -0.18% | -0.16% | -0.87% | -0.17% | |
| AUD | 0.16% | -0.02% | 0.08% | -0.04% | 0.16% | -0.71% | -0.01% | |
| NZD | 0.87% | 0.68% | 0.79% | 0.70% | 0.87% | 0.71% | 0.69% | |
| CHF | 0.17% | -0.00% | 0.10% | -0.01% | 0.17% | 0.01% | -0.69% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
ABN AMRO’s Rogier Quaedvlieg highlights that US labour-market conditions are weaker than headline unemployment suggests, as rapidly declining participation is holding the rate down. He notes that payroll growth has slowed sharply, household employment is falling, and only a small part of the participation drop is demographic. Behavioural withdrawal, especially among older and younger workers, risks a quick rise in unemployment if job creation stays weak.
Participation tailwind hides labour slack
"Payrolls slowed sharply in June, confirming our earlier warning that frontloaded hiring would likely be followed by payback."
"Last week’s labour-market report delivered the kind of payroll print we warned about in our global monthly, even if the timing was earlier than expected."
"Despite the weak household employment numbers, the unemployment rate has remained stable and has even declined, dropping below 4.2%."
"Participation has fallen by 0.9pp since December, from 62.4% to 61.5%."
"Had participation changed only because of demographics, the unemployment rate would now be around 5.2%."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
DBS Group Research economist Sherilyn Chew notes that renewed geopolitical risk has lifted yields across Asia, but sees Indian G-Secs as offering a tactical opportunity. She argues the India sell-off is mainly macro repricing, with domestic fundamentals and structural demand intact. Foreign participation remains supportive, and DBS views the 10-year sector as attractive for adding duration once risk sentiment stabilises.
Indian G-Secs repricing seen as transient
"Renewed geopolitical risk has pushed yields higher across the region, but we would differentiate between markets where the repricing presents a more compelling entry and those where it reinforces existing concerns."
"For India, the sell-off looks largely driven by a broad-based macro repricing rather than any deterioration in domestic fundamentals."
"With supportive structural demand and ongoing foreign participation still supportive, the spike is likely transient and should fade once risk sentiment stabilises."
"As such, we view this repricing episode as a tactical opportunity to add duration exposure in the 10-year sector, at more attractive entry levels."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
ING strategists Michiel Tukker and Benjamin Schroeder note that the Federal Reserve’s June minutes confirmed a more hawkish stance despite an unchanged policy rate. They highlight that nine officials pencilled in higher rates by year-end and that most see further policy firming as likely if inflation stays elevated due to AI-driven demand, high energy prices and tariffs, though ING’s base case expects moderation.
June minutes reinforce hawkish Fed stance
"This more upbeat take on the economy and the labour market was also reflected in the more hawkish stance of the Fed, which was just confirmed by the minutes of the June meeting."
"While voting unanimously to keep rates on hold, that meeting saw nine Fed officials pencilling in higher rates by the end of this year."
"Most officials agreed that “some policy firming would likely be warranted” in a scenario in which inflation remained elevated due to strong AI-driven demand, high energy prices and tariffs."
"This is not our base case for inflation, where we see more room for moderation."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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