Forex News

Rabobank strategists underline that the Monetary Authority of Singapore (MAS) has tightened policy via the exchange rate despite weak GDP, reacting to potential core inflation from the energy shock. They also note Indonesia’s dual engagement with Russia and the US, and highlight the strategic importance of the Strait of Malacca, suggesting Asian FX will be sensitive to both policy and geopolitical developments.

Singapore policy shift and Malacca risks

"Yes, in Singapore, the MAS just became the first major Asian economy to tighten policy into this energy crisis (as usual, via the exchange rate) due to fears that core inflation could rise ahead despite a negative Q1 GDP print. Will that prove a bell-weather globally?"

"Yes, Indonesia’s President Prabowo just met with Putin in Moscow. However, his defence minister just simultaneously agreed a deepened US defence partnership. Notably, the latter is reported to allow US flyover of military aircraft, which gives the Pentagon new access routes to both the Middle East and Asia. Moreover, for those wanting to join certain dots, Indonesia, along with Singapore, is home to the Strait of Malacca, another of the world’s critical energy and cargo chokepoints. Singapore is of course deeply opposed to any new ‘toll ways’ emerging in critical waterways."

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

ING’s Frantisek Taborsky expects March inflation in Romania to stay above 10% in coming months, peaking near 11%, keeping the National Bank of Romania on hold with no rate cuts in 2026. In Czech Republic, he sees CNB unchanged despite firmer inflation and limited scope for EUR/CZK to revisit 24.250. ING remains broadly bullish on Hungary, looking for EUR/HUF to stabilise in the 355–360 range.

Romania, Czech policy steady as Hungary preferred

"Today, we will see more inflation figures for March in the CEE region. In Romania, the morning figures showed an increase from 9.3% to 9.9% YoY, above market expectations."

"We expect inflation to exceed/continue above 10% in the coming months, with a peak in April around 11%. This should keep the National Bank of Romania on hold for a longer period and we do not expect rate cuts this year."

"In the Czech Republic, the final estimate of March inflation will be published, where the flash showed an increase from 1.4% to 1.9%, below market expectations."

"The question is where core inflation moved from February's 2.7%, but for now, like other central banks in the region, we see the CNB unchanged this year."

"EUR/CZK is gradually grinding down and with levels below 24.350 it is not far from 24.250, ahead of US-Iran levels. Given the geopolitical uncertainty and the two CNB rate hikes priced in, we do not see the conditions for a return to these levels ​​at this time."

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

• GBP/JPY rallies to multi-year highs as Oil-driven Yen weakness continues.
• US-Iran diplomacy hopes lift sentiment, supporting risk-sensitive currencies.
• Technically, GBP/JPY remains in a strong uptrend, supported above the 100- and 200-day SMAs.

GBP/JPY advances on Tuesday, extending gains for a seventh consecutive day as elevated Oil prices continue to weigh on the Japanese Yen (JPY), while improving market sentiment, driven by renewed hopes of US-Iran negotiations, supports the British Pound (GBP). At the time of writing, the cross is trading around 215.60, its highest level since July 2008.

Although Oil prices have eased somewhat from recent highs on prospects that a second round of negotiations could take place in Islamabad, they remain elevated as tensions around the reopening of the Strait of Hormuz persist.

The International Monetary Fund (IMF) warned that a more severe scenario could see Oil prices averaging $110 per barrel in 2026 and rising to $125 in 2027, compared with around $82 under its baseline outlook. Kristalina Georgieva, Managing Director of the IMF, cautioned that such a scenario could push some economies into recession, with global inflation climbing above 6%.

From a technical perspective, the daily chart suggests GBP/JPY maintains a bullish bias, with the pair extending its upward trend and trading well above the 100-day Simple Moving Average (SMA) at 210.88 and the 200-day SMA at 205.68, reinforcing the broader uptrend.

Momentum stays constructive, with the Relative Strength Index (14) near overbought territory at 68 and the Moving Average Convergence Divergence (MACD) indicator back in positive territory around 0.41, hinting that buying pressure remains in control despite the risk of short-term consolidation after the latest advance. Meanwhile, the Average Directional Index (ADX) near 17 suggests the trend is still developing rather than overextended.

On the upside, if the pair sustains a break above the 215.00 zone, it could pave the way for further gains toward the 217.00 region, with scope to extend toward 220.00.

On the downside, a failure to hold above the 215.00 level could see the pair retest initial support near 213.00, followed by the 100-day SMA around 210.88. A break below this level would shift the near-term bias to bearish, exposing the 200-day SMA near 205.68.

MUFG’s Senior Currency Analyst Lee Hardman notes that the US Dollar index has quickly surrendered its early-week rebound, returning close to pre‑conflict levels as optimism grows over further US–Iran talks and Middle East deescalation. The Dollar and Japanese Yen have underperformed, while Scandinavian and commodity currencies have led G10 gains, raising downside risks to MUFG’s updated US Dollar forecasts.

Dollar slips as risk sentiment improves

"The US dollar’s rebound at the start of this week has proven short-lived with the dollar index quickly giving back those gains and more overnight as it moves back closer to pre-Middle East conflict levels."

"The further reversal of US dollar strength was triggered by fresh investor optimism that the US and Iran will continue to work towards a deal to bring an end to the conflict."

"In the foreign exchange market the best performing G10 currencies this month on the back of building investor optimism that the Middle East conflict will continue to deescalate have been the Scandi currencies of the Norwegian krone and Swedish krona closely followed by the commodity currencies of the New Zealand and Australian dollars while the US dollar and yen have both underperformed."

"The failure of the US dollar to strengthen further in response to the energy price shock is clearly a bearish development which is increasing downside risks to our updated forecasts."

"The latest developments have helped to bring the price of oil back below USD100/barrel and lifted global equity markets back closer to record highs."

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

BNP Paribas’ Stéphane ALBY assesses how Gulf economies are absorbing the conflict-related shock. He notes that Oil exports via the Strait of Hormuz have been severely disrupted, with Bahrain, Kuwait, and Qatar hit hardest, while Saudi Arabia and the UAE partially benefit from higher Oil prices. Despite likely Gross Domestic Product (GDP) contraction and pressure on tourism, transport, and real estate, strong macro fundamentals and large sovereign wealth funds support resilience, though heightened geopolitical risk may weigh on future foreign investment flows.

Conflict shock versus strong fundamentals

"The reopening of the Strait of Hormuz will be key. Apart from Oman, only Saudi Arabia and the United Arab Emirates have the capacity to bypass the Strait of Hormuz, but only for limited quantities."

"For these three countries, the rise in global oil prices should partially offset the decline in export volumes."

"Given the significant weight of hydrocarbons to the Gulf economies, a contraction in regional GDP is likely this year."

"Thankfully, the Gulf’s macro fundamentals are solid enough to absorb the shock."

"The Gulf economies’ capacity to withstand a shock is therefore very strong. In the very short term, we can expect a shift in priorities towards supporting their own economies, and therefore a slowdown in foreign investment."

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

Commerzbank’s Tatha Ghose warns that USD/TRY is gaining momentum towards 45.00 as Turkey faces a worsening external backdrop and extended energy price shock. He notes that prior Lira stability relied on heavy FX intervention, depleting reserves, while capital inflows have stalled and the current account deficit widened. Fitch’s outlook cut underscores rising risks from continued reserve drawdown.

Intervention limits and external imbalances

"USD/TRY is gaining momentum, approaching the 45.00 mark as the external market environment worsens and the energy price shock extends further."

"The exchange rate was anyway on a depreciating path – and was stabilised by heavy intervention at the expense of FX reserves over the past month, something which cannot be continued indefinitely."

"Latest data highlight a wider current-account deficit in Turkey as well as stop to foreign capital inflow because optimism about falling inflation has faded since February."

"CBT conducted more than USD 50bn in FX interventions to support the lira, Fitch noted and such a rate of drawdown represents significant risks."

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

Deutsche Bank’s Sebastian Becker assesses Germany’s new fiscal relief package to counter higher energy prices from the conflict in Iran, judging it small relative to 2026 GDP and earlier 2022–23 measures. The temporary energy tax cut and employee bonus are seen as offering negligible support to growth and only marginally reducing inflation, with much of the gross relief offset by windfall and tobacco taxes.

Mini-package offers modest macro support

"The recently unveiled relief package, worth EUR 7-14 bn (around 0.15-0.30% of 2026F GDP), offers only limited fiscal relief and we expect it to have a negligible impact on GDP growth."

"All up, due to persistently high oil prices, we now forecast inflation closer to 2.9% this year (up from the previously projected 2.7%)."

"However, with both measures slated for re-financing through a windfall profit tax and increased tobacco tax, the net fiscal impact is expected to be negligible."

"The dampening effect on the 2026 inflation rate will also be very small, around 0.05pp for the full year."

"Consequently, the German economy would likely need to face another recession–or a further sharp escalation of the energy price shock–to justify such a measure."

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

• Producer inflation in the US rose less than expected in March.
• The US Dollar Index extends its daily decline toward 98.00.

Producer inflation in the United States, as measured by the change in the Producer Price Index (PPI), rose to 4% on a yearly basis in March from 3.4% in February, the US Bureau of Labor Statistics (BLS) reported on Tuesday. This reading came in below the market expectation of 4.6%. On a monthly basis, the PPI rose 0.5%, matching February's increase and falling short of analysts' estimate of 1.2%.

Other details of the report showed that the PPI ex Food & Energy was up 3.8% YoY in March, compared to the market forecast of 4.2%.

Market reaction

The US Dollar Index (DXY) remains under bearish pressure following this data and was last seen losing 0.35% on the day at 98.03.

Rabobank strategists Molly Schwartz and Christian Lawrence expect Banxico to deliver one more 25bp rate cut in May 2026, bringing the policy rate to 6.50% by year-end. They highlight that the balance of risks for Mexican growth is skewed to the downside, while inflation is being driven by temporary non-core shocks. The risk to their Banxico rate forecast is tilted toward no further easing.

Rabobank pulls forward final rate cut

"Given the recent Minutes published by Banxico, we are moving our one 25bp cut from Banxico from the June meeting to the upcoming May meeting. We still see the year end rate at 6.50%. We will note that Banxico’s most recent meeting occurred before the CPI inflation print for March was released."

"Against this backdrop, the Governing Board decided by majority to cut the target overnight interbank rate by 25 basis points to 6.75%, continuing the easing cycle. The majority judged that the policy stance remained restrictive despite cumulative cuts, and appropriate given the combination of weak economic activity, persistent slack, and inflation pressures largely driven by transitory relative-price shocks. The Board emphasized that monetary policy is well positioned to prevent second-round effects while allowing for gradual normalization, and that future decisions"

"will depend on incoming data and evolving external conditions, especially developments related to the Middle East conflict."

"Looking ahead, depending on the evolution of macroeconomic and financial conditions, the Board will evaluate the appropriateness and timing for an additional reference rate cut. It will take into account the effects of all determinants of inflation and will monitor the evolution of external conditions. Actions will be implemented in such a way that the reference rate remains consistent at all times with the trajectory needed to enable an orderly and sustained convergence of headline inflation to the 3% target during the forecast period."

"Given this environment and the bias of the majority of the Board in favor of focusing on the deteriorating economic environment and the willingness to look through the short term effects of inflation, we have adjusted our forecast for the Banxico rate path this year and now see the Bank cutting rates by 25bp at the next meeting on May 7, suggesting a terminal rate of 6.50%. The risk to our forecast is skewed in favor of no cuts."

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