Forex News
ING’s Global Head of Macro Carsten Brzeski warns that recurring European heatwaves are becoming a structural drag on Eurozone growth. He cites academic and ECB research showing measurable losses in output and higher food inflation linked to extreme temperatures. Brzeski argues that climate-related disruptions, from productivity losses to supply chain issues, now represent a new downside risk for Eurozone economic performance.
Heat turning into macro headwind
"For years, heatwaves were treated the way insurers treat hailstorms: a regrettable but temporary cost, smoothed out over the cycle. That framing is becoming outdated. A 2021 study of Europe’s worst heat years (2003, 2010, 2015 and 2018) put continent-wide GDP losses from reduced labour productivity alone at 0.3-0.5% (output, not GDP growth), exceeding 1% in the most exposed regions."
"Other studies add the costs of cooling and consequently calculate an even larger impact on growth. Add rising healthcare costs, emergency infrastructure repairs and the impact of heatwaves and drought on waterways, transportation or agriculture, and the negative impact on the economy grows further still."
"Last year, a joint paper from the University of Mannheim and the ECB also put a number on the economic damage, analysing the heatwaves, droughts and floods of the summer of 2025. According to the paper, the European economy lost some 0.3% of output. This damage could grow to an accumulated 0.8% by 2029, taking into account the effects of lost productivity, supply chain disruption and depressed tourism revenue."
"Previously, the ECB had also estimated that heatwaves and drought could push up food inflation by some 0.4-0.9pp, with that effect potentially doubling over the next 30 years."
"Looking ahead, while the recent drop in energy prices should bring some relief to European households and companies, the current heatwaves bring a new downside risk for the European economy: potential supply chain frictions due to low water levels in main rivers and affected infrastructure like railways and highways, but also productivity losses."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Deutsche Bank Research notes that investors reduced expectations for further Fed rate hikes after softer US PCE inflation, pulling December hike pricing down and lowering 2-year and 10-year Treasury yields. The Dollar Index is slightly weaker, while the bank’s economists still anticipate a relatively hawkish Fed path with two rate increases pencilled in later this year.
Rates repricing and labour data focus
"So investors dialled back expectations of Fed rate hikes, with the amount of hikes priced by December down -7.3bps to 32bps over the week. In turn, that led the 2yr Treasury yield -8.7bps lower over the week (-3.1bps on Friday), whilst the 10yr yield (-8.4bps, -2.3bps on Friday) fell to 4.37%. Pricing of ECB rate hikes by December also fell -12.8bps over the week to 24bps."
"In the US, our economists expect payroll growth on Thursday to slow to +75k (from +172k previously), with private payrolls rising by around +90k. There is some risk of seasonals pulling down the numbers as they have in recent years around this time."
"The unemployment rate is expected to hold at 4.3%, while average hourly earnings are seen unchanged at +0.3% month-on-month."
"On policy, attention will turn to Wednesday, when Fed Chair Warsh speaks at the ECB’s Sintra forum. Our economists continue to expect a relatively hawkish policy path, with two rate hikes pencilled in later this year."
"However, near-term guidance is likely to remain limited, leaving markets to take their cues primarily from incoming data."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Rabobank's Senior FX Strategist Jane Foley discusses EUR/USD within a broader reassessment of Dollar drivers. Foley notes that even if the US Dollar (USD) is in long-term decline, cyclical forces can still support it. Strong US labour data, resilient consumption and equity inflows underpin a firmer Dollar, while the Euro (EUR) faces growth-related headwinds and positioning shifts after the Iran war.
Dollar upswing prospects
"Since the middle of May we have been discussing the potential for directional differentiation between the structural and cyclical drivers of the USD. In summary, even if the USD has entered into a period of long-term decline, many market participants would likely accept that there was space for cyclical uptrends. This month the DXY dollar index has traded at its highest levels since last spring, which begs the question as to whether the greenback has entered into a cyclical upswing."
"We will be re-visiting our EUR/USD forecasts this week with a view to forecasting a more emboldened dollar."
"Even though it is Rabobank’s house view that the Fed will hold rates steady for the remainder of this year, a better-than-expected performance by the US labour market this year, coupled with a resilient consumer sector and strong inflows into US stocks all suggest that the USD will find support this year. By contrast, we expect the EUR to struggle to rebuild enthusiasm back to recent levels."
"That said, without a significant pick up in Eurozone activity data, we expect it will be difficult for EUR bulls to regain the optimism that was in evidence at the start of this year. Earlier this month EUR/USD broke below our 1 month 1.15 forecasts. We will be reviewing our EUR/USD forecasts later this week."
"Given the time frames involved, we would argue that cyclical drivers will still move the USD in both directions. Moreover, most of the time, cyclical factors will likely impact prices in a more urgent fashion than structural changes. As ever, changes in short-term interest rate differentials are a key driver for FX rates."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- The British Pound trades higher against its currency peers as UK Andy Burnham vows to continue the Labour Party’s 2024 manifesto.
- BoE’s Greene voted for a hike in policy rates to counter second-round inflation risks.
- Investors await the US NFP data to get fresh cues regarding the Fed’s monetary policy outlook.
The British Pound (GBP) outperforms its major currency peers, trading 0.25% higher to near 1.3230 against the US Dollar (USD) during the European trading session on Monday. The United Kingdom (UK) currency gains as Greater Manchester Mayor Andy Burnham, the frontrunner for the leadership position after Prime Minister (PM) Keir Starmer’s resignation, has vowed to continue the principles of the Labor Party’s 2024 manifesto, a scenario that indicates the continuation of ongoing fiscal policy.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.18% | -0.25% | 0.05% | 0.09% | -0.06% | -0.25% | -0.19% | |
| EUR | 0.18% | -0.07% | 0.24% | 0.26% | 0.15% | -0.04% | -0.00% | |
| GBP | 0.25% | 0.07% | 0.32% | 0.34% | 0.19% | 0.00% | 0.07% | |
| JPY | -0.05% | -0.24% | -0.32% | 0.04% | -0.12% | -0.32% | -0.24% | |
| CAD | -0.09% | -0.26% | -0.34% | -0.04% | -0.15% | -0.35% | -0.30% | |
| AUD | 0.06% | -0.15% | -0.19% | 0.12% | 0.15% | -0.19% | -0.11% | |
| NZD | 0.25% | 0.04% | 0.00% | 0.32% | 0.35% | 0.19% | 0.07% | |
| CHF | 0.19% | 0.00% | -0.07% | 0.24% | 0.30% | 0.11% | -0.07% |
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
No change in the UK’s policies means no fresh boost to interest obligations for the government on fresh debt, which generally happens when the political shift is done between different parties. In the European trade, 10-year UK Gilt Yields have given back their slight gains and are marginally lower to near 4.73%.
“Our plans are consistent with 2024 Labour manifesto,” UK Burnham said.
On the monetary policy front, investors seek fresh cues regarding how long the Bank of England (BoE) will keep interest rates at 3.75%. In the policy announcement this month, the BoE left policy rates steady, with a 7-2 majority. BoE Monetary Policy Committee (MPC) member Megan Greene voted for an interest rate hike, calling it an “insurance against larger second-round inflation effects”.
Meanwhile, the US Dollar trades slightly lower, with investors awaiting the United States (US) Nonfarm Payrolls (NFP) data for June, which will be released on Thursday. Investors will pay close attention to the US NFP data to get fresh cues regarding the Federal Reserve’s (Fed) monetary policy outlook.
According to the CME FedWatch tool, there is an almost 80% chance that the Fed will deliver at least one interest rate hike this year.
UK gilt yields FAQs
UK Gilt Yields measure the annual return an investor can expect from holding UK government bonds, or Gilts. Like other bonds, Gilts pay interest to holders at regular intervals, the ‘coupon’, followed by the full value of the bond at maturity. The coupon is fixed but the Yield varies as it takes into account changes in the bond's price. For example, a Gilt worth 100 Pounds Sterling might have a coupon of 5.0%. If the Gilt's price were to fall to 98 Pounds, the coupon would still be 5.0%, but the Gilt Yield would rise to 5.102% to reflect the decline in price.
Many factors influence Gilt yields, but the main ones are interest rates, the strength of the British economy, the liquidity of the bond market and the value of the Pound Sterling. Rising inflation will generally weaken Gilt prices and lead to higher Gilt yields because Gilts are long-term investments susceptible to inflation, which erodes their value. Higher interest rates impact existing Gilt yields because newly-issued Gilts will carry a higher, more attractive coupon. Liquidity can be a risk when there is a lack of buyers or sellers due to panic or preference for riskier assets.
Probably the most important factor influencing the level of Gilt yields is interest rates. These are set by the Bank of England (BoE) to ensure price stability. Higher interest rates will raise yields and lower the price of Gilts because new Gilts issued will bear a higher, more attractive coupon, reducing demand for older Gilts, which will see a corresponding decline in price.
Inflation is a key factor affecting Gilt yields as it impacts the value of the principal received by the holder at the end of the term, as well as the relative value of the repayments. Higher inflation deteriorates the value of Gilts over time, reflected in a higher yield (lower price). The opposite is true of lower inflation. In rare cases of deflation, a Gilt may rise in price – represented by a negative yield.
Foreign holders of Gilts are exposed to exchange-rate risk since Gilts are denominated in Pound Sterling. If the currency strengthens investors will realize a higher return and vice versa if it weakens. In addition, Gilt yields are highly correlated to the Pound Sterling. This is because yields are a reflection of interest rates and interest rate expectations, a key driver of Pound Sterling. Higher interest rates, raise the coupon on newly-issued Gilts, attracting more global investors. Since they are priced in Pounds, this increases demand for Pound Sterling.
BNY’s Geoff Yu reports that the U.S. and Iran have agreed to halt mutual attacks and resume talks on the Strait of Hormuz, allowing shipping to move more freely. Markets reacted cautiously, with Brent, WTI and Omani crude prices higher as tensions eased. The bank also notes that normalizing energy markets are reducing inflation sensitivity to Gulf developments.
Hormuz talks ease supply fears
"The U.S. and Iran have agreed to halt attacks on each other ahead of renewed talks this week on the Strait of Hormuz and related issues, after several days of retaliatory strikes threatened a fragile interim truce. A U.S. official said technical discussions will continue on the memorandum of understanding reached this month, with both sides stepping back for now and shipping allowed to move more freely. The confrontation began after an Iranian strike on a container ship triggered U.S. retaliation, followed by further exchanges over vessel attacks."
"Markets reacted cautiously, with Brent crude rising and U.S. equity futures gaining as tensions eased slightly. Brent +0.903% to 72.64, WTI +1.228% to 70.08, Omani crude +3.847% to 66.69, Dubai crude -0.575% to 79.214."
"While oil-driven inflation pressures have eased, a new wave of supply-side constraints linked to the global artificial intelligence investment cycle is beginning to emerge, raising the risk that inflation may prove more persistent than markets currently expect."
"The conflict’s impact on inflation is likely at its lowest ebb, but a new wave of supply constraints is already emerging and is likely to persist well beyond current forecast horizons. South Korea’s ₩1.350qn (roughly $1tn) public-private investment program for its semiconductor sector underscores the extraordinary scale of capital expenditure required to sustain the global artificial intelligence buildout."
"Any relief for central banks may therefore prove short-lived, and this week’s Sintra forum presents a timely opportunity for Fed Chair Kevin Warsh and his peers to reinforce a tough but credible message that the fight against inflation is far from over."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- WTI prices steady around $70 amid confusing reports regarding the US-Iran peace deal.
- Washington and Tehran have agreed to cease hostilities, but the date of the next round of talks remains unclear.
- Iranian authorities affirmed that the sovereignty of the Strait of Hormuz belongs to Iran and Oman.
Crude Oil prices are practically flat on Monday, with the price of the US benchmark West Texas Intermediate (WTI) barrel practically flat around the $70.00 level. The decline in Crude prices witnessed over the last few weeks stalled on Monday as a fresh exchange of attacks between the US and Iran and confusing messages about the status of the Strait of Hormuz have put investors on their toes.
WTI Oil prices have steadied on Monday, following a nearly 25% selloff over the last few weeks. News that the US and Iran agreed to stop last weekend’s reciprocal attacks, while reports about the resumption of the peace talks remain uncertain. Axios, citing US officials, reported that talks are scheduled for this week, but Iranian Deputy Foreign Minister Kazem Gharibabadi affirmed that there is no current plan to meet the US technical teams.
Strait of Hormuz status remains unclear
Another point of friction is the status of the Strait of Hormuz. Iranian authorities said on Monday that the ships can sail freely through the waterway, provided they have clearance from Iranian authorities. Gharibabadi posted on X that Iran and Oman hold sovereignty over Hormuz and that they recently held a meeting to discuss issues related to traffic through the strait.
Meanwhile, the US CNN News Channel reported on Monday that the US Navy has elevated the level of alert for ships sailing through Hormuz to “significantly high” while the United Kingdom Maritime agency, UKMTO, raised its threat level to “substantial” following recent attacks on commercial vessels, according to Euronews.
WTI Oil prices depreciated by almost 25% over the previous three weeks, retracing most of the prior gains as progress in the US-Iran peace talks boosted hopes of a swift reopening of Hormuz. The decline seems to have taken a breather, with markets awaiting clarity on the peace deal, yet upside attempts remain limited so far.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
Guntermann at Commerzbank notes that while Oil prices near pre-war levels reduce tail risks for growth, inflation and rate volatility, Euro area inflation is not falling fast enough to dispel European Central Bank (ECB) hawkishness. Lower June headline readings in Spain and Belgium may signal a first post-war drop in Euro area HICP, with headline seen at 3.0% and core at 2.5%.
First post-war HICP decline eyed
"Inflation and the weather have something in common these days. The hottest spell is probably over, but the trends remain unstable, and it will be some time before the situation stabilises at comfortable levels."
"Although oil prices near pre-war levels reduce tail risks for economic growth, inflation and rates volatility, inflation is probably not coming down quickly enough to dispel the ECB hawkishness. The coming days will provide reality checks on all counts, also given several ceasefire breaches in the Middle East."
"Oil prices will be in focus at the start of the week, and upticks could overcast the message from national consumer price reports. Today, lower headline inflation in Spain and Belgium for June could foreshadow similar trends in Germany tomorrow and the euro area HICP on Wednesday. As this would be the first drop since the war began, it could support the notion that the peak in inflation is now behind."
"Recently lower oil should be the key driver, with energy costs likely to lead €-headline inflation down from 3.2% to 3.0%. While we also expect core inflation to slip back below the rounding threshold to 2.5%, the outlook is less clear-cut, and also the ECB continues to emphasise that price pressure for services keeps building up."
"ECB: Schnabel says peace deal makes negative scenarios less likely, but "energy price shock can feed into broader inflationary dynamics", and "food, goods and service inflation are facing upside risks"."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
OCBC’s Sim Moh Siong and Christopher Wong highlight that a more hawkish Federal Reserve and flatter US yield curve have replaced high Oil prices as the main support for the Dollar. Their new forecast sees EUR/USD at 1.11 and USD/JPY at 163 by year-end, with DXY projected to gain 2–3% and low-yielders like the Swiss Franc and Japanese Yen under pressure.
Fed signals underpin stronger Dollar
"The USD strengthened despite weaker terms of trade from lower oil. A more hawkish Fed and flatter yield curve have replaced high oil prices as the main support for the USD."
"Two messages stand out from the hawkish Fed signals. First, it has reassured markets on policy independence, triggering an unwind of debasement trades through lower gold and crypto, a flatter curve and a stronger USD. Second, with the Fed back in focus, the USD is realigning with rate differentials after the earlier dislocation during the energy shock."
"New USD forecast: EUR/USD at 1.11 (previous: 1.18) and USD/JPY at 163 (previous: 155) by year-end. Hawkish Fed signals lift USD, shifts our view to modest strength from rangebound. DXY breakout targets 2 to 3 percent upside; 5 percent move requires oil surge or US overheating scenario."
"A firmer USD alongside widening rate differentials tends to weigh most on low-yielders such as CHF and JPY. Procyclical carry can still perform, but trade resilience will depend on selecting appropriate funding currencies."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
United Kingdom (UK) Greater Manchester Mayor Andy Burnham has stated during the European trading session on Monday that his plans after getting the leadership position would be consistent with Labour’s 2024 manifesto.
Remarks
Our plans are consistent with 2024 Labour manifesto.
I intend to give Britain the 'circuit breaker’ it needs.
We will not announce government appointments until the end of the selection process.
Market Reaction
There seems to be a positive reaction by the British Pound (GBP), following remarks from UK Andy Burnham. At press time, GBP/USD trades 0.24% higher to near 1.3230.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Societe Generale strategists Michael Haigh and Jeremy Sellem examine World Gold Council (WGC) survey data and market flows to gauge central bank demand for Gold. The authors refine survey interpretation, infer 100–120 tonnes of additional buying in 2026, track UK exports and LBMA vault data, and link Gold prices closely to US real yields, supporting a neutral near-term stance that turns more constructive into 2027.
Survey intentions versus actual demand
"In this week’s CCA, we analyse the latest World Gold Council (WGC) central bank survey, with a focus on gold buying intentions. Year to date, net central bank purchases have been modest at +40t and highly concentrated with Turkey and Poland accounting for two-thirds of total activity. In our latest outlook we highlighted a likely resumption of visible central bank buying from Q4 2026."
"We therefore refocus the analysis on a six-month post-survey window, which we view as more realistic. As with any asset allocator, central banks typically have reasonable visibility over portfolio positioning in the near term, but far less over a full year. In this context, stated intentions should carry greater informational value over shorter horizons."
"Applying this framework to the 2026 survey across both questions, and using the regression estimates, implies additional purchases of c. 100–120 tonnes over the remainder of the year. This is roughly double the volume recorded in the first four months and aligns with our broader call for a resumption in central bank buying. Our conviction is reinforced by market signals, notably outflows from LBMA vaults and a pickup in UK gold exports."
"Using our simple regression framework, a 20‑tonne increase in vault holdings is consistent with a pickup in export activity to around 61 tonnes. While this remains slightly below the post‑2022 average of 73 tonnes, it exceeds the 53‑tonne average observed since 2015 for this time of year, signalling a meaningful improvement in underlying central bank demand."
"Our economists’ central scenario sees 10Y US real yields remaining above 2% through Q3, before declining gradually into year-end and into H1 2027. This underpins a neutral stance over the summer, with scope for a more constructive outlook later in the year as the opportunity cost of holding gold begins to ease."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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