Forex News

TD Securities’ Global Strategy Team highlights a bull-steepening in US rates as Oil fell and geopolitical headlines hit sentiment. For May Nonfarm Payrolls (NFP), they forecast a 60k headline gain, unemployment at 4.4% and Average Hourly Earnings (AHE) up 0.3% m/m, expecting a dovish market reaction that may be limited by ongoing focus on US inflation data.

NFP forecast points to slowdown

"On Friday, all focus will be on NFP, where we expect a headline of 60k and UE to increase to 4.4%. While we are likely to have a dovish reaction, the market's response will be capped given the focus on inflation."

"We expect headline payrolls to slow to 60k, with 60k private and 0k government (cons: 85k). The move lower in May will likely be led by a moderation in trade, transportation & utilities job gains, while healthcare will continue its outsized strength."

"We also look for the unemployment rate to increase to 4.4% in May (cons: 4.3%), with the risk that declining participation keeps it level."

"We expect AHE to increase 0.3% m/m (cons: 0.3%), translating to 3.5% y/y (cons: 3.4%)."

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

• The Indian Rupee gains against the US Dollar after the RBI's monetary policy announcement.
• RBI Governor Malhotra leaves Repo Rate steady at 5.25%, raises inflation projections, and lowers growth forecasts.
• Investors await the US NFP data for fresh cues regarding the Fed’s monetary policy outlook.

The Indian Rupee gains against the US Dollar (USD) after the Reserve Bank of India’s (RBI) monetary policy decision, with the USD/INR pair sliding to near 95.00.

As expected, the RBI has left its Repo Rate steady at 5.25%, with a warning that adverse implications of the extended disruption in global supply chains and higher energy prices have prompted risks both to inflation and growth. However, RBI Governor Sanjay Malhotra has stated that the headline inflation is still below the central bank’s target, and the core inflation is much lower, excluding precious metals.

Regarding the monetary policy outlook, RBI Governor Malhotra has guided that it is “prudent to wait for greater clarity to emerge” and the central bank will remain “data-dependent”.

The RBI has raised the retail inflation forecast for the Financial Year (FY) 2026-27 to 5.1% from 4.6% previously anticipated, and has lowered the GDP growth forecast to 6.6% from 6.9%. Meanwhile, RBI Governor Sanjay Malhotra has stressed that the central bank remains firmly committed to its inflation mandate despite recent external shocks.

In the monetary policy announcement, the RBI also addressed the issue of significant foreign outflows and unveiled various measures to boost foreign inflows into the economy, especially the withdrawal of taxes on interest income earned from government securities as well as on capital gains.

Geopolitical tensions to remain a key drag on Indian Rupee

Continued hostilities between Israel and Lebanon, despite the United States (US)-brokered ceasefire, have escalated the US-Iran deal uncertainty.

Hezbollah chief Naim Qassem has rejected the ceasefire deal as a “farce”, warning that northern Israel will remain a target for fighters as long as Israel continues to bomb Lebanon, Al Jazeera reported.

Ongoing Israel-Lebanon attacks could result in a resumption in oil prices’ rally, a scenario that will be unfavorable for currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs.

US NFP data awaited

Later in the day, investors will pay close attention to the US Nonfarm Payrolls (NFP) data for May, which will be published at 12:30 GMT. The US official employment data will influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook.

The US NFP report is expected to show that employers hired 85K fresh workers, lower than 115K in April. The Unemployment Rate is seen steady at 4.3%.

Year-on-Year (YoY) Average Hourly Earnings, a key measure of wage growth, is estimated to arrive lower at 3.4% from the previous reading of 3.6%. On a monthly basis, the wage growth measure is expected to have grown 0.3% faster than 0.2% in April.

Technical Analysis: USD/INR tumbles to near 95.00

USD/INR trades sharply lower at around 95.28 at press time. The near-term tone of the pair has become uncertain as it has fallen back below the 20-period Exponential Moving Average (EMA), which is at 95.45.

The Relative Strength Index (RSI) has fallen to near 47.00, indicating a surge in sellers' dominance but not an outright bearish momentum.

On the downside, the pair could slide to the May 7 low around 94.00 if it fails to hold 95.00. Looking up, the pair might aim to revisit the all-time high slightly above 97.00 if it manages to rise above the June 4 high at 96.30

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

BNY’s Bob Savage notes that both retail and institutional investors bought the April weakness in US equities, but momentum has faded and exposure to energy and technology is elevated. He highlights June quarter-end and half-year-end rebalancing as a key driver, with liquidity, earnings growth, IPO supply and central bank policy likely to shape the next phase of the equity rally.

Rebalancing, liquidity and earnings drivers

"The June quarter-end and half-year-end rebalancing is key to understanding the current environment in equities, particularly in the U.S. Institutional holdings in energy and IT are outsized – over 20% above the 10-year average in the U.S. and even more in emerging markets."

"There is a risk for June in U.S. equities from a larger unwind of the energy and IT trades. The question is whether the “buy-the-dip” reaction function will be the same should there be a catalyst for a retracement."

"As equities move into the second half of the year, the market appears to be entering a new phase where liquidity, earnings delivery and policy expectations matter more than geopolitical headlines."

"The key question is whether the buy-the-dip mentality remains intact if markets face a more meaningful correction driven by higher-for-longer interest rates, persistent inflation, or earnings disappointments."

"We expect greater sector rotation and wider performance dispersion, with fundamentals becoming increasingly important as the market transitions from momentum-driven gains toward a more selective and valuation-sensitive environment."

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

The Indonesian Rupiah (IDR) has dropped to a historic low, crossing the psychological threshold of 18,000 per US Dollar alongside a sharp multi-year contraction in domestic equity markets. This severe currency depreciation stems from a combination of geopolitical risks, acute global dollar liquidity shortages, and rising energy costs that hit the net oil-importing Asian economy. 

Compounding these external shocks are significant domestic concerns regarding Bank Indonesia's (BI) policy independence under newly passed growth-mandate legislation, prompting major global banks to signal continued downside pressure for the Rupiah in the near term.

Institutional independence fears and energy shocks drag down the Rupiah

According to strategy analysts at Brown Brothers Harriman (BBH), the legislative broadening of Bank Indonesia’s mandate to actively target economic growth has rattled investors, stoking fears that inflation and exchange rate defense might take a back seat. This structural shift, combined with a severe energy blockade in the Middle East that disrupts Oil imports, leaves the fundamentally cheap currency heavily exposed to immediate downside risks.

IDR undervaluation looks excessive relative to domestic fundamentals. But until the energy shock fades, IDR will remain under downside pressure.

Persistent capital outflows intensify risks

Analysts at MUFG point out that the Rupiah’s decline is being accelerated by substantial foreign capital flight from domestic equities and rising global bond yields. Funding stress in the local market has reached extreme levels, which could push the local currency lower against the US Dollar before overextended short positions eventually trigger a turnaround.

Liquidity conditions in USD/IDR remain extremely tight, akin to the stress seen during the March 2020 COVID shock. This points to continued upside risks for USD/IDR.

A heavily suppressed near-term outlook, but with potential for sharp reversals

Both financial institutions point to a weak, highly pressured path for the Indonesian Rupiah, warning that the currency remains structurally vulnerable in the near term. Brown Brothers Harriman emphasizes that while the Rupiah is technically undervalued relative to domestic fundamentals, it cannot escape persistent downside pressure until global energy shocks recede. MUFG projects clear upside risks for the USD/IDR currency pair driven by acute market funding stress, though it notes that because investor positioning has become so heavily crowded, any geopolitical de-escalation or policy clarity could quickly spark an aggressive reversal.

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

Silver prices (XAG/USD) fell on Friday, according to FXStreet data. Silver trades at $72.87 per troy ounce, down 1.37% from the $73.89 it cost on Thursday.

Silver prices have increased by 2.52% 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 61.31 on Friday, up from 60.57 on Thursday.

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

Danske Bank’s Danske Research Team notes that US economic growth slowed at the start of 2026 but has remained more resilient than expected despite the war in Iran. The bank keeps its 2026 GDP growth forecast at 2.0% and raises 2027 to 1.8%, while warning that higher-than-expected inflation and weak real income growth pose risks to the outlook.

Growth resilient but inflation pressures rise

"Economic growth cooled at the beginning of 2026, but despite the war in Iran, leading indicators have held up better than we anticipated. Improving labour market conditions and still solid investment demand lift the growth outlook."

"We keep our 2026 GDP growth forecast at 2.0% (from 2.0%) and lift 2027 to 1.8% (from 1.7%). Potential for future growth relies increasingly on fixed investments, not least related to AI, while consumers' ability to increase spending is limited by muted real wage sum growth."

"Inflation has exceeded our forecasts partly because of prolonging war in Iran, but also as underlying price pressures have increased. We lift our forecast for headline inflation to 3.5% in 2026 (from 2.4%) and 2.8% in 2027 (from 2.4%), and core inflation to 2.8% in 2026 (from 2.5%) and 3.0% in 2027 (from 2.6%)."

"In late May, we revised our forecast for the Fed Funds Rate higher, and now expect two rate hikes in December and March. The risk of more persistent inflation pressures has increased while downside risks to labour markets have eased."

"That said, weak real income growth remains a downside risk for both our real GDP and policy rate expectations."

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

Deutsche Bank strategists highlight that Brent Oil has reversed recent gains as hopes grow for a US-Iran deal, easing stagflation concerns and pulling inflation expectations lower. They note declines in both spot and 6‑month Brent futures alongside softer US and Euro inflation swaps. This backdrop has reduced perceived risks of a prolonged conflict and supported a more dovish central bank path.

Brent slide tempers inflation concerns

"Oil prices did rebound a bit during the US session as Lebanon’s Hezbollah militia rejected the US-brokered ceasefire, but overall this didn’t derail the more optimistic mood following the ceasefire announcement by Israel and the Lebanese government the previous evening."

"And investors also priced out the chance of a longer conflict, with the 6-month Brent future (-2.15%) also falling to $85.04/bbl."

"So that helped to ease concerns about inflation, with the 1yr US inflation swap (-9.2bps) falling to 3.09%, whilst the 1yr Euro inflation swap (-5.5bps) fell to 2.99%."

"Before these overnight moves, markets stabilised yesterday amidst growing hopes for some sort of US-Iran deal. So Brent crude oil prices (-2.84%) fell back to $95.03/bbl, reversing course after three consecutive gains, which in turn helped to ease fears about a stagflationary shock."

"In terms of the latest from the Middle East, there wasn’t much in the way of fresh news. However, oil prices saw a clear move lower after Trump issued a post criticising the vote in the House of Representatives against the Iran conflict."

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

Rabobank’s Senior Market Strategist Benjamin Picton highlights moves by Australia’s iron ore majors to counter China’s growing monopsony power in the iron ore trade. With China’s new state-owned buying group pushing for CNY settlement, Australian producers supplying over half of global iron ore are exploring state-backed marketing options, taking cues from Indonesia’s single-desk approach in coal, palm oil and ferroalloys.

Canberra pressed on pricing power response

"While China’s reduction in oil imports helps planet earth rebalance energy flows, movements are afoot in Australia to counter Chinese monopsony power over the iron ore trade."

"China recently formed the state-owned China Mineral Resources Group to coordinate purchases of iron ore cargoes for China’s steel industry and exert market power to ensure that suppliers are paid in CNY, rather than USD."

"Australian firms supply more than 50% of global iron ore, but those firms have seen their market power eroded by alternative supply coming online in west Africa and an inability to coordinate to counter Chinese market power."

"The Australian Financial Review this morning reports overtures from iron ore majors to the Australian government to counter monopsony buying power and give producers more say over how much they are paid and in which currency."

"Australia’s second-closest neighbour Indonesia recently did just that for coal, palm oil and ferroalloys, and has the world’s largest reserves of nickel – a critical input for Chinese stainless steel and EV battery production."

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