Forex News

• UK CPI slows to 2.6%, easing near-term BoE pressure.
• Oil surge keeps inflation risks alive for Fed policymakers.
• US jobless claims, PMIs and Fed decision drive next catalyst.

The Pound Sterling holds firm during the North American session as UK inflation data dipped, easing pressure on the Bank of England to tackle higher prices, while attacks between the US and Iran don’t seem to be ending in the Middle East. The GBP/USD trades at 1.3377.

GBP/USD holds as softer inflation offsets Middle East risks

During the European session, UK inflation data for June dipped from 2.8% to 2.6% YoY. The core Consumer Price Index (CPI) remained steady at 2.6% YoY for the same period. Even though this relieves the BoE, traders continued to price in an 82% chance for a rate hike by the November 5 meeting, according to Prime Terminal data.

The data was a relief to the new Prime Minister, Andy Burnham, who is seeking to implement measures to reduce the high living costs.

The new UK Finance Minister, John Healey, said the data was positive but that the government would need to do more to help households.

Despite this, the Gulf War triggered a jump in Oil prices, with West Texas Intermediate (WTI), the US crude benchmark, rising by over 2.5% to $86.70. So far in July, petrol prices have risen nearly 24%, shy of recovering the $90 figure, WTI’s floor level in June.

Recently, the US President Donald Trump warned Iran that if they attack ships, the US would retaliate, attacking bridges or power plants, including those located near Tehran.

In the US, the economic docket is absent, yet traders are waiting for the release of Initial Jobless Claims for the week ending July 18. Alongside this, traders are also bracing for S&P Flash PMIs and the Federal Reserve’s (Fed) monetary policy decision next week.

Money markets have priced in a 65% chance that the Fed would keep rates unchanged at the July 29 meeting, down from 78% a day earlier, according to Prime Terminal data.

GBP/USD price forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3375, maintaining a mildly bearish near-term bias as spot continues to hold beneath the cluster of Simple Moving Averages (50, 100 and 200-day SMAs) between roughly 1.3464 and 1.3472, as well as the descending resistance trend line at 1.3476. The Relative Strength Index (RSI 14) at 50 reads neutral, hinting at a consolidative tone rather than strong directional momentum. The latest FXS Fed Sentiment Index reading at 128.64 suggests a relatively firm policy backdrop that may continue to cap Sterling on rallies.

On the topside, initial resistance is located at the 50-day SMA at 1.3464, followed by the 100-day SMA at 1.3468 and the 200-day SMA at 1.3472, all reinforcing a dense supply zone near the recent trendline barrier at 1.3476. A sustained break above this band would be needed to ease bearish pressure. With no clear technical support levels immediately below the market in the current dataset, any pullback from present levels would likely retest recent lows, leaving the pair vulnerable to further downside while it trades under the aforementioned moving average cluster and trend resistance.

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

• USD/CAD falls as rising Oil prices lift the commodity-linked Canadian Dollar.
• WTI climbs to its highest level since June 11 on Middle East supply concerns.
• Hawkish Fed expectations and US tariff risks could limit further gains in the Loonie.

USD/CAD edges lower on Wednesday as a mildly softer US Dollar (USD) and rising Oil prices help the Canadian Dollar (CAD) snap a two-day losing streak. At the time of writing, the pair trades around 1.4085, down 0.16% on the day.

Higher Oil prices typically support the commodity-linked Loonie, given Canada’s position as a major crude exporter. West Texas Intermediate (WTI) trades around $86.00, near its highest level since June 11.

Oil prices are rising as fighting in the Middle East disrupts shipping through the Strait of Hormuz, while threats from Yemen’s Ansar Allah raise fresh supply concerns in the Red Sea.

US President Donald Trump issued a fresh warning to Iran on Wednesday, threatening strikes on the country’s bridge and energy infrastructure if Tehran targets vessels in the Strait of Hormuz.

The US Dollar trades slightly lower on the day but remains supported by geopolitical tensions and hawkish Fed expectations as higher Oil prices add to inflation risks. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 101.12, down 0.08% on the day.

Traders now await the July 28-29 Federal Open Market Committee (FOMC) meeting. According to the CME FedWatch Tool, the probability of a July rate hike has climbed to 28% from 10% a week ago, while the odds of a September hike stand at 69%.

On the Canadian side, the Bank of Canada (BoC) left its policy rate unchanged at 2.25% at its July meeting and reiterated that it was prepared to adjust interest rates if needed.

According to TD Securities, “recent headlines of new US Section 338 tariffs on Canada pose a headwind for CAD,” with “trade uncertainty to keep [USD/CAD] above 1.40 near term.” Even so, the bank expects the Loonie to regain some ground over time, stating that it “see[s] scope for it move toward our 1.39 year-end forecast,” and ultimately anticipates that “we see [USD/CAD] eventually retracing lower to 1.39 by year-end 2026.”

• The New Zealand Dollar weakens against the US Dollar as renewed risk aversion weighs on market sentiment.
• Stronger-than-expected inflation in New Zealand reinforces expectations of another RBNZ rate hike in September.
• US threats against Iran boost safe-haven demand and support the US Dollar.

NZD/USD trades around 0.5815 on Wednesday at the time of writing, down 0.16% on the day. Despite stronger-than-expected inflation data from New Zealand, the New Zealand Dollar (NZD) remains under pressure as investors favor the US Dollar (USD) amid escalating geopolitical tensions between the United States (US) and Iran.

New Zealand's annual inflation accelerated to 4.1% in the second quarter from 3.1% in the previous quarter. The reading exceeded both market expectations of 4% and the Reserve Bank of New Zealand's (RBNZ) forecast of 3.9%, marking the highest level since the fourth quarter of 2023. The data reinforces recent warnings from RBNZ Chief Economist Paul Conway about persistent inflationary pressure and strengthens expectations that the central bank will deliver another rate hike at its September meeting, following July's increase, its first in three years.

RBNZ tightening expectations underpin Kiwi as inflation risks persist

Strategists at BBH argue that “above target inflation and a more favorable domestic growth outlook” continue to support the case for additional RBNZ rate hikes, which they see as NZD supportive. They note that at its July 8 meeting, the RBNZ raised the Official Cash Rate (OCR) by 25 bps to 2.50% and indicated that “further OCR increases appear likely at upcoming meetings.” Reflecting this hawkish stance, BBH points out that “the swaps curve price in 60bps hikes by year-end and a total of 100bps of tightening over the next twelve months to 3.50% – near the top of the RBNZ estimated neutral range (2.20%-4.10%).”

According to TD Securities, upside risks to inflation “remain given renewed Middle East tensions pushing Brent above $90,” reinforcing the need for further policy tightening. The bank adds: “We expect the RBNZ to hike again in September, after it restarted its hiking cycle in July.”

However, this supportive monetary policy backdrop for the New Zealand Dollar is being overshadowed by deteriorating market sentiment. Investors are reducing exposure to risk-sensitive currencies as tensions between the United States and Iran continue to escalate. US President Donald Trump warned on Wednesday that the United States would strike Iranian bridges and power plants if Tehran attacks another vessel in the Strait of Hormuz, raising fears of a broader conflict and further disruptions to global energy supplies.

These geopolitical concerns are supporting demand for safe-haven assets, benefiting the US Dollar and limiting the upside potential for NZD/USD despite expectations of further monetary tightening in New Zealand.

Meanwhile, according to the CME FedWatch Tool, markets continue to price in a strong chance that the Federal Reserve (Fed) will leave interest rates unchanged at its next meeting while maintaining expectations for tighter monetary policy over the longer term. This outlook is also helping to support the Greenback against more risk-sensitive currencies.

Standard Chartered economists Carol Liao and Shuang Ding argue that China’s July Politburo meeting will prioritise implementation of existing fiscal plans over new stimulus. They expect fiscal execution to accelerate in H2 after a marked slowdown following front-loaded Q1 spending. Infrastructure investment is likely to rebound, with spending increasingly directed toward AI-related and green-transition projects to stabilise growth.

Politburo seen prioritising fiscal delivery

"We expect the meeting to focus on accelerating fiscal execution in H2, while keeping a contingency plan Funding for goods trade-in programme is evenly paced; infrastructure spending likely to rebound in H2 Spending to increasingly focus on infrastructure related to AI and the green transition."

"As a result, the market seems to be more focused on whether the July Politburo meeting will deliver additional stimulus."

"We expect the July Politburo meeting to focus on accelerating fiscal execution in H2 rather than expand the policy scope, with monetary policy playing a supplementary role."

"We believe this led to the sharp infrastructure investment contraction in Q2, and appears to be an intentional fine-tuning of the spending pace after strong Q1 growth."

"We think infrastructure spending will continue to play a critical role in stabilising growth near-term, focusing on green transition, high-tech and social/livelihood projects."

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

• AUD/USD rebounds toward 0.7000 as the DXY falls near 101.10
• Trump’s warning of potential US strikes on Iranian infrastructure might limit the Aussie’s recovery.
• Australia’s June Employment report is expected to show a 15K job increase.

AUD/USD trades near 0.7000 on Wednesday, recovering from an intraday pullback but remaining marginally lower on the day. The pair briefly fell toward 0.6985 before rebounding, while the US Dollar Index (DXY) slipped toward 101.10, helping the Australian Dollar regain some ground.

Geopolitical risks remain elevated after United States (US) President Donald Trump warned that the United States would strike Iranian bridges and power plants if Iran attacks another ship in the Strait of Hormuz.

The comments increased concerns about a broader conflict and further disruption to global energy supplies. Higher geopolitical uncertainty may support safe-haven demand for the US Dollar, potentially limiting AUD/USD gains, and rising Oil and Gold prices indicate that markets remain cautious.

Investors now await Australia’s June labor market report. Employment is expected to rise by 15K, slowing sharply from May’s 40.3K increase. The Unemployment Rate is forecast to remain unchanged at 4.4%, while the Participation Rate is expected to hold at 66.7%. The report will also provide details on full-time and part-time employment after increases of 5.2K and 35.2K, respectively, in May.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.6993, holding between the 100-period Simple Moving Average (SMA) support at 0.6953 and the 20-period SMA resistance at 0.6998, which leaves the pair in a neutral but slightly capped near-term stance. Price is struggling to decisively clear the nearby cluster of resistance defined by the 20-period SMA at 0.6998 and the horizontal barrier at 0.6999, while the Relative Strength Index (RSI) around 49 hints at consolidative momentum rather than a strong directional push.

On the downside, initial support appears at 0.6989 ahead of the lower horizontal floor at 0.6981, with stronger structural demand emerging from the 100-period SMA near 0.6953. On the topside, a sustained move above the 20-period SMA at 0.6998 and the 0.6999 horizontal cap would open the way toward the next resistance at 0.7005, where sellers could attempt to reassert control.

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

• USD/JPY rebounds from its intraday low and stays close to levels last seen in 1986.
• Markets remain focused on Middle East tensions and possible FX intervention.
• BoJ officials view persistent Yen weakness as an upside risk to inflation.

The Japanese Yen (JPY) gives up earlier gains on Wednesday, failing to capitalize on hawkish signals from the Bank of Japan (BoJ) and a softer US Dollar (USD) as Middle East tensions keep markets on edge. At the time of writing, USD/JPY trades around 163.08, rebounding from an intraday low of 162.71.

Unnamed BoJ officials reportedly said the central bank is open to raising interest rates more often than every six months. They also see the recent weakness in the Japanese Yen as a risk that could push inflation higher.

USD/JPY climbed to 163.24 on Tuesday, its highest level since 1986. Broad-based US Dollar strength, Japan’s relatively low interest rates and rising Oil prices amid supply disruptions in the Strait of Hormuz continue to weigh on the Yen. Japan is particularly vulnerable because it depends heavily on imported energy.

Persistent Yen weakness keeps traders alert to possible intervention in the foreign exchange market. Japanese Finance Minister Satsuki Katayama repeated that authorities were prepared to take appropriate action if needed.

On the fiscal side, the Ministry of Finance recently indicated that it may encourage public-sector asset managers to increase their holdings of Japanese government bonds. This could bring some funds back into domestic assets and support the Yen, although repatriation alone is unlikely to reverse the currency’s weakness.

According to Rabobank, the Yen is unlikely to recover meaningfully without stronger assurances over Japan’s fiscal position and clearer signals that the BoJ is prepared to raise rates more quickly.

On the geopolitical front, US President Donald Trump issued a fresh warning to Iran on Wednesday, threatening strikes on the country’s infrastructure if Tehran targets vessels in the Strait of Hormuz. His remarks came after the US military completed an eleventh consecutive night of strikes on Iran.

ING analysts discuss changes to US Section 232 aluminium tariffs aimed at incentivizing domestic smelting investment. Qualifying projects can import at 25% instead of 50%, but ING stresses this is a long-term industrial policy with limited near-term impact. They note US primary aluminium output has shrunk to four smelters, leaving the market structurally reliant on imports and supporting Midwest premiums.

US market stays structurally import-reliant

"In base metals, the Trump administration amended its Section 232 aluminium tariffs to encourage investment in domestic smelting. Companies that build, expand or refurbish US smelting capacity can apply to import qualifying volumes at a 25% tariff instead of the standard 50% rate."

"US primary aluminium production continued to decline over the years despite years of tariff protection. The country now has only four operating primary aluminium smelters."

"However, the latest changes are unlikely to materially alter the near-term US market. The programme should be viewed as a long-term industrial policy rather than a near-term solution to the country’s supply shortfall."

"If successful, it could support a gradual revival of US primary aluminium production. Until meaningful new capacity comes online, the US will remain structurally dependent on imports, keeping Midwest premiums well supported."

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