Forex News

DBS economist Radhika Rao expects India’s June CPI inflation to edge up to 4.1% YoY from 3.9%, driven by food normalisation and fuel-cost pass-through. She sees limited upside risks to core inflation, an improving but uneven southwest monsoon, and the June trade deficit remaining elevated near USD 28.5 billion despite the recent oil-price correction.

Mild CPI rise and trade deficit

"June CPI inflation is expected to rise marginally to 4.1% yoy from 3.9% the month before, on continued normalisation in food segments and passthrough of fuel costs through the related segments."

"Beyond food and fuel, upside risks to core inflation appear limited, amid softer gold as well as precious metal prices and little scope for further pump price adjustments."

"Markets are also focused on the spatial and geographical spread of ongoing southwest monsoon."

"Encouragingly, the nationwide rainfall shortfall has narrowed considerably into July to -15% (as of 8 July), from over 40% gap in end-June, with key crop-producing belts of central and northwest India witnessing improvements."

"June trade data are unlikely to fully capture the impact of the mid-month correction in oil prices, with the trade deficit expected to remain elevated at around $28.5bn."

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

Commerzbank’s Tatha Ghose reports that the National Bank of Poland kept rates at 3.75% and a neutral stance, but Governor Adam Glapinski’s press conference was markedly dovish. He floated a possible September rate cut and downplayed inflation and FX risks, leading Commerzbank to expect Polish Zloty (PLN) underperformance versus Czech Koruna (CZK) as markets price in easing in coming quarters.

NBP dovish tilt weakens zloty case

"Poland’s National Bank (NBP) delivered a cautious July sitting, on paper, with unchanged 3.75% rate, a neutral stance, and updated macroeconomic projections which appear stagflationary. As examples, the new Inflation Report raised the 2026 CPI mid-point by 0.60pp to 2.85% and 2027 by 0.35pp to 2.75%, while trimming GDP growth for those years by 0.20pp and 0.15pp respectively."

"But, the press conference tore up this story: NBP Governor Adam Glapinski described the council as “cautiously dovish” and himself as “decidedly dovish”, openly floating a 25bp cut motion at the September meeting (if no fresh shock were to arrive). He conceded that fuel tax normalization will push inflation higher in coming months, but insisted CPI will stay inside the 2.5%±1pp band and portrayed recent developments – slower wage growth, softer commodity prices, a benign growth outlook – as inflation-supportive in the dovish sense."

"There was no genuine concern about second-round effects from the Iran shock. Glapinski even downplayed recent zloty weakness, simply repeating that the CB could intervene in FX if the move were to become “too sharp”."

"In essence, Glapinski confirmed our own view that the next move would be a rate cut, not hike, something markets could begin to price-in for Q4. The reason why Glapinski’s dovishness came as somewhat of a surprise is that the Iran situation had worsened in the past couple of days, and NBP’s forecast revisions matched up with that direction."

"This means that the main supportive factor for PLN – the idea that Iran might force NBP into a hawkish stance – has evaporated. With CNB still enjoying a more credible hawkish bias, the zloty is set to underperform the Czech koruna over the coming quarter."

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

• EUR/USD edges up above 1.1450 but remains capped below last week's top, at 1.1475.
• German inflation figures confirm that price pressures eased in June, adding to the case for an ECB pause in July.
• The US Dollar trades lower across the board as hopes of a negotiated end to Iran's war remain alive.

The Euro (EUR) holds minor gains against a somewhat softer US Dollar (USD) on Friday. The pair edged up to the mid-range of the 1.1400s, but it has failed to find acceptance above the top of the last two weeks' trading range, in the area of 1.1475, and is set to close the week practically unchanged.

In Germany, the final Harmonized Index of Consumer Prices (HICP) for June, released earlier on the day, confirmed the moderation in inflationary pressures anticipated by the preliminary reading, which eases pressure on the European Central Bank (ECB) to hike interest rates further at its July meeting.

German consumer inflation, as measured by the HICP, eased to a 2.4% year-over-year rate in June from 2.7% in May and April's 2.9% peak. Monthly inflation contracted 0.2%, also in line with preliminary estimations, and following a 0.1% contraction in May. The impact of these figures on the Euro has been marginal.

The rebound in Oil prices weighs on the Euro

The resumption of the hostilities between the US and Iran and the ensuing rebound in oil prices, with traffic through the key Strait of Hormuz plunging, has acted as a headwind for any significant Euro recovery this week.

The US military launched a series of strikes on Iranian targets earlier this week in retaliation for alleged attacks from Tehran on vessels attempting to cross Hormuz, and Iranian forces responded by targeting US bases in Gulf countries. Markets, however, have taken these acts as manoeuvres to gain leverage in fut¡ure negotiations, and risk aversion has remained contained, which kept the Euro from falling further.

In the US, the minutes of the last Federal Reserve (Fed) monetary policy meeting, released on Wednesday, showed a firm commitment to bring inflation to target. The central bank's governing board, however, was split on the near-term rate path, leaving investors pondering the timing for the next hike. The US Dollar retreated moderately after the release of the minutes.

(This story was corrected on July 10 at 07:29 GMT to say that German HICP contracted 0.1% in May, and not 0.% as previously stated.)

• USD/JPY attracts some sellers to near 161.50 in Friday’s early European session.
• The prospect Japanese pension funds will invest more domestically to support the Japanese Yen.
• Fed's Williams doesn't expect a sustained surge in energy prices.

The USD/JPY pair tumbles to around 161.50 during the early European trading hours on Friday. The Japanese Yen (JPY) edges higher against the US Dollar (USD) after the reports that Japan plans to encourage pension funds to increase their holdings of domestic financial assets.

Japan’s Finance Minister Satsuki Katayama said that the government is pursuing measures that would include the Government Pension Investment Fund (GPIF) to make "substantially greater investments in Japanese financial assets,” per Reuters. Analysts said this move could offer greater support to ‌the battered currency than intervention.

Traders reduce their bets of a rate hike from the US Federal Reserve (Fed) this year, weighing on the Greenback against the JPY. New York Fed President John Williams said on Thursday that despite the resumption of hostilities in the Middle East, he was not looking for a sustained rise in ‌energy prices over the remainder of the year.

Expectations for a rate hike of at least 25 basis points (bps) at the July meeting dropped to 24.6% from 31% in the previous session, but up from 18.2% a week ago, according to the CME FedWatch tool. For the September policy meeting, markets are pricing in a 62.3% chance of a hike, down from the 66.6% on Wednesday but an increase from the 54.1% a week earlier.

UOB’s Quek Ser Leang highlights a modest uptick in EUR/USD momentum, with scope to retest 1.1450 but limited prospects for a sustained break higher. Intraday support is seen at 1.1420 and 1.1405. For the coming one to three weeks, the pair is viewed in a 1.1360–1.1450 range, while a break of 1.1390/1.1410 could expose 1.1210 longer term.

Euro capped near recent highs

"24-HOUR VIEW: EUR declined to 1.1390 two days ago before recovering to close largely unchanged at 1.1414 (+0.03%). Yesterday, we noted that “momentum indicators are turning flat,” and we held the view that EUR “is likely to range-trade between 1.1395 and 1.1440.” EUR subsequently traded within a higher range of 1.1412/1.1449, closing at 1.1428 (+0.12%). The slight increase in upward momentum suggests EUR may retest 1.1450. A continued rise above this level is unlikely. Support is at 1.1420; a breach of 1.1405 would mean that the prevailing mild upward pressure has eased."

"1-3 WEEKS VIEW: Yesterday (09 Jul, spot at 1.1420), we highlighted that EUR “has likely moved back into a range-trading phase,” and we expected it “to trade between 1.1360 and 1.1450.” Although EUR subsequently rose to 1.1449, there has been no clear increase in upward momentum. Looking ahead, with momentum remaining flat, a break above 1.1450 is likely to result in a broader trading range rather than a sustained move higher."

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

• The Swiss Franc gives up some of its gains against the US Dollar.
• Oil prices recover amid fears of a prolonged US-Iran war.
• Investors await the US CPI data for June, which will be released next week.

The Swiss Franc (CHF) pares some of its early gains against the US Dollar (USD) during the early European trading session on Friday. The USD/CHF pair is 0.26% lower at around 0.8048 even after a slight recovery move.

The Swiss Franc pair surrenders some gains as the US Dollar attracts slight bids amid a recovery in oil prices. At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.14% lower to near 100.80 after revisiting the three-week low of 100.60 earlier in the day.

Oil prices corrected sharply on Thursday after a United States (US) official confirmed that technical talks with Iran are still on despite President Donald Trump declaring the collapse of the memorandum of understanding (MoU).

However, continued exchange of attacks between the US and Iran have resurfaced fears of energy supply disruption, a scenario that could prompt the US inflationary pressures further.

To get cues regarding the current status of US inflation, investors await the Consumer Price Index (CPI) data for June, which will be released on Tuesday. The data is expected to show that the core CPI – which excludes volatile items such as food and oil – grew at a steady pace of 2.9% Year-on-Year (YoY).

On the Swiss Franc front, the currency trades higher against its major peers, except the Japanese Yen (JPY) amid a cautious market mood.