Forex News

• WTI recovers from its lowest level since April 17 as traders await clarity on a possible US-Iran agreement.
• Iran says the proposed agreement does not require Tehran to transfer control of the Strait of Hormuz.
• Technically, WTI's near-term tone remains bearish, with RSI signaling weak upside momentum.

West Texas Intermediate (WTI) pares some part of earlier losses on Friday as markets seek confirmation of a possible US-Iran agreement, prompting traders to refrain from placing aggressive bearish bets.

At the time of writing, WTI trades around $83.80 per barrel after recovering from an intraday low of $81.80, its lowest level since April 17.

Crude Oil prices came under heavy selling pressure on Thursday after US President Donald Trump said the US and Iran could sign a peace deal as soon as this weekend that would reopen the Strait of Hormuz, a critical chokepoint for around 20% of global Oil flows.

However, questions remain over the future management of the Strait of Hormuz. According to IRNA, "the future administration of the Strait will be resolved as a regional matter through dialogue and joint decision-making between Tehran and Oman."

IRNA also reported that the proposed agreement with the United States does not require Iran to transfer control of the strategic waterway.

Until the details of any agreement become clearer, a geopolitical risk premium is likely to remain embedded in Oil prices. However, the technical outlook remains fragile, with prices trading below key moving averages and momentum indicators pointing lower.

Technical analysis:

WTI retains a bearish near-term bias, with price holding below the 100-, 50- and 21-day simple moving averages (SMAs) clustered between roughly $85 and $94, which cap any recovery attempts for now.

The Relative Strength Index (RSI) on the daily chart is near 39 and keeps a downside bias in momentum, while the subdued Average Directional Index (ADX) around 14 hints at a weak directional trend.

On the topside, initial resistance is seen at the 100-day SMA at $85.23, with further barriers at the 21-day SMA near $92.17 and the 50-day SMA around $93.70, where sellers would likely re-emerge if a bounce extends.

On the downside, immediate support is seen at the $80 psychological mark near the lower end of the war-driven trading range, followed by the 200-day SMA at $72.49.

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

Commerzbank analysts Charlie Lay and Moses Lim argue that the Rupee remains vulnerable to external shocks, notably Middle East tensions, higher energy costs and El Nino-related risks. They stress India’s heavy reliance on imported Oil, the drag from softer exports and lingering US trade risks, but also point to resilient domestic demand and substantial FX reserves supporting INR over the coming quarters.

Energy, monsoon and trade risks dominate

"The Middle East conflict continues to weigh disproportionately on the Indian rupee due to the country’s heavy reliance on imported energy, increasing pressure on inflation and the external balance. Although growth surprised to the upside at 7.7% in FY2025-2026, the economy is expected to moderate to around 6.5% in FY2026-2027 as higher oil prices, geopolitical uncertainty, supply chain disruptions, and lingering US tariff risks weigh on activity."

"However, the economy faces several external headwinds. Exports are likely to soften amid elevated global uncertainty, supply chain disruptions arising from the Middle East conflict, and higher global commodity prices. While trade risks have eased following the US Supreme Court's ruling against the IEEPA tariffs, India remains subject to Section 301 investigations."

"A growing downside risk is the El Nino weather pattern, which is expected to bring warmer and drier conditions. The Ministry of Earth Sciences projects monsoon rainfall at around 90% of its historical average. A weaker monsoon could reduce crop yields and increase fuel demand as farmers rely more heavily on irrigation pumps, adding upward pressure to both food and fuel inflation."

"More recently, RBI and the government announced a coordinated package of measures aimed at strengthening the balance of payments through higher foreign capital inflows. These include tax exemptions on foreign investment in government bonds, expanded foreign access to sovereign debt, a subsidised FCNR(B) deposit scheme, and a concessional FX swap facility for state-owned firms. Estimates suggest the measures could attract USD30-50bn of inflows over the next year."

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

TD Securities strategists note that Precious Metals, particularly Gold, are struggling to gain traction as elevated Fed hike probabilities keep real rates high. CTA's (Commodity Trading Advisors) are running a small net short and scenario analysis points to a relatively tight trading band. A fragile Iran deal backdrop and firm energy prices mean Gold is not yet in a clear recovery phase.

CTA shorts and constrained trading range

"Precious metals still can't catch a bid. Despite headlines driving oil lower, rates and probabilities of Fed hikes remain elevated, limiting the upside for gold."

"For now CTAs remain comfortable at a small net-short, with our pricing simulations highlighting a tight range under most scenarios."

"If potential deal talk keeps oil under wraps in the near-term, the worst case scenario of testing the next selling triggers just below the key $4000/oz level may be avoided for now."

"However, the still fragile deal framework and elevated energy pricing suggest precious metals are not fully out of the woods just yet."

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

• USD/CAD rises on Friday and trades around 1.3990, up 0.16% on the day at the time of writing.
• Stronger-than-expected US producer inflation reinforces expectations of a longer-lasting restrictive monetary policy stance.
• The Canadian Dollar remains under pressure due to lower Oil prices and the Bank of Canada's cautious tone.

USD/CAD trades higher around 1.3990 on Friday, with the US Dollar (USD) benefiting from stronger-than-expected inflation data in the United States (US), while the Canadian Dollar (CAD) remains weighed down by falling Oil prices and a Bank of Canada (BoC) that is showing little urgency to raise rates further.

Thursday’s Producer Price Index (PPI) report showed that US inflation accelerated in May. The annual figure rose to 6.5%, marking its fastest pace since November 2022, while the monthly increase of 1.1% exceeded market expectations. The data reinforced expectations that the Federal Reserve (Fed) could keep monetary policy restrictive for longer. John Ryding, Chief Economic Advisor at Brean Capital, said the report strengthens the case for those Federal Open Market Committee (FOMC) members who believe another rate hike may be needed later this year.

The US Dollar is also drawing support from an ongoing backdrop of geopolitical uncertainty. Although US President Donald Trump stated that a peace agreement with Iran could be signed as soon as this weekend, Iranian officials indicated that no final decision has yet been reached. Tensions remain elevated in the Middle East after US forces intercepted Iranian drones near the Strait of Hormuz, while the Islamic Revolutionary Guard Corps reiterated its readiness to respond to any aggression.

On the Canadian side, the BoC left its policy rate unchanged at 2.25% at its June meeting. The central bank noted that there is still limited evidence that higher energy prices are feeding through broadly into inflation. However, BoC Governor Tiff Macklem reiterated that policymakers would not hesitate to raise rates if necessary to keep inflation under control.

Comments from BBH analysts suggest that markets may be overestimating the extent of future tightening from the Bank of Canada. According to the bank, the central bank’s cautious stance could support a gradual extension of USD/CAD gains in the coming months.

Meanwhile, lower Oil prices continue to weigh on the Loonie. Hopes for an agreement between Washington and Tehran have fueled expectations of a normalization in global energy flows, putting downward pressure on Crude prices. As the Canadian Dollar is closely linked to the country’s energy exports, weaker Oil prices continue to provide support for USD/CAD.

Investors will now focus on the preliminary University of Michigan Consumer Sentiment Index for June, due later on Friday. The release could influence expectations regarding the Fed’s policy outlook and the near-term direction of the US Dollar.

Nordea’s Jan von Gerich highlights that the ECB delivered a widely expected 25bp hike and is likely to continue tightening, with the next move expected in July. He argues that broadening inflation pressures mean lower energy prices alone will not ease ECB concerns. Nordea’s baseline is for rates to reach 3% via consecutive hikes, above current market pricing.

Broadening inflation keeps ECB on track

"The ECB delivered the widely expected 25bp rate hike, while further clarity on the Fed’s response is expected next week."

"We expect more hikes from the ECB, and even though uncertainties remain elevated, our baseline points to the next move already at the July meeting."

"By now, there are already plenty of signs of broadening inflation pressures, so at least as far as the ECB is concerned, the question is no longer whether there will be a monetary policy response, but how big it will be."

"Lower energy prices alone would probably not remove all the ECB’s inflation worries, which has been confirmed by several Governing Council speakers as well."

"We still think the ECB will hike rates all the way to 3% at consecutive meetings, which is clearly above the current market pricing."

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

ING’s Commodities Strategist Ewa Manthey notes that LME copper is trading near record highs, supported by supply tightness, US tariff-driven stockpiling and AI-related power demand. The market is already pricing US tariff risk, with the COMEX-LME spread around $400/t. ING expects a tight global copper balance into 2026, with the tariff outcome shaping spreads and inventory visibility.

Tariff scenarios drive COMEX-LME copper spread

"The US tariff decision on copper imports is weeks away, with the Commerce Secretary due to deliver a recommendation to President Donald Trump by 30 June. The market has already begun pricing the outcome. The COMEX-LME spread has widened to around $400/t, suggesting the market continues to price meaningful tariff risk into US-delivered refined copper."

"LME copper is trading near record highs, with prices up around 10% year-to-date and holding up well against a difficult macro backdrop. Strong US jobs data has reinforced expectations that the Federal Reserve will keep policy restrictive for longer, while renewed tensions involving Iran have weighed on broader risk sentiment."

"A confirmed 15% phased tariff from 1 January 2027 would likely increase the premium of COMEX over LME copper. In practice, both benchmarks would move higher. COMEX would be supported by stronger US import demand, while LME would also benefit as metal diverted away from the US tightens supply availability elsewhere."

"We forecast the global copper market to move into a deficit of around 35kt in 2026, reflecting mine supply losses across Indonesia, Chile, the DRC and Zambia, alongside disruptions to Middle Eastern sulphur flows and sustained end-use demand in electrification and grid infrastructure. The tariff outcome does not change that underlying market balance. However, it will determine how quickly the deficit becomes visible in exchange inventory data and how the price gap between COMEX and LME evolves."

"We see LME copper broadly supported at current levels through 2Q, before easing modestly into 3Q and 4Q as the initial tariff stockpiling impulse fades and macro headwinds persist. The tariff announcement itself represents near-term upside risk to our near-term forecast. A front-loaded 30% tariff would put further upside in play. Conversely, a delay or outright rejection of tariffs represents the clearest downside risk to our view over the second half of the year."

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

Societe Generale strategists note Mexico still appears steady even as conditions become more challenging. Inflation has cooled to 3.94% in May, while Banxico has signalled an end to its easing cycle, leading markets to price potential hikes. They highlight record exports to the US and Mexico’s strong United States-Mexico-Canada Agreement (USMCA) position, but warn about uncertainty over future USMCA arrangements.

Mexico steady but USMCA clouds outlook

"Mexico still looks steady, even if the playing field is getting a bit more challenging."

"Inflation has cooled to 3.94% in May, back below the 4% mark, but Banxico has already signalled the end of its easing cycle, prompting markets to price renewed hikes."

"Trade is clearly doing the heavy lifting, with exports to the US hitting a record $50.7bn in April, underlining Mexico’s strong position within the USMCA framework."

"That said, the outlook is clouded by uncertainty around the future of the USMCA, with the US leaning toward periodic reviews rather than a clean renewal."

"USD/MXN was capped below 17.50 barrier while USD/BRL rally stalled at 5.20."

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

Commerzbank’s Bernd Weidensteiner and Christoph Balz argue that Kevin Warsh’s first Federal Reserve meeting is unlikely to deliver an immediate rate cut, given elevated PCE inflation and a still‑solid labor market. They expect the Fed to drop its easing bias next week, then only begin a gradual cutting cycle around mid‑2027, constrained by inflation risks and political pressure.

Warsh unlikely to cut near term

"However, an interest rate cut is unlikely to be seriously on the table next week. This is because inflation risks have continued to rise since the last meeting in April. Based on the comprehensive inflation measure preferred by the Federal Reserve—the deflator of personal consumption expenditures (PCE) —prices in April were 3.8% higher than a year earlier."

"Since the inflation rate is well above the Fed’s 2% target and is actually moving further away from it, a rate cut would only be justified if the Fed were to completely miss its second goal of full employment. In fact, the labor market has recovered from the slump it experienced last fall. At that time, the unemployment rate had risen to 4.6%, prompting the Fed to cut rates three times."

"We expect the central bank to remove the “easing bias.” While Kevin Warsh will have no objection to an interest rate cut as the next step, he generally does not believe in signaling future interest rate moves. He could therefore agree to calls to eliminate the wording, even if he does not share the substantive arguments."

"Warsh won’t have a better chance of pushing through an interest rate cut until next year. By then, the inflation rate is expected to fall again, as the price-driving effects of tariffs and the higher energy costs resulting from the conflict in the Persian Gulf should begin to subside. In addition, Warsh expects that the introduction of artificial intelligence (AI) will significantly boost productivity, as was the case during the “New Economy” of the 1990s and early 2000s."

"We continue to expect that, due to inflation risks, calls for interest rate hikes will grow louder in the coming months, but that this will not become the prevailing view within the FOMC. If the situation in the Persian Gulf eases and oil prices—and thus the inflation rate—fall again, sentiment is likely to shift and the question of interest rate cuts will resurface. Starting around the middle of next year, the Fed will likely begin cutting interest rates, by 75 basis points through the end of 2027."

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

Nomura’s Global FX Strategy team, including Dominic Bunning and Yusuke Miyairi, argues that a more hawkish ECB path versus the Bank of England should support the Euro against the Pound. They keep a long EUR/GBP stance and see narrowing front-end rate differentials and UK political-fiscal risks as catalysts for a move in EUR/GBP towards 0.90 over the coming months.

Long EUR/GBP on ECB-BoE divergence

"Hawkish ECB announcements today, as well as potential rate hikes in the future will be EUR positive, in our view. We like to express this via long EUR/GBP, with the GBP leg likely to face adverse pressure due to political fiscal risks."

"We think there is room for EUR to outperform many of its peers as the ECB shows a more hawkish reaction function to upside price pressures. We have maintained a long EUR/GBP trade over recent months, and while the pair has not moved significantly against us, it has also been an incredibly frustrating position to hold, failing to break out to the topside despite a number of risks to GBP (especially on the political and fiscal front). However, we think the clearer signs of monetary policy divergence will ultimately drag the pair higher."

"EUR/GBP has a consistent relationship with front-end rate spreads, and with our new view of a terminal ECB rate of 3.00% versus a BoE rate of 3.50% in 2027 (one hike this year, two cuts next year), a narrowing of the 2y rate differential to below 100bp from 140bp would support a move in EUR/GBP towards 0.90 (Figure 4). Positioning data are mixed but do not suggest many impediments to a move higher in the cross."

"Political and fiscal risks persist for the UK, of course, ahead of the by-election on 18 June which currently seems likely to see Andy Burnham return as an MP and challenge PM Keir Starmer for the top job. The resignation of Defence Secretary John Healey on 11 June further undermines Starmer, but also points to an underlying truth that the fiscal backdrop in the UK is exceedingly tight and will require spending cuts or tax increases. We would think Burnham will favour the latter, weighing on growth further."

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