Forex News

• GBP/USD advances as traders digest solid US jobless claims.
• US Treasury buyback pressure fades as the US Dollar steadies near recent lows.
• UK Retail Sales and PMIs could steer BoE hike expectations.

The Pound Sterling (GBP) advances on Thursday during the North American session, up 0.25% after US economic data showed that the labor market remains solid, despite a weaker Nonfarm Payrolls in July. The GBP/USD pair trades at 1.3639 after reaching a daily high of 1.3659, its highest level since February.

GBP/USD rises as UK inflation offsets solid US labor data

The Greenback has recovered some ground after posting losses, following the US Department of the Treasury's announcement of a bond buyback program. The Treasury’s goal is to provide liquidity for the long end of the curve, but markets interpreted the move as a form of Yield Curve Control (YCC). 

The US Dollar Index (DXY), which measures the buck’s performance against a basket of six currencies, remains steady at 98.79, after refreshing two-and-a-half-month lows at 98.55, a level last seen in May 14.

Data-wise, the US Initial Jobless Claims for the week ending August 15 dipped from 212K down to 206K, below forecasts of 210K. At the same time, the 4-week average of jobless claims edged up from 199.75K to 204K.

Recently, Federal Reserve (Fed) officials crossed the wires. St. Louis Fed Alberto Musalem said that strong growth and investment are influencing the bond market. He added that in July, he recommended raising rates, but for the September meeting, he remains open.

Earlier, San Francisco Fed Mary Daly said that a rise in long-term bond yields is a global issue, which reduces its usefulness as a signal for the Fed. She added that she doesn’t see Fed credibility as at risk and is making the case that the short end is reacting to the data.

In the UK, inflation hit a four-month high in July as confirmed by data released on Wednesday. Expectations that the Bank of England will raise rates in 2026 remain high, with traders expecting 25 basis points of tightening by the December meeting, as revealed by Prime Terminal.

In the meantime, traders are eyeing the release of UK Retail Sales for July, which are expected to show that consumer spending decelerated. In addition, traders will eye S&P Global Flash PMIS. Across the pond, the US schedule will feature S&P Global Flash PMIs, amid a scarce week of data releases.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3636, maintaining a bullish near-term bias as price holds above the cluster of former descending trend-line resistance now turned support around 1.3499–1.3409 and the 50/100/200-day simple moving average (SMA) group near 1.3390. The upward-sloping support lines, with break points at 1.3609 and 1.3366, reinforce the constructive structure, while the Relative Strength Index (14) at 70.49 edges into overbought territory, hinting that upside momentum is strong but vulnerable to consolidation.

On the downside, immediate support emerges at the recent highs around 1.3609, followed by the broken trend-line levels at 1.3499 and 1.3409, and then the dense SMA floor near 1.3390, with the lower rising trend-line break at 1.3366 acting as a deeper structural base. With no clear resistance levels defined above the market in the current dataset, the pair would likely need an overbought correction before bears can challenge this supportive zone, keeping the broader path of least resistance skewed to the upside while these levels hold.

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

Federal Reserve Bank of St. Louis President Alberto Musalem is crossing the wires with remarks on the economy and the monetary policy outlook, speaking in an interview with CNBC on Thursday.

Musalem flags upside inflation risks, keeps Dollar bulls alert despite cautious tone shift

Fed’s Musalem delivered a moderately hawkish-leaning message, with a 7/10 FXS Speechtracker score that is in line with the speaker’s historical average, but the emphasis on neutral-to-accommodative policy and “pretty accommodative” financial conditions tempers the tone.

The key remark that underlying inflation running between 2.5%-3% is “too high,” and that hiking now could avoid more aggressive action later underscores upside inflation risks and a bias toward pre-emptive tightening, even as Musalem stresses Fed credibility and independence from fiscal policy. References to strong growth, recovering productivity, and potential supply shocks such as a “super El Nino” reinforce a narrative where inflation risks remain front and center, keeping the Dollar supported on dips.

The FXS Fed Sentiment Index slipped 0.34 points to 132.42, signaling a modest pullback in perceived hawkishness from the prior reading despite the still-strong focus on inflation. With the index firmly above the 100 neutral line, the Fed remains in hawkish territory even after this slight sentiment cooling, suggesting markets will continue to price a non-trivial probability of further tightening, in line with Musalem’s warning that current rates may not be sufficient to reliably return inflation to 2%.

Key quotes:

Strong growth and investment are influencing the bond market.

Fed credibility is not in question.

The Fed is focused on making monetary policy independent of fiscal policy.

Monetary policy is neutral or accommodative right now.

Financial conditions are pretty accommodative here.

The number one concern of the public is inflation.

Businesses are facing high input costs.

A super El Niño might be the next supply shock.

Given current Fed rates, sees a lower probability of getting inflation back to 2%.

Hiking rates now could save more aggressive action later.

Underlying inflation is between 2.5% and 3%, is too high and must be lowered.

Productivity is seeing a recovery.

The best thing the Fed can do for growth is get inflation back to 2%.

Some parts of the economy are seeing credit getting crowded out.

Forward guidance is useful when rates are at zero.

Forward guidance suggests commitment; communicating a framework is different.

When you have supply shocks, you have to look at core inflation.

Won't offer a firm view on what he wants the Fed to do at the September FOMC.

Won't prejudge the upcoming FOMC meeting.

Scotiabank strategists Shaun Osborne and Eric Theoret note the US Dollar (USD) is extending losses to its weakest level since mid-June as markets react to the US Treasury’s decision to double bond buybacks. The move is seen as an attempt to manage longer-term yields amid doubts over Federal Reserve (Fed) inflation resolve and US fiscal sustainability, with US Dollar Index (DXY) seen falling another 1–1.5% near term.

Treasury buybacks pressure Dollar further

"The USD is weakening further today, sliding to its lowest since mid-June. Stocks are mixed, crude oil prices are stronger and major bond markets are a little weaker. Treasurys are underperforming and the curve is steepening again."

"Yesterday’s Treasury Dept. announcement that it was doubling the size of its bond buybacks took the market by surprise. The announcement came just two weeks after its latest quarterly refunding announcement and a few hours before a 20Y Treasury auction."

"The plan targets longer-term rates and is limited in scale; buybacks go from USD2bn to USD4bn and run from September 9th-November 4th. It’s ostensibly a liquidity management issue but the announcement left the impression that the Treasury is trying to calm the Treasury markets after the recent ramp up in term rates and it’s not a good look."

"It suggests that the Treasury is trying to manage longer-term rates—which have been rising because markets are questioning the Fed’s commitment to inflation fighting and investors are worried about the sustainability of US fiscal policy. If yields can’t fully take the strain from those concerns, the USD will have to. The dollar debasement trade is making a comeback."

"The July FOMC minutes showed that “many” policymakers felt tighter policy would be needed if inflation didn’t decline. But recent signs of abating price pressures and some softening in the labour market suggest the risk of a September hike is still lower than market-implied probabilities (a bit more than 30%)."

"On the charts, DXY losses are extending through the 50% retracement of the dollar’s H1 gains, paving the way for a further 1-1.5% decline in the index in the near term."

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

• USD/CHF rebounds after falling to its lowest level since June 17.
• The pair’s technical structure weakens following a break below the 50-day SMA.
• Buyers defend the area around the 100-day SMA at 0.7975.

USD/CHF regains ground on Thursday as the US Dollar (USD) stabilises following the previous day’s broad weakness, which pushed the pair below the 0.8000 psychological mark and to its lowest level since June 17, weakening the near-term bullish structure. At the time of writing, USD/CHF trades around 0.7998 after bouncing from an intraday low of 0.7949.

The pair lost 1.83% on Wednesday and slipped below the 50-day Simple Moving Average (SMA) at 0.8085 for the first time since June 2. However, buyers re-emerged after a brief dip below the 100-day SMA at 0.7975, helping the pair regain ground.

USD/CHF is hovering just below the 0.8000 horizontal barrier. Momentum remains fragile, with the Relative Strength Index (RSI) at 38.2 and the Moving Average Convergence Divergence (MACD) holding below zero, suggesting that recovery attempts could struggle against nearby resistance.

On the topside, initial resistance emerges at the 0.8000 mark, followed by the support-turned-resistance zone near 0.8050 and the 50-day SMA at 0.8085. On the downside, the 100-day SMA at 0.7975 offers immediate support, ahead of the 200-day SMA at 0.7933. A deeper decline could expose the horizontal floor at 0.7850.

• The US Treasury Secretary is considering bond buybacks exceeding $4 billion.
• Bessent says current yields do not reflect underlying economic fundamentals.
• The US official sees a good chance that the deficit has peaked and signals an increased focus on fiscal consolidation.

United States (US) Treasury Secretary Scott Bessent said on Thursday that the Treasury could increase bond buybacks beyond $4 billion, partly to signal that current yields do not reflect underlying economic fundamentals. He stressed that interest rates have nothing to do with the buyback decision.

On fiscal policy, Bessent said there is a very good chance that the US deficit has already peaked and indicated that the administration will likely increase its focus on fiscal consolidation. He also played down the $40 trillion debt threshold and expects tariff revenues in 2026 to remain similar to 2025 levels.

Bessent added that the Treasury and the Federal Reserve (Fed) would coordinate in the event of changes to the central bank’s balance sheet. On inflation, he noted that market indicators point to lower price pressures ahead.

Key takeaways

Buyback could be more than 4 billion.

Part of it is signaling.

We want to show that yields do not reflect underlying fundamentals.

Probably going to announce increased focus on fiscal consolidation.

Nothing magic about $40 trillion debt number.

Expect tariff 2026 income will be similar to 2025.

Very good chance we've seen peak deficit.

Markets got a little ahead of itself.

Treasury and Fed would work together if any change in balance sheet.

We would adjust.

Rates have nothing to do with buyback decision.

Markers are saying [inflation] will be lower in future.

Market reaction

The US Dollar (USD) showed little reaction to Bessent’s comments, with the US Dollar Index (DXY) remaining broadly unchanged on Thursday, trading around 98.80 at the time of writing. Meanwhile, the benchmark 10-year US Treasury yield remains supported after Wednesday’s decline, rising by more than 6 basis points on Thursday to around 4.70%.

• US Oil reaches a fresh three-week high, supported by persistent concerns over global supply.
• Donald Trump threatens severe economic consequences for countries providing support to Iran.
• Qatar sees the Iran-Oman agreement as a preliminary step toward renewed negotiations with Washington.

West Texas Intermediate (WTI) US Oil rises 1.89% on Thursday and trades around $85.85 at the time of writing, after reaching a fresh three-week high at $87.38 earlier in the day. Oil prices remain supported by disruptions to global energy supplies and the lack of a diplomatic breakthrough between Washington and Tehran.

WTI benefits in particular from concerns surrounding the closure of the Strait of Hormuz and the Bab el-Mandeb Strait. According to available information, the two waterways together account for around 27% of global energy supply, maintaining a significant risk premium in Oil prices.

The prospect of a rapid normalization in supply remains limited as United States (US) President Donald Trump steps up economic pressure on Iran. The US President warns that countries allowing their financial institutions, businesses, airports or government entities to provide economic support to Tehran could face severe economic consequences.

Trump specifically calls for an end to Oil smuggling, swap lines, cash transfers and other mechanisms that could support the Iranian economy. Washington's tougher stance is therefore fueling fears that the Strait of Hormuz could remain closed for longer, keeping risks to global energy flows elevated.

On the diplomatic front, however, Qatar believes that talks between Iran and Oman over the management of the Strait of Hormuz could represent an important step before a potential resumption of dialogue between the United States and Iran.

Qatar's Foreign Ministry spokesperson Majed Al-Ansari said on Tuesday that discussions between Iran and Oman had become a key step toward restarting a broader diplomatic process. Progress on this issue could pave the way for Washington and Tehran to return to the negotiating table, but the lack of an immediate agreement continues to support WTI for now.

WTI US Oil technical analysis

In the one-hour chart, WTI US Oil trades at $85.81, retaining a bullish near-term bias as price holds above the 100-period simple moving average (SMA) at $83.52 and the 200-period SMA at $82.26. The cluster of nearby horizontal levels, with initial support just beneath at $85.65 and $85.00, suggests a well-supported market, while the Relative Strength Index (14) around 57 keeps momentum in positive but not overbought territory.

On the downside, immediate support is seen at $85.65, followed by $85.00, with deeper demand levels emerging at $83.70 and the $83.52 and $82.26 SMAs reinforcing the broader uptrend if a larger pullback unfolds. On the topside, the next significant resistance stands at $87.38, and a sustained break above this barrier would likely open the way to further gains as bullish momentum extends.

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

DBS Group Research economist Radhika Rao notes Bank Indonesia (BI) kept its policy rate at 5.75% with Acting Governor Destry maintaining a neutral bias while flagging global risks. A strong domestic growth print and Indonesian Rupiah (IDR) stability underpin the decision. Policy risks are seen as externally driven, with domestic catalysts turning constructive as the government reinforces growth-supportive priorities for 2027 alongside fiscal consolidation.

BI holds rates as risks stay external

"Bank Indonesia left the policy rate unchanged at 5.75% yesterday, along expectations. Acting Governor Destry maintained a neutral bias but highlighted global risks."

"A firm 2Q domestic growth report and recent stability in the rupiah backed BI's decision to leave the benchmark rate on hold. Policy risks, at this juncture, are more external focused as the currency and bond market remain susceptible to geopolitical developments on elevated global oil as well as crack spreads, besides DM yields."

"Few changes were made to the measures announced in July, including an extension of the hedging discount to include FDI and foreign borrowings by domestic banks, in addition to portfolio investors. Add to this, a flexible rollover mechanism has been introduced to extend swaps based on the remaining life of underlying assets, subject to pre-conditions."

"Domestic catalysts have turned constructive after the government reinforced its growth-supportive focus for 2027, while maintaining fiscal consolidation (our note). We expect a rate pause in Sept, while maintaining one insurance hike in 4Q26 if financial conditions and sentiments weaken."

"Calming effect on US long-end rates (post buybacks) should relieve pressure on the backend of the regional rate curves."

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

• USD/CAD remains on the back foot despite a modest US Dollar recovery.
• Higher Oil prices and improving US-Canada trade relations underpin the Canadian Dollar.
• Rebounding US Treasury yields and upbeat Jobless Claims help the US Dollar stabilise.

USD/CAD remains under pressure on Thursday even as the US Dollar (USD) stages a modest recovery following the previous day’s sharp selloff. Higher Oil prices support the commodity-linked Canadian Dollar (CAD), keeping the pair near a three-month low. At the time of writing, USD/CAD trades around 1.3778, down 0.22% on the day.

The Loonie also draws support from signs of progress in trade talks between the United States and Canada. US President Donald Trump has paused planned 50% tariffs on around $20 billion worth of Canadian goods for three days, saying the two countries have a deal.

Meanwhile, Oil prices stay elevated as the US-Iran standoff keeps supply concerns in focus. West Texas Intermediate (WTI) trades around $85.80 per barrel, up nearly 5% so far this week. The Canadian Dollar is highly sensitive to Oil prices because Canada is a major crude exporter.

The Greenback fell to a three-month low on Wednesday after the US Treasury announced larger buybacks of longer-dated government securities, pushing long-term yields sharply lower.

However, the move proved short-lived, with both the 10-year and 30-year Treasury yields rebounding on Thursday. Large fiscal deficits, heavy debt issuance and persistent inflation risks keep upward pressure on borrowing costs.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades around 98.80, recovering from an intraday low of 98.56, its weakest level since May 14.

Weekly US labour market data provide additional support to the Greenback. Initial Jobless Claims fell to 206K in the week ending August 15, below market expectations of 210K and the upwardly revised previous reading of 212K.

On the monetary policy front, Federal Reserve (Fed) policymakers continue to see inflation as the main risk. Strategists at Scotiabank point out that the July FOMC minutes revealed that “many” policymakers judged “tighter policy would be needed if inflation didn’t decline.” However, they argue that “recent signs of abating price pressures and some softening in the labour market” mean the “risk of a September hike is still lower than market-implied probabilities,” which they note are currently “a bit more than 30%.”

Scotiabank strategists Shaun Osborne and Eric Theoret note that GBP/USD gains into the mid-1.36s are driven more by US Dollar (USD) weakness than intrinsic British Pound (GBP) strength, though United Kingdom (UK) survey data show improving manufacturing orders and pricing power. Technically, Cable has met the near-term objective of retesting the May peak, and a sustained move above 1.3650/60 is seen implying scope for an extension towards 1.41 this year.

Cable targets higher after May peak retest

"Sterling gains to the mid-1.36s largely reflect our general outlook for the pound but the story is clearly more about USD weakness than GBP strength at the moment."

"The August CBI Trends survey reflected significant improvement in still weak manufacturing orders (to the best level since late 2024) and a rebound in industrial pricing power."

"Bullish—Cable gains have reached our near-term objective of a retest of the early May peak at 1.3658."

"Underlying trend dynamics remain solidly bullish and, after a period of range trading and two tests of 1.3150 (April and June), a sustained push above 1.3650/60 implies potential for an extension towards the 1.41 zone over the balance of the year."

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