Forex News

BNY’s John Velis highlights uncertainty around Federal Reserve (Fed) leadership as Kevin Warsh faces Senate confirmation hearings. Political conditions could delay his appointment, while Jerome Powell has pledged to stay as Chair pro tempore until an investigation concludes. Prediction markets assign low odds to a swift transition, leaving policy continuity but timing of any change in Fed leadership unclear.

Politics complicate Fed transition path

"On Tuesday, the Senate Banking Committee holds confirmation hearings for Fed Chair nominee Kevin Warsh amid uncertainty over the timing of the Fed’s leadership transition."

"The president, for his part, has recently indicated he wants to pursue the investigation, setting up an indefinite delay for the confirmation proceedings if Tillis holds to his position."

"In his last FOMC press conference, Chair Jerome Powell (whose term leading the FOMC formally expires on May 15) said he would stay on as Chair pro tempore if no successor is named by then."

"Prediction markets are skeptical that everything will be wrapped up by May 15."

"The hearing will be substantive regardless of the outcome on confirmation and timing."

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

• EUR/USD finds support near 1.1750 on Tuesday after rejection at 1.1790.
• Eurozone economic sentiment deteriorated beyond expectations in April.
• Investors remain cautious ahead of the second round of US-Iran peace talks.

The Euro (EUR) posts moderate losses against the US Dollar (USD), trading at 1.1765 ahead of Tuesday's US session opening, after being capped at the 1.1790 area on Monday. Investors are digesting a gloomy Eurozone ZEW economic sentiment survey earlier on the day, while the focus now turns to the Federal Reserve (Fed) chair nominee, Kevin Warsh, and the US-Iran peace talks

Data released by the ZEW Institute on Tuesday revealed that institutional investors' sentiment about the German economy has plunged to -17.2 in April, its weakest reading since December 2022, well below the -5 forecasted by market analysts, following a -0.5 reading in March. The feeling about the current economic situation also declined, to -73.7 in April, from -62.9 in March.

Likewise, the Eurozone Economic Sentiment has dropped to -20.4, also its weakest reading since December 2022. The market was expecting a moderate improvement to -3.6 from last month's -8.5 print.

Concerning the geopolitical situation, the Wall Street Journal reported on Monday that Tehran conveyed to regional mediators its willingness to send a delegation to Pakistan. Iranian authorities had threatened to pull out of the peace process on Monday, in retaliation for the seizure of an Iranian cargo vessel by the US military.

Beyond that, Reuters cited an anonymous US source, affirming that “things are moving forward”, altogether, feeding a moderate market optimism.

In the US, the recently appointed Fed Chairman, Kevin Warsh, will face the confirmation hearing at the US Senate later on Tuesday. The former Fed Governor will likely face questions about the central bank's independence from the White House and its financial portfolio.

Technical Analysis: Sideways consolidation below 1.1800

EUR/USD maintains its upside trend from the late-March lows intact, but recent price action shows some hesitation ahead of the 1.1800 area. Technical indicators in the 4-hour chart are also hinting at a weakening upside momentum.

The Relative Strength Index has been moving back and forth around the 50 midline, pointing to a lack of clear bias. The Moving Average Convergence Divergence (MACD) remains at its slightly negative levels, showing a fading upside pressure rather than a decisive bearish turn, at least for now.

Bulls have been capped at 1.1790 area earlier on Tuesday, which is closing the path towards Friday's highs near 1.1850 for now. On the downside, immediate support is located at Monday's lows near 1.1730, followed by the upward-sloping trendline, now around 1.1705. A clear break below this area would open the way towards a cluster of support levels between 1.1645 and 1.1675, which held bears on April 8, 9, 10, and 13.

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

ING analysts Warren Patterson and Ewa Manthey report Copper has eased after recent gains but remains near two‑month highs, with macro headwinds and tighter monetary policy weighing on industrial metals demand. Aluminium prices stay supported by supply disruptions in Gulf producers, where March output fell 6% to 15,963 tonnes per day, according to industry data.

Industrial metals face mixed drivers

"In base metals, copper edged lower after recent gains, but continues to trade near two-month highs, while macro headwinds are slowing down momentum."

"Higher energy prices and sticky inflation risk keeping monetary policy tighter for longer, weighing on the industrial metals demand outlook."

"Aluminium prices remain supported by ongoing supply disruptions in the Middle East."

"Production in Gulf countries dropped 6% to 15,963 tonnes a day in March, according to data from the International Aluminium Institute."

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

• The Pound Sterling trades lower against the US Dollar at around 1.3510 ahead of Kevin Warsh’s testimony.
• The UK’s Average Earnings Excluding Bonuses arrive higher at 3.6% YoY against 3.5% estimates.
• Investors await the UK CPI data for fresh cues on the interest rate outlook.

The Pound Sterling (GBP) demonstrates a mixed performance against its major currency peers during the late European trading session on Tuesday. The British currency recovers half of its early losses against the US Dollar (USD), with the GBP/USD pair trading 0.15% lower around 1.3510, following the release of the United Kingdom (UK) labor market data for the three months ending in February.

The Office for National Statistics (ONS) reported that the ILO Unemployment Rate dropped to 4.9%, while it was expected to remain steady at 5.2%. New jobs created during the quarter ending February were 25K, significantly lower than the previous reading of 84K.

Average Earnings Excluding Bonuses, a key measure of wage growth, cooled down at a moderate pace to 3.6% Year-on-Year (YoY) against estimates of 3.5%. In the three months ending January, the wage growth measure was recorded at 3.8%.

Better-than-projected wage growth numbers and a lower jobless rate are expected to allow traders to maintain bets supporting the Bank of England (BoE) leaving interest rates unchanged at 3.75% in the policy meeting on April 30.

For more cues on the BoE’s monetary policy outlook, investors await the UK Consumer Price Index (CPI) data for March, which will be released on Wednesday. The UK CPI report is expected to show that the headline inflation accelerated to 3.3% YoY from the previous reading of 3%.

During the late European trade, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades almost 0.2% higher to near 98.20 ahead of the confirmation hearing of United States (US) President Donald Trump’s nominee, Kevin Warsh, as the Federal Reserve’s (Fed) next chairman at 14:00 GMT.

Kevin Warsh’s testimony at his confirmation hearing is expected to be significant for the US Dollar’s outlook, as it will indicate his thoughts on the Fed’s monetary policy outlook. In his previous work at the Fed, Warsh was known for having a preference for a strong US Dollar and opposing Quantitative Easing (QE) in the Fed’s balance sheet.

However, Warsh’s decision-making in his new term is expected to be influenced by US President Trump’s economic agenda, as he has criticized the Fed, especially Chairman Jerome Powell, several times for not lowering interest rates aggressively.

United States (US) President Donald Trump said during late European trading hours on Tuesday, through a post on Truth Social, that Iran has violated the terms of the two-week ceasefire numerous times.

TD Securities’ Global Strategy Team expects US Retail Sales for March to post strong gains, led by higher gasoline prices and solid control group spending. They see only a sideways move in auto sales and firm food services. Markets are also watching Fed Chair nominee Kevin Warsh’s confirmation hearing and ongoing Middle East developments for implications for US rates.

Retail strength and Warsh hearing

"Warsh's prepared remarks for Tuesday's nomination hearing were released, where Warsh defends Fed independence and leans somewhat hawkish on the inflation front. We expect him to remain noncommittal ahead of the Senate Banking Committee, with both rates and balance sheet policy in focus."

"In addition to Warsh's hearing, retail sales will be released in the morning, where we are expecting above-consensus prints for both headline and control group. However, markets will remain focused on the Middle East, with the negotiations in Pakistan beginning."

"We expect retail sales increased sharply in March at 1.7% m/m, largely due to higher gasoline prices (cons: 1.4%). Strong control group sales at 0.6%—also somewhat supported by core goods inflation—will also likely support the headline (cons: 0.2%). We look for only a sideways move in auto sales."

"Food services sales, the only services category in the report, were likely strong as well at 0.7%."

"Rates bear flattened on Monday as the Strait was closed again over the weekend, with equities only modestly lower in the session."

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

• USD/JPY pops up above 159.00 but remains within range, capped below 160.00.
• Rumours that the BoJ will leave interest rates on hold next week have hurt the Yen.
• Investors bid their time awaiting the outcome of US-Iran peace talks and Fed Warsh's testimony.

The US Dollar (USD) posts moderate gains against the Japanese Yen (JPY) on Tuesday, with price action returning above 159.00 after bouncing up from 157.59 lows on Friday. The pair, however, remains bouncing back and forth within a broadly 150-pip range, from 158.50 to the key 160.00 level.

A Reuters report released earlier on Tuesday, hinting at steady interest rates at the Bank of Japan’s (BOJ) monetary policy meeting next week, has added pressure on the Yen. Various sources related to the bank indicated to the news agency that policymakers might wait for more data to assess the economic consequences of the war in the Middle East.

Meanwhile, the US Dollar Index, which measures the value of the Greenback against a basket of six majors, posts minor gains on Tuesday, as investors bid their time, awaiting the second round of talks between the US and Iran and the testimony of the recently appointed Federal Reserve (Fed) Chair Kevin Warsh ahead of the US Senate. 

On the geopolitical front, the Wall Street Journal confirmed that Tehran will finally send delegates to Pakistan for negotiations after threatening to pull out of the peace process. US sources have been sending mixed messages, though markets remain hopeful that some progress is possible. This is keeping the safe-haven US Dollar at relatively low levels.

Technical analysts at the UOB Bank expect the pair to remain trading sideways in the near-term: “We are not able to derive much from the volatile price action. (...) For the time being, USD could trade between 157.55 and 160.50.”

Brown Brothers Harriman’s (BBH) Elias Haddad highlights that GBP/USD is trading near 1.3500 after a mixed United Kingdom (UK) labor report, with falling unemployment but weaker payrolls. Easing wage pressures below the BoE’s projections support renewed easing later this year. BBH expects BoE rate hike pricing to revert to cuts and sees GBP/USD confined to a 1.3400–1.3700 range in the near term.

Mixed data but easing wage pressures

"Importantly, easing wage pressures leaves room for the BoE to resume easing later this year. In line with consensus, the policy-relevant private sector regular pay growth slowed to 3.2% y/y in February vs. 3.3% in January."

"That’s the lowest pace of wage growth since October 2020 and is below the BoE’s Q1 projection of 3.5%."

"We expect BoE rate hike bets to flip back to cuts given excess slack in the UK economy. The BoE estimates a negative output gap of -1% of GDP in 2026."

"GBP/USD will likely trade within a 1.3400 and 1.3700 range in the near term."

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

Danske Research Team reports that Reuters sources suggest the Bank of Japan (BoJ) is likely to hold off raising interest rates at the April meeting due to uncertainty from the Iran war. While most conditions for a hike remain in place, Danske now expects no April move and postpones its rate-hike call to June, in line with current market pricing.

War uncertainty delays BoJ normalisation

"In Japan, Reuters sources said that "the BoJ is likely to hold off raising interest rates..." citing economic and price outlook uncertainty imposed by the war."

"We now expect the Bank of Japan to keep interest rates unchanged at the April meeting next week."

"While we think most conditions for a hike are still in place, the BoJ is unlikely to deliver any surprises."

"As such, we postpone our call for a rate hike to June, which markets currently price as a 50% probability, although this will largely depend on developments in energy markets."

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