Forex News
Societe Generale’s Kunal Kundu notes that India’s March Index of Industrial Production (IIP) growth slowed to 4.1% year-on-year from 5.2% in February, the weakest in five months, with the eight-core sector contracting and power output softening. Manufacturing and capex-linked categories supported the headline, but weak consumer non-durables and exposure to petrochemical-linked disruptions point to uneven activity and softer readings ahead.
Capex strength offsets weak consumption
"March IIP rose 4.1% yoy, down from 5.2% in February, making it the slowest growth in five months."
"Core sector was a drag: The eight-core sector (~40% of IIP) contracted 0.4% yoy (weakest in 19 months), led by a 24.6% yoy plunge in fertiliser output; power output also softened, signalling early stress in the energy chain."
"Manufacturing grew 4.3% yoy in March and FY26 manufacturing growth improved to about 5.0% y/y (vs 4.1% in FY25), helping offset weakness elsewhere."
"Capital goods and infrastructure/construction goods outpaced staples, while consumer non-durables growth remained low—pointing to uneven demand conditions."
"Unevenness + lagged geopolitics risk: Performance across manufacturing subsectors was mixed; segments exposed to petrochemical inputs/logistics (e.g., chemicals/electronics/PCB-linked materials) are vulnerable as conflict-driven disruptions begin to transmit, with broader second-round effects likely to emerge with a lag, especially for the MSMEs."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
TD Securities economists Oscar Munoz and Eli Nir expect the Federal Reserve (Fed) to stay on hold until September as it assesses the Iran conflict’s impact and monitors inflation. They project 50 bps of cuts in 2026, plus 25 bps in March 2027, but warn that persistent energy-driven inflation and internal Federal Open Market Committee (FOMC) divisions could delay easing and keep the Fed funds rate higher for longer.
Easing path conditional on Iran shock
"Powell was noncommittal on future policy but noted discussions about shifting forward guidance to a more two-sided stance, a change favored by three regional Fed presidents who dissented in April. As expected, any hawkish shift would likely begin with statement language."
"The high degree of division on the Committee amid the unfolding oil shock underscores how difficult it will be for soon-to-be Chair Warsh to achieve cuts in the near-term. We expect that the FOMC can still resume easing in September on inflation normalization — conditional on more modest economic impacts from Iran. However, the risk is growing that the Fed remains on hold for longer."
"We look for 50bps total of easing this year in September and December with an additional 25bps cut in March 2027, ending with a Fed funds rate at 3.00%. However, we acknowledge the risk is growing around a Fed that remains on hold for longer."
"Post-FOMC Fedspeak this week will be highlighted by President Williams — with any comments on the language change discussion being key to watch."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Commerzbank’s Thu Lan Nguyen writes that suspected MoF/BoJ intervention has strengthened the Japanese Yen (JPY), but questions how long gains will last. Markets still doubt the Bank of Japan's (BoJ willingness to respond forcefully to inflation, and see the JPY as a G10 laggard. However, relatively low rate expectations mean the BoJ could still meet or exceed what is priced in.
Intervention meets low policy expectations
"There was no official confirmation, but there were plenty of unofficial signals - including a “final warning” from a top official: the Ministry of Finance (MoF) and the Bank of Japan (BoJ) intervened in the foreign exchange market on Friday to strengthen the Japanese yen. The big question now is: How long will the JPY’s strength last?"
"That will depend on two things: the duration of the war in Iran and the accompanying inflation concerns, on the one hand. And the actions of the BoJ, on the other. For a key reason for the JPY’s weakness in recent weeks is that - unlike the ECB - the market does not trust Japanese monetary policymakers to respond particularly strongly to the current inflation shock."
"Admittedly, BoJ officials have so far done little to counter the market’s tentative expectations. Therefore, as long as their rhetoric does not change significantly (i.e., in a hawkish direction), the JPY is likely to remain the laggard among G10 currencies, i.e. downward pressure will return if tensions in the energy markets increase again."
"But what is the advantage of low expectations? They are easier to meet! In other words: provided the blockade of the Strait of Hormuz ends within the next few months, the much higher interest rate expectations for the ECB and the Fed are highly likely to be revised downward."
"In contrast, the odds are good that the BoJ will deliver the two rate hikes priced in by year-end, even if the situation in the gulf region were to be resolved soon."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
BNY’s Bob Savage highlights that Oil remains driven by conflicting forces, with U.S. escort plans in the Strait of Hormuz initially knocking prices lower before renewed attacks lifted them again. ECB officials warn about energy-driven supply shocks, while OPEC+ producers plan to gradually unwind voluntary cuts in 2026, stressing flexibility and market stability as Brent trades above $108 and WTI above $102.
Strait tensions and OPEC+ recalibration
"The U.S. plan to escort ships out of the Strait of Hormuz, as announced by President Trump, pushed oil down 2%. However, oil prices then bounced back up 1.5% after ships came under attack. The number of vessels passing the strait remain minimal, averaging five a day, but with only three in the last 48 hours."
"Warnings on oil prices and supply shocks from ECB speakers stand out."
"Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria and Oman have met virtually to review global oil market conditions. They agreed to implement a production adjustment of 188,000 barrels per day in June 2026, reducing the additional voluntary cuts announced in April 2023. The countries emphasized a cautious approach, retaining flexibility to adjust production levels, including reversing previous cuts from November 2023."
"They reaffirmed their commitment to market stability, full conformity with the Declaration of Cooperation and compensating for any overproduction since January 2024."
"This leaves U.S. data today again being interpreted in the context of oil prices."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Societe Generale economists flag rising political risk around Prime Minister Keir Starmer ahead of 7 May local elections. A weak result could trigger a leadership challenge, though the lack of a clear successor may delay moves until the September conference. Betting markets assign roughly a two‑thirds chance that Starmer leaves office by end‑2026.
Leadership challenge risk after local elections
"On the political front, Prime Minister Keir Starmer survived a vote on whether he should be investigated for misleading Parliament over the appointment of Peter Mandelson as US ambassador."
"This week in the UK, markets will be laser-focused on the 7 May local elections."
"A poor result could act as a catalyst for a leadership challenge, although this is far from guaranteed."
"Moreover, any leadership challenge may not be immediate, with risks potentially extending through to the September party conference."
"Betting markets currently price the implied probability of Starmer leaving office by end-2026 at around 66%."
"News reports have speculated that there will be a cabinet reshuffle after the local elections."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- USD/CAD edges higher as escalating Strait of Hormuz tensions support the US Dollar.
- Rising Oil prices support the Loonie, but gains lag against the USD.
- Markets eye US and Canadian employment data this week.
USD/CAD edges higher on Monday as rising tensions in the Strait of Hormuz, amid the ongoing US–Iran standoff, support the US Dollar (USD). At the time of writing, the pair is trading around 1.3617, up nearly 0.22% on the day.
US-Iran tensions show no signs of de-escalation. Iran’s Fars news agency reported that two missiles struck a US naval vessel near the island of Jask after it allegedly ignored warnings from the Islamic Revolutionary Guard Corps (IRGC) to halt. However, a US official denied that any American vessel had been hit, according to Axios.
The development follows US President Donald Trump’s announcement of a naval initiative dubbed “Project Freedom,” aimed at escorting stranded commercial vessels through the Strait of Hormuz. In response, Tehran warned it would attack US forces if they attempted to approach or enter the waterway.
Over the weekend, Washington rejected Iran’s revised 14-point proposal and presented a counteroffer, now under review in Tehran, with nuclear disagreements still unresolved. Trump said in an interview with Israel’s Kan News, “It’s not acceptable to me. I’ve studied it, I’ve studied everything — it’s not acceptable.”
Persistent geopolitical tensions are underpinning the US Dollar after its recent weakness. At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 98.28, extending Friday’s rebound from near two-week lows.
For the Canadian Dollar (CAD), ongoing supply disruptions in the Strait of Hormuz and the resulting surge in Oil prices are supporting the commodity-linked Loonie against its major peers, given Canada’s role as a major crude exporter. Still, the Loonie lags the US Dollar, which continues to draw support from its status as a global reserve currency.
Meanwhile, rising Oil-driven inflation risks are also fueling hawkish expectations for both the Federal Reserve (Fed) and the Bank of Canada (BoC). Higher energy costs have already pushed inflation higher in recent data. Attention now turns to the upcoming employment reports from both the US and Canada, due on Friday, which could provide further direction for monetary policy expectations and the USD/CAD pair.
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
BNP Paribas economists expect United Kingdom (UK) growth to slow to 0.7% in 2026 from 1.4% in 2025, with quarterly expansion dropping to about 0.1%. Inflation is projected to rise to 3.6% year-on-year before easing only gradually, prompting a 50 bps monetary tightening in 2026, while 10-year gilt yields stay elevated before falling to 4.30% in 2027.
UK outlook constrained by inflation
"Economic activity is expected to slow down in 2026, with growth limited to 0.7% after 1.4% in 2025; following a forecasted +0.4% q/q in Q1, the average quarterly pace would fall to around +0.1%."
"This slowdown would occur against a backdrop of renewed inflationary pressures triggered by the war in Iran: inflation would reach 3.6% y/y before easing only gradually to 3.3% y/y in 2027, remaining well above BoE's target."
"In this context, and contrary to the initially envisaged easing scenario, monetary policy would shift toward a tightening of 50 basis points in 2026."
"10y gilt yields will remain elevated in 2026, before falling to 4.30% in 2027 on reduced net supply, a decline in political risk premia and a market starting to eye BoE rate cuts."
"We anticipate stabilisation of the yen and the GBP against the dollar in 2026 (USD/JPY 160 and GBP/USD 1.35 by Q4 2026) and 2027."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Silver declines at the start of the week, pressured by a stronger US Dollar and rising yields.
- Geopolitical tensions in the Middle East fuel risk aversion, supporting the US Dollar.
- Hawkish monetary policy expectations continue to weigh on non-yielding assets.
Silver (XAG/USD) starts the week on a negative note, trading around $73.50 at the time of writing, down 2.41% on Monday. The white metal is facing profit-taking amid a strengthening US Dollar (USD) and rising US Treasury yields.
Developments in the Strait of Hormuz are adding to market uncertainty. According to Iranian state-linked media, missiles were reportedly fired toward a United States (US) naval vessel near the strategic waterway after it allegedly ignored warnings from Iran’s Islamic Revolutionary Guard Corps. While US officials denied that any ship was hit, the incident highlights the fragility of the situation. In parallel, Washington has launched a naval initiative aimed at securing commercial shipping routes in the area, prompting Tehran to warn of potential retaliation in case of further military presence. The lack of progress in diplomatic talks between the two countries continues to keep tensions elevated.
However, unlike its usual role, this geopolitical backdrop is not providing sustained support to precious metals, as flows are primarily directed toward the US Dollar. The Greenback is benefiting from this defensive demand, further supported by higher US Treasury yields. This dynamic is directly weighing on Silver, a non-yielding asset, whose appeal diminishes when interest rates are expected to remain higher for longer.
Monetary policy expectations remain a key driver. Markets anticipate that the Federal Reserve (Fed) will maintain a cautious stance in response to persistent inflation risks, partly fueled by elevated energy prices linked to potential supply disruptions in the Strait of Hormuz. According to the CME FedWatch tool, investors are pushing back expectations for monetary easing while increasingly pricing in the possibility of tighter policy over the longer term.
In this context, the combination of a firm US Dollar, elevated yields, and a prolonged hawkish rate outlook continues to cap Silver’s upside potential. Investors now turn their attention to upcoming US macroeconomic data, particularly labor market and activity indicators, as well as speeches from Fed officials, for further clues on the future path of interest rates.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
TD Securities economists Oscar Munoz and Eli Nir anticipate a normalization in United States (US) labor data, with nonfarm payrolls at 80k, unemployment at 4.3% and modest wage growth. ISM Services Purchasing Managers' Index (PMI) is seen edging down, while JOLTS and Michigan sentiment soften only slightly. The Iran conflict and higher energy prices frame the macro backdrop, but recent Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE) Price Index data suggest enough resilience for the Fed to stay patient.
Labor, services and sentiment in focus
"We expect payrolls will show a normalization in job gains, ISM services to decline again, JOLTS to move lower, and UMich to rebound only slightly (in line with last week's consumer confidence)."
"We expect payrolls to show some signs of stabilization after three volatile months, with NFP likely increasing 80k owing to 85k private gains and 5k government job losses. Healthcare, leisure & hospitality, and trade, transportation & utilities will likely support most of the improvement. The UE [Unemployment] rate should continue showing stabilization at 4.3% as well — with participation moving sideways."
"We also expect AHE [Average Hourly Earnings] to stay modest at 0.2% m/m, with the y/y moving up to 3.7%."
"We expect the ISM services index to move sideways in April, edging down to 53.7 after unwinding February’s jump, with higher energy prices weighing more clearly on survey responses."
"Data last week showed a resilient economy that allows the Fed to be patient in assessing impacts from Iran. GDP in Q1 rebounded due to a reversal of the government shutdown and stronger underlying activity. Consumption did moderate though, with faster fixed investment largely supported by AI (Artificial intelligence)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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