Forex News

• GBP/USD kicks off the new week on a weaker note amid the emergence of USD dip-buying.
• Fed rate hike bets and geopolitical uncertainties revive demand for the safe-haven buck.
• The divergent Fed-BoE policy outlook favors bears and backs the case for a further decline.

The GBP/USD pair struggles to capitalize on Friday's goodish rebound from the 1.1335 area, or its lowest level since July 30, and attracts fresh sellers at the start of a new week. Spot prices stick to modest intraday losses through the early European session and currently trade around the 1.3375 region, down nearly 0.15% for the day, and seem poised to decline further.

Against the backdrop of the Federal Reserve's (Fed) hawkish stance, escalating tensions in the Middle East assist the safe-haven US Dollar (USD) to regain positive traction following Friday's modest pullback from its highest level since late July. Adding to this, the Bank of England's (BoE) dovish on-hold decision continues to undermine the British Pound (GBP) and further exerts some pressure on the GBP/USD pair.

The US central bank raised interest rates for the first time in three years at the end of the September meeting last Wednesday. Moreover, the so-called dot plot revealed that Fed officials expect at least one more hike this year. In contrast, the BoE held rates steady last Thursday and retained a cautious stance. The divergent Fed-BoE policy outlook, in turn, validates the negative outlook for the GBP/USD pair.

BoE hold at 3.75% undercuts hawkish GBP positioning

Analysts at Danske Bank note that in the UK, the Bank of England “kept the Bank Rate unchanged at 3.75%, in line with expectations,” with the Monetary Policy Committee voting 6-3 as “Pill, Greene and Mann again backed a hike.” They describe the outcome as “broadly as expected” but stress that, given “the very hawkish market pricing going into the meeting,” the decision nonetheless “triggered some GBP weakness and lower rates.”

On the geopolitical front, Yemen's Iran-backed Houthi forces attacked sensitive sites in the Saudi capital of Riyadh with missiles and drones on Saturday. Moreover, Iran ruled out reopening the Strait of Hormuz or returning to negotiations with the US until Washington meets its conditions. This keeps the geopolitical risk premium in play, favoring USD bulls and backing the case for further depreciation for the GBP/USD pair.

Traders now look forward to speeches from influential FOMC members, which, along with developments surrounding the Middle East crisis, will drive the USD and the GBP/USD pair. The focus, however, will be on a meeting between US President Donald Trump and his Chinese counterpart Xi Jinping on Thursday. Apart from this, traders will take cues from flash PMIs from the UK and the US to grab short-term opportunities.

GBP/USD daily chart

Technical Analysis

The GBP/USD pair remains under pressure below the 100-day Simple Moving Average (SMA) and the 50.0% Fibonacci retracement, suggesting rallies are being capped by this nearby confluence of overhead levels. Immediate support is seen at the 61.8% Fibo. retracement at 1.3344, ahead of the 78.6% level at 1.3254 and the prior swing low region at 1.3138, where buyers may attempt to stem deeper losses.

On the topside, initial resistance is aligned at the 50.0% retracement at 1.3408, followed by the 100-day SMA at 1.3436 and the 38.2% retracement at 1.3471, with a stronger barrier higher up at the 23.6% level near 1.3550.

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

• EUR/JPY may find immediate support at the nine-day EMA of 179.83.
• The 14-day Relative Strength Index is at 43.32, hinting at still-soft momentum.
• The primary barrier lies at the 50-day EMA of 182.65.

EUR/JPY extends its gains for the second consecutive day, trading around 180.40 during European hours on Monday. Technical analysis of the daily chart shows the currency cross trading within a descending channel, keeping the overall bearish bias.

The EUR/JPY cross is keeping a bearish near-term bias as it holds below the 50-day Exponential Moving Average (EMA) while clinging just above the nine-day EMA. This configuration suggests the currency cross is consolidating under medium-term trend resistance, with the 14-day Relative Strength Index (RSI) at 43.32 hinting at still-soft momentum and limiting the scope for an immediate bullish reversal unless price can reclaim the 50-day EMA.

The EUR/JPY cross may pull back and test the immediate support at the nine-day EMA of 179.83. A break below the short-term price average would strengthen the bearish bias and put downward pressure on the currency cross to navigate the region around 177.40, followed by nearly an 11-month low of 175.70, recorded in November 2025.

On the upside, the EUR/JPY cross could rise toward the 50-day EMA of 182.65. Further resistance lies at the upper boundary of the descending channel around 185.00, followed by the all-time high of 187.95 set on April 17.

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

Danske Research Team reports a strong rebound in global equities, with the S&P 500, Nasdaq, Stoxx 600 and Kospi all posting solid gains despite a recent Fed hike and further tightening priced. They argue that robust consensus earnings growth of 35% and rising estimates make a sustained equity sell-off difficult, advocating a barbell strategy favouring global tech over industrials as valuations adjust.

AI-led rally and barbell strategy

"Equities rebounded strongly on Thursday. The S&P 500 advanced 1.2%, the Nasdaq gained 1.7% in its best session since early August, the Stoxx 600 rose 0.9%, and Kospi is surging a remarkable 2.7% at the time of writing."

"We must therefore conclude that a Fed hike (along with the four additional hikes priced over the next 12 months) was not the end of the world for risk assets. The gravitational force on equities remains higher."

"Consensus earnings growth of 35% this year, with estimates still trending upward, makes a sustained equity sell-off, or even a pause, increasingly difficult. As earnings compound, valuation multiples contract rapidly, which provides a cushion to higher rates."

"As the regional performance reveals, the AI trade was once again the standout. Semiconductor and memory stocks led the advance, but big tech also posted solid gains. Intel, AMD and Micron all rallied between 6-8%."

"On the back of the reasoning above, we advocate a barbell strategy: buying global tech with historical earnings growth and undemanding valuations, financed by an underweight position in global industrials, where valuations remain elevated despite significantly weaker earnings."

"Notably, industrials were among yesterday's weakest performers despite the broader risk-on backdrop, perhaps signalling that investors are becoming increasingly selective."

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

Here is what you need to know on Monday, September 21:

The US Dollar (USD) Index holds its ground and clings to marginal gains above 100.00 early Monday after rising more than 1% in the previous week, fuelled by the Federal Reserve's hawkish outlook. The US economic calendar will feature Chicago Fed National Activity Index data for August. Investors will also pay close attention to comments from central bank officials throughout the day.

Analysts at Nordea highlight that the US economy “remains resilient, while inflationary pressures show few signs of easing,” and note that “with the labor market also holding up well, the case for a more restrictive monetary policy stance is strengthening.” Against this backdrop, they “maintain our forecast for two more hikes,” stressing that “we expect this hike to be delivered, followed by another hike next year, as inflationary pressures are likely to persist.” Nordea adds that “the risks to our rate outlook remain tilted to the upside,” underscoring their view that “the risks as tilted to the upside” for further Fed tightening.

Meanwhile, tensions in the Middle East remain high. Iran’s Islamic Revolutionary Guard Corps (IRGC) warned that any new military attack by the US could trigger a response fought across a different geographical area and with different weapons. Later in the week, US President Donald Trump and Chinese President Xi Jinping are due to meet to discuss trade relations.

Markets eye tentative US-China thaw as officials flag possible AI dialogue

Analysts at ABN Amro highlight that the tone around the latest US-China engagement has been more constructive than many had anticipated, noting that “the initial signs are reasonably positive amidst generally low expectations,” with US Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng meeting alongside key officials including US Trade Representative Jamieson Greer and China’s international trade negotiator Li Chenggang. According to the bank, the talks “centered around trade, investment, the Iran war, and in some signs that there might be increasing collaboration to address the risks from AI a possible US-China AI dialog,” underscoring a tentative willingness on both sides to explore cooperation on emerging technological risks.

USD/JPY climbed to its highest level in two weeks above 158.00 on Friday even though the Bank of Japan (BoJ) announced that they raised the short-term interest rate by 25 basis points (bps) to 1.25% from 1.00%. Two members of the BoJ board dissented and BoJ Governor Kazuo Ueda reiterated that they will keep raising the interest rate in response to the economy and prices.

Yen softens as BoJ hike underwhelms hawkish expectations

Analysts at OCBC note that the Yen weakened after the BoJ raised its policy rate by “25bp to 1.25%, its highest in over 3 decades.” They highlight that while the move was widely anticipated, the “7–2 vote and relatively limited guidance on the pace of further normalisation disappointed expectations for a hawkish signal,” prompting a softer JPY response despite the historic adjustment.

OCBC adds that, in the near term, “JPY may remain volatile, with UST-JGB yield differentials still an important driver,” and warns that “thin liquidity (due to JP hols on Mon – Wed) may exacerbate FX moves.” However, the bank also points out that “firmer domestic inflation and wage data, intervention risk or signs of repatriation flows could help limit JPY downside,” suggesting some potential constraints on further Yen weakness even as markets digest the BoJ’s cautious tone.

EUR/USD stays below 1.1500 in the European morning on Monday after closing the previous week deep in negative territory. Later in the session, European Central Bank President (ECB) Christine Lagarde will deliver opening remarks at the ECB Roundtable on Pontes launch in Frankfurt.

Gold corrects lower and trades near $4,350 in the European morning on Monday after managing to post moderate gains last week.

GBP/USD struggles to stage a rebound and stays below 1.3400 following the previous week's sharp decline.

OCBC’s Christopher Wong observes that weekend attacks targeting Saudi Arabia have revived supply and geopolitical concerns in Oil markets. While Saudi authorities reported no new infrastructure damage, Wong notes that existing pipeline issues and disrupted Yanbu loadings underscore ongoing disruption risks, suggesting near-term downside in Brent and WTI may be limited unless Saudi flows normalise and attacks subside.

Geopolitical risks remain despite renewed downside in Oil

"Oil could see some renewed support after fresh attacks on Saudi Arabia over the weekend. Houthis claimed missile and drone strikes on Riyadh and an Aramco facility at Yanbu, though Saudi authorities said the attacks on Yanbu and several other locations were thwarted, with no fresh damage to oil infrastructure reported."

"This comes with the East-West pipeline already damaged and Yanbu loadings disrupted. Brent had eased to around US$105/bbl on Friday as supply concerns moderated, but the weekend developments are a reminder that disruption risks remain."

"For now, further downside in oil may be limited unless Saudi flows normalise and attacks on energy infrastructure subside."

"Weekend attacks on Saudi Arabia keep supply/geopolitical risks alive, potentially limiting near-term downside in oil prices."

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

• The US Dollar trades strongly at the start of the week.
• The Fed is almost certain to deliver at least one more interest rate hike this year.
• Investors await Fed speeches and the outcome of meeting between leaders from the US and Gulf nations.

The US Dollar (USD) reflects strength at the start of the week on prospects of further Federal Reserve (Fed) monetary tightening this year. At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, is up 0.15% to near 100.37.

According to the CME FedWatch tool, the odds of the Fed delivering at least one more interest rate hike this year are almost 88%.

Hawkish Fed bets have increased after the policy announcement last week, in which it raised interest rates by 25 basis points (bps) to 3.75%-4.00% and signaled at least one more this year.

Meanwhile, investors await speeches from Federal Reserve (Fed) members amid the completion of the blackout period. Later in the day, Chicago Fed Bank President Austan Goolsbee is scheduled to speak in London at an Official Monetary and Financial Institutions Forum event.

Over the weekend, Minneapolis Fed Bank President Neel Kashkari said in an interview with Fox News' Sunday Morning Futures, that high inflation remains a key concern for policymakers and is not just in rising oil prices.

Kashkari keeps hawkish bias as resilient US economy sustains inflation risks

Kashkari’s latest remarks score 6.2 on the FXS Speechtracker, essentially in line with the 6.3 historical average and signaling a steady hawkish tone. Emphasis that inflation “remains too high,” extends beyond oil, and must be addressed alongside robust growth, resilient activity, and improving productivity underscores a message that policy cannot relax yet even as the real economy shows strength. The reminder that the bond market is the Treasury’s responsibility, coupled with a still-robust labor market, keeps the focus on persistent underlying price pressures rather than market volatility.

The FXS Fed Sentiment Index fell by 1.47 points to 150.61, indicating a modest pullback in perceived hawkishness while remaining firmly above the neutral 100 mark. This configuration suggests that, despite a slight softening in tone, the Fed narrative tracked by the FXS Speechtracker is still clearly hawkish, consistent with a central bank that sees resilient growth and sticky inflation as reasons to keep policy restrictive.

On the global front, investors await meeting between US President Donald Trump and leaders from Gulf nations at the United Nations (UN) General Assembly in New York beginning today (Monday, 21 September).

US Dollar Index Technical Analysis

In the daily chart, Dollar Index Spot trades at 100.35. The near-term bias is bullish as price has pushed decisively above the 20-day exponential moving average (EMA) at 99.63, indicating that recent gains have tilted the short-term trend higher.

The Relative Strength Index (RSI) at 63.15 sits in positive territory, suggesting building upside momentum without yet signaling overbought conditions.

On the topside, the immediate focus is whether the index can maintain its break above the 20-day EMA at 99.63, which now acts as a nearby dynamic reference for the bulls. Holding above this moving average would keep the constructive tone intact and leave room for further appreciation above the last week high near 100.55, while a daily close back below it would hint at a loss of upside traction and a possible pause in the current advance.

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

• EUR/USD holds recent losses below 1.1500, just above the seven-week low of 1.1456.
• Growing political uncertainty in Germany has offset the impact of lower Oil prices.
• Fed's Goolsbee and ECB's Lagarde's speeches will attract attention later on Monday

The Euro (EUR) consolidates losses against the US Dollar (USD) on Monday, as market concerns about the sharp defeat of German Chancellor Friedrich Merz’s ruling party in state elections in northeastern Germany have offset the positive impact of lower Oil prices. EUR/USD holds below 1.1500 on Monday, with the seven-week low of 1.1454 hit last week, at a short distance.

Merz acknowledged that the result of his centre-right CDU party in the elections in Mecklenburg-Western Pomerania was a “disaster”, although he has vowed to remain in office to complete the economic reforms in progress. The CDU obtained 4.9% of the vote, below the 5% threshold to enter the state parliament, its worst result in postwar Germany. The victory was for the eurosceptic and pro-Kremlin Alternative for Germany (AfD).

These results have offset the positive impact of lower Oil prices, which pose a significant relief for the Eurozone’s net Crude-importing economies. The price of the Brent Oil barrel has dropped to levels close to $98.00, nearly 7% below last week’s highs amid news that Saudi Arabia fixed its East-West pipeline and increased its supply volumes in September.

ING holds to year-end EUR/USD target despite shifting ECB expectations

Analysts at ING explain that they have “kept our EUR/USD profile unchanged, still targeting 1.160 for year-end,” arguing that “EUR and USD front-end swaps – the most relevant for FX – look quite similar.”

ING experts note that they “see only one more hike by both central banks this year and then a prolonged pause; the dovish repricing should be similar in size.” Historically, they add, “that is often associated with a slightly higher EUR/USD as lower USD rates tend to have a positive knock-on effect on global risk sentiment.”

The Federal Reserve (Fed) hiked interest rates last week, as widely expected, but Chairman Kevin Warsh surprised markets with an unequivocal hawkish stance, which boosted hopes of further rate hikes before year-end and provided a significant impulse to the US Dollar.

In the calendar today, Chicago Fed President Austan Gololsbee will speak about monetary policy at the Official Monetary and Financial Institutions Forum (OMFIF) in London. Later on, European Central Bank President Christine Lagarde will take part in a roundtable in Frankfurt. The highlights this week, however, are likely to be the preliminary Purchasing Managers' Index (PMI) figures for September, due on Wednesday.

• Silver price slips as investors monitor Middle East developments and assess impacts on inflation and interest rates.
• Crude oil dropped due to hopes of diplomacy, though ongoing Ukrainian and Yemeni strikes restrained downside pressure.
• US President Trump signaled openness to meeting Iranian President Pezeshkian and other leaders at the UN General Assembly.

Silver price (XAG/USD) remains subdued after two days of gains, trading around $65.80 per troy ounce during the early European hours on Monday. Non-yielding Silver eased as investors continued to track developments in the Middle East and assess their potential impact on inflation and interest rates.

Crude oil prices fell on growing hopes that increased diplomatic efforts could help end the Middle East conflict and restore stable energy flows from the region. A significant factor behind this optimism is US President Donald Trump stating he would "probably" be open to meeting Iranian President Masoud Pezeshkian on the sidelines of the United Nations General Assembly in New York this week. Alongside this potential encounter, Trump may meet with other Persian Gulf leaders and is scheduled to hold a summit with Chinese President Xi Jinping.

However, the downside of oil prices could be restrained amid ongoing geopolitical tensions. Ukraine launched a massive overnight drone and missile assault targeting Moscow and its surrounding region, according to BBC reports. Meanwhile, Yemen’s Houthis claimed responsibility for missile and drone strikes against "sensitive" locations in the Saudi capital of Riyadh, as reported by the Guardian on Saturday, following sightings of flames and heavy smoke near the city's main airport.

Last week, the US Federal Reserve implemented a 25-basis-point rate hike, its first in three years, aiming to curb inflation while signaling additional increases ahead. According to the CME FedWatch tool, markets now price in a 56.5% probability of another rate hike at the October meeting, up from 42.5% the prior week. Emphasizing the central bank's stance, Fed Chair Kevin Warsh stated that inflation remains unacceptably high and that recent summer readings show no meaningful improvement in underlying trends.

Kashkari keeps hawkish bias as resilient growth complicates Fed’s inflation fight

Kashkari’s latest remarks score 6.2 on the FXS Speechtracker, essentially in line with the 6.3 historical average and signaling a steady hawkish tone. The emphasis that inflation “remains too high,” extends beyond oil, and must be addressed even as growth and productivity stay robust underscores a message of persistent policy vigilance rather than imminent easing. References to a resilient American economy and a robust labor market reinforce the idea that the Fed can maintain restrictive policy for longer without immediate concern for growth.

The FXS Fed Sentiment Index fell by 1.47 points to 150.61, indicating a modest softening in perceived hawkishness while remaining firmly above the neutral 100 mark. This configuration suggests that, despite a slight pullback in tone captured by the FXS Speechtracker, the overall policy stance remains clearly hawkish in the context of resilient growth and still-elevated inflation.

ING strategist Frantisek Taborsky says Moody’s downgrade of Poland to A3 adds to pressure on CEE assets at the start of a relatively quiet second half of the month. With high energy prices, a stronger US Dollar and limited progress in the US-Iran conflict weighing on the region, ING maintains a bearish view on CEE currencies. ING sees 24.300–24.350 as fair value for EUR/CZK and further upside risk in EUR/PLN, while EUR/HUF could rise near term before potential support for the forint around the NBH meeting pulls the pair back towards 362.

Downgrade reinforces weak CEE FX

"The second half of the month is typically quieter in CEE, with little beyond tomorrow's National Bank of Hungary's meeting likely to attract market attention. Headlines from the Middle East and US over the weekend suggest a slightly positive open for markets today. On Friday, Moody’s downgraded Poland to A3, bringing its rating in line with S&P and Fitch. Although bond markets may have partly priced this in, some aversion to Polish bonds is likely this morning."

"Today’s calendar includes Poland’s August wage data, a key indicator for the central bank. Polish retail sales follow tomorrow, alongside the National Bank of Hungary meeting. The NBH is expected to pause its current “mini” easing cycle, leaving the policy rate at 5.50%. It will also publish a new forecast and may review its inflation target, potentially outlining a two-step reduction from 3.0% to 2.0%."

"In the Czech Republic, consumer demand data is due on Thursday, followed by Friday’s Czech National Bank minutes, which should provide more detail on last week’s board discussion."

"CEE currencies remain weak, and we retain a bearish outlook for the week ahead. Limited progress in the US-Iran conflict, high energy prices and a stronger US dollar should continue to hinder any recovery. After last week’s CNB meeting, we still see 24.300–24.350 as fair value for EUR/CZK."

"By contrast, EUR/PLN has further upside potential, with today offering an early test after the rating downgrade. EUR/HUF may rise today, but tomorrow’s NBH meeting should provide temporary support to the forint, potentially allowing EUR/HUF to test 362."

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