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Commerzbank’s Tatha Ghose expects the Central Bank of the Republic of Türkiye (CBRT) to leave rates unchanged or only align the policy rate with effective funding, which he views as insufficient tightening. With monthly inflation still above 2.5% and reserves under pressure from FX intervention, he warns that reliance on macroprudential tools is inadequate and sees rising risk of a more disorderly Lira depreciation.

Insufficient tightening risks Lira weakness

"Turkey’s central bank (CBRT) will announce its rate decision today. Consensus is skewed towards no change, although a minority still expects a 300bp hike from 37% to 40%. Even if the bank were to move the policy rate to 40%, that would largely amount to aligning the repo rate with the current effective funding rate at the top of the corridor, rather than delivering a meaningful tightening in financial conditions."

"In our view, such a step would be only mildly constructive because we do not foresee that the lending rate would also be moved up from 40% to 43% and the repo facility left unused (which is the only combination resulting in effective tightening). With inflation dynamics still unfavourable, the key question is whether the CBRT is prepared to tighten decisively; a partial clean-up of the corridor framework at this stage would be too little too late."

"Our estimate suggests that seasonally-adjusted month-on-month change in prices remained above 2.5% m/m in May. While this marked a modest easing from April, when prices were hit by the full impact of the Iran-related oil shock, it would still rank among the stronger monthly readings of the year so far."

"In our assessment, however, greater reliance on macroprudential and secondary tools is unlikely to resolve the core problem. The Q2 inflation report already lifted the interim inflation target to 24.0% from 16.0%, and we would not rule out a further upward revision in Q3 and Q4."

"If that perception continues to dominate policy expectations, the risk of a more disorderly depreciation episode in the months ahead rises materially."

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

• EUR/USD consolidates around 1.1550, hovering within the last two days' range.
• The ECB is widely expected to hike rates by 25 basis points later in the day.
• Growing tensions in the Middle East and hot US inflation data are supporting the US Dollar.

The Euro (EUR) edges up against the US Dollar (USD) on Thursday but remains trapped within the range of the last two days, around 1.1550, not far from two-month lows, near 1.1500. Fresh US strikes on Iran are weighing on risk appetite, while the wide market expectations that the European Central Bank (ECB) will hike rates later on Thursday keep the Euro afloat.

The ECB concludes its two-day monetary policy meeting later in the day, and a 25-basis-point rate hike is practically written in stone. The decision is unlikely to provide any significant support to the pair, as investors will be more attentive to the bank’s forward guidance. In that sense, a lack of commitment to further monetary tightening might be considered a dovish message and send the Euro tumbling.

Market sentiment, meanwhile, remains cautious, following a new round of US strikes against Iranian targets and US President Donald Trump’s threat of further attacks if Tehran fails to sign a deal. Iranian authorities announced the closure of the Strait of Hormuz, and the Islamic Revolutionary Guard Corps (IRGC) said that two vessels attempting to cross the waterway were targeted.

In the US, on Wednesday, Consumer Price Index (CPI) figures confirmed that inflation accelerated to a 4.2% year-over-year pace in May. This is the highest level in more than three years and more than twice the Federal Reserve’s (Fed) 2% target, which boosts expectations of Fed rate hikes later this year and provides additional support to the USD.

Technical Analysis: Euro remains vulnerable near 1.1500

EUR/USD holds in a neutral consolidation after a modest recovery from recent lows. The broader bearish trend, however, remains in play. Indicators on intraday charts are mixed. The 4-hour Relative Strength Index (RSI) shows subdued bullish pressure at levels below 50, and the slightly positive Moving Average Convergence Divergence (MACD) hints at a tentative attempt to stabilize rather than a decisive bullish reversal.

Resistance at the 1.1580 previous support area (May 21 low) holds bulls and closes the path towards the June 4 and 5 highs, around 1.1645, ahead of the late-May highs, at 1.1685.

On the downside, a confirmation below Monday's low, near 1.1505, would give fresh hope for bears and expose the March 30 low, at 1.1443. Further down, the year-to-date low, at 1.1411 (March 13 low), will come into focus.

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

• EUR/CAD rises as the ECB is set to deliver a 25-basis-point rate hike on the Deposit Facility on Thursday.
• Markets eye the ECB's economic projections and Lagarde's speech to gauge if today's expected rate hike signals further tightening.
• The Canadian Dollar weakens as oil prices may decline following reports of the US completing military strikes in Iran.

EUR/CAD recovers its recent losses registered in the previous day, trading around 1.6110 during the early European hours on Thursday. The currency cross appreciates as the Euro (EUR) receives support ahead of the European Central Bank’s (ECB) policy decision due later in the day.

Traders widely expect the ECB to deliver a 25-basis-point rate hike on the Deposit Facility at its June policy meeting. Policymakers address the threat of second-round inflation effects amid elevated energy prices. This would be its first rate increase in three years.

Traders will closely monitor the ECB’s projections for inflation and economic growth. The market is pricing in three rate rises for the rest of the year. Also, ECB President Christine Lagarde's press conference could give hints as to whether the hike is a one-and-done rate adjustment or if more tightening is likely this year.

The EUR/CAD cross appreciates as the commodity-linked Canadian Dollar (CAD) faces challenges as investors expect oil prices to ease after the US military announced it had completed its latest strikes on Iran, raising hopes that peace negotiations could resume and tempering oil supply concerns. It is worth noting that Canada is a major oil exporter, and the CAD is heavily classified as a commodity currency.

Danske Research Team expects the European Central Bank (ECB) to raise the deposit rate by 25bp to 2.25%, in line with consensus. With the June move fully priced, they see market attention shifting to communication on future policy. They anticipate President Lagarde will retain flexibility and projects a final 25bp hike in Q3, taking the deposit rate to 2.50%.

Markets eye guidance beyond June move

"As the main event of the week in Europe, we expect the ECB to hike the deposit rate by 25bp to 2.25%, in line with consensus and markets."

"With the June hike fully priced in by markets, all focus during the press conference will be on signals."

"We expect Lagarde to keep full optionality on the future policy rate path, including a potential summer hike, but without pre-committing."

"Looking ahead, we forecast a final 25bp hike in Q3, bringing the deposit rate to 2.50%."

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

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann see GBP/USD consolidating after a brief push above 1.3420 failed to gain traction. Intraday, they expect any pullback to stay within 1.3330–1.3395 and not break clearly below 1.3330. On a 1–3 week and 1–3 month horizon, the Pound is seen range-bound, with broader parameters between 1.3210 and 1.3655.

Pound seen confined to broad band

"24-HOUR VIEW: GBP rose to 1.3411 two days ago and then pulled back. When GBP was at 1.3370 in the early Asian session yesterday, we noted that “despite the advance, GBP has not gained much momentum,” and we expected GBP to “trade in a range between 1.3330 and 1.3400.” The subsequent price movements did not unfold as expected. GBP rose briefly to 1.3424 before pulling back to close little changed at 1.3367 (-0.08%). While the pullback has gathered some momentum, and GBP could edge lower, any decline is likely part of a lower range of 1.3330/1.3395. In other words, GBP is unlikely to break clearly below 1.3330."

"1-3 WEEKS VIEW: Our most recent narrative was from Monday (08 Jun, spot at 1.3330), when we indicated that GBP “must break clearly below 1.3300 before further declines toward 1.3240 can be expected.” Yesterday, GBP broke our ‘strong resistance’ level at 1.3410, printing a high of 1.3424. Downward momentum has faded, and for the time being, GBP is likely to trade in a range between 1.3300 and 1.3435."

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

ING’s Warren Patterson and Ewa Manthey note Gold prices are retreating as investors reassess US monetary policy after data showing still persistent inflation risks. They say Gold has fallen sharply from record highs, erasing year-to-date gains, and expect near-term direction to hinge on US data, Treasury yields, Federal Reserve expectations and Middle East developments.

Retreat from records tied to Fed path

"Gold prices continued to retreat, extending recent losses as investors reassessed the outlook for US monetary policy."

"The precious metal initially pared losses after softer-than-expected core inflation figures but remained under pressure as Treasury yields firmed."

"Gold has retreated sharply from recent record highs, wiping out all year-to-date gains."

"While geopolitical uncertainty and central bank buying continue to offer longer-term support, near-term price direction is likely to remain closely tied to US economic data, Treasury yields and expectations for Federal Reserve policy."

"Markets will continue to focus on incoming US economic data and any shifts in Fed expectations."

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

• NZD/USD weakens to around 0.5795 in Thursday’s early European session. 
• US and Iran trade strikes for the second day, weighing on the New Zealand Dollar. 
• The US May PPI inflation report will be published later on Thursday. 

The NZD/USD pair loses traction to near 0.5795 during the early European trading hours on Thursday. Renewed skirmishes between the United States (US) and Iran undermine the New Zealand Dollar (NZD) against the US Dollar (USD). Traders brace for the US Producer Price Index (PPI) report, which is due later on Thursday. 

The US and Iran have exchanged strikes for the second night in a row. Washington characterized their attacks as "self-defense strikes." It came after US President Donald Trump vowed, "We hit them hard yesterday, and we're going to hit them again hard today.” Meanwhile, Iran’s top joint military command said that it is closing the Strait of Hormuz for “passage of any vessels," adding that any vessel that attempts passage will be targeted.

The continued back-and-forth of attacks raises concerns about the status of diplomatic efforts to end the war, which boosts a safe-haven currency such as the Greenback and creates a headwind for the pair. 

The US PPI inflation report will be in the spotlight later on Thursday. The headline PPI is expected to show a rise of 6.4% YoY in May, compared to 6.0% in April, while the core PPI is projected to show an increase of 5.4% versus 5.2% prior. Any further signs of hotter inflation in the US could lift the USD in the near term. 

However, a hawkish stance from the Reserve Bank of New Zealand (RBNZ) might help limit the Kiwi’s losses. RBNZ Governor Anna Breman said that the Official Cash Rate (OCR) is likely to increase sooner and by more than previously signaled, citing Middle East conflict-driven inflation, weaker growth and rising input costs across New Zealand and its trading partners. Markets have repriced the New Zealand rate outlook, with traders now expecting multiple hikes through early 2027.

Commerzbank’s Michael Pfister expects the European Central Bank (ECB) to deliver its first rate hike in months, but notes this is already priced into EUR/USD. He doubts President Lagarde will pre-commit to multiple hikes and highlights cooling Oil prices and softer inflation expectations. Pfister concludes that a hawkish surprise is unlikely and sees Euro (EUR) downside risks dominating near term.

Downside risks against US Dollar after ECB decision

"Today’s ECB meeting is expected to result in the first interest rate hike in many months. This move has already been priced in, so there is unlikely to be much scope for surprises in this regard. The key question is whether the ECB can deliver a hawkish surprise in its statement and subsequent press conference, thereby boosting the euro."

"Even if the ECB were prepared to raise interest rates three times this year, Christine Lagarde is unlikely to commit to that today. She will instead emphasise that the ECB will do everything in its power to ensure price stability. This probably won't be enough to further increase interest rate expectations."

"On the other hand, developments in the oil market have also calmed down somewhat in recent weeks - we are now well past the peak. Combined with lower-than-expected inflation rates in recent months, inflation expectations have also corrected slightly."

"It seems rather unlikely that the ECB will in light of these developments adopt a more hawkish stance than is already anticipated. For the euro, this means that risks are likely to be skewed to the downside today."

"We therefore continue to expect only a slow recovery in EUR/USD, with a level of just 1.16 expected by the end of the month."

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

• AUD/USD rises to near 0.7007 as the US Dollar faces slight selling pressure.
• The US CPI cools down on a monthly basis, but rose expectedly on an annualized basis in May.
• Investors await the RBA’s monetary policy announcement on Tuesday.

The AUD/USD pair trades 0.14% higher to near 0.7007 during the European trading session on Thursday. The Aussie pair gains as the US Dollar (USD) ticks lower after the release of the softer monthly United States (US) Consumer Price Index (CPI) data for May.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.1% lower to near 99.97.

On Wednesday, the US monthly headline CPI arrived lower at 0.5%, as expected, against the previous reading of 0.6%. Month-on-month core CPI – which excludes volatile food and energy items – growth cooled down to 0.2% from the previous reading of 0.4%. Meanwhile, Year-on-Year (YoY) headline and core CPI accelerated to 4.2% and 2.9%, as expected.

However, the broader outlook of the US Dollar appears to be firm as the next monetary policy adjustment by the Federal Reserve (Fed) appears to be on the upside. According to the CME FedWatch tool, the odds of the Fed delivering at least one interest rate hike this year are almost 71%.

On the Aussie front, investors await the Reserve Bank of Australia’s (RBA) monetary policy announcement on Tuesday, in which it is expected to leave interest rates unchanged.

AUD/USD technical analysis

AUD/USD trades marginally higher at around 0.7007 at press time. However, the pair maintains a bearish near-term tone as spot holds beneath the 20-day exponential moving average (EMA) at 0.7107 and a dense Fibonacci resistance band starting at the 50.0% retracement around 0.7057.

The Relative Strength Index (14) hovers near 34, indicating persistent downside pressure but not yet extreme oversold, which suggests sellers remain in control while leaving room for further losses before a more meaningful corrective bounce.

On the downside, immediate support aligns with the 61.8% Fibonacci retracement at 0.7005, a break of which would expose the 78.6% level at 0.6930 ahead of the prior swing low area marked by the 100.0% retracement at 0.6836. On the topside, initial resistance is seen at the 50.0% retracement near 0.7057, followed by a tight cluster formed by the 20-day EMA at 0.7107 and the 38.2% retracement at 0.7110, with further recovery attempts likely capped while the pair trades below the 23.6% retracement at 0.7174.

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

Danske Research Team highlights another weak session for global equities, with major indices down and a defensive rotation within sectors. Materials, industrials and technology underperformed, led by semiconductors. Asian markets opened lower, following Wall Street’s tone, while US equity futures turned marginally higher, suggesting only a tentative stabilisation after the prior day’s sell-off.

Defensive sectors outperform in risk-off trade

"Global risk appetite was weak again yesterday, with a sharp decline across major equity indices, with global equities down 1.3%."

"The rotation within equity was a classic defensive rotation on a risk off with min vol and value outperforming peers."

"Defensive sectors rose with the exception of health care."

"The materials and industrials were among the weakest performers, yet the much in-focus tech sector also dropped markedly."

"This morning, Asian markets are in the red, reflecting the tone set by US markets yesterday."

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