Forex News

Russia exported nearly 3.94 million barrels of Crude Oil per day last week, marking a 20% increase from the prior week despite US sanctions. A record volume of Russian Crude now sits in tankers at sea, raising questions about demand even as production bottlenecks push exports higher, Commerzbank's commodity analyst Carsten Fritsch notes.

Russian seaborne Oil exports spike to highest since September

"Russia exported significantly more Crude Oil by sea last week than in previous weeks. According to Bloomberg data based on tanker data, seaborne shipments rose to 3.94 million barrels per day in the week ending November 30. That was a good 20% more than in the previous week and the highest level since early September. The less volatile 4-week average also rose to 3.46 million barrels per day."

"The increase in exports can be explained by the fact that, due to the ongoing Ukrainian drone attacks on Oil refineries in Russia, less Crude Oil can be processed and therefore more is available for export. The increase in Oil exports comes as a surprise, as US sanctions against Russia's two largest Oil companies came into effect just before the reporting week."

"However, the increase in exports does not automatically mean that there are buyers for the Oil. According to Bloomberg, more than 180 million barrels of Russian Oil were in tankers at sea at the end of November, representing a 21% increase within three months. Some of the ships are likely to be sailing without a specific destination, looking for a buyer."

The Swiss National Bank (SNB) is expected to maintain its policy rate at 0% despite weak inflation and GDP growth, citing high barriers to negative rates. Following limited interventions in 2024, the SNB remains willing to use FX purchases to manage disinflation while forecasting steady growth into 2026, NOMURA's Research Analysts report.

On hold at 0.00% despite low inflation and falling GDP

"We expect the SNB to leave its policy rate unchanged at 0.00% at its 11 December meeting."

"The latest inflation and GDP growth data were both weak. However, we expect the SNB to forecast inflation to rise again and continued GDP growth in 2026, so a rate cut will likely not be required, particularly as the bar to a negative policy rate is high."

"The SNB purchased CHF5.1bn of FX in Q2 following limited interventions in 2024, suggesting it remains willing to use this policy tool to curb disinflation."

Since the beginning of October, the price of a barrel of Brent crude Oil has fluctuated mainly between USD 60 and 65. This is unlikely to change in the coming week, as factors supporting and weighing on prices are likely to balance each other out. At the beginning of the week, China's crude Oil imports are of particular interest, Commerzbank's commodity analyst Barbara Lambrecht notes.

China’s Oil Imports remain robust amid high diesel crack spreads

"According to the IEA, Chinese Oil demand this year is likely to be only 100,000 barrels per year higher than last year, but crude Oil imports in the first ten months were 400,000 barrels per day higher than in the same period last year. We expect imports to remain high in November. Part of this is likely to continue to flow into the build-up of strategic reserves. Recently, the very high crack spreads on the diesel market provided a strong incentive for crude Oil processing. We therefore assume that imports were also very robust in November and will support prices."

"On the other hand, the new forecasts from the energy agencies out during the coming week are likely to weigh on prices. Although no major corrections are expected, they would continue to point to an oversupply on the Oil market in the coming year. Last month, the EIA revised its Oil price expectations slightly upward. This was mainly due to tougher sanctions against Russia and higher stockpiling in China. Higher prices and a recent surprise increase in production were decisive factors in raising the forecast for US production slightly (see figure). It is questionable whether further upward corrections will follow."

The Reserve Bank of India (RBI) cut its policy rate by 25bps to 5.25%, supporting economic growth amid a benign inflation outlook. USD/INR hovers just below record highs as markets price in a floor for rates, with potential future hikes over the next two years, BBH FX analysts report.

RBI lowers policy rate to 5.25% amid benign inflation

"USD/INR firmed back up to 90.0000, a touch below yesterday’s record high of 90.4248. The Reserve Bank of India (RBI) delivered on expectations and cut the policy rate 25bps cut to 5.25%. The RBI monetary policy committee unanimously backed the cut, stating 'the benign inflation outlook continues to provide the policy space to support the growth momentum'."

"The swaps curve shows the policy rate has reached a floor at 5.25%, with rate hikes priced in over the next two years. The risk is the RBI eases again which is a drag for INR. India core inflation excluding gold is near the lower-end the RBI’s 2%-6% target range and tariff related developments are likely to decelerate growth in the coming quarters."

The Bank of Japan (BoJ) is set to raise interest rates to 0.75% this month, sending USD/JPY lower as the Japanese Yen (JPY) strengthens. Further BoJ hikes and stronger-than-expected Fed cuts could narrow the US-Japan rate gap to 150bps by year-end 2026, supporting additional yen gains, Commerzbank's FX analyst Michael Pfister notes.

Yen gains as market prices stronger Japanese rates

"Another Japanese interest rate hike is approaching. While the first signs that decision-makers were considering such a move at the December meeting emerged in September, the signals have intensified since then. Reports have emerged overnight that decision-makers are ready for the hike, provided there are no unexpected shocks before the meeting in just under two weeks. The Bank of Japan's intention to raise interest rates to 0.75% this month could hardly be clearer."

"If inflation remains above the central bank's target for such a long time, decision-makers risk losing credibility. I was also critical of the BoJ's interest rate hikes in 2024 because we simply did not see the 'second force' identified by the BoJ, i.e. sustained domestic inflationary pressure driven by services. However, a central bank cannot afford to ignore volatile components indefinitely. In recent decades, excessive inflation has not been an issue in Japan, so market participants are likely to tolerate a prolonged period of high inflation. But at some point, that will no longer be the case."

"The fact that the market is now pricing in stronger Japanese interest rate hikes is finally benefiting the yen – after many weeks of higher levels, USD/JPY is finally trending lower again. There is probably potential for even lower levels, i.e. a stronger yen. We expect another BoJ interest rate hike in April (to 1%), and anticipate stronger Fed interest rate cuts than the market expects. Ultimately, therefore, the interest rate differential is likely to fall to 150 basis points by the end of next year, with the yen appreciating accordingly against the US dollar."

• The Pound Sterling aims to extend its upside further due to multiple tailwinds.
• UK S&P Global Composite PMI is revised higher to 51.2 in November.
• Investors expect both the Fed and the BoE to cut interest rates this month.

The Pound Sterling (GBP) trades 0.1% higher to near 1.3360 against the US Dollar (USD) during the European trading session on Friday. The GBP/USD pair gains as the US Dollar retreats to near its five-week low, with traders remaining confident that the Federal Reserve (Fed) will cut interest rates in its monetary policy meeting next week.

During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades cautiously near its five-week low around 98.75.

According to the CME FedWatch tool, the probability of the Fed cutting interest rates by 25 basis points (bps) to 3.50%-3.75% in the December policy meeting is 87%.

Firm Fed dovish expectations are backed by weakening US job market conditions. The US ADP reported on Wednesday that the private sector shed 32K jobs in November, while it was expected to add 5K fresh workers.

The minutes of the Federal Open Market Committee (FOMC) meeting in October also showed that policymakers acknowledged downside labor market risks and the need to loosen monetary conditions further. However, several members argued against reducing interest rates in December.

In Friday’s session, investors will focus on the US Personal Consumption Expenditure Price Index (PCE) data for September, which will be released later in the day. However, its impact might be insignificant on expectations towards the Fed's next step, as it is delayed data.

Pound Sterling capitalizes on UK budget, upwardly revised PMI

• The Pound Sterling strives to extend its recent rally against its major currency peers on Friday. The British currency has been outperforming its peers for over a week, prompted by the United Kingdom (UK) budget announced on November 26, and an upward revision in the S&P Global Purchasing Managers’ Index (PMI) data for November.
• The budget announced by Chancellor of the Exchequer Rachel Reeves last week unveiled the Labour Party’s plans to raise 26 billion pounds in taxes to fill the fiscal hole without having a material burden on households.
• Financial market participants were worried before the budget announcement that the government might go against its self-imposed fiscal rules to address welfare spending measures, a scenario that could have promoted UK gilt yields. However, the government passed the bond market test and also presented large-scale investment plans.
• On Wednesday, the S&P Global reported that the Composite PMI rose to 51.2 from the preliminary reading of 50.5, which diminished fears of muted business activity.
• Going forward, the major trigger for the Pound Sterling will be market expectations for the Bank of England’s (BoE) monetary policy outlook. The BoE is expected to cut interest rates in the next meeting on December 18 to support weakening job market conditions.

Technical Analysis: GBP/USD sees more upside above 1.3400

The Pound Sterling trades firmly near its monthly high of 1.3385 against the US Dollar, posted on Thursday. The pair holds above a rising 20-day Exponential Moving Average (EMA) at 1.3227, maintaining a positive near-term bias. The 20-day EMA has sloped higher in recent sessions, and dips remain shallow.

The 14-day Relative Strength Index (RSI) at 62.77 reflects bullish momentum.

Momentum remains supportive, while price stays above the rising 20-day EMA. A daily close above the 50% Fibonacci retracement at 1.3402 would reinforce the bullish tone and open room for continuation towards the October 17 high of 1.3471. Conversely, failure to breach that barrier would keep the pair consolidating, with pullbacks leaning toward the 38.2% Fibonacci area and trend support.

USD/JPY fell to 154.35 as the Japanese Yen (JPY) strengthens amid growing expectations for a Bank of Japan (BoJ) rate hike this month. Markets anticipate a 25bp BoJ hike on 14 December, with two additional hikes next year likely to lift the policy rate to 1.25% by end-2026, MUFG's FX analysts Lee Hardman and Abdul-Ahad Lockhart report.

BoJ rate hike expectations lift Yen

"The yen has continued to strengthen during the Asian trading session resulting USD/JPY falling to a fresh low of 154.35. It leaves the yen on track to record its second consecutive week of gains against the US dollar. The yen has benefitted this week from building expectations for the BoJ to resume rate hikes this month."

"The Bloomberg report provides confirmation that recent comments from BoJ officials including Governor Ueda were intended to signal to market participants that rates would be raised this month, and that the government will not stand in their way. The report did note though that the final decision over a rate hike will be made at the last minute after assessing all economic data and information. "

"The latest Tankan survey is scheduled to be released ahead of the next BoJ policy meeting on 14th December, and unless there is a significant downside surprise to business confidence we expect the BoJ to hike rates by 25bps this month. We then expect the BoJ to stick to a gradual pace of tightening, forecasting two rates hikes (every six months) next year lifting the policy rate up to 1.25% by the end of 2026."

USD/CAD is under pressure near 1.3940 as markets await Canada’s November labor force survey, with modest job losses expected. The Bank of Canada (BOC) is likely done cutting rates, while upcoming USMCA talks remain a potential downside risk for the Canadian economy, BBH FX analysts report.

BOC seen on hold amid subdued hiring outlook

"USD/CAD is trading heavy near 1.3940. Canada’s November labor force survey is up next (1:30pm London, 8:30am New York). The economy is expected to lose -2.5k jobs in November after surprising with strong gains of 66.6k and 60.4k in October and September, respectively. The Q3 business outlook survey indicates subdued hiring intentions over the next 12 months."

"So long as labor weakness doesn’t deepen or widen, the Bank of Canada (BOC) is finished cutting. The swaps market implies steady rates at 2.25% over the next twelve months and a 25bps hike to 2.50% in the next two years. USD/CAD needs to sustain a break below its 200-day moving average (1.3913) to gain downside traction."

"The upcoming review of the United States-Mexico-Canada trade agreement (USMCA) is an ongoing source of uncertainty and a downside risk to Canada’s economy. Businesses and consumers may be cautious as they wait for more clarity about the future of USMCA. The first six-year joint review of the USMCA is scheduled for July 1, 2026."