Forex News
Rabobank's Senior FX Strategist Jane Foley discusses the British Pound's (GBP) strong performance, noting GBP is the second-best G10 currency over three months despite no Bank of England (BoE) hikes. The team highlights market optimism around incoming UK Prime Minister Burnham and his likely right-leaning Chancellor choice, but stresses fiscal constraints and political scepticism. They expect EUR/GBP to rise toward 0.87 over a 3‑month horizon.
Pound resilience faces political tests
"On a 3-month view the pound is the second best performing G10 currency after the USD. This is despite domestic political change in the UK and the fact that the BoE, unlike five other G10 central banks, has not hiked interest rates this year. There has been a tightening of UK market rates relative to the start of the Iran war, although rate hike expectations have dropped noticeably back from their peak."
"GBP’s resilient tone suggests that the market may be willing to give PM-in- waiting-Burnham the benefit of a honeymoon period. This morning’s press reports that he may be erring towards choosing a Chancellor from the right of the Labour party rather than the left, strengthens the potential that both the gilts market and GBP will breathe a sigh of relief. That said, it is still unclear how Burnham intends to fund his agenda."
"We remain sceptical of the ability of GBP to extend its current resilient tone beyond the summer and look for EUR/GBP to push higher towards 0.87 on a 3-month view."
"This factor coupled with Rabo Research’s house view that BoE rates will remain on hold this year, suggests scope for a move higher in EUR/GBP on a 3-month view."
"For certain, the market will be watching news on fiscal issues closely in view of the clear budgetary constraints in the UK. For this reason, Burnham’s choice of Chancellor will be a big test. While UK asset markets will be relieved if his Chancellor is not from the left of the party, it may be tough for the new PM to maintain any honeymoon period into the autumn."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/USD recovers intraday losses as softer US inflation data weighs on the US Dollar.
- Back-to-back CPI and PPI misses reduce expectations of an immediate Fed rate hike.
- Middle East-driven energy risks keep inflation concerns alive.
EUR/USD recovers its intraday losses on Wednesday as the US Dollar (USD) comes under pressure after the latest US inflation data surprised to the downside. At the time of writing, the pair trades around 1.1430 after hitting an intraday low of 1.1406.
The US Producer Price Index (PPI) fell 0.3% MoM in June after rising 0.6% in May, below the forecast of 0%. On an annual basis, producer inflation slowed to 5.5% from 6.0%, also undershooting expectations of 6.2%.
Core PPI, which excludes food and energy, rose 0.2% MoM, below the expected 0.4% increase but slightly above May’s 0.1% gain. The annual core rate edged up to 4.7% from 4.6%, although it came in below the 5.2% forecast.
The figures follow softer US Consumer Price Index (CPI) data released on Tuesday. The back-to-back inflation misses have reduced expectations of an immediate Federal Reserve (Fed) interest rate hike, pulling the US Dollar lower and offering some support to the Euro (EUR).
The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, is trading below 101 after giving up its earlier gains.
According to the CME FedWatch Tool, markets now see an 88% chance that the Fed will leave interest rates unchanged at its July meeting, while the probability of a September hike has fallen to around 52%.
However, the slowdown in inflation could prove temporary, as energy-driven price risks persist following renewed fighting between the United States (US) and Iran. Disruptions to supplies through the Strait of Hormuz have lifted Oil prices, keeping the possibility of a Fed rate hike later this year on the table.
New York Fed President John Williams said on Wednesday that inflation is still too high and must return to the Fed’s target on a sustained basis. Williams expects inflation to ease to around 3.25% by the end of this year, move closer to 2% in 2027 and reach the target in 2028.
On the Euro side, European Central Bank (ECB) officials continue to signal a cautious approach after raising the Deposit Facility Rate by 25 basis points to 2.25% in June. Bundesbank President Joachim Nagel said on Wednesday that rates are at an appropriate level following last month’s decision, but added that policymakers should act decisively if necessary.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.08% | -0.30% | -0.02% | 0.02% | -0.24% | -0.24% | -0.07% | |
| EUR | 0.08% | -0.28% | 0.06% | 0.09% | -0.21% | -0.22% | -0.00% | |
| GBP | 0.30% | 0.28% | 0.31% | 0.35% | 0.07% | 0.05% | 0.27% | |
| JPY | 0.02% | -0.06% | -0.31% | 0.03% | -0.24% | -0.24% | -0.07% | |
| CAD | -0.02% | -0.09% | -0.35% | -0.03% | -0.26% | -0.32% | -0.09% | |
| AUD | 0.24% | 0.21% | -0.07% | 0.24% | 0.26% | -0.03% | 0.15% | |
| NZD | 0.24% | 0.22% | -0.05% | 0.24% | 0.32% | 0.03% | 0.22% | |
| CHF | 0.07% | 0.00% | -0.27% | 0.07% | 0.09% | -0.15% | -0.22% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Rabobank strategists Mauricio Une and Renan Alves note that the US Dollar (USD) ended the previous week at Brazilian Real (BRL) 5.1086, with the Brazilian Real appreciating 1.2% and ranking third among 24 emerging currencies. They highlight expectations of a smaller spread between local and global interest rates in 2026 and a fragile domestic fiscal backdrop in an electoral year, leading Rabobank to project the US Dollar at BRL 5.35 by year end.
BRL strength but Dollar recovery eyed
"Externally, the US and Iran have resumed the exchange of bellicose attacks, raising tensions by putting the MoU at risk and casting uncertainty to future global prices formation."
"Our view: the recent exchange of bellicose attacks exposes the fragility of the MoU previously struck by Iran and the United States."
"The dollar ended the previous week at R$ 5.1086, implying a weekly appreciation of 1.2% of the BRL vis à vis the USD, the third better weekly performance among 24 emerging currencies."
"With the expectation of a smaller spread between local and global interest rates along 2026 and eventual global recovery of the greenback amid a fragile domestic fiscal environment in the middle of an electoral year, we expect the US dollar to post R$ 5.35 by year end."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
BNY’s Geoff Yu reports that European Central Bank (ECB) officials Piero Cipollone and Martin Kocher are focused on preventing the energy shock and Middle East uncertainty from feeding broader Eurozone inflation. They see limited second‑round effects so far and stress a data‑dependent stance, keeping options open on rates while Bundesbank President Joachim Nagel reiterates the need for vigilance on inflation expectations.
Data dependent stance on inflation risks
"ECB officials Piero Cipollone and Martin Kocher have both signaled that the central bank is focused on preventing the energy shock and Middle East uncertainty from feeding into broader inflation dynamics, rather than treating imported price pressure as a reason for automatic tightening. Cipollone said the ECB is seeing the direct impact of higher energy prices and some indirect passthrough to production costs, but not yet second-round effects from wages or corporate pricing behavior."
"Kocher echoed that view, saying the ECB is not seeing second-round inflation for now, though policy must remain calibrated to expectations amid elevated uncertainty. Both comments point to a data-dependent stance, with the ECB ready to act if inflation expectations become less anchored, while keeping the option of holding or raising rates open. However, Bundesbank President Joachim Nagel reiterated the need for vigilance."
"Euro area industrial production fell 0.2% m/m and 1.2% y/y in May (initial estimates), while EU output declined 0.1% m/m and 0.3% y/y. The m/m fall followed gains in April and reflected weaker intermediate goods and durable consumer goods production, partly offset by higher energy, capital goods and non-durable consumer goods output. On a y/y basis, capital goods and energy rose, but sharp drops in non-durable consumer goods and durable consumer goods dragged on overall activity."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
TD Securities’ James Rossiter discusses UK political developments and their market implications, focusing on the race for the next Chancellor under expected Prime Minister Burnham. The report highlights the shift away from Ed Miliband toward more market-friendly candidates Yvette Cooper and Shabana Mahmood, outlines near-term policy priorities on devolution and cost of living, and notes potential future tweaks to UK fiscal rules relevant for Gilt markets.
Chancellor race and fiscal outlook
"Credible reports to well-placed UK political journalists overnight suggest that Ed Miliband's ambitions to be the next Chancellor have been dashed. Reports are conflicting across media outlets, but both Foreign Secretary Yvette Cooper and Home Secretary Shabana Mahmood are reported to be the top contenders (see The Times, The i Paper, and The FT). Prediction markets now put Cooper at 39% probability and Mahmood at 33%. Miliband has fallen sharply from nearly 70% to 15% in just 24hrs."
"We've long believed that the wide-open contest (with Streeting and McFadden also rumored for the post) was a signal that PM-to-be Burnham understood market concerns about Miliband. Market participants have feared that Miliband would go for big-spending and strong environmental regulations that could cap UK growth in some key sectors like energy and AI. Other contenders lie to the right of the Labour party, and would likely be more market-sensitive."
"Turning to next steps, we expect a slew of quick announcements in the coming days targeting devolution of power and policies to address the cost of living crisis. Neither of these should cause material concern for markets. A quiet summer likely comes thereafter before a busy autumn schedule."
"The Labour Party Conference is 27-30 September, and will serve as a platform for Burnham's major policy ambitions. An autumn budget is due at some point, with reports that Burnham is pushing for a mid-Oct date (rather than Nov). He has reiterated that he plans to stick to the fiscal rules, which should reassure Gilt markets. But we see this as a short-term commitment, as these rules do change frequently, and we could see them tweaked next year."
"Credible reports overnight suggest Ed Miliband has lost the race to become the next UK Chancellor. The more market-friendly Yvette Cooper and Shabana Mahmood are heavily rumoured to be in the lead. Markets will like this outcome."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/GBP trades near a one-year low as higher UK interest rate expectations support the Pound.
- Markets fully price a BoE rate hike by November, while another near-term ECB increase appears unlikely.
- Attention turns to Thursday’s UK GDP and production data for fresh clues on the BoE’s policy path.
EUR/GBP stays under pressure as reduced political uncertainty in the United Kingdom and expectations of higher Bank of England (BoE) interest rates keep the British Pound (GBP) favoured over the Euro (EUR). At the time of writing, the cross trades around 0.8509, near its lowest level since June 2025.
Oil-driven inflation risks are back in focus after renewed fighting between the United States and Iran disrupted supplies through the Strait of Hormuz. The rebound in energy prices has raised expectations that the BoE may need to tighten monetary policy.
Reuters reported that money markets fully price a BoE rate hike by November, with a second increase expected by March 2027. The BoE currently holds its Bank Rate at 3.75%.
Meanwhile, the European Central Bank (ECB) raised its Deposit Facility Rate by 25 basis points to 2.25% in June in response to surging Oil prices. However, markets see little chance of another increase in the near term, although a further rate hike by year-end remains possible.
Bundesbank President Joachim Nagel said on Wednesday that ECB interest rates are at an appropriate level following the June decision. He added that policymakers should respond cautiously but act decisively if needed.
ECB policymaker Fabio Panetta said Eurozone inflation is hovering around 3% and is expected to stay above that level until early 2027. He added that future rate decisions should focus on keeping inflation expectations anchored and limiting the indirect and second-round effects of energy shocks.
The wide gap between UK and Eurozone interest rates should keep EUR/GBP tilted to the downside in the near term. Attention now turns to the UK Gross Domestic Product (GDP), Industrial Production and Manufacturing Production data due on Thursday for fresh clues on the economic outlook and the BoE’s interest rate path.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.21% | -0.02% | -0.03% | -0.27% | -0.28% | 0.01% | |
| EUR | 0.06% | -0.21% | 0.04% | 0.02% | -0.25% | -0.28% | 0.06% | |
| GBP | 0.21% | 0.21% | 0.22% | 0.21% | -0.05% | -0.08% | 0.26% | |
| JPY | 0.02% | -0.04% | -0.22% | -0.00% | -0.25% | -0.27% | 0.03% | |
| CAD | 0.03% | -0.02% | -0.21% | 0.00% | -0.24% | -0.31% | 0.04% | |
| AUD | 0.27% | 0.25% | 0.05% | 0.25% | 0.24% | -0.05% | 0.27% | |
| NZD | 0.28% | 0.28% | 0.08% | 0.27% | 0.31% | 0.05% | 0.34% | |
| CHF | -0.01% | -0.06% | -0.26% | -0.03% | -0.04% | -0.27% | -0.34% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Producer inflation in the United States, as measured by the change in the Producer Price Index (PPI), declined to 5.5% on a yearly basis in June from 6% in May, the US Bureau of Labor Statistics (BLS) reported on Wednesday. This reading came in below the market expectation of 6.2%.
On a monthly basis, the PPI declined by 0.3%, following the 0.6% increase recorded in May and improved compared with analysts' estimate for no change.
Other details of the report showed that the PPI ex Food & Energy was up 0.2% and 4.7% on a monthly and yearly basis, respectively.
Market reaction
The US Dollar (USD) comes under modest bearish pressure following this report and the USD Index retreats from session highs. At press time, the USD Index was trading marginally lower on the day near 100.90.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Standard Chartered economists Hunter Chan and Shuang Ding note that China’s Q2 Gross Domestic Product (GDP) growth slowed to 4.3% year-on-year, below the 4.5–5.0% target range, with domestic demand remaining soft. They highlight stronger exports and industrial production versus weak consumption and investment. They expect accelerated fiscal spending on infrastructure and an accommodative monetary stance, while maintaining a 2026 growth forecast of 4.6%.
Growth slows as policy stays accommodative
"China’s Q2 growth fell below the targeted range of 4.5-5.0%, slowing sharply to 4.3% y/y after exceeding expectations at 5% in Q1."
"The imbalance between strong supply and soft domestic demand will likely remain a key challenge in H2."
"We maintain our 2026 growth forecast at 4.6% on the assumption of faster budget implementation in H2."
"The government will likely prioritise implementation of existing policies while developing a contingency plan."
"We expect the government to accelerate fiscal spending on infrastructure before considering additional stimulus, given still-decent fiscal room in H2."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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