Forex News

BNY’s Bob Savage reports that European Union (EU) exports, especially to the United States (US), have weakened sharply and sentiment indicators remain below long‑run averages, underscoring subdued Eurozone momentum. Savage notes that softer producer prices in France, mixed confidence in Italy and Sweden, and broad EUR/USD declines reflect persistent concerns over demand and inflation dynamics across the bloc.

Soft data backdrop for Euro

"EU external trade data for Q1 showed a marked weakening in exports, particularly to the U.S."

"The EU and euro area sentiment surveys for May showed economic confidence remaining weak despite modest stabilization."

"However, both measures remained well below their long-run averages of 100, signaling continued subdued economic momentum."

"These figures are still below pre-Middle East conflict levels and highlight persistent concerns among households and businesses."

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

BNP Paribas argues that United States growth outperformance is being driven by strong productivity gains rather than immediate benefits from Artificial Intelligence. The bank notes that hourly labour productivity has accelerated sharply compared with the pre-Covid period and expects this strength to persist into 2026 and 2027. US institutions see AI as a moderate but supportive factor for long-term GDP growth.

Productivity surge underpins US expansion

"Since 2022, US growth has proved resilient in the face of a succession of shocks, including inflation, monetary tightening and tariffs."

"According to our forecasts, this strength is set to continue in 2026 and 2027 (see EcoPerspectives United States: Growth and Full Employment tested by Uncertainty), with strong productivity gains being the key driver."

"Following a temporary surge linked to the pandemic crisis (which is depicted as a “bump” on the chart before correction), hourly labour productivity growth reached an annual average of +2.4% between 2023 and 2025, compared with +1.3% between 2014 and 2019."

"In the medium term, however, AI is expected to support the upward trend."

"Expectations of future productivity gains driven by AI underpin the current investment cycle."

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

• EUR/USD depreciates for the third consecutive day, but remains within range, above 1.1575.
• Rising tensions in Iran and high Crude prices are weighing on the Euro.
• In the US, April's PCE Price Index is likely to confirm the inflationary impact of Iran's war.

The Euro (EUR) trades lower for the third consecutive day against the US Dollar (USD) on Thursday. Price action remains contained within a roughly 80-pip range around 1.1600, but technical indicators show a fading momentum, with the US-Iran ceasefire under threat and US Personal Consumer Expenditures (PCE) Prices Index set to show rising inflationary pressures.

Market sentiment soured on Thursday following news reporting fresh US attacks on Iran. Tehran also affirmed that it launched a strike on a US base in the Gulf, and Kuwait reported interceptions of hostile missiles and drones. These skirmishes have pushed back hopes of a swift end to the war and the reopening of the Strait of Hormuz, boosting Brent Oil prices above $94 from lows below $92 on Wednesday.

From a wider perspective, however, the pair remains in range, supported by market hopes of an upcoming interest rate hike by the European Central Bank (ECB). The ECB Watch Tool shows a 91% chance that the central bank will hike its Deposit Rate by 25 basis points to 2.25% at their June 11 meeting, and recent comments by ECB speakers have endorsed this view.

ECB's Chief Economist Philip Lane warned that second-round inflation effects from the energy shock will outlast the Iran conflict and affirmed that the bank must ensure that the feeling that inflation will remain high for a long time does not hold among the public or price setters. On Tuesday, ECB policymaker Isabel Schnabel said that the bank needs to hike rates in June.

In the US, all eyes will be on the Personal Consumption Expenditures (PCE) Price Index data for April, due later on the day. The Federal Reserve’s (Fed) favourite inflation gauge is expected to confirm that prices kept rising last month. If the market consensus is met, Fed hawks will have further reasons to push for tighter monetary policy, which might send US yields and the US Dollar soaring, hammering the EUR/USD.

Technical Analysis: The Euro keeps wavering within range

EUR/USD trades at 1.1610, maintaining a mildly bearish near-term bias yet with trading confined within an 80-pip range, between 1.1575 and 1.1660. The Relative Strength Index (RSI) remains below the midline, and a slightly negative Moving Average Convergence Divergence (MACD) reading hints at fading upside momentum, reflecting a market that remains vulnerable to additional downside probes.

Bears, however, should break support at the May 21 low, near 1.1575, to shift the focus towards the April bottom in the 1.1505-1.1525 area. A confirmation above the May 18 and 27 highs, in the area of 1.1660, on the contrary, would bring the May 14 low, at 1.1720, into focus ahead of May's peak, in the 1.1790 area.

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

The accounts of the European Central Bank's April policy meeting showed on Thursday that policymakers acknowledged that upside risks to inflation and downside risks to growth have intensified.

Key takeaways

"Weakness could persist well beyond the end of the conflict."

"There was little evidence that the increase in energy prices was generating second-round effects."

"On the consumer side too, it was still too early for second-round effects to be visible, since for this wage negotiations needed to take place."

"Current situation of a classical negative supply shock was different from the situation in 2022."

"It was now evident that the energy price shock was not only large, but also becoming more persistent, raising the risk of it feeding through into broader inflation dynamics."

"By June, more information on the impact of the energy shock would be available."

"A number of members would not have opposed raising rates."

"Increasingly unlikely that a looking through approach without any monetary policy action would be appropriate."

"A number of members noted that the decision was a close call."

"It was argued risks of unanchoring had re-emerged."

"The view was broadly shared that there was no evidence yet of strong second-round effects."

"If a conclusive agreement was reached to end the war, one could not quick reversal in the risks to inflation."

Market reaction

EUR/USD showed no immediate reaction to the ECB Accounts and was last seen trading slightly above 1.1600, losing 0.12% on the day.

• GBP/USD is down to near 1.3400 amid renewed fears of US-Iran conflicts.
• Iran’s IRGC warns against disruption near the Strait of Hormuz.
• Investors await the US PCE Inflation data for April.

The GBP/USD pair trades 0.2% lower to near 1.3400 during the European trading session on Thursday. The pair is broadly under pressure due to fears of a resumption of the Middle East war after the exchange of attacks between the United States (US) and Iran.

During the day, Iran’s Islamic Revolutionary Guard Corps (IRGC) has claimed its authority near the Strait of Hormuz, stating that Tehran is controlling and managing the passage, and any disruption will be met with a 'decisive response’. The IRGC added that vessels need to “obtain permission and coordinate with the Navy to pass through Hormuz.

Iran’s attempt to gain authority on Hormuz is in contrast with US President Donald Trump’s demands for a permanent peace deal, which includes Hormuz reopening and the handover of uranium enrichment to the US.

Meanwhile, renewed US-Iran tensions have increased the safe-haven appeal of the US Dollar. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades higher at around 99.30.

Going forward, investors will focus on the US Personal Consumption Expenditure Price Index (PCE) data for April, which will be published at 12:30 GMT.

GBP/USD technical analysis

GBP/USD trades lower at around 1.3400, maintaining a near-term bearish bias as it holds beneath the 20-day Exponential Moving Average (EMA) at 1.3461 and within the broader descending trend defined by the resistance line from 1.3871 through 1.3593. The overall trend appears to be sideways amid the Symmetrical Triangle.

The Relative Strength Index (RSI) wobbles inside the 40.00-60.00 zone, reflecting indecisiveness among investors.

On the topside, initial resistance emerges at the 20-day EMA around 1.3461, with the descending trend-line region near 1.3593 acting as the next cap. On the downside, immediate support is seen near the broken uptrend reference at 1.3333, with a deeper cushion aligning with the earlier trend-line origin around 1.3162 if selling pressure accelerates.

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

ABN AMRO notes that the new energy shock will push Eurozone inflation higher, though less severely than in 2022–23, as gas price rises are smaller and electricity has decoupled from gas. The ECB’s need to pre-empt second-round effects will tighten financial conditions and damp growth, but a cyclical recovery should broadly continue, supported by increased German fiscal spending.

Energy-driven inflation and fiscal support

"The inflation jump from the new energy shock will outweigh the hit to growth."

"However, we expect a much narrower and manageable rise in inflation compared to the 2022-23 shock."

"This is because the magnitude of gas price rises is much lower, but also because electricity markets have largely decoupled from gas."

"Still, because the ECB will need to get ahead of any second round inflation effects, growth will be dampened by a tightening of financial conditions."

"At the same time, the cyclical recovery is expected to broadly continue, helped by higher German fiscal spending."

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

Deutsche Bank’s Jim Reid and team note that Brent Oil has rebounded strongly after fresh US defensive strikes and new sanctions on Iran, which reversed yesterday’s sharp decline to a one‑month low. They highlight that Iranian and US statements on a reported interim peace proposal for the Strait of Hormuz have been contradictory, keeping Oil volatility elevated and linked closely to evolving geopolitical headlines.

War risks keep Brent highly volatile

"One skill required in this job at the moment is adaptability as the tone has all changed in the last couple of hours with Oil back up and equities down after the US carried out another series of defensive strikes and imposed sanctions preventing Iran from profiting from Strait of Hormuz traffic."

"This has led to Brent rallying +3.92% this morning to $97.99/bbl after falling -5.31% yesterday and to a one-month low of $94.29/bbl."

"The main one yesterday came from Iran’s state TV, who reported on an unofficial draft for an interim peace deal."

"According to them, this proposal would see maritime traffic through the Strait of Hormuz return to normal within a month, while the US would lift its blockade on Iranian ports."

"However, we then heard from the White House later on, who said this report was a “complete fabrication”, which dampened hopes for an imminent deal."

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

• USD/JPY pulls back from monthly highs at 159.65 but remains close to the key 160.00 area.
• Concerns about fresh US-Iran hostilities hammered risk appetite during the Asian session.
• Later on Thursday, the US PCE Prices Index and Tokyo CPI figures are likely to set the pair's direction.

The Japanese Yen (JPY) trims losses against the US Dollar (USD) during Thursday’s European trading session, although it remains dangerously close to levels that allegedly triggered an intervention in April. The USD/JPY pair trades at the 159.45 area at the time of writing, after hitting fresh monthly highs at 159.65, but remains close to the 160.00 level, considered a line in the sand for Tokyo interventions.

The Greenback extended gains during the Asian session, as fresh hostilities between the US and Iran cast doubt about the fate of the frail peace process and dampened hopes of a swift reopening of the Strait of Hormuz. US Treasury yields rose, buoying the US Dollar higher, and Oil prices bounced from lows, adding pressure on the JPY.

Market fears ebbed during the European trading session, and the USD pulled back against its main peers. Investors' focus is now on the US Personal Consumption Expenditures (PCE) Price Index release, due later on the day, which is expected to show that inflation accelerated further in April, providing further reasons for Federal Reserve (Fed) hawks to call for monetary tightening.

In Japan, Bank of Japan Governor (BoJ) Kazuo Ueda warned that a temporary energy shock can become persistent if it feeds into wages, expectations, and price-setting behaviour. These comments endorse hopes that the BoJ will tighten its monetary policy further after the June 15 meeting. Markets, however, will await the Tokyo CPI release, due later on the day, to confirm those expectations.  

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