Forex News

• Silver tumbles nearly 8% as hawkish Fed expectations boost US Treasury yields and the US Dollar.
• Strong US inflation and resilient consumer spending increase bets on a possible Fed rate hike later this year.
• Technically, XAG/USD remains under pressure below key moving averages, with fading momentum indicators suggesting bears retain near-term control.

Silver (XAG/USD) plunges on Friday, erasing all gains recorded earlier this week as hawkish Federal Reserve (Fed) expectations push US Treasury yields and the US Dollar (USD) higher. At the time of writing, XAG/USD is trading around $76.65, down nearly 8% on the day and hovering near its lowest level in over a week.

The sharp decline comes as the latest US economic data, including stronger-than-expected inflation and resilient consumer spending, strengthened expectations that the Fed could raise interest rates later this year as higher Oil prices linked to ongoing Middle East disruptions continue to fuel inflationary pressures.

According to the CME FedWatch Tool, traders now expect the US central bank to keep interest rates unchanged in the coming months, while pricing in a roughly 42% probability of a rate hike at the December meeting.

Against this backdrop, Silver is expected to maintain a bearish near-term bias as a higher interest rate environment reduces the appeal of non-yielding assets like Silver, while technical indicators suggest bears remain in control.

Technical Analysis:

In the daily chart, XAG/USD retains a capped tone as price holds beneath both the 50-day Simple Moving Average (SMA) at $76.99 and the 100-day SMA at $81.28. The 200-day SMA at $65.04 remains well below the market, suggesting the broader trend is still constructive, but the current pullback is pressuring the short- and medium-term structure.

The Relative Strength Index (14) at 47.37 hovers just below the neutral line, while the Moving Average Convergence Divergence (MACD) indicator stays in positive territory around 0.66 but has eased from recent highs, hinting that bullish momentum is waning rather than strengthening.

On the topside, immediate resistance is located at the 50-day SMA at $76.99, where a sustained break would be needed to alleviate near-term downside pressure, with the next bullish hurdle emerging at the 100-day SMA at $81.28.

On the downside, the main structural support is much lower at the 200-day SMA near $65.04, leaving the metal vulnerable to further corrective slippage if sellers maintain control below the overhanging cluster of shorter-term moving averages.

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

Commerzbank’s Thu Lan Nguyen notes that Aluminium production in China has exceeded official caps thanks to high prices and ample alumina, but this may not fully offset disrupted Gulf supply. A major Swiss trader warns of a sizeable 2026 deficit and potentially “paper-thin” inventories by year-end, implying possible supply bottlenecks and pronounced price volatility.

Chinese output versus looming deficit

"In contrast, figures on aluminum production are expected to be released as early as Monday. High prices and an abundant supply of alumina make aluminum production attractive, so that production in the first quarter exceeded the government-mandated production cap."

"This trend likely continued in April, as suggested by China’s increased aluminum exports. However, since supply from the Gulf region is struggling to reach the market, China’s high production is unlikely to put much pressure on aluminum prices."

"Attention in the aluminium market is also likely to increasingly focus on inventory levels. While higher production from China should help alleviate supply shortfalls from the Gulf region (see above), a significant supply gap is likely to remain given robust demand so far, not least due to a resilient Chinese industry."

"A major commodities trader based in Switzerland warns that inventories in the aluminium market could fall to “paper-thin” levels by the end of the year. The company also expects a supply deficit of 2 million tons this year."

"If this were to actually occur, supply bottlenecks could not be ruled out, which in turn would lead to significant price swings."

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

• USD/JPY advances for a fifth consecutive day and hits a two-week high on Friday.
• Strong US data and rising Treasury yields reinforce expectations of a more hawkish Fed.
• Fears of intervention by Japanese authorities continue to limit the pair’s upside potential.

USD/JPY trades around 158.55 on Friday at the time of writing, up 0.11% on the day, as the pair extends its bullish momentum for a fifth straight day. The rebound in the US Dollar (USD), supported by higher US yields and expectations of tighter monetary policy from the Federal Reserve (Fed), continues to weigh on the Japanese Yen (JPY).

Investors increased their bets on a possible Fed rate hike this year following the release of stronger-than-expected US inflation data earlier this week. United States (US) Consumer Price Index (CPI) inflation accelerated to 3.8% YoY in April from 3.3% previously, while the Producer Price Index (PPI) surged 6% on a yearly basis. At the same time, Retail Sales rose 0.5% MoM, confirming the resilience of US consumer spending.

This combination of solid data pushed US Treasury yields higher, with the benchmark 10-year yield reaching its highest level in nearly a year. Deutsche Bank noted that short-term yields also moved higher, with the two-year Treasury yield climbing back above 4%, further supporting the Greenback.

According to the CME FedWatch tool, markets are now pricing nearly a 40% chance of at least one rate hike before year-end, compared with less than 15% a week earlier. This shift continues to support demand for the US Dollar and underpins USD/JPY.

The geopolitical backdrop is also helping the US currency. Persistent tensions in the Middle East, particularly surrounding negotiations between the United States and Iran and risks linked to the Strait of Hormuz, continue to fuel market caution. Meanwhile, the meeting between US President Donald Trump and Chinese President Xi Jinping was perceived as constructive by investors, easing some concerns over trade tensions.

In Japan, the latest data showed that the Producer Price Index rose 4.9% YoY in April, driven by higher energy and import costs. Rising Oil prices continue to weigh on Japan’s economic outlook due to the country’s heavy reliance on energy imports.

MUFG analysts believe that rising global yields and higher Oil prices continue to undermine the Japanese Yen and reduce the effectiveness of previous interventions by the Ministry of Finance (MoF). The bank also noted that Japanese real yields remain too low to provide lasting support for the currency.

Commerzbank, meanwhile, argues that foreign exchange interventions alone will not be sufficient to support the JPY without additional rate hikes from the Bank of Japan (BoJ). The bank recalled that the relative success of the July 2024 interventions coincided with monetary tightening from the Japanese central bank.

Despite USD/JPY extending its advance above the 158.00 level, speculation about a potential intervention from Japanese authorities continues to cap further upside in the pair.

Societe Generale’s Kit Juckes notes that while US yields have risen sharply since the conflict with Iran, the Dollar’s appreciation has been relatively modest because rates have also increased elsewhere. Against this backdrop, the bank’s end-2026 GBP/USD forecast is set below Bloomberg consensus, implying a softer Pound (GBP) versus the US Dollar (USD) over the medium term.

Bank sees weaker Pound into 2026

"The war changed the interest rate outlook, with 2-year yields rising by over 6% since it started."

"That is because rates have risen elsewhere too, and while relative rates have moved in the dollar’s favour, they have only done so modestly."

"Even so, the trend (US 2-year yields rising faster than we are seeing elsewhere) is clear enough."

"The Bloomberg end-2026 DXY, EUR/USD and GBP/USD consensus forecasts are 96.7, 1.20 and 1.35 ."

"Ours are 98.6, 1.16 and 1.32."

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

KOSPI, the South Korean stock benchmark, soared to an all-time high of 8,046.78 on Friday, driven by a rally in the tech sector. AI-related technology and semiconductors led the advance, which later reversed amid massive profit-taking.

Among the worst performers is Samsung, which makes up roughly 40% of the entire index and shed over 8.5%.

The index now stabilizes around 7,500, down around 6.1% on the day.

Source: Trading view

US session

Early in the American session, Wall Street points to a negative performance, with United States (US) futures trading in the red. Still, US stocks' negative momentum seems mostly related to a shift in the market’s perspective on US monetary policy, as speculative interest lifts bets on a rate hike before year-end following hotter-than-anticipated inflation figures released this week.

DBS Group Research’s Radhika Rao notes that India’s latest fuel price hike reflects higher global crude costs and aims to moderate domestic demand and imports. She contrasts a benign April CPI print with a sharp acceleration in wholesale prices, highlighting rising cost-side pressures for businesses and the potential impact of higher petrol and diesel prices on the CPI basket.

Fuel hike and wholesale inflation pressures

"India raised fuel prices on Friday morning, with petrol and diesel prices up around INR 3/litre, which takes petrol prices higher by INR3.14/l up to INR 97.77/l across several cities, while diesel prices climbed by INR 3.11/litre to as high as INR 90.67/l, according to the press release."

"Higher pump prices are likely to aid in moderating demand and consequently the import burden."

"Given the weightage of petrol and diesel in the CPI basket, with a ~3-5% increase likely to add ~15-25bp to the headline."

"In contrast to the benign April CPI report (see note), the wholesale price gauge rose by the fastest pace in three and half years in April, up 8.3% yoy from 3.9% month before."

"This points to rising cost-side pressures faced by businesses, through an increase in input costs, logistics etc."

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