Forex News

• The Indian Rupee continues to underperform against the US Dollar on the back strong hawkish Fed bets.
• Oil prices rise further as Saudi Arabia closes its major pipeline.
• India’s retail inflation accelerated to 4.82% YoY in August vs. 4.8% estimates.

The Indian Rupee (INR) extends its previous week’s downfall against the US Dollar (USD) on Tuesday, with the USD/INR rising above 95.90. The pair declined a little over 1% last week due to rising United States (US) Treasury Yields and elevated oil prices.

Indian currency markets were closed on Monday due to Ganesh Chaturthi celebrations. The Indian currency continues its underperformance this week, with 10-year US bond yields rallying further to 5.04%, a level never seen in the past 19 years. US Treasury Yields have rallied on the back of firm expectations that the Federal Reserve (Fed) will hike interest rates in the policy announcement on Wednesday.

Hawkish Fed expectations are prompted by hotter-than-projected US Producer Price Index (PPI) and sticky Consumer Price Index (CPI) reports for August.

Surging US Treasury Yields have also strengthened the US Dollar. At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, is up 0.15% to near 99.62.

While the Fed is almost certain to raise interest rates, investors will pay more attention to the monetary policy statement and Fed Chair Kevin Warsh’s press conference to get fresh cues regarding the interest rate outlook.

Fed seen hiking in September but stopping after one move

Economists at ING explain that they have "changed their view to a 25bp Federal Reserve rate hike in September in the wake of Chair Kevin Warsh’s address at the Jackson Hole symposium," adding that "the data since then has justified that decision." While they acknowledge that "ordinarily the assumption is that if the Fed hikes, they don’t just go once," and that "financial markets are now pricing two and a half further rate hikes after the all-but-assured 16 September move," the ING team argues that "this time around we think that one and done might be the case," with their projections for jobs and inflation suggesting "no need for a series of hikes."

Oil prices remain higher amid escalating energy supply concerns

In the opening session, the MCX Crude Oil contract expiring on September 21 is up 1.8% to near Rs. 9,900. The oil price is close to its multi-month high of Rs. 10,043 posted on Friday.

Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high-oil-price environment.

Analysts at Deutsche Bank highlight that the latest move in the oil price comes “following the precautionary shutdown of a major Saudi pipeline late on Friday following recent attacks, and the postponement of today's planned meeting between Iran and other Gulf states to discuss the creation of a temporary shipping corridor through the Strait of Hormuz.” They note that these developments have reinforced market concerns around regional supply security and key shipping routes.

India’s retail CPI rises at slightly faster-than-expected pace

On Monday, India’s Ministry of Statistics and Programme Implementation reported that the retail CPI grew by 4.82% Year-on-Year (YoY), faster than 4.8% estimates and the previous reading of 4.45%. Still, the CPI data remains inside Reserve Bank of India’s (RBI) tolerance band of 2%-6%.

A faster-than-projected growth in inflationary pressures at the retail level will likely increase expectations of an interest rate hike by the RBI in the near term.

USD/INR Technical Analysis

USD/INR trades sharply higher at around 95.92. The pair holds a bullish near-term bias as it trades above the 20-day exponential moving average (EMA) at 95.30, suggesting dips remain supported while buyers maintain control.

The Relative Strength Index (RSI) at 63.56 leans into bullish territory, hinting that upside momentum is firm but not yet overstretched.

On the downside, immediate support is seen at the 20-day EMA near 95.30, reinforcing a deeper demand zone on any corrective pullback, followed by 95.00. Looking up, the pair could aim to revisit the all-time high near 97.10.

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

ING’s Warren Patterson and Ewa Manthey highlight that Copper is retreating as calls from major technology executives to slow AI development hit tech stocks and dampen expectations for data-centre investment. They add that rising inventories, softer nearby spreads and improving exchange availability signal easing tightness on the LME, though they still see persistent mine-supply constraints supporting prices once current positioning unwinds.

Tech sentiment and LME balance weigh

"In base metals, copper continued to pull back. Calls from leading technology executives to slow AI development hit tech stocks and weighed on copper, raising concerns over the outlook for data-centre investment."

"This added to pressure from signs of improving exchange availability, which eased some of the supply concerns that had driven prices to record highs."

"Rising inventories and softer nearby spreads suggest that the extreme tightness across the LME market is beginning to moderate. A stronger dollar and cautious sentiment ahead of the Fed meeting also weighed on the wider base metals complex."

"In the near term, copper could remain under pressure as stretched positioning unwinds. Persistent mine-supply constraints should continue to support prices."

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

• The US Dollar trades higher against its currency peers ahead of the Fed’s monetary policy announcement.
• The Fed is highly anticipated to hike interest rates on Wednesday.
• Market experts seem to agree on a fresh repricing of the Fed’s interest rate expectations.

The US Dollar (USD) outperforms its major currency peers on Tuesday, following strong United States (US) Treasury Yields on expectations that the Federal Reserve (Fed) will remain on the monetary tightening path even after hiking interest rates at the policy meeting on Wednesday.

At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.16% higher to near 99.62. 10-year US Treasury Yields hit record highs at 5.04%, the highest level seen in the last 19 years.

According to the CME FedWatch tool, the odds of the Fed hiking interest rates by 25 basis points (bps) to 3.75%-4.00% on Wednesday are 92.5%. The tool also shows a 78.65% chance that the Fed will deliver at least two interest rate hikes within this year.

On Wednesday, the Fed is highly anticipated to hike interest rates as the US Producer Price Index (PPI) report for August showed faster-than-expected growth in inflation at the wholesale level, and the US Consumer Price Index (CPI) report for the same month revealed signs of sticky consumer inflation.

Meanwhile, financial market experts have repriced Fed interest rate expectations for the near and medium term, seeing more hikes this year and in 2027 as well on the back of elevated inflationary pressures.

Strategists at BNY said, “While we expect a hike this week, and probably one more this year, we think the path to even higher policy rates is strewn with potential impediments to significantly tighter policy.” In their view, “the nearly 100bp of hikes (equivalent to four hikes of the standard 25bp increment) currently priced in will be realized.”

Analysts at MUFG also observed that the latest repricing in the US rates market has turned notably more hawkish, with investors now anticipating a meaningful policy reversal from the Fed over the coming year. They highlight that “the US rate market now expects the Fed to deliver almost 100bps of hikes in the year ahead fully reversing last year’s rate cuts that totalled 75bps,” underscoring how quickly expectations have swung back toward renewed tightening.

Similarly, analysts at Danske Bank note that the recent repricing of the Fed’s policy path has led them to revise their terminal rate expectations modestly higher. The bank now “maintain[s] our forecast for 25bp increases at both the December and March meetings, taking the Fed Funds rate to 4.25-4.50% towards the end of 2027 (prior: 4.00-4.25%).” Danske Bank highlights that this adjustment reflects a slightly more hawkish trajectory than previously assumed, while still envisaging a gradual path for policy tightening over the coming years.

OCBC strategist Christopher Wong notes USD/JPY has rebounded as higher UST yields, a firmer USD and rising Oil offset support from Bank of Japan (BoJ) tightening expectations. He warns against extrapolating gains ahead of Friday’s BoJ meeting, with markets almost fully pricing another hike. Wong sees USD/JPY supported if yields and Oil stay elevated, but says less hawkish Fed or BoJ guidance could revive Japanese Yen (JPY) strength.

Rebound faces Fed and BoJ event risks

"USD/JPY rebounded as higher UST yields, a firmer USD and another rise in oil offset some of the recent support from BoJ tightening expectations. Higher oil is also an unfavourable terms-of-trade development for Japan."

"Still, we would be cautious about extrapolating the rebound ahead of Friday’s BoJ meeting, with markets almost fully pricing another hike and speculative positioning having shifted net long JPY for the first time since February."

"USD/JPY may still stay supported if UST yields and oil stay elevated, but Fed and BoJ event risks should keep price action two-way. A less hawkish Fed or BoJ guidance pointing to further normalisation would bring the JPY-positive theme back into focus."

"Our earlier technical caution for bullish divergence of MACD played out. Last seen at 154.40 levels. Bearish momentum intact though there are some signs of it fading while RSI rose from oversold conditions."

"We still caution for interim risks of bullish divergence on MACD and RSI. But as bearish crossovers remain intact, we continue to monitor price action and look for rallies to fade into. Resistance at 155 (23.6% fibo retracement of 2026 low to high), 156.70 (38.2% fibo). Support at 153, 152.20 levels (2026 low)."

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

• USD/CHF consolidates below monthly highs at 0.8200 after rallying nearly 1,2% so far in September.
• The US Dollar rallies across the board as investors ramp up bets on Fed monetary tightening.
• Low SNB interest rates are making the CHF the carry traders' favourite funding currency.

The Swiss Franc (CHF) consolidates losses against the US Dollar (USD) on Tuesday, with the USD/CHF trading just below one-and-a-half-month highs at the 0.8200 level. The monetary policy divergence between the US Federal Reserve (Fed) and the Swiss National Bank (SNB) is weighing down the Swissie, which has depreciated nearly 1.2% so far in September despite its traditional safe-haven appeal.

The combination of a strong US Nonfarm Payrolls (NFP) report in August and the hot US inflationary pressures seen last week have boosted market expectations that the Fed will hike interest rates on Wednesday. Futures markets are pricing a 92% chance of a quarter-point rate hike after their September 16 meeting, and another one before the end of the year, according to figures by the CME’s FedWatch Tool. This sentiment has been buoying the US Dollar across the board this week.

The SNB, on the contrary, is widely expected to leave interest rates on hold at the current 0% level for the rest of the year and most likely well into 2027. Consumer inflation accelerated to a 0.8% year-over-year rate in August, up from 0.4% in July, which prompted the SNB President,Martin Schlegel to affirm that the “wind has changed on interest rates,” but markets, so far, have discarded an imminent monetary policy change.

Carry traders set their gaze on the Swissie

Against this backdrop, the low SNB interest rates set the Swiss Franc as one of the favourite funding currencies for carry trade, especially after the Bank of Japan’s (BoJ) hawkish repricing triggered a massive unwinding of Yen short positions.

This practice consists of borrowing a low-yielding currency to buy a higher-yielding one, pocketing the differential, and is having its best run in years, according to Citi data released by Reuters.

Rabobank strategists, however, warn that "the CHF could see a surge in long positions if market anxieties rise,” underscoring the Swiss Franc’s enduring safe haven appeal. "Given that next year will bring the French Presidential election and the prospect of a victory by the far-right, this may be a risk that many market participants may be wary about,” and one that could still trigger renewed demand for the Franc, says Rabobank in a note.

Quek Ser Leang at UOB notes AUD/USD fell more sharply than anticipated to 0.7109, leaving short-term conditions oversold and favouring consolidation between 0.7110 and 0.7155 intraday. The bank maintains a negative 1–3 week bias, stating AUD must close below 0.7100 to open 0.7050, while resistance at 0.7175 limits upside. Earlier, UOB had flagged downside potential toward 0.7120.

Australian Dollar remains under pressure

"24-HOUR VIEW: After our expectation that AUD would decline to 0.7140 did not materialise last Friday, we indicated yesterday that “the underlying tone remains soft, and we continue to expect AUD to test 0.7140.” We also highlighted that “a break below this level is not ruled out, but the major support at 0.7120 is unlikely to come into view.” Our call for AUD to weaken was not wrong, but we did not anticipate the sharp drop that reached a low of 0.7109. The decline appears to be overdone, and AUD is unlikely to weaken much further. Today, AUD is more likely to consolidate between 0.7110 and 0.7155."

"1-3 WEEKS VIEW: We turned negative on AUD last Friday (11 Sep, spot at 0.7160). We highlighted that following the sharp decline on Thursday, “the rapid increase in downward momentum indicates that AUD could decline toward 0.7120.” Yesterday, AUD fell below 0.7120 as it dropped to a low of 0.7109. While further weakness is not ruled out, short-term conditions are oversold, and AUD must close below 0.7100 before a move to 0.7050 can be expected. The likelihood of AUD closing below 0.7100 will remain intact as long as AUD holds below the ‘strong resistance’ at 0.7175 (level previously at 0.7210)"

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

• The British Pound trades mixed after the release of the steady UK labor market report for three months ending July.
• Investors keenly await the UK CPI and the BoE’s policy decision.
• The Fed is almost certain to raise interest rates on Wednesday.

The British Pound (GBP) reflects a mixed performance against its currency peers after the release of the United Kingdom (UK) labor market data for three months ending July.

The Office for National Statistics (ONS) reported that the economy created 67K fresh jobs, lower than 83K in three months ending June. The ILO Unemployment Rate remained steady at 4.9%, while it was expected to increase to 5%.

Average Earnings Excluding Bonuses, a key measure of wage growth, rose steadily by 3.5% Year-on-Year (YoY), as expected. The wage growth measure Including Bonuses also grew in line with estimates of 3.9%, slower than the previous reading of 4.2%, revised higher from 4.1%.

Meanwhile, investors await the UK Consumer Price Index (CPI) data for August, and the Bank of England’s (BoE) interest rate decision, which are scheduled for Wednesday and Thursday, respectively.

The UK CPI report is expected to show that the headline inflation accelerated to 3.1% Year-on-Year (YoY) from 2.9% in July. In the same period, the core CPI – which excludes the volatile components of food, energy, alcohol and tobacco – grew at a faster pace of 2.7% against the previous reading of 2.6%.

BoE seen on hold as softer UK data give room to pause

Strategists at Brown Brothers Harriman note that the Bank of England is “widely expected to keep the policy rate at 3.75% for a sixth straight meeting” at Thursday’s decision. They anticipate “another 6-3 vote,” with Megan Greene, Catherine L Mann and Huw Pill “backing a 25bps hike,” even as the majority opts to stay on hold. In their view, “easing UK wage growth and services inflation give the BoE room to stand pat,” a dynamic that should be underscored by incoming data, as “the UK July labor market data (Tuesday) and August CPI (Wednesday) are expected to reinforce that trend.”

Against the US Dollar, the Pound Sterling is down 0.17% to near 1.3478. The GBP/USD pair trades lower as the US Dollar outperforms ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.

Economists at ING explain that they have "changed our view to a 25bp Federal Reserve rate hike in September in the wake of Chair Kevin Warsh’s address at the Jackson Hole symposium," adding that "the data since then has justified that decision

GBP/USD Technical Analysis

In the daily chart, GBP/USD trades at 1.3477, sitting right on a previously rising trend-line pivot while remaining capped by the 20-day exponential moving average (EMA) at 1.3524 overhead. This keeps the near-term tone mildly bearish, as price trades below its short-term EMA and struggles to sustain the prior uptrend structure, while the Relative Strength Index (RSI) near 43 suggests fading bullish momentum rather than an oversold condition.

On the topside, initial resistance is aligned at the 20-day EMA around 1.3524, and a close above this barrier would be needed to ease the current downside bias and open the way to a deeper recovery. On the downside, the immediate pivot support is clustered around the broken trend-line area at 1.3477, with more substantial structural backing only emerging towards the trendline’s origin near 1.3137, where buyers would be expected to defend the broader bullish structure.

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

(This story was corrected at 11:35 GMT on Tuesday to say in the fifth paragraph that The UK CPI report is expected to show that the headline inflation accelerated to 3.1%, not US CPI)

Standard Chartered’s Chong Hoon Park and Nicholas Chia expect the Bank of Japan to hike its policy rate by 25bps to 1.25% at the 17-18 September meeting. They see the move as pre-emptive, with the economy able to absorb another modest hike, but anticipate a more patient phase of policy normalisation thereafter, given structurally slow growth and fiscal constraints.

Pre-emptive hike then slower pace

"We expect the BoJ to raise the policy rate by 25bps to 1.25% at its 17-18 September meeting, while avoiding an overly hawkish message."

"The economy appears able to absorb another modest hike: Q2 GDP growth was revised up, exports remain robust, investment indicators are resilient, and real wages are rising."

"Inflation risks are also increasing as higher energy prices and earlier JPY weakness pass through the supply chain."

"Meanwhile, consumption remains subdued; much of the recent inflation pressure is imported; JGB yields have risen sharply; and higher interest costs are beginning to constrain Japan’s fiscal position."

"We therefore view a September move as a pre-emptive hike, followed by a more patient phase of policy normalisation."

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

ING economist James Smith argues that recent United Kingdom (UK) jobs data underline a cooler labour market and weaker wage dynamics, reducing the risk of another inflation surge. He notes that private sector wage growth aligns with the Bank of England’s 2% inflation target, and ING’s base case is for the Bank of England (BoE) to keep interest rates on hold into next year despite higher energy prices.

Cooler labour market tempers inflation risks

"All of this goes hand in hand with the weak wage growth we’re seeing. Admittedly, private sector wage growth looks like it has reached a floor of 2.9% – or around 3.3% when so-called compositional effects are stripped out."

"Still, the basic story is unchanged. Wage growth across the private sector is consistent with a medium-term inflation target of 2%, judging by the Bank of England’s own analysis earlier this year."

"In short, the fact that the UK jobs market is far, far cooler than it was when the Ukraine shock hit four years ago, means we’re much less likely to see severe second-round effects on inflation from higher energy prices. This is a point that the Bank of England’s doves appear to be becoming increasingly confident about."

"So while a rate hike can’t be ruled out later this year if energy prices stay high, we expect another 6-3 vote to keep rates on hold this week, and we’re not convinced we’ll see a wholesale hawkish pivot on the committee this time around."

"Today’s jobs report is yet another reminder that the UK economy is far less susceptible to another long-lasting inflation wave. Though a rate hike can't be ruled out if energy prices stay high, our base case is for the Bank of England to keep policy on hold into next year."

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

• EUR/USD remains on its back foot, with monthly lows near 1.1520 under pressure.
• A tepid German ZEW Economic Sentiment Report and bright Eurozone Trade Balance figures have failed to lift the Euro.
• The Dollar remains buoyed as investors brace for the first Fed rate hike in three years.

The Euro (EUR) remains on the defensive against the US Dollar (USD) as investors brace for the first interest rate hike by the US Federal Reserve (Fed) after three years. Mixed Eurozone economic sentiment and trade balance figures have failed to lift the EUR/USD, which trades just above monthly lows near 1.1520, after having depreciated for the last four days

Data released by the ZEW Institute on Thursday revealed that the German Economic Sentiment remained stable in September, with the Index ticking up 0.5 to 34.7, but below market expectations of a larger improvement, to 37. The index that measures the current economic situation has improved to -47.1 from -61.1 in August, beyond the .52.2 expected by the market, although it remains at negative levels.

The report shows cautious optimism about the economic recovery, with fiscal measures and strong export momentum bolstering growth, although it warns about looming risks, namely the persistently high energy prices and the uncertainty caused by hybrid attacks.

At the same time, Eurostat has released July’s Trade Balance figures, which show a EUR 14.2 billion surplus, beating expectations of a EUR 3.7 billion net profit, after a downwardly revised EUR 7.2 billion surplus in June.

Fed hiking bets are boosting the US Dollar

The US Dollar, on the other hand, remains buoyed by rising bets of a Federal Reserve (Fed) quarter-point hike on Wednesday. According to ING Analyst Francesco Pesole, “yesterday, the dollar finally caught up with the tailwinds we’ve highlighted over the past couple of weeks: supported front-end rates, high oil prices, and a soft risk environment.”

Looking ahead, Pesole expects some consolidation in the very near term, suggesting the Dollar “may stay in tighter ranges until the FOMC delivers its verdict tomorrow evening,” and appreciate further later on, as “the broader backdrop keeps the odds in favour of further dollar gains.”