Forex News
ING FX Strategist Francesco Pesole highlights that EUR/USD appears modestly undervalued, with short-term fair value estimated around 1.160–1.1650 based on swap spreads. He maintains a positive bias on EUR/USD but doubts a near-term break above 1.160 without a dovish surprise from the Federal Reserve. For now, he sees strengthening technical support around 1.1500, while Eurozone GDP revisions are expected to be minor.
Fair value signals and key levels
"Our models suggest EUR/USD’s short-term fair value sits in the 1.160-1.1650 area. That’s primarily on the back of the c.10bp tightening in two-year swap rate spreads, which retain a significantly higher beta than other drivers."
"That supports our positive bias on EUR/USD, even though we aren’t convinced a break above 1.160 is on the cards in the coming days unless communication from the Fed starts to surprise on the dovish side. For now, EUR/USD bulls like us may be content with strengthening technical support around 1.1500."
"In the eurozone, the second release of 2Q GDP will be released today, with no expectations for meaningful changes to the advance 0.4% quarter-on-quarter print. "
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Deutsche Bank strategists report that United States (US) equities, led by the S&P 500, have reached new record highs as softer inflation data and lower Oil prices reinforce expectations that the Fed can stay on hold. Rate-sensitive sectors and major tech indices, including the NASDAQ and semiconductor stocks, have participated in the rally, with breadth improving via equal-weighted benchmarks.
US equities extend record-setting rally
"In contrast, Hong Kong's Hang Seng (-0.93%) and Australia's S&P/ASX 200 (-1.01%) are under pressure, while mainland Chinese benchmarks are seeing modest declines, with the CSI 300 (-0.12%) and Shanghai Composite (-0.21%) edging lower."
"And in turn, all this dovish newsflow benefited US equities, with the S&P 500 (+0.65%) at another record."
"This was aided by a recovery for the Magnificent 7 (+1.20%) as well as tech stocks more broadly as the NASDAQ (+0.81%) and the Philly semiconductor index (+0.46%) also advanced. But it was a positive day more broadly with the equal-weighted S&P 500 (+0.74%) outperforming and hitting a new high as well. "
"Earlier in Europe, markets hadn’t been quite as resilient, with the STOXX 600 (-0.04%) edging lower for a second consecutive session."
"In Asia this morning, the KOSPI (+1.99%) continues its recent comeback, extending its rally to a fifth straight session, with the Nikkei (+0.56%) also firm."
"S&P 500 futures are flat with the Nasdaq equivalent -0.15%. European futures are back up a quarter to half a percent."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/CAD declines to near 1.3910 in Friday’s early European session.
- US producer prices were unchanged in July, below the consensus.
- Traders added to bets favoring no change in rates at the Fed's September meeting.
The USD/CAD pair attracts some sellers to around 1.3910 during the early European trading hours on Friday. The US Dollar (USD) weakens against the Canadian Dollar (CAD) as cooled US inflation data have tempered aggressive Federal Reserve (Fed) rate-hike bets. The US July Retail Sales report will be in the spotlight later on Friday.
The Fed is expected to leave interest rates unchanged in September after data on Thursday showed inflation cooled in July. The Bureau of Labor Statistics showed on Thursday that the US Producer Price Index (PPI) was unchanged in July, following a revised 0.1% decline in June. This figure came in below the market consensus of 0.2%.
Meanwhile, the core PPI, which excludes food and energy, increased 0.2% MoM in July, softer than a 0.3% gain expected. On an annual basis, the headline PPI climbed 4.7% YoY in July, while the core PPI rose 4.2% YoY during the same period.
Traders are now pricing a 38% odds of a rate hike next month, according to the CME FedWatch tool, and remain convinced the US central bank will need to raise rates by the end of 2026 to bring down inflation that has been running above the 2% target for more than five years.
New York Fed President John C. Williams said that he expects inflation to continue to ease as the effects of last year's tariff increases and the Middle East war abate, allowing the central bank to keep its policy rate unchanged.
Ongoing tensions in the Middle East and uncertainty surrounding reopening the Strait of Hormuz could boost crude oil prices and underpin the commodity-linked Loonie. It is worth noting that Canada is a major oil-exporting country, and high crude oil prices generally have a positive impact on the CAD.
Loonie seen finding support as Fed stays sidelined
Strategists at National Bank of Canada suggest that the Canadian Dollar’s recent softness may begin to fade, arguing that, “aided by a sidelined Fed, the underwhelming loonie may finally find its footing.” They point to their latest Forex analysis as reinforcing the view that a steady Fed backdrop could prove increasingly supportive for the Loonie over the coming quarters.
Goolsbee’s softer inflation tone nudges Dollar expectations but keeps Fed bias hawkish
Fed’s Goolsbee delivers a moderately cautious tone, with the FXS Speechtracker score at 4.6/10, notably weaker relative to the historical average of 6.8/10. The emphasis on “a little bit better” inflation readings and the hope that tariff and oil shocks prove one-off suggests growing confidence that price pressures are easing, yet still framed as conditional and data-dependent. The remark that the US economy is “steady” reinforces a narrative of gradual progress toward the 2% target rather than a decisive dovish pivot.
The FXS Fed Sentiment Index fell by 2.36 points to 134.61, signaling a modest pullback in perceived hawkishness following the interview. Despite the decline, the index remains firmly above the 100 neutral line, indicating that Fed policy is still viewed as hawkish overall, even as Goolsbee’s softer tone trims the edge of that stance.
Technical Analysis: USD/CAD
In the daily chart, USD/CAD maintains a bearish near-term bias as it holds beneath the 100-day moving average (MA) and the Bollinger Bands’ 20-period middle band. Price is slipping toward the lower Bollinger band support, while the Relative Strength Index (14) at 31.96 hovers just above oversold territory, hinting that downside momentum remains in control but could be nearing exhaustion.
On the topside, immediate resistance is seen at the 100-day MA at 1.3920, followed by the Bollinger middle band at 1.4025, with the upper band around 1.4162 acting as a stronger cap if a corrective bounce extends. On the downside, the lower Bollinger band at 1.3885 is the first notable support zone, and a sustained break below this level would reinforce the prevailing bearish structure on the daily timeframe.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- NZD/USD appreciates as traders firmly expect the RBNZ to hike interest rates next month.
- Softer July manufacturing data raises questions about the extent of future policy tightening.
- CME FedWatch shows September Fed rate hike probability dropping from 40% to 34.8%.
NZD/USD gains ground after four days of losses, trading around 0.5870 during the early European hours on Friday. The pair appreciates as the New Zealand Dollar (NZD) receives support from traders continuing to price in a Reserve Bank of New Zealand (RBNZ) rate hike next month. The RBNZ has repeatedly stressed the need to withdraw some of its policy support, keeping market expectations for another rate increase firmly in place.
However, soft economic data released this week has raised fresh questions regarding the extent to which the RBNZ can continue tightening its monetary policy. For instance, the Business NZ Performance of Manufacturing Index fell to 54.3 in July from an upwardly revised 60.1 in June. While this still marks the 21st consecutive month of expansion and remains well above the long-term average of 52.5, the slowdown highlights emerging uncertainties for the economy.
NZD inflation expectations seen reinforcing RBNZ credibility
Brown Brothers Harriman’s Elias Haddad highlights that the latest RBNZ survey shows inflation expectations “remain close to the RBNZ 2% target midpoint for inflation, underscoring the bank’s credibility.” He notes that this anchoring of expectations around the midpoint is an important signal for policymakers as they assess the outlook for the Kiwi and the appropriate stance of RBNZ policy.
The US Dollar (USD) declines as market attention is now turning toward the upcoming United States (US) July Retail Sales data scheduled for release later in the day. Meanwhile, the Greenback faces downward pressure following a softer-than-expected US inflation report that has weighed on investor sentiment.
The Bureau of Labor Statistics reported that US wholesale costs for goods and services were flat in July. This came in below the anticipated 0.2% growth and followed a revised 0.1% decline in June. Excluding volatile food and energy components, the core Producer Price Index (PPI) rose 0.2%, slightly under market consensus expectations of 0.3%. On an annual basis, headline PPI climbed 4.7% year-over-year in July, while core PPI increased by 4.2% over the same period.
These cooling inflation metrics have notably shifted expectations regarding Federal Reserve monetary policy. According to the CME FedWatch Tool, markets are now pricing in a 34.8% probability of a US rate hike at the upcoming September meeting, down from 40% immediately following the PPI data release.
Technical Analysis: NZD/USD rises amid bullish momentum
In the daily chart, NZD/USD trades at 0.5870. The pair holds above both the 50-day exponential moving average (EMA) at 0.5823 and the 9-day EMA at 0.5865, hinting at a constructive near-term bias while it consolidates just over the shorter average. The Relative Strength Index (14) at 56.6 stays in positive territory without being overbought, suggesting bullish momentum is present but not stretched, even as the latest Fed Sentiment Index reading around 134.6 reflects softer US policy expectations that tend to favor the kiwi.
On the topside, initial resistance appears at 0.5995, ahead of a higher barrier at 0.6094 that marks a more significant cap for any continuation of the recovery. On the downside, immediate support is provided by the 9-day EMA at 0.5865, followed by the 50-day EMA at 0.5823; a deeper pullback would expose the next structural floors at 0.5580 and 0.5486.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- The British Pound ticks lower against the Japanese Yen as the BoJ is expected to remain on a monetary tightening path.
- Investors are confident that the BoJ will raise interest rates at the September meeting.
- Financial markets await the UK employment and CPI data.
The British Pound (GBP) faces mild selling pressure against the Japanese Yen (JPY) during the European trading session on Friday. The GBP/JPY pair edges down as the Japanese currency outperforms its peers amid firm expectations that the Bank of Japan (BoJ) will raise interest rates in the September policy meeting.
According to a report from Reuters, three sources familiar with the matter said that the BoJ IS set to raise interest rates as soon as September and is likely to hike more aggressively thereafter than the current pace of roughly twice a year.
The BoJ Summary of Opinions (BoJ) of the July meeting also showed that a majority of board members supported an upward monetary policy path after leaving interest rates unchanged at 1%.
Meanwhile, investors seek fresh remarks from Japan’s Ministry of Finance (MoF) regarding whether there would be more United State (US)-Japan joint intervention to counter excessive volatility in the Japanese currency. In late July, the US-Japan jointly intervened to prop up the Yen.
On the British currency front, financial markets shift their focus to the United Kingdom (UK) employment data for three months ending June and the Consumer Price Index (CPI) data for July, which will be released next week.
Investors will pay close attention to both data sets to get fresh cues about the Bank of England’s (BoE) monetary policy outlook.
Currently, financial markets are not anticipating any BoE interest rate hike in the near term.
BoE seen holding Bank Rate despite firmer UK growth
Analysts at Societe Generale argue that the latest data on UK activity is unlikely to shift the monetary policy outlook. They note that "even though GDP was slightly stronger than the BoE forecast, we don’t think it changes their calculus," as underlying dynamics remain consistent with a gradual cooling in the economy. In their view, "slack continues to build in the labour market, putting downward pressure on wage growth," and both Societe Generale and the BoE "believe the second half of the year is likely to experience softer growth that should limit firms’ pricing power to pass on their higher costs." Against this backdrop, the bank expects policy to stay on hold, stating that "if energy prices remain as they are, we believe the BoE will keep Bank Rate at 3.75% throughout 2026."
Economic Indicator
Consumer Price Index (YoY)
The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.
Read more.Next release: Wed Aug 19, 2026 06:00
Frequency: Monthly
Consensus: -
Previous: 2.6%
Source: Office for National Statistics
The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.
OCBC’s Sim Moh Siong and Christopher Wong note that September Bank of Japan (BoJ) hike expectations have risen sharply, but the Japanese Yen (JPY) has reacted only modestly. They argue a sustained JPY recovery likely needs clearer commitment to faster policy normalisation, with intervention risks capping USD/JPY near 160. They also highlight alignment between BoJ and government on addressing inflation and supporting JPY-buying intervention.
BoJ hikes, intervention and JPY recovery
"Bloomberg reported that the Takaichi administration supports an early BoJ rate hike, helping lift market-implied odds of a September hike to 75%, from 60% a week ago."
"This points to growing alignment between the BoJ, which remains concerned about inflationary pressures from a weak JPY, and the government, which is seeking to enhance the effectiveness of JPY-buying intervention."
"Despite the shift in expectations, the JPY's response has been muted. Should the BoJ deliver another rate hike in September, it would mark its third increase in nine months and the fastest pace of policy tightening since the collapse of Japan's asset bubble in 1989."
"However, it remains unclear how much appetite the government has for additional rate hikes beyond September or October."
"A more meaningful and sustained JPY recovery will likely require a stronger signal from the BoJ that policy normalisation can proceed at a faster pace. For now, intervention risks should help cap USD/JPY near 160, while the CHF remains the preferred funding currency for carry trades."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Here is what you need to know on Friday, August 14:
The US Dollar (USD) struggles to stay resilient against its rivals on Thursday but manages to limit its losses as investors reassess the Federal Reserve's (Fed) policy outlook, while evaluating the developments in the Middle East. The European economic calendar will feature second-quarter Gross Domestic Product (GDP) growth data. In the second half of the day, July Retail Sales and the University of Michigan's preliminary Consumer Sentiment Index data from the United States (US) will be watched closely by market participants.
The data from the US showed on Thursday that annual producer inflation, as measured by the change in the Producer Price Index (PPI) softened to 4.7% in July from 5.5% in June. This print came in below the market expectation of 4.9%. According to the CME FedWatch Tool, the odds of a 25 basis points Fed rate hike in September currently stands about 33%, compared to nearly 50% a week ago. In turn, the USD Index stays in negative territory below 100.00 in the European session on Friday.
Fed hawkish rhetoric persists as August inflation data looms large
Analysts at Commerzbank argue that the upcoming US data will be pivotal for policy, noting that "the August inflation figures, which will be released shortly before the next Fed meeting, are now likely to be decisive." Against this backdrop, they highlight that Cleveland Fed President Beth Hammack is "working hard to cement her status as a hawk." Hammack "does not believe that inflation will subside on its own" and insists "the Fed must therefore back up its words with action." Moreover, Commerzbank underscores that, in her view, "a single interest rate hike would not be enough," reinforcing the message that parts of the Fed remain firmly committed to a tougher stance on inflation despite recent softer readings.
Meanwhile, US Treasury Secretary Scott Bessent noted on Thursday that Washington is going to apply measures that have "never been seen" on Iran, and US Secretary of Defense Pete Hegseth said that the US can sustain its blockade against Iran “indefinitely.” Following Thursday's choppyy action, crude Oil prices stretch higher early Friday, rising about 1% near $81.30.
Citing three sources familiar with the matter, Reuters reported on Friday that the Bank of Japan (BoJ) is set to raise interest rates as soon as September and is likely to hike more aggressively thereafter from the current pace of roughly twice a year. USD/JPY edges lower in the European morning and trades below 159.30.
Yen reaction muted even as BoJ tightening pace reaches historic clip
Analysts at OCBC highlight that, “despite the shift in expectations, the JPY's response has been muted,” even as markets increasingly price in another Bank of Japan move next month. They note that if the BoJ “deliver[s] another rate hike in September, it would mark its third increase in nine months and the fastest pace of policy tightening since the collapse of Japan's asset bubble in 1989.” However, OCBC cautions that “it remains unclear how much appetite the government has for additional rate hikes beyond September or October,” leaving investors uncertain about how far and how fast Japan’s policy normalisation can ultimately run.
Despite shifting expectations about a Fed rate increase in September, the uncertainty surrounding the situation in the Middle East made it difficult for Gold (XAU/USD) to build on its weekly gains. After closing in negative territory on Thursday, XAU/USD stays on the back foot and trades below $4,350 in the European session on Friday, down about 0.5% on the day.
After falling toward 1.1500 on Thursday, EUR/USD staged a rebound to close the day virtually unchanged. The pair holds its ground and trades marginally higher on the day, slightly below 1.1550, in the European morning. The Eurozone economy is foreacst to expand at an annual rate of 1% in the second quarter.
GBP/USD corrects higher and fluctuates at around 1.3500 early Friday, following two consecutive days of small losses.
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.
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