Forex News
- GBP/USD rallies beyond 1% over the last two days to hit a fresh three-week high near 1.3350.
- Dovish comments by Fed officials and lower US Treasury yields have hammered the US Dollar.
- The Pound has drawn support from strong UK economic data this week.
The British Pound (GBP) appreciates against a weak US Dollar (USD) on Friday as risk appetite improves, with global yields pulling back from highs, and investors reprice Federal Reserve’s (Fed) monetary tightening bets. The GBP/USD has rallied more than 1% over the last two days, breaching the top of the last three weeks' range and hitting session highs at 1.3349 so far.
Investors are selling the US Dollar across the board, following comments by Fed officials earlier this week, hinting at a pause at October's Federal Open Market Committee (FOMC) meeting, as the bank needs more time to assess the economic impact of September’s rate hike.
Fed's Warsh fails to clarify the bank's near-term path
The Federal Reserve Chairman, Kevin Warsh, spoke at the International Monetary Fund (IMF) forum in Bangkok earlier on Friday, but did little to clarify the Fed’s next moves. Warsh sounded optimistic regarding the economic outlook and reaffirmed the bank’s commitment to bring inflation to target, but he refused to give any hints about a monetary tightening cycle.
According to DBS analysts, "the USD’s failure to sustain gains following the upside CPI surprise raises questions about the durability of its rally." The bank affirms that "the reversal in Treasury yields and in Fed hike expectations suggests that investors are mindful of growth and earnings risks from further tightening."
UK data feeds hopes of a near-term BoE rate hike
In the UK, data released this week was supportive for the Pound. The monthly Gross Domestic Product (GDP) showed that the economy grew unexpectedly in August, fuelled by a strong performance of the industrial sector, which supports the idea that the Bank of England might raise interest rates in the coming months.
The Bank of England's (BoE) Governor Andrew Bailey, however, failed to confirm those hopes. Bailey said at the International Monetary Fund meeting in Bangkok that it is “too early to form strong views on the strength of 2nd round effects (on inflation)” and that signs of those effects are “subdued”, suggesting limited immediate pressure for aggressive tightening.
His speech was scored at 6.2/10 by FXS Speechtracker, slightly below his historic 6.4/10 baseline. The impact of these comments on the Pound was marginal.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
Usd rally questioned as Fed tightening risks meet growth concerns
"Overall, the USD’s failure to sustain gains following the upside CPI surprise raises questions about the durability of its rally," according to DBS analysts. The bank affirms that "the reversal in Treasury yields and in Fed hike expectations suggests that investors are mindful of growth and earnings risks from further tightening," reinforcing the sense that markets are increasingly focused on the potential economic and corporate fallout of additional policy restraint.
Societe Generale’s Kenneth Broux highlights that USD/BRL has formed a higher low and is staging a short-term bounce toward its 200‑day moving average near 5.14. The bank notes that a sustained break above this level could open a larger move toward the September highs around 5.20/5.24, while the recent low near 4.99 is seen as short‑term support.
Brazilian Real tests key resistance
"USD/BRL carved out a higher low at 4.94, compared with the 4.88 low recorded in May. A short-term bounce has materialized following this test. The pair is now approaching the 200-DMA near 5.14, which could act as an interim hurdle."
"If USD/BRL establishes itself above 5.14, a larger up move cannot be ruled out towards September high of 5.20/5.24. The low registered earlier this week at 4.99 may serve as a short-term support."
"Market friendly candidate Flavio Bolsonaro has led Lula in every major runoff poll released over the past week by 2-6pp, raising expectations of a more fiscally conservative policy mix that could compress risk premia, attract bond inflows and further support BRL."
"BRL rally loses steam ahead of presidential runoff. The BRL is up 2.1% MTD on a total return basis, while MXN has been the main LatAm laggard (-1.6%), as investors increasingly favour markets where politics and carry are moving in the same direction."
"The BRL rally was cut short yesterday as the Senate approved legislation to shorten the workweek without reducing pay, which may benefit Lula in the 25th October runoff vote. The macro data have also tilted in Brazil's favour, with retail sales rebounding 0.8% m/m in August after a 0.8% decline in July."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Nordea strategists note EUR/USD has already hit its H1 2027 target of 1.12 and now expect further US Dollar (USD) strength versus the Euro (EUR). Nordea lower its year-end EUR/USD forecast to 1.10 and projects a test of 1.08 in H1 2027 before a recovery to 1.14 in H2 2027 and 1.20 by end-2028, citing rate differentials, AI-related inflows and European political risks.
Forecast cut as USD stays supported
"Overall, we remain constructive on the USD relative to the EUR over the next six to nine months."
"EUR/USD reached our H1 2027 target of 1.12 faster than expected."
"We therefore lower our year-end EUR/USD forecast to 1.10 from 1.14."
"We expect EUR/USD to test 1.08 in H1 2027 before recovering to 1.14 in H2 2027 and 1.20 by end-2028."
"Our baseline remains a strong US economy and two further Fed hikes, with risks skewed to the upside."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- WTI Oil price clings to gains near $96.00 as markets continue to offer risk premium to oil prices.
- ING says that risk premium to oil prices could erode if flows through Hormuz remain sustained.
- The IEA agrees to release the remaining 100 million barrels of oil from strategic reserves.
West Texas Intermediate (WTI), futures on NYMEX, holds onto weekly gains near $96.00 during the European trading session on Friday. The oil price has gained significantly this week, as financial markets continue to offer risk premium due to prolonged Middle East conflicts.
However, market experts argue that risk premium attached to oil prices could start eroding if flows through the Middle East, with the help of United States (US) military, remain sustained.
Oil flows hold firm through Strait of Hormuz despite security incidents
Analysts at Commerzbank highlight the resilience of shipping activity through the Strait of Hormuz, noting that, “despite the attacks, US Central Command (CENTCOM) said more than 40 vessels transited the strait in the prior 24 hours and oil flow reportedly hit 12 million barrels a day.” This underscores that, even amid heightened security concerns, headline crude supply routes have so far remained largely uninterrupted.
Strategists at ING argue that "the longer this pickup in flows continues, the more likely the market will start giving back some of this risk premium." However, ING stresses that "in order to see a full removal, there needs to be some kind of agreement between the US and Iran," adding that such a deal "would provide the market with more confidence that stronger oil flows from the region will continue."
However, continued restrictions by Iranian military for ships attempting to pass the Hormuz strait keep energy supply fears intact. According to a Reuters report, maritime officials said this week that a container ship and a dry bulk carrier have both sunk near the Hormuz in the past 24 hours after being hit by projectiles in separate incidents.
Meanwhile, the International Energy Agency (IEA) has now agreed to "release the remaining 100 million barrels of oil from strategic reserves," completing the drawdown first announced in response to the Persian Gulf supply shortfall, ING reported.
WTI Technical Analysis
In the daily chart, WTI US Oil trades at $96.11. The contract holds a bullish near-term bias as it extends above the 20-day Exponential Moving Average (EMA) at $92.29, suggesting buyers remain in control after the latest advance. Momentum reinforces this constructive tone, with the Relative Strength Index (14) hovering around 60, indicating firm but not yet overbought conditions.
On the downside, immediate support is seen at the 20-day EMA near $92.29, which underpins the current uptrend and would be the first line of defense on any pullback. As long as WTI holds above this moving average, the technical setup favors dip-buying rather than aggressive selling, with the current price around $96.11 acting as a near-term pivot for directional moves.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
Commerzbank economists Dr. Jörg Krämer, Dr. Vincent Stamer and colleagues argue that Middle East crude exports have nearly returned to pre-war levels thanks to dark transits through the Strait of Hormuz. They expect high risk premia to fade, with Oil futures falling from about USD 104 toward USD 85 by year-end. Diesel and European natural gas prices should ease more slowly, keeping Euro area inflation elevated until mid-2027.
Risk premia and gradual de-escalation
"Oil exports from the Middle East have recovered significantly, thanks in part to the “dark transits” of tankers through the Strait of Hormuz that we had anticipated. Nevertheless, prices for fossil fuels such as crude oil, diesel and natural gas remain high. "
"If oil exports continue their upward trend thanks to dark transits, prices should soon start to fall. However, at USD 104 per barrel on the futures market, oil prices remain high."
"One reason is the persistently elevated level of risk: for several weeks now, the Houthis in Yemen have stepped up their involvement in the conflict, making passage through the Bab al-Mandab Strait at the southern end of the Red Sea even riskier. Iran itself could also intensify its attacks in the Persian Gulf again or target key pipelines in Saudi Arabia"
"This increases the risk premium embedded in oil prices. Over time, however, these risks should subside and oil prices should fall, moving towards USD 85 by year-end."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
ING’s Chris Turner notes that the Dollar is benefiting from a flatter US yield curve as hot inflation data keeps short-dated rates elevated while long-dated Treasuries recover. He argues this backdrop typically favors the Dollar versus activity and emerging market currencies.
Dollar holds firm on curve dynamics
"The big takeaway this week has been the recovery of the long-end of the US Treasury market, even as inflation data continues to come in hot. Here it seems that investors are starting to find value in long-dated Treasuries and are viewing those as a middling hedge against a correction in the AI trade. Were the tech sell-off to gain momentum, that Treasury buying would move to the shorter end of the curve."
"Inflation data is keeping short-dated interest rates supported and has delivered a near 20bp flattening in the 2-10 year Treasury curve this week."
"Typically, an environment where the Fed is applying the brakes while growth prospects are being revised down is good for the dollar against activity and emerging market currencies. It is only when short end rates break lower that the dollar is ready to drop. And we are not there yet."
"Barring another big leg down in AI stocks and risk assets in general, expect the dollar to consolidate near recent highs. We would continue to expect some defensive outperformance of the Swiss franc in this environment."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- The US Dollar Index plunges to session lows near 101.60 on Friday from weekly highs near 103.00.
- The weekly chart shows a bearish engulfing candle in progress, a common indicator of trend reversals.
- FX analysts agree that doubts about AI profitability and overestimated Fed tightening bets might take a toll on the US Dollar in the coming months.
The US Dollar (USD) has depreciated sharply against most of its major peers over the last two days, hammered by a mix of lower US Treasury yields and dovish comments by Federal Reserve (Fed) officials. The US Dollar Index (DXY), which measures the Greenback's value against a basket of six majors, has retreated to the 101.60 area from weekly highs near 103.00, and is set for its first weekly decline in one month.
The weekly chart shows a bearish engulfing candle in progress, which is a common pattern for trend reversals. From a more fundamental perspective, analysts from some of the world’s major commercial banks observe solid reasons to support that view.
Dollar rally questioned as Fed signals and AI risks temper upside
Analysts at MUFG/BTMU observe that Fed Chair Warsh “gave little away today that underlines the potential for surprises ahead under this new Fed regime,” noting that “we will likely get a better understanding of that when numerous working groups report findings, including on AI and inflation.”
The bank notes that “a December rate hike is still very likely, but the pricing of hikes in 2027 looks overdone,” a view also expressed by New York Fed President Williams, “one of the more senior members of the FOMC,” as MUFG/BTMU highlights in a note.
The OCBC puts the focus on the AI boom: “AI has supported US growth, equities, yields and the USD. But that strength cuts both ways. If the investment cycle cools, those same supports could reverse, leaving the dollar vulnerable even in a risk-off environment.” OCBC experts caution that “the USD does not always benefit from risk aversion. When the shock originates in the US, as with the recent AI financing jitters, pressure on US assets can overwhelm the USD’s traditional safe-haven appeal. That matters because AI has become an important pillar of US growth resilience.”
Strong US data has failed to lift the US Dollar
Commerzbank experts note “surprisingly strong US consumer price data on Wednesday were followed yesterday by stronger-than-expected retail sales and producer price figures,” which “adds to the evidence that price pressures are becoming increasingly broad-based.”
The bank, however, observes that “the dollar was unable to hold on to its gains from Wednesday,” and argues that “for the dollar to receive lasting support, the market would need to price in more tightening overall than it did previously. So far, that has not happened. US rate expectations for the end of this year have barely moved in recent days.”
Along the same lines, DBS flags that “overall, the USD’s failure to sustain gains following the upside CPI surprise raises questions about the durability of its rally.” In their view, “the reversal in Treasury yields and in Fed hike expectations suggests that investors are mindful of growth and earnings risks from further tightening,” limiting the scope for a more persistent Dollar bid despite stronger data.
Economic Indicator
Consumer Price Index (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Last release: Wed Oct 14, 2026 12:30
Frequency: Monthly
Actual: 3.7%
Consensus: 3.6%
Previous: 3.4%
Source: US Bureau of Labor Statistics
The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
Economic Indicator
Producer Price Index (YoY)
The Producer Price Index released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).
Read more.Last release: Thu Oct 15, 2026 12:30
Frequency: Monthly
Actual: 6.3%
Consensus: 5.3%
Previous: 5.4%
Source: US Bureau of Labor Statistics
Societe Generale highlights that the Reserve Bank of India has taken proactive steps to support the Indian Rupee, deploying multiple FX-related measures and bond operations. The report notes a risk-off driven reversal in US yields that benefits the Rupee, alongside higher CPI and WPI inflation and a wider trade deficit. The tone is cautiously constructive for INR over the coming days.
RBI actions bolster INR resilience
"The proactive RBI defended the INR by implementing a broad set of FX-support measures this week, including the reintroduction of a dedicated oil import window, tighter restrictions on corporate hedging, limits on uncovered FX transactions, a ban on rebooking cancelled derivatives, and fresh open market operation (OMO) bond sales."
"These steps were complemented by extending FX curbs to GIFT City and broadening the use of risk reserves."
"Risk-off driven sharp reversal in US yields despite strong CPI provides major fillip for the INR."
"On data front, headline CPI accelerated to 5.54% yoy in September from 4.83% in August, while factory gauge WPI jumped to 11.39% yoy from 9.92%."
"Trade deficit widened to $30.2bn in September from $26.86bn in August."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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