Forex News
BNY’s Geoff Yu reports that Australia’s Melbourne Institute inflation gauge fell again in June, with both headline and trimmed mean measures easing. Yu notes that this points to more established disinflation and suggests the Reserve Bank of Australia may need to move away from its neutral stance, as current market pricing for further tightening looks vulnerable if softer inflation persists.
Disinflation undermines tightening bets
"Australia’s Melbourne Institute inflation gauge fell 0.4% m/m in June, led by lower fuel prices."
"The drop follows a 0.3% decline in May, marking a second consecutive month of price weakness."
"The y/y rate slowed to 3.9% from 4.4%, while the trimmed mean measure fell 0.5% m/m after dropping 0.1% previously, taking its y/y pace down to 2.8% from 3.6%."
"The snapshot points to broader easing in both headline and underlying price pressure, suggesting disinflation is becoming more established."
"That could force the RBA to shift away from its neutral stance, with market pricing of 35bp of tightening by year-end now looking increasingly vulnerable if softer inflation momentum persists."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Societe Generale strategists Kit Juckes and Olivier Korber argue that Dollar strength remains underpinned by robust US growth, sticky inflation and a favourable terms of trade shock versus Europe and Asia. They note the Dollar has already risen against most majors and expect USD strength to persist through the second half of 2026, despite a recent pause.
King Dollar narrative remains intact
"Our 2026 FX Outlook ‘King Dollar will return’ had a cover picture of ‘Growth’ fighting ‘The Fed’ for a chest full of dollars."
"The US economy was already out-performing European and Asian competition, but higher oil prices brought with them a terms of trade shock – positive for the US, negative for Europe and Asia."
"As a result, the mood has changed and the dollar has risen against two thirds of the other major currencies, and all but two of the G10 ones (resource-rich AUD and NOK)."
"We expect USD strength to persist through the second half of the year."
"Of the main drivers of US growth (oil, AI capex and fiscal support), only the oil price is retreating."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
ING’s Chris Turner says EUR/USD is consolidating above 1.1400 as markets reassess European Central Bank (ECB) and Fed paths, with a September ECB hike priced below 50% probability. He expects ECB speakers to stress lingering inflation risks, sees Dollar strength on the Fed story, and looks for EUR/USD to stay offered in the 1.13/1.14 area with resistance at 1.1475.
ECB speakers and capped EUR/USD topside
"EUR/USD is consolidating above 1.1400 as the market considers the next move for central bank policy expectations and keeps one eye on geopolitics and equity market sentiment. "
"A September rate hike from the European Central Bank is now priced with less than a 50% probability, but it is too early for the ECB to sound the 'all-clear' on inflation, given the risk that core inflation could still edge higher over the coming months."
"Expect that message to come through from ECB speakers this week, including heavy hitters such as Isabel Schnabel and Philip Lane."
"As above, we can see the dollar edging a little higher this week on the Fed story and would assume that EUR/USD resistance at 1.1475 now limits the topside."
"We have a bias that EUR/USD can stay offered in the 1.13/14 area until it becomes much clearer that the Fed does need to hike rates after all. That is the house view, but it may not become clearer until the end of the quarter."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- USD/JPY bounces up to 162.30, drawing closer to 40-year highs at 162.80.
- A broad-based wave of US Dollar strength is driving FX markets on Monday.
- Analysts at MUFG warn that the market might be underpricing the BoJ's commitment to normalize its monetary policy.
The Japanese Yen (JPY) has resumed its broader downtrend against the US Dollar (USD) on Monday following a mild relief last week. The USD/JPY has appreciated nearly 0.6% on the day so far, hitting session highs at around 161.30, with the 40-year high of 162.84 coming closer and risks of Tokyo intervention increasing exponentially.
US Dollar strength is driving markets on Monday as investors come to terms with the likelihood that the Federal Reserve will hike interest rates this year, despite last week’s Nonfarm Payrolls disappointment.
Beyond that, comments by Iranian authorities reiterating their willingness to control the Strait of Hormuz and to collect fees from vessels crossing it have raised concerns about friction with the US, which has previously said this would be unacceptable.
Japanese authorities, in the meantime, are showing unusual mutism, leaving investors suspicious of a change in tactics. Market sources, including Reuters, suggest that Japanese authorities might have opted to step in without prior warnings to squeeze speculators and optimise the impact of their actions.
Looking further, MUFG’s Lee Hardman suggests that the market is underpricing the hawkish Bank of Japan’s stance, at a change in fundamental scenario in favour of the battered JPY: "The ongoing steepening of the Japanese yield curve stands in contrast to flatter curves in the US, UK and Germany. The combination of the weaker yen and rising long-term JGB yields reflects some renewed fiscal concerns in Japan, and concerns that the BoJ remains behind the curve in tightening monetary policy."
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
HSBC strategists argue that the USD/JPY pair is trading near its highest level in around 40 years and may have shifted into a new, higher range. They expect further US Dollar (USD) strength versus Japanese Yen (JPY) through mid-2027, assuming wide US-Japan rate differentials persist and the Ministry of Finance only intervenes selectively to curb excessive JPY weakness.
USD/JPY seen in higher trading band
"We changed our broad USD view after the 17 June FOMC meeting and now expect the US Dollar Index (DXY) to trade in a new and higher range. In line with this, we also anticipate further USD strength versus JPY through mid-2027."
"Our view assumes the Bank of Japan (BoJ) will avoid rapid, hawkish rate hikes, keeping nominal and real US-Japan rate differentials wide. We also expect fiscal concerns to persist as authorities use fiscal policy to curb cost of living pressures, boost investment and strengthen defence."
"Finally, we think the Ministry of Finance (MoF) will continue resisting unfettered JPY depreciation. A weaker JPY remains unpopular with the Japanese public and raises the risk of renewed “triple sell” episodes across JPY, equities and bonds."
"We see several plausible reasons for this slightly higher bar for intervention. The short-term “fair” value of USD/JPY, based on its correlations with underlying variables including the broad USD trend, has likely shifted higher alongside the recent rise in the DXY."
"Lower oil prices also reduce the urgency to curb imported inflation compared to March-May. In addition, the MoF also typically aims to surprise the market, and past episodes suggest subsequent intervention waves can occur at incrementally higher levels (e.g. 1998, 2022 and 2024)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Oil prices edge lower as fears of a global supply glut return to the forefront.
- OPEC+ output hikes and normalizing traffic through the Strait of Hormuz weigh on market sentiment.
- Analysts see supply fundamentals keeping pressure on Crude prices.
West Texas Intermediate (WTI) US Oil trades around $68.30 at the time of writing on Monday, down 0.64% on the day, as investors continue to assess the global supply outlook following the latest production decisions by the Organization of the Petroleum Exporting Countries and its allies (OPEC+). Despite posting two consecutive daily gains last week, Crude Oil prices remain close to multi-month lows as fears of a global supply glut gradually return.
Markets are digesting OPEC+'s decision to increase output by 188K barrels per day from August, with Saudi Arabia and Russia leading the production increase. The additional supply is viewed as a sign of confidence in regional stability as shipping traffic through the Strait of Hormuz has largely normalized after recent disruptions.
However, lingering geopolitical risks in the Middle East continue to limit downside pressure. Although tanker traffic has broadly returned to normal, market participants remain alert to any renewed escalation that could disrupt this strategic waterway, which handles nearly one-fifth of global Oil shipments.
Meanwhile, Iran has reportedly entered discussions with several Japanese companies to resume Crude Oil exports under a temporary United States (US) sanctions waiver. According to Reuters, the 60-day exemption, granted as part of ongoing negotiations between Tehran and Washington, expires on August 21, while potential buyers are said to be seeking stronger guarantees regarding shipping security before proceeding.
Major banks remain broadly cautious on the Oil market outlook. Analysts at Commerzbank believe the interim agreement between the United States (US) and Iran, combined with recovering exports and additional OPEC+ production increases, reinforces the risk of a global supply surplus. Rabobank also notes that actual export capacity will continue to depend on shipping security in the Persian Gulf, while warning that geopolitical tensions could gradually fragment the global Oil market.
Other institutions share a similar view. Citi expects Brent Crude to fall toward $60 by year-end, compared to $71.80 at the time of press, as market fundamentals regain control following the easing of disruptions in the Strait of Hormuz. Goldman Sachs also believes the Oil market has entered a new phase in which prices may continue to trend gradually lower despite temporary rebounds driven by geopolitical headlines.
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.
- EUR/GBP drifts back from 0.8575 highs and approaches one-year lows at 0.8546.
- A string of fairly positive Eurozone releases has failed to support the Euro.
- The British Pound has been unaffected by the weak UK construction activity figures.
The Euro (EUR) remains depressed near one-year lows against the British Pound (GBP) on Monday, hitting session lows below 0.8560 after pulling back from Friday’s highs at 0.8575. A string of rather positive Eurozone figures has failed to provide any significant support, while the Pound remains moderately bid despite weak UK construction figures.
Eurozone Retail Sales have picked up 0.2% in May, slightly below the 0.3% market consensus but above the 0.3% contraction seen in April. Year-over-year (Y-o-Y), consumption accelerated to 1.6%, as expected, up from April’s 1% reading.
Before that, German Factory Orders figures beat expectations with a 1.9% increase in May, well above the 1.2% increase expected, partially reversing the 3.2% contraction seen in April. The Sentix Investors’ Confidence Index for July improved to -3.1, from -13.4 in June, reaching its best reading in the last four months.
In the UK, May’s S&P Global Construction Purchasing Managers Index (PMI) figures revealed a weaker-than-expected improvement in the sector’s business activity. The Index improved to 38.4 from 38.2 in the previous month, yet remained well below the 40.0 reading anticipated by market consensus.
The Pound remains fairly steady amid the UK’s political uncertainty as the market braces for the seventh prime minister in the last 10 years. Andy Burnham, the Mayor of Manchester and the best-positioned to replace the previous PM, Keith Starmer, has vowed to respect the fiscal rules, which is keeping Pound’s bears in check for now.
Economic Indicator
Factory Orders s.a. (MoM)
The Factory orders released by the Deutsche Bundesbank is an indicator that includes shipments, inventories, and new and unfilled orders. An increase in the factory order total may indicate an expansion in the German economy and could be an inflationary factor. It is worth noting that the German Factory barely influences, either positively or negatively, the total Eurozone GDP. A high reading is positive (or bullish) for the EUR, while a low reading is negative.
Read more.Last release: Mon Jul 06, 2026 06:00
Frequency: Monthly
Actual: 1.9%
Consensus: 1.2%
Previous: -3.8%
Source: Federal Statistics Office of Germany
Economic Indicator
Retail Sales (MoM)
The Retail Sales data, released by Eurostat on a monthly basis, measures the volume of retail sales in the Eurozone. It shows the performance of the retail sector in the short term, which accounts for around 5% of the total value added of the Eurozone economies. Retail Sales data is widely followed as an indicator of consumer spending. Percent changes reflect the rate of changes in such sales, with the MoM reading comparing sales volumes in the reference month with the prior month. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish
Read more.Last release: Mon Jul 06, 2026 09:00
Frequency: Monthly
Actual: 0.2%
Consensus: 0.3%
Previous: -0.4%
Source: Eurostat
Rabobank's Senior FX Strategist Jane Foley notes that EUR/USD recently fell below its prior 1‑month forecast of 1.15, prompting a reassessment of projections. RaboResearch has shifted its 1‑ to 12‑month forecast table moderately in favour of the Dollar but says its broader view is largely unchanged and expects EUR/USD to trade in choppy ranges around 1.14–1.15 in H2 and return to 1.16 over 12 months.
Rangebound profile with mild USD tilt
"Last month EUR/USD pushed below our previous 1 month forecast of 1.15, which forced us to re-evaluate our outlook."
"While we have adjusted our 1 month to 12 month forecast table this week moderately in favour of the USD, our overall outlook is not much changed from the end of last year."
"We maintain the view that EUR/USD will struggle to regain the directional uptrend that was in evidence for much of last year and that choppy ranges are more likely for the currency pair in the coming months."
"That said, in contrast to current market pricing, RaboResearch expects the Fed to hold rates steady through to the end of this year."
"We expect a choppy range centred around 1.14 to 1.15 in H2 this year and a return to 1.16 in 12 months as hawkish Fed views in the market abate."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Gold price fails to extend its three-day winning streak as the US Dollar rebounds.
- The Fed is highly anticipated to deliver at least one interest rate hike this year.
- Fed Chair Warsh said at the ECB forum that inflation remains too high.
Gold price (XAU/USD) is down 0.8% to near $4,140 during the European trading session on Monday. The precious metal faces selling pressure as the three-day rally hits a pause after failing to extend above $4,202.
Bullions come under pressure as the US Dollar (USD) bounces back after a negative week. At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.22% higher to near 101.10.
Technically, a higher US Dollar makes the Gold price an unfavorable risk-reward bet for investors.
Last week, the US Dollar fell sharply after traders slightly trimmed the Federal Reserve’s (Fed) hawkish interest rate expectations, following the release of the United States (US) Nonfarm Payrolls (NFP) data for June. The US NFP report showed that the economy created 57K fresh jobs, significantly lower than estimates of 110K.
According to the CME FedWatch tool, the odds of the Fed delivering at least one interest rate hike by the end of September are 53.2%, down from 59.4% seen a week ago.
However, traders are still increasingly confident that there will be an interest rate hike by the Fed this year.
Higher interest rates by the Fed diminish the appeal of non-yielding assets, such as Gold.
Also, the latest remarks from Fed Chairman Kevin Warsh at the European Central Bank (ECB) Forum in Sintra show that officials are more concerned about inflation than the labor market. Warsh said at the Forum that inflation remains “too high”, and stressed to bring price stability.
Gold technical analysis
XAU/USD trades lower at around $4,143.46, maintaining a bearish near-term bias as it holds beneath both the 20-day Exponential Moving Average (EMA) at roughly $4,171 and the 50-day EMA near $4,344. The dual cluster of overhead EMAs suggests rallies are likely to be capped while price remains lodged below these trend gauges, with the Relative Strength Index (RSI) hovering just under the 50 line and hinting at subdued bullish momentum during any corrective bounces.
On the topside, initial resistance emerges at the 20-day EMA around $4,171, with a stronger barrier at the 50-day EMA near $4,344, where sellers could look to reassert control if the metal extends a recovery. On the downside, the Gold price could resume its downside journey if it fails to hold the June low of $3,941.76. A break below $3,941.76 would expose the Gold price to $3,900, followed by the September 25 low near $3,722.
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Societe Generale notes that Sterling has been the strongest G10 currency since the Makerfield by-election, helped by a still-sizeable but reduced speculative short base. The bank highlights further room for gains, especially on EUR/GBP and GBP/JPY crosses, supported by M&A flows in GBP/USD and a recent upgrade of UK assets to overweight by a US bank, alongside Societe Generale’s own overweight stance on UK stocks.
Sterling outperforms with room to run
"In the UK, notwithstanding concerns over the Labour party tacking left under Andy Burnham, sterling is the best performer in G10 by a distance (1%) since the by-election in Makerfield on 18 June."
"The short speculative base of 35.5% of OI (as of late June) has been trimmed back but in theory leaves further room for the currency to catch up, perhaps more so on cross basis (EUR/GBP, GBP/JPY?) than outright vs the dollar."
"There was further M&A support for GBP/USD over the weekend after Castlelake submitted a cash bid of £5.2bn to purchase EasyJet."
"We took note on Friday of the bullish note and portfolio ratings upgrade for sterling assets from market-weight to overweight by a US bank. Our own Asset Allocation team is overweight UK stocks based on superior dividend returns."
"The Labour leadership contest kicks off on Thursday and nominations close on 16 July. Without a challenger, Andy Burnham would be formally appointed PM on 20 July."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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