Forex News

Nordea’s Jan von Gerich and Tuuli Koivu note that the European Central Bank (ECB) raised rates by 25bp and signalled readiness to tighten further as inflation stays above target. They highlight that core inflation is projected above 2% through 2028, supporting expectations for multiple additional hikes and a 3% deposit rate by October, despite downside risks to growth from the war in the Middle East.

ECB projections back more rate hikes

"The ECB hiked rates by 25bp and stands ready to do more, as the inflation outlook warrants. The above-target core inflation forecast still in 2028 supports our call for another rate hike as early as the July meeting and a total of four hikes."

"Despite downward revisions to growth, the ECB staff has not lost faith in the euro-area economy, and sees growth only modestly lower this year and next compared to March, while the core inflation profile was revised higher across the forecast horizon, underlying the need for further hikes. A core inflation forecast of 2.2% still in 2028 was based on market expectations of around three rate hikes in total, suggesting rates may have to be raised more than three times."

"Inflation projections were revised up for both 2026 and 2027 by a notable margin. Core inflation, now projected at 2.5% this year and 2.5% in 2027 signals persistent above-target price pressures and supports our view that further rate hikes are likely in the coming meetings."

"We continue to think the next 25bp hike will take place at the July meeting, though uncertainty remains large. In total, we expect a total of three further 25bp rate increases, which would lead to a 3% deposit rate at the October meeting."

"The immediate market reaction was relatively limited, and current financial market pricing suggests clear uncertainty over whether the next hike would take place already in July, but incoming data and news from the Middle East can certainly lead to more notable swings in expectations also going forward. We continue to see upside potential for euro-area rates."

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

BNY’s Bob Savage highlights that Oil initially spiked on renewed U.S.–Iran tensions before easing, but analysts remain concerned about supply risks and the durability of any peace deal. Rystad Energy warns of sharply higher prices, while low unfinished stocks and ongoing inventory drawdowns in the U.S. underline tightness. WTI forward prices remain below May highs but above March–April lows.

Geopolitics and tight stocks support Oil

"The overnight reaction of oil markets to the escalation of the U.S.–Iran conflict leaves analysts worried about oil supply and the durability of the peace deal."

"Rystad Energy, for example, warns of $150/bbl oil."

"Another concern for U.S. oil products and costs is that unfinished oil stocks are at 1997 lows, likely limiting the current pace of refining."

"The U.S. has reported seven consecutive weeks of crude oil inventory declines and nine weeks of product drawdowns."

"WTI Oil six-month forward prices are $80.95 below the May highs of $87.80 but above $75 lows in March and April."

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

Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to raise key rates by 25 basis points at the June policy meeting and responds to questions from the press.

ECB press conference key takeaways

"Conflict is weighing on activity."

"Labour demand has cooled further."

"Domestic demand weaker than projected in March."

"Households in solid financial position."

"Wage trackers continue to indicate easing labour costs in 2026."

"Some indicators of underlying inflation have been driven higher by energy shock."

"Most measures of longer-term expectations stand at around 2%."

"Increase in energy prices will lift inflation further, above 2% in the first half of 2027."

"Risks to growth outlook are to the downside."

"Middle East war among downside risks to growth."

Risks to inflation outlook are to the upside."

"If energy prices were to rise more or for longer, inflation would increase further."

"Bigger spillover to other prices is among upside risks."

"We did not discuss alternatives."

"Discussion was not at all about insurance hike."

"Indirect cost of Iran war also showing up."

"Decision is robust across three scenarios."

"Manufacturing has held up."

"Consumption is a driver of growth."

"Investment underpinned by governments."

"Will monitor size, persistence of energy price increase."

"A sudden, sharp drop in asset prices would pose risks to financial stability."

" We are beginning to see broadening of inflation."

"Net income of workers will be positive, will lead to assume consumption be driver of growth."

"Inflation to return to target in autumn of 2027."

"Short-term inflation expectations have risen."

"Longer-term inflation expectations are broadly anchored at target."

This section below was published at 12:15 GMT to cover the European Central Bank's policy announcements and the immediate market reaction.

The European Central Bank (ECB) announced on Thursday that it raised key rates by 25 basis points (bps) following the June policy meeting, as expected. With this decision, the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility stood at 2.4%, 2.65% and 2.25%, respectively.

Developing story, please refresh the page for updates.

ECB policy statement key takeaways

"War in Middle East is generating inflation pressures, and decision to raise rates is robust across a range of scenarios mapping out how shock might evolve and affect medium-term outlook for Euro area."

"In baseline of new Eurosystem staff projections, headline inflation is expected to average 3.0% in 2026, 2.3% in 2027 and 2.0% in 2028."

"ECB's new growth forecast: 0.8% in 2026, 1.2% in 2027 and 1.5% in 2028."

"ECB's core inflation projection: 2.5% in 2026 and 2027 and 2.2% in 2028."

"Compared with March, staff have revised up their baseline projection for inflation in 2026 and 2027 owing to a higher path for energy prices, which, to some extent, is expected to feed into food, goods and services inflation."

"Outlook remains uncertain, with upside risks for inflation and downside risks for economic growth."

"This uncertainty is also reflected in broad range of outcomes for inflation and growth in updated illustrative scenarios put together by Eurosystem staff."

"With today’s decision, ECB remains well positioned to navigate uncertainty caused by war."

"Will closely monitor situation and follow a data-dependent and meeting-by-meeting approach to determining appropriate monetary policy stance."

"Interest rate decisions will be based on its assessment of inflation outlook and risks surrounding it, in light of incoming economic and financial data, as well as dynamics of underlying inflation and strength of monetary policy transmission."

"ECB is not pre-committing to a particular rate path."

"APP and Pandemic Emergency Purchase Programme (PEPP) APP and PEPP portfolios are declining at a measured and predictable pace, as Eurosystem no longer reinvests principal payments from maturing securities."

Market reaction to ECB policy decision

The Euro's reaction to the ECB policy decision was largely muted. At the time of press, EUR/USD was trading virtually unchanged at 1.1535.

This section below was published as a preview of the European Central Bank's interest rate decision at 05:00 GMT.

• The European Central Bank is widely expected to raise interest rates by 25 basis points on Thursday.
• Investors will focus on whether the ECB signals that further tightening could follow in the coming months.
• The outlook remains clouded by the Middle East war, rising energy prices and weakening Eurozone growth.

The European Central Bank (ECB) is set to announce its monetary policy decision at 12:15 GMT following its June meeting.

The Frankfurt-based institution is widely expected to raise its key interest rates by 25 basis points, taking the deposit facility rate to 2.25% from 2%. Such a move would mark the first rate hike since September 2023 and reflect policymakers’ growing concern about the inflationary impact of the energy shock caused by the war in Iran and the disruption of shipping routes in the Middle East.

ECB President Christine Lagarde will hold a press conference shortly after the announcement, at 12:45 GMT, where investors will seek guidance on whether June represents the start of a broader tightening cycle or merely a precautionary adjustment. The ECB is expected to publish updated staff projections alongside the decision, with economists anticipating higher inflation forecasts and weaker growth estimates compared with the March projections.

While a rate hike is largely priced in by financial markets, uncertainty remains elevated. Policymakers must balance the risk of inflation becoming more persistent against the danger of further weakening an already fragile Eurozone economy. As a result, communication regarding future policy steps is likely to be the key market driver.

What to expect from the ECB interest rate decision?

The ECB enters the June meeting facing a significantly different environment than it did only a few months ago. Eurozone inflation accelerated to 3.2% YoY in May from 3% in April, while core inflation rose to 2.5%, reflecting the gradual transmission of higher energy prices into broader price categories.

Several Governing Council members have openly supported a rate increase in recent weeks. ECB Chief Economist Philip Lane indicated that inflation projections would likely be revised higher, while Executive Board member Isabel Schnabel argued that the central bank could no longer simply “look through” the energy shock. Even traditionally dovish policymakers have acknowledged that a tightening of monetary policy may be necessary to prevent inflation expectations from becoming unanchored.

Updated ECB projections are expected to reinforce this view as several institutions forecast that inflation estimates for 2026 could be revised closer to 3%, up from 2.6% in March, while growth forecasts are likely to be downgraded as higher energy costs weigh on activity. Recent Purchasing Managers Index (PMI) surveys have already pointed to deteriorating business conditions, with Eurozone economic activity remaining in contraction territory.

Despite the expected hike, the ECB is unlikely to provide explicit forward guidance. Policymakers continue to emphasize a data-dependent and meeting-by-meeting approach, reflecting the exceptional uncertainty surrounding the geopolitical situation and future energy prices. Most analysts expect Christine Lagarde to maintain a cautiously hawkish tone, acknowledging upside risks to inflation while avoiding any commitment regarding the timing of additional moves.

The key debate within markets is whether June marks the beginning of a new tightening cycle or simply an insurance hike designed to preserve the ECB’s anti-inflation credibility. While some institutions foresee multiple hikes over the coming months, others argue that weakening growth, tighter financial conditions and limited evidence of wage-driven inflation should ultimately restrict the scope of further tightening.

How could the ECB meeting impact EUR/USD?

Ahead of the decision, markets have largely priced in a 25-basis-point rate increase, meaning the Euro’s immediate reaction may depend more on the ECB’s communication than on the decision itself.

A more hawkish-than-expected message from Christine Lagarde, particularly if she suggests that additional rate hikes could be warranted in July or September, would likely support the Euro (EUR) by pushing European rate expectations higher. An upward revision to inflation forecasts that highlights persistent price pressures could further reinforce this reaction.

Conversely, if the ECB emphasizes downside risks to growth and signals that June should not be interpreted as the start of an aggressive tightening cycle, the common currency could struggle to gain traction despite the rate increase. Traders would likely interpret such communication as confirmation that only limited additional tightening remains likely.

Interest rate differentials will remain a key driver for EUR/USD. While the ECB is expected to raise rates this week, the Federal Reserve (Fed) is widely expected to keep policy unchanged at its upcoming meeting, even as markets start to anticipate rate hikes later this year. This divergence could provide near-term support for the Euro if the ECB adopts a sufficiently hawkish tone.

Nevertheless, broader market themes remain highly influential, as developments in the Middle East conflict, energy markets and global risk sentiment could continue to dominate EUR/USD price action. As a result, unless the ECB substantially alters expectations regarding the future path of interest rates, the pair may remain driven as much by geopolitical developments as by monetary policy itself.

Since early June 2025, the EUR/USD pair has been trading within a broad horizontal range, with no clear trend. In the daily chart above, EUR/USD maintains a bearish near-term tone as spot remains anchored below the 50-day, 200-day and 100-day Simple Moving Averages (SMAs), clustered between roughly 1.1670 and 1.1692. 

The downward resistance trend line, last intersected around 1.1704, continues to frame the broader downside bias. Meanwhile, the Relative Strength Index (RSI) at 38.9 indicates weak momentum but stops short of oversold territory, suggesting that sellers retain control, albeit with limited immediate exhaustion signals.

On the topside, initial resistance emerges at the 50-day SMA near 1.1670, followed closely by the 200-day SMA around 1.1678, creating a dense supply band just overhead. A move above these would then expose the 100-day SMA at 1.1692 ahead of the trend-line reference near 1.1704. 

On the downside, the first support comes at the psychological 1.1500 level, close to Monday’s low. A break below this area could reinforce the bearish pressure and open the door for a move toward 1.1400, a key support zone located near the March 13 and August 1 lows. A sustained decline below 1.1400 would further strengthen the negative outlook and expose lower levels not seen since June 2025.

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

Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to raise key rates by 25 basis points at the June policy meeting and responds to questions from the press.

Key takeaways

"Manufacturing has held up."

"Consumption is a driver of growth."

"Investment underpinned by governments."

"Will monitor size, persistence of energy price increase."

"A sudden, sharp drop in asset prices would pose risks to financial stability."

" We are beginning to see broadening of inflation."

"Net income of workers will be positive, will lead to assume consumption be driver of growth."

"Inflation to return to target in autumn of 2027."

"Short-term inflation expectations have risen."

"Longer-term inflation expectations are broadly anchored at target."

Deutsche Bank’s Sanjay Raja expects UK headline CPI to edge up to 3.01% year-on-year in May, with core CPI at 2.72% and Services CPI at 3.65%. The bank projects CPI to average 3.1% this year before easing to 2.6% next year and 2.3% in 2028, with risks to inflation seen skewed to the upside.

CPI path lifted by energy and services

"After a bigger than expected drop in inflation over April, we expect a little more of a bounce in the data. Indeed, some of the drop in services prices will likely unwind into May. Food and core goods prices will also likely see some lingering price pressures."

"Looking ahead, the inflation trajectory points to further upside. We expect more price pressures to build in the coming months–particularly as dual fuel bills reset in July."

"We expect CPI to track around 3.1% y-o-y this year, before slowing to 2.6% y-o-y next year."

"In short, we continue to see CPI taking a small step up over the remainder of the year as dual fuel bills rise and some upward pressure from food/core goods feed through into the data. Our peak in CPI has now been revised lower, on account of downward sloping oil and gas futures curves."

"Risks remain skewed firmly to the upside. Price survey data point to further price pressures ahead—and more so than what our models suggest."

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

United States (US) President Donald Trump said on Thursday that negotiations with Iran remain ongoing but warned of further military action, stating that additional strikes are expected later in the day. Trump made these statements in a Fox News interview.

We are talking to them.

My preference would be to take Kharg Island.

Not sure US has the appetite for it.

They are negotiating with us to make a deal, but they are proud.

I’d rather not hit bridges and power plants.

People would not be able to drink water. I don’t want to do that.

There will be more bombing tonight, bigger, more powerful.”

TD Securities’ Prashant Newnaha and Howard Du argue recent weak Australian data and Federal Budget tax changes should keep the RBA cash rate at 4.35% next week and likely on hold for longer. With trimmed mean inflation still elevated and the output gap closing, they see rate cuts as premature but acknowledges waning conviction in an August hike.

Weak data challenge August hike expectations

"The run of softer data and taxation changes announced in the Federal Budget ensures the RBA holds the cash rate steady at 4.35% at next week's meeting. More important for markets is whether the Bank's messaging signals the cash rate on a prolonged hold. The market would interpret such a message as dovish, and this is where the risks lie."

"However, we doubt the RBA's models signal an impending recession and with trimmed mean inflation remaining elevated for some time, any discussion of cuts to the cash rate is pre-mature."

"As for the output gap, NAB's measure of capacity utilization is trending down towards the long term average. The implication is the positive output gap is closing. The other signal the capacity utilization measure is sending is an impending rise in the unemployment rate, which would be well above the quarterly averages the RBA has in its May SoMP forecasts for this year."

"So where does this leave us? Our conviction on the RBA delivering a hike at its August is waning, but we will look to the May CPI print (June 24th) to confirm if the RBA has room to deliver one more hike (Aug or later) or whether the RBA is set to keep cash rate on hold for a prolonged period."

"Lastly, one cannot ignore the developments from the Federal Budget. The changes to negative gearing and capital gains taxes are likely to drive a material slowing in credit growth. Does the RBA need to hike into that with urgency? Not really."

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

Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to raise key rates by 25 basis points at the June policy meeting and responds to questions from the press.

Key takeaways

"Risks to growth outlook are to the downside."

"Middle East war among downside risks to growth."

Risks to inflation outlook are to the upside."

"If energy prices were to rise more or for longer, inflation would increase further."

"Bigger spillover to other prices is among upside risks."

"We did not discuss alternatives."

"Discussion was not at all about insurance hike."

"Indirect cost of Iran war also showing up."

"Decision is robust across three scenarios."

• Silver falls to its lowest level since March 23, losing 0.58% on the day to near $63.00.
• Rising expectations of Fed rate hikes continue to pressure non-yielding precious metals.
• Escalating US-Iran tensions are supporting the USD more than traditional safe-haven assets.

Silver (XAG/USD) extends its bearish move on Thursday and trades around $63.00, down 0.58% on the day at the time of writing. The white metal remains under pressure as investors reassess the outlook for US monetary policy following another round of strong inflation data and a worsening geopolitical backdrop in the Middle East.

The decline in Silver comes as markets increasingly favor the US Dollar (USD) as the preferred safe-haven asset. Despite escalating tensions between Washington and Tehran, defensive flows are shifting toward the Greenback, supported by rising US Treasury yields.

United States (US) President Donald Trump said on Thursday that the US would hit Iran “very hard tonight,” increasing concerns about a further military escalation and its implications for energy markets. Oil prices have remained elevated since the start of the war, fueling concerns about global inflation.

Against this backdrop, investors are increasingly pricing in a more aggressive tightening path from the Federal Reserve (Fed). Inflation data released this week showed persistent price pressures, while the Producer Price Index (PPI) climbed 6.5% YoY in May, its highest level since November 2022. As a result, US yields moved higher, supporting the US Dollar and reducing the appeal of non-yielding assets.

According to the CME FedWatch tool, markets now assign a high chance to at least one Fed rate hike before year-end. This shift is negative for Silver, whose attractiveness tends to diminish when real yields rise.

Analysts at ING also note that precious metals remain closely tied to the direction of US Treasury yields and expectations for Federal Reserve policy. With the US Dollar maintaining its advantage and Treasury yields remaining biased to the upside, Silver continues to face significant selling pressure, while traders remain focused on upcoming US economic data and developments in the Middle East conflict.

Royal Bank of Canada (RBC) economist Claire Fan notes that Canada’s Gross Domestic Product (GDP) contracted in Q1, but measures of excess slack such as the unemployment rate still align with prior tracking. Fan keeps its growth outlook unchanged, instead lowering potential GDP estimates. Policy rates at the Bank of Canada (BoC) and the Federal Reserve (Fed) are seen as appropriate, with both central banks expected to hold through 2026.

Soft GDP but outlook unchanged

"Canada’s gross domestic product contracted in Q1, but indicators for excess economic slack including the unemployment rate remain consistent with our prior tracking."

"We have left our growth outlook unchanged, while passing through weakness to lower potential GDP estimates."

"The Bank of Canada and U.S. Federal Reserve’s current policy rates remain appropriate."

"We’re tracking moderate excess supply in Canada versus excess demand in the U.S."

"Both central banks are expected to hold through 2026 with modest BoC rate increases after, while the Fed remains on the sidelines."

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