Forex News

MUFG notes that Oil prices have declined as markets reassess supply risks tied to the US-Iran war and regional chokepoints. Saudi Arabia’s efforts to restore the East-West pipeline and continued tanker traffic through the Strait of Hormuz, alongside diplomatic moves by the US, Gulf nations, China and Iran, have supported a rally in risk assets and global duration.

Supply concerns ease with diplomacy

"Oil prices fell, risk assets rallied, while global duration did better after enduring a meaningful sell-off over the past few weeks."

"Part of this was driven by some easing of oil supply concerns as the markets looked forward the next round of diplomacy that will shape the US-Iran war."

"Saudi Arabia in particular has moved to restore the damaged East-West pipeline to its Red Sea coast, aiming to return about half its capacity within days."

"At the same time, some tankers continue to traverse the contested Strait of Hormuz."

"Reuters also reported that Beijing privately asked Iran to help rein in Houthi militants after an appeal to China by Riyadh, with the militant group making advances in Yemen towards the Bab el-Mandeb chokepoint in recent days."

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

United Overseas Bank’s (UOB) Quek Ser Leang maintains a bearish stance on EUR/USD after recent declines, expecting the pair to trade intraday between 1.1460 and 1.1500 as momentum eases. Over the coming weeks, the Euro (EUR) is seen potentially extending losses toward 1.1435 and 1.1400, with strong resistance at 1.1545 and EMAs signalling further downside.

Euro-Dollar bias stays to downside

"24-HOUR VIEW: Two days ago, EUR plunged to a low of 1.1460. Yesterday, when EUR was at 1.1470, we indicated that “while further EUR weakness is not ruled out, deeply oversold conditions suggest any decline could stay within a 1.1435/1.1505 range.” EUR then edged to a low of 1.1450, rebounded to 1.1497 before closing little changed at 1.1474 (+0.09%). Downward momentum has eased somewhat, and today, we expect EUR to trade in a range, most likely between 1.1460 and 1.1500."

"1-3 WEEKS VIEW: Reiterating our negative view from one week ago, we indicated yesterday (17 Sep, spot at 1.1470) that EUR “could continue to decline to 1.1435, with potential extension to 1.1400.” We will continue to hold the same view as long as the ‘strong resistance’ at 1.1545 (no change in level) is not breached. "

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

Retail Sales, a key measure of consumer spending, in the United Kingdom (UK) rises 0.5% month-over-month (MoM) in August after declining at a similar pace in July, the latest data published by the Office for National Statistics (ONS) showed on Friday. Economists expected Retail Sales to decline again but at a moderate pace of 0.2%.

On an annualized basis, the consumer spending measure rose at a faster-than-expected pace of 2.4% against the previous reading of 1.2%, revised lower from 1.6%. The data was expected to grew by 1.9%.

Market reaction

The British Pound (GBP) appears to have attracted some bids after the release of the strong UK Retail Sales data for August. As of writing, GBP/USD rebounds marginally to near 1.3366 from 1.3361.

• Dropping oil prices eased imported inflation concerns, supporting the Indonesian Rupiah's recent rally.
• Bank Indonesia balances rate differentials with the US while managing a 3.19% inflation uptick.
• US Dollar struggles as lower oil yields pulled US Treasury rates back to 4.93%.

USD/IDR halts its six-day winning streak, trading around 17,780 during Asian hours on Friday. The currency pair continues to hold its losses, with the Indonesian Rupiah (IDR) drawing strength from a pullback in crude oil prices. Lower energy costs have helped ease fears of imported inflation across the region.

Crude prices tumbled following reports that Saudi Arabia is actively taking steps to restore flows through its crucial East-West pipeline. Additionally, market focus has turned toward upcoming discussions between US President Donald Trump and leaders in the Gulf region, offering hopes for stabilized regional supply chains.

Domestic conditions in Indonesia present a mixed picture. Local policymakers are working to contain food-price volatility following an acceleration in August's headline inflation rate to 3.19%. Despite these efforts, broader market sentiment remains constrained by an uncertain policy outlook.

Bank Indonesia (BI) faces the delicate balancing act of maintaining an effective interest-rate differential relative to the US while simultaneously upholding rupiah stability and supporting economic growth. Traders are now closely awaiting BI’s policy decision next week, which follows two consecutive months of unchanged borrowing costs in August.

On the US side of the pair, the US Dollar (USD) has encountered headwinds as falling oil prices help alleviate broad-based inflationary pressures. The retreat in inflation expectations pulled US Treasury yields lower from their recent multi-year highs, with the benchmark 10-year yield declining to approximately 4.93% after briefly surmounting the 5.0% threshold earlier in the week.

However, the Greenback’s downside potential may remain limited due to hawkish comments from Federal Reserve Chair Kevin Warsh. Warsh emphasized that inflation has stayed elevated for too long and noted that recent summer economic data did not demonstrate significant structural improvement. Following his remarks, market expectations shifted rapidly; the CME FedWatch tool now shows traders pricing in a 53.1% chance of a rate hike at the Federal Reserve's October meeting, up from 44% the previous day.

Fed’s Warsh underscores inflation fight, supports stronger Dollar tone

Warsh’s press conference registers a 7.4/10 on the FXS Speechtracker, modestly above the 7/10 historical average and signaling a firmer hawkish bias relative to the established baseline. The repeated emphasis that “today was the right decision,” grounded in an economy that has “strengthened” and allows the Fed to “focus on price stability,” frames the move as a deliberate withdrawal of accommodation driven by persistent inflation that is “not passing the test.” Warsh’s stress on trends over noisy data points and on staying “in our lane” on independence reinforces a disciplined, inflation-first stance that is supportive of a stronger Dollar narrative.

The FXS Fed Sentiment Index jumps by +26.07 points to 151.79, pushing deeper into hawkish territory well above the neutral 100 threshold and aligning with the above-baseline FXS Speechtracker score. This sizeable move confirms that markets are interpreting the decision and Warsh’s tone as a clear step toward tighter policy, with implications for higher Dollar yields and a more challenging backdrop for risk-sensitive currencies.