Forex News

• UK inflation misses forecasts, forcing traders to trim BoE hike bets.
• US Retail Sales beat estimates, reinforcing the consumer resilience narrative.
• Fed dot plot and Warsh press conference to drive the next move.

The Pound Sterling (GBP) retreats towards 1.3400 against the US Dollar (USD) on Wednesday following the latest UK inflation report, forcing investors to reassess hawkish bets on the Bank of England (BoE), while solid US Retail Sales boost the Greenback ahead of the Federal Reserve (Fed) decision. The GBP/USD pair trades with losses of over 0.22%.

GBP/USD retreats as strong US sales revive Dollar momentum

Sentiment remains neutral, as US equity markets fluctuate between gains and losses, with traders awaiting the Federal Reserve’s monetary policy meeting. The US central bank is expected to hold rates unchanged and update its economic projections and the path of interest rates in the Summary of Economic Projections (SEP). After this, the new Fed Chair, Kevin Warsh, will hit the stand at his first press conference leading the Fed.

So far, traders have priced in a nearly 20% chance that the Federal Reserve would raise interest rates towards the end of 2026, according to Prime Terminal data.

In the meantime, US Retail Sales in May expanded by 0.9% MoM, exceeding estimates of a 0.5% increase, according to the US Census Bureau. Digging into the report, gas stations rose 3.4%, lifting the headline figure as gasoline prices jumped due to the Iran war. The data showed consumers' resilience, with 11 of 13 categories posting increases.

Across the pond, UK inflation steadied at 2.8% YoY in May, unchanged from April’s, below economists' estimates for a 3% jump. Speculation that the Bank of England would raise rates was trimmed. A week ago, the BoE was expected to tighten policy by 50 basis points (bps), but at the time of writing, money markets are pricing in a 30-bps tightening.

Ahead, traders eye the Fed’s policy decision and Kevin Warsh's press conference. In the UK, investors are waiting for the release of economic growth figures.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3397, keeping a soft tone as it hovers below a cluster of overhead levels. The pair is capped by the simple moving average around 1.3475 and trades beneath both the reclaimed upward trend-line break at 1.3432 and the broader downward resistance trend line coming in near 1.3551, suggesting rallies remain vulnerable. The Relative Strength Index (14) around the mid‑40s hints at fading momentum, reinforcing a cautious, mildly bearish bias while price holds under these reference levels.

On the topside, initial resistance is seen at the former upward support trendline break around 1.3432, with the simple moving average near 1.3475 forming the next hurdle and the downward resistance trendline at approximately 1.3551 acting as a more distant cap. With no clear structural support levels printed below the market in this dataset, any break under 1.3397 would leave the pair exposed to fresh downside exploration, keeping focus on how price reacts to the nearby resistance band overhead.

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

• AUD/USD trades with a neutral tone as improved risk sentiment supports the Australian Dollar.
• Trump’s comments on Iran and the Strait of Hormuz helped ease market concerns.
• Investors await the first Fed decision under Kevin Warsh, with rates expected to remain unchanged.

The AUD/USD pair trades near 0.7070 with a neutral tone on Wednesday, as the Australian Dollar (AUD) benefits from improved risk sentiment following the latest developments in the US-Iran conflict.

Market mood improved partially after United States (US) President Donald Trump defended the ceasefire framework with Iran, saying the Strait of Hormuz had reopened but warning that bombing could resume if Tehran “acts up.”

Shipping data showed that several Iranian oil tankers had passed through the Strait of Hormuz following the US-Iran framework deal, adding to expectations that Middle East supply could return to the market. The prospect of lower energy prices supported risk-sensitive currencies such as the Aussie, although uncertainty remains high.

Meanwhile, investors remain cautious ahead of the Federal Reserve’s (Fed) June policy decision. The first Fed meeting led by Kevin Warsh is expected to end with interest rates unchanged in the 3.50%-3.75% range as policymakers continue to balance easing Oil-related inflation against still-elevated headline inflation and solid US economic activity.

Short-term technical analysis:

On the 4-hour chart, AUD/USD trades at 0.7070. The pair holds a mild bullish bias, trading above the 20-period Simple Moving Average (SMA) at 0.7064 but capped by the 100-period SMA at 0.7101. The Relative Strength Index (RSI) around 55 hints at steady, rather than impulsive, upside momentum as price grinds higher within a tight range.

On the topside, immediate resistance emerges at the temporary range high around 0.7074, with the 100-period SMA at 0.7101 acting as the next key hurdle if buyers extend the move. On the downside, initial support is seen at 0.7065, reinforced by the clustering of the 20-period SMA at 0.7064 and additional horizontal levels at 0.7058 and 0.7054, where a break would expose a deeper corrective pullback.

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

• The New Zealand Dollar loses ground against the US Dollar ahead of the Federal Reserve’s monetary policy decision.
• Investors await updated economic projections and comments from Kevin Warsh at his first meeting as central bank chair.
• New Zealand consumer confidence falls to its lowest level since 2023 as traders look ahead to first-quarter GDP data.

NZD/USD trades around 0.5820 on Wednesday at the time of writing, down 0.24% on the day as investors reduce risk exposure ahead of the Federal Reserve (Fed) monetary policy announcement.

Markets widely expect the central bank to keep its benchmark interest rate unchanged within the 3.5%-3.75% range, delaying any policy adjustment until a later date. Attention is now focused on the Fed’s updated economic projections and comments from Fed Chair Kevin Warsh, whose first post-meeting press conference could provide important clues about the future path of interest rates.

This cautious stance supports the US Dollar (USD) in the short term and weighs on risk-sensitive currencies, including the New Zealand Dollar (NZD). However, Kiwi losses remain limited as improving geopolitical sentiment continues to reduce demand for traditional safe-haven assets. Investors are closely monitoring developments surrounding negotiations between the United States (US) and Iran after recent comments suggested progress toward a peace agreement.

In New Zealand, data released on Wednesday delivered mixed signals. The first-quarter current account deficit stood at NZ$1.01B, compared with NZ$0.71B a year earlier, while coming in slightly better than market expectations. Meanwhile, the Westpac McDermott Miller Consumer Confidence Index dropped to 80.4 in the second quarter, its lowest level since 2023, as households faced higher living and energy costs.

Despite this softer economic backdrop, the Reserve Bank of New Zealand (RBNZ) maintains a relatively hawkish stance. The central bank recently signaled the possibility of a 25-basis-point rate increase at its July 8 meeting, while its projections suggest the Official Cash Rate could reach around 2.85% by year-end, a factor that continues to provide some support for the New Zealand Dollar.

Traders now turn their attention to New Zealand’s first-quarter Gross Domestic Product (GDP) release, as well as the Fed’s policy decision later on Wednesday, with both events likely to shape the next directional move in NZD/USD.

The Japanese Yen (JPY) remains under pressure despite the Bank of Japan’s latest rate hike, with analysts highlighting that the move has not been enough to trigger a sustained  recovery for the Japanese currency. Societe Generale sees short USD/JPY as attractive if the Federal Reserve delivers a dovish outcome, while OCBC argues that the BoJ’s cautious tightening path limits near-term support for the Yen and keeps intervention risk in focus.

Societe Generale sees short USD/JPY as a dovish Fed trade

Societe Generale argues that recent G10 central bank decisions, including the BoJ hike, have not caused major FX moves. For USD/JPY, the key trigger may now come from the Federal Reserve rather than the BoJ.

The implication is that the Yen could benefit if the Fed sounds more cautious on rates, as a dovish US outlook would reduce support for the US Dollar. In that scenario, USD/JPY could become vulnerable to downside pressure, especially after trading at elevated levels.

Short USD/JPY and short USD/SEK should deliver results in the event of a dovish outcome; further EUR weakness would follow on from any hawkish surprises.

OCBC says BoJ caution limits near-term Yen support

OCBC notes that the BoJ’s 25 basis points hike to 1.0% was widely expected and failed to provide strong support for the Japanese Yen. While the policy bias still points toward further hikes, the central bank has not signaled a faster tightening cycle.

Analysts suggests that the Yen may struggle to gain sustained traction unless the BoJ becomes more clearly hawkish. With Japan still offering the lowest real rate among G10 economies, JPY remains attractive as a funding currency, which can cap rallies even after rate hikes.

Policy bias remains for further hikes, but there is no signal of an accelerated tightening path. This limits near-term support for the JPY. Despite policy rate at 30-year highs, Japan still has the lowest real rate in the G10.

Banks agree Yen needs a stronger catalyst

Both banks suggest that the Japanese Yen’s next major move depends on whether policy expectations shift more decisively. Societe Generale focuses on the Fed side, arguing that a dovish US outcome could support short USD/JPY positions. OCBC focuses on the BoJ side, warning that cautious tightening is not enough.

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

European Central Bank (ECB) policymaker Olaf Sleijpen said in a speech at an event organized by the European Economics & Financial Center (EEFC) in London on Wednesday that while a repeat of 2022's inflation spike appears less likely, the risk cannot be fully ruled out.

Key takeaways:

A repeat of 2022’s inflation problems appear less likely but cannot be excluded.

For Eurozone monetary policy, the key issue is the risk of second-round effects.

Market expectations point to a declining path for oil prices, but uncertainty remains.”