Forex News

• EUR/GBP extends its recovery to the 0.8570 area but remains below last week's highs at 0.8600.
• The Pound pulled lower against most peers as UK consumer inflation figures came in line with market expectations.
• The BOE is widely expected to leave interest rates on hold after Thursday's monetary policy meeting.

The Euro (EUR) edged up against a softer British Pound (GBP) after UK Consumer Prices Index (CPI) data revealed that inflation grew in line with market expectations in August. The EUR/GBP pair jumped about 10 pips to session highs above 0.8570, extending its recovery from lows near 0.8550 on Tuesday, but still below last week’s highs at 0.8600.

UK data released on Wednesday has shown consumer prices accelerating to a 3.1% year-on-year rate in August from 2.9% in July, while the core CPI grew 2.6% in the twelve months to August, unchanged from the previous month. These figures are in line with market expectations,

Producer prices, on the other hand, beat forecasts, as the input Producer Price Index (PPI) accelerated to 6.1% year-over-year from 4.9% in July, beating the market consensus of 5.4%. In the same vein, the Output PPI rose to 3.7% Y-o-Y from 3.1% in the previous month, well above market expectations of a 3.3% growth rate.

These figures, however, have failed to change the view that the Bank of England (BoE) will stand pat on rates on Thursday. The Monetary Policy Committee is highly expected to show divergences, but recent comments from Governor Bailey dismissing the idea that rate hikes are inevitable have dampened hopes of any immediate tightening move.

Risk aversion, high Oil prices limit Euro rallies

The Euro, however, is failing to draw any significant support from the Pound's weakness, weighed by a moderate risk-off mood and high Oil prices. Brent Oil remains steady above $100 as the situation in the Middle East complicates, which poses a serious challenge for the Eurozone’s importing economies.

Looking ahead, ING Analyst Francisco Pesole sees little room for further Euro depreciation as the balance of risks at this week’s Bank of England meeting “are actually on the dovish side.” Pesole observes that, unlike the ECB, “BoE doves will hold their ground and stress that there is no evidence price pressures are extending beyond energy prices,” limiting scope for a more hawkish shift.

“We struggle to see EUR/GBP falling much further from here,” says ING in a note, warning that “most risks appear on the upside in the coming weeks,” citing the monetary policy backdrop, “potential fiscal headlines ahead of the late October budget” and “growing pressure on Downing Street to allow independence referendums in Scotland, Wales and Northern Ireland.”

• The Australian Dollar is slightly down to near 0.7125 against the US Dollar ahead of the Fed’s policy.
• The Fed is highly anticipated to hike interest rates by 25 bps to 3.75%-4.00%.
• Market experts see the dot plot’s outcome as key trigger for US Dollar’s next move.

The Australian Dollar (AUD) trades slightly lower at around 0.7125 against the US Dollar (USD) during the European trading session on Wednesday. The Aussie pair is under pressure as the market sentiment is cautious, with investors awaiting the Federal Reserve’s (Fed) monetary policy announcement at 18:00 GMT.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, holds onto its almost two-week high at around 99.70.

According to Commerzbank, the latest upside surprise in inflation means that “a majority on the FOMC is likely to vote to increase the federal funds rate,” a move that would “help allay doubts about the Fed’s credibility.”

However, the bank clarified that the market reaction will hinge not just on the decision itself but also on the updated projections. The bank added, “If the dot plot suggest that further hikes are quite likely, the market is likely to see this as confirmation that the benchmark interest rate could rise further, which could cause the US Dollar to gain ground.”

AUD/USD Technical Analysis

AUD/USD trades subduedly at around 0.7125, keeping a mildly bearish tone as it sits below the 20-period exponential moving average (EMA) at 0.7152. The short-term trend bias remains capped while price holds under this dynamic barrier, and the Relative Strength Index (RSI) near 48 drifts just below the midline, hinting at fading bullish momentum rather than oversold conditions.

On the topside, immediate resistance is aligned with the 20-period EMA at 0.7152, and a daily close above this level would be needed to ease the current downside pressure and open the way for a corrective advance. Looking down, the pair could be exposed to 0.7050 if it fails to hold the immediate support level near the September 14 low at 0.7108.

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

Here is what you need to know on Wednesday, September 16:

The US Dollar (USD) flatlines near a two-week high around 99.60 in early European trading on Wednesday. The benchmark 10-year US Treasury yield note trades at 4.992% after attempting to retest the 5% mark, its highest since 2007. The US Federal Reserve (Fed) will announce its interest rate decision later on Wednesday, followed by a press conference by Fed Chair Kevin Warsh.

Markets are now pricing in nearly a 92.4% probability that the Fed will raise interest rates by a quarter of a percentage point at its September policy meeting on Wednesday, according to the CME FedWatch tool.

Traders remain glued to developments in the Middle East after an Iran-backed attack on Saudi Arabia’s East-West pipeline. A spokesperson for the Saudi-led military coalition in Yemen said on Tuesday that Saudi Arabia air defences destroyed a Houthi drone south of Mecca before it entered prohibited airspace over the holy city. 

Reuters reported on Tuesday that oil loadings ‌at Saudi Arabia's Yanbu port had been suspended after the world's biggest crude exporter shut its East-West pipeline following an attack by Yemen's Iran-aligned Houthis on Friday.

Dollar support builds as US yields climb ahead of FOMC

Analysts at MUFG highlight that the recent firming in the US Dollar has been underpinned by a renewed rise in US rates, noting that “the US 10y Treasury yield has now reached 5.00%, while the 2y yield climbed to 4.66%.” They point out that “since the start of the year, US 10y yields have risen by more than 80bps, while Asian and European yields have also surged, amidst rising commodity prices.” Against this backdrop, MUFG observes that “market attention now turns to the FOMC meeting decision later today,” with investors “pricing more than a 90% probability of a 25bps Fed rate hike, while expecting a cumulative two hikes by year-end.” However, the bank cautions that “the Fed faces a difficult trade-off,” as policymakers balance persistent inflation pressures against the mounting costs of tighter policy.

Lagarde flags persistent inflation and long shock, modestly hawkish tilt

The FXS Speechtracker score of 6.4 versus President Lagarde’s 6.2 average points to a slightly more impactful and modestly hawkish tone, as the speech underscores inflation at 3.3% and stresses the ECB’s primary mandate of price stability for the entire Euro area. Emphasis on a “longer-lasting” shock, volatile energy markets due to Middle East conflict, and rising long-term rates linked to public finances and funding needs, including for artificial intelligence, reinforces the message that restrictive conditions may need to persist.

This combination supports a bias toward keeping policy relatively tight, which is broadly supportive of the Euro on a medium-term horizon, especially versus lower-yielding peers. However, the call to simplify administrative regulations at both European and French levels hints at a growth-supportive structural agenda, tempering the hawkishness and suggesting the ECB will remain attentive to fragmentation risks across member states.

EUR/USD edges higher to near 1.1550 in the European morning. The European Central Bank (ECB) last week emphasized it won’t pre-commit to further steps after raising rates for a second time since the Iran war started.  

GBP/USD holds positive ground around 1.3485 following the UK inflation data. The country’s headline Consumer Price Index (CPI) climbed 3.1% YoY in August, compared to a rise of 2.9% in June, according to the Office for National Statistics (ONS) on Wednesday. This figure came in line with the market consensus. 

Meanwhile, the core CPI, which excludes volatile food and energy items, rose 2.6% YoY in August, versus 2.6% prior, matching expectations. The monthly UK CPI arrived at 0.5% in August, compared to an increase of 0.3% in the previous reading. 

This CPI inflation report will feed into the Bank of England’s (BoE) decision-making ahead of its interest rate decision on Thursday. Markets expect the UK central bank to leave the interest rate unchanged at 3.75% in September. 

USD/JPY loses ground to near 155.00 in the European session on Wednesday. The Bank of Japan (BoJ) is anticipated to raise its policy interest rate to 1.25%, the highest level in about 31 years, at its September policy-setting meeting on Friday.

Gold rebounds from more than a one-month low to above $4,300 on Wednesday. Traders await the Fed’s policy decision, with a rate hike largely priced in.

Commerzbank economists note India’s August CPI rose to 4.8% year-on-year, above the RBI midpoint but still below the central bank’s full-year forecast. They see a more finely balanced policy outlook, with a likely hawkish hold at 5.25%. A narrower trade deficit and strong capital inflows should support INR, even as higher Oil prices pressure inflation and the currency.

Higher CPI but supportive external mix

"August CPI inflation rose to 4.8% yoy (Bloomberg consensus: 4.9%) vs 4.5% in July. This was the highest reading since December 2024 and the third consecutive month above the Reserve Bank of India's (RBI) 4% midpoint target."

"Inflation averaged around 3.8% year-to-date, remaining below the RBI's FY2026-2027 forecast of 5.0% and in the lower half of its 2-6% target range. Nevertheless, if oil prices remain high for an extended period, the risk is to the upside."

"Nevertheless, the policy outlook has consequently become more finely balanced. RBI is expected to leave the policy rate unchanged at 5.25% at its next meeting on 7 October, but it could be a hawkish hold. RBI Governor Sanjay Malhotra said last Friday that underlying price pressures remain low, suggesting limited urgency to tighten monetary policy for now."

"On trade, the August trade deficit narrowed more than expected to USD26.9bn (Bloomberg consensus: USD32.2bn) vs USD32.0 in July."

"The narrower trade deficit should support India's external position after the current account swung to a USD4.2bn deficit in Q2 from a USD6.5bn surplus in Q1. At the same time, measures aimed at attracting foreign capital have strengthened the financial account."

"In FX, USD/INR rose 0.4% to 95.96 yesterday, just below the psychologically important 96.00 level. INR had weakened due to higher crude oil prices and the firmer USD."

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

The United Kingdom (UK) headline Consumer Price Index (CPI) climbed 3.1% over the year in August, compared to a rise of 2.9% in July, the data released by the Office for National Statistics (ONS) showed on Wednesday. 

Markets predicted a 3.1% growth in the reported period. The UK inflation reading was well above the Bank of England’s (BoE) 2% inflation target.

The core CPI (excluding volatile food and energy items) rose 2.6% year-over-year (YoY) in the same period, compared to July’s 2.6% print and came in line with the forecast.

Meanwhile, the monthly UK CPI arrived at 0.5% in August versus an increase of 0.3% reported in July, matching the market consensus.

GBP/USD reaction to the UK CPI inflation data

The British Pound (GBP) attracts some sellers in an immediate reaction to the UK inflation report. At the time of writing, the GBP/USD pair is trading 0.04% higher on the day to trade at 1.3483.

This section below was published at 02:00 GMT as a preview of the UK Consumer Price Index (CPI) inflation data.

• UK inflation is expected to accelerate to 3.1% YoY in August from 2.9% in July, driven in part by higher energy prices.
• Core inflation is also expected to pick up, while further energy and food price pressure looms.
• The data comes one day before the BoE’s decision, with policymakers expected to keep rates unchanged.

The United Kingdom (UK) Office for National Statistics (ONS) will publish the highly anticipated Consumer Price Index (CPI) data for August on Wednesday at 06:00 GMT.

The inflation report could trigger volatility in the British Pound (GBP), as it comes just one day before the Bank of England (BoE) monetary policy decision. The central bank is expected to keep its policy rate unchanged at 3.75% on Thursday, but another acceleration in price pressure could strengthen expectations of an interest rate hike in the coming months.

What to expect from the next UK inflation report?

The UK Consumer Price Index is expected to rise 3.1% YoY in August, up from 2.9% in July, moving further away from the BoE’s 2% target. On a monthly basis, CPI is expected to increase by 0.5% in August, following a 0.3% rise in July.

Core inflation, which excludes the volatile energy, food, alcohol and tobacco components, is also expected to accelerate to 2.7% YoY from 2.6% previously. A simultaneous increase in headline and core inflation could fuel concerns at the BoE about persistent price pressure.

The expected acceleration in headline inflation comes as the consequences of the conflict in the Middle East continue to feed through to UK energy costs. UK Finance notes that transport prices rose 9.1% YoY in July and that pump prices increased again in August, with a litre of unleaded petrol reaching its highest level since November 2022.

Inflationary pressure could also persist beyond the August report. UK energy regulator Ofgem has confirmed another 4% increase in the energy price cap from October, following the increase implemented in July.

Risks also appear to be spreading to food prices. The latest Worldpanel by Numerator data showed that grocery price inflation accelerated to 2.3% YoY in the four weeks to September 6, from 2.1% in the previous report. Meanwhile, the Food and Drink Federation (FDF) expects food and non-alcoholic drink inflation to reach 3.9% in December before exceeding 6% in 2027, due in part to higher energy costs, logistical disruptions and weather conditions.

This pressure could further complicate the disinflation process. The BoE projected in July that headline inflation would peak at around 3.2% in the fourth quarter of 2026, while judging that risks to its inflation outlook were tilted to the upside. Bloomberg Economics now estimates that higher energy costs could push UK inflation above 4% in 2027.

How will the UK Consumer Price Index report affect GBP/USD?

Wednesday’s release is particularly important for GBP/USD as it comes on the eve of the BoE’s monetary policy decision. Economists widely expect the central bank to keep its policy rate unchanged at 3.75%. All 65 economists surveyed in a Reuters poll conducted between September 4 and 8 expect the BoE to remain on hold on Thursday, while 57 of them anticipate rates staying unchanged through the end of the year.

Markets, however, are taking a more hawkish view. According to Morningstar, interest rate markets see a potential first BoE rate hike as early as November and are pricing in three increases by mid-2027.

Divisions within the Monetary Policy Committee (MPC) add to the importance of the inflation report. At the July meeting, three of the nine committee members voted for a 25-basis-point (bps) rate increase, up from two members previously.

The key debate for the BoE, however, remains whether the energy shock is generating more persistent second-round inflation effects. According to Reuters, citing HSBC UK economist Elizabeth Martins, the BoE has indicated that it would consider a policy move if second-round effects emerged, but current conditions are unlikely to be enough for policymakers supporting unchanged rates to switch their votes.

A report showing headline and core inflation above expectations could nevertheless change the picture. Such a surprise would reinforce concerns that energy-related pressures are beginning to spread more broadly through the economy and could increase the likelihood of a rate hike in the coming months. In this scenario, the British Pound could attract fresh demand, pushing GBP/USD higher.

Conversely, softer-than-expected inflation, particularly in the core measure, would strengthen the argument that the energy shock remains largely temporary and is not yet generating persistent domestic price pressure. This could reduce expectations of BoE monetary tightening and weigh on the British Pound.

A release broadly in line with expectations could quickly shift attention toward the composition of the report, particularly services inflation, as well as the BoE’s vote split and policy message on Thursday. With a September rate hike still considered unlikely, the key question for markets could be whether the acceleration in August inflation is strong enough to bring the next rate increase closer.

On the 4-hour chart, GBP/USD keeps a bearish near-term bias as it holds beneath the 200-period Simple Moving Average (SMA) at 1.3529 and a confluence of resistance around 1.3550 marked by the 100-period SMA and a horizontal cap, while a downward-sloping trendline continues to weigh on rallies. The Relative Strength Index (14) hovers in the high-30s, hinting that downside momentum remains in place even as price stabilizes just above nearby supports.

On the topside, initial resistance appears at the 200-period SMA around 1.3529, with a denser barrier near 1.3550 where the 100-period SMA aligns with horizontal resistance, ahead of the 1.3570 level and the overarching descending trendline. On the downside, immediate support is seen at 1.3480, with further cushions at 1.3464 and 1.3434; a clear break below this support band would open the door to an extension of the current bearish phase.

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

• GBP/USD retreats from session highs near 1.3500 after the release of UK inflation data.
• UK CPI accelerated in line with the market consensus in August, while producer prices beat expectations.
• Fed-BoE monetary policy divergence is keeping Pound rallies limited this week.

The British Pound (GBP) ticks higher against the US Dollar (USD) on Wednesday, although the GBP/USD pair retreated to 1.3480 from session highs near 1.3500 after the release of the UK Consumer Prices Index (CPI) data for August. More broadly, the Pound remains 0.3% lower this week so far, as markets brace for a Federal Reserve (Fed) rate hike while the Bank of England (BoE) is expected to leave rates on hold on Thursday.

Consumer inflation accelerated to 0.5% in the UK in August from 0.3% in July, while the yearly CPI climbed to 3.1% from 2.9%, according to levels released by the UK Office for National Statistics on Wednesday. The core CPI has remained growing at a steady 2.6% pace, in line with market expectations,

Producer prices, on the other hand, beat forecasts, with the input Producer Price Index (PPI) rising to a 6.1% year-over-year (Y-o-Y) rate in August from 4.9% in July, above the 5.4% market consensus, and the Output PPI accelerating to 3.7% Y-o-Y from 3.1% in the previous month. The market had anticipated a softer increase to 3.3%.

These figures, however, do not alter the view that the Bank of England (BoE) will leave its benchmark interest rate steady at 3.75% on Thursday. The Monetary Policy Committee is highly expected to show divergences, but recent comments from Governor Bailey dismissing the idea that rate hikes are inevitable have dampened hopes of any immediate tightening move.

A Fed rate hike is nearly fully priced

In the US, on the contrary, the Federal Reserve (Fed) is widely expected to hike interest rates by 25 basis points later in the day. A strong US Nonfarm Payrolls (NFP) report in August, coupled with the hot inflationary figures released last week, has prompted futures markets to price in a 92% chance of a rate hike and a 70% probability of at least one more hike before the end of the year.

Bearing in mind the Fed Chairman Kevin Warsh's distaste for forward guidance, the market will be looking at the central bank's interest rate projections, the so-called "dot plot," to confirm expectations of further monetary tightening in the near-term.

In that sense, analysts at TD Securities anticipate that the dot plot "may show a lower number of hikes than markets anticipate." The experts note that, given the recent repricing of the hiking path, the US Dollar might go through "some knee-jerk weakness" in the immediate aftermath.

UOB’s Quek Ser Leang and Lee Sue Ann keep a cautious stance on EUR/USD after the pair closed almost unchanged near 1.1543. They note slowing downside momentum intraday but still see room for a move toward 1.1520, while the broader 1–3 week view points to potential losses toward 1.1490 unless resistance at 1.1585 is breached, suggesting sustained downside pressure.

Momentum still favors mild downside

"24-HOUR VIEW: After EUR fell more than we expected on Monday, we highlighted yesterday that “there is a chance for EUR to drop to 1.1520 before a more sustained rebound can be expected.” We added, “the next support at 1.1490 is unlikely to come under threat.” While EUR fell as expected, it recovered from 1.1525 to close largely unchanged at 1.1543 (-0.03%). Downward momentum is starting to slow, but there is still a chance for EUR to decline toward 1.1520. A breach of this level is not ruled out, but based on the prevailing momentum, the major support at 1.1490 is still unlikely to come under threat. Resistance is at 1.1550, followed by 1.1565."

"1-3 WEEKS VIEW: Our update from yesterday (15 Sep, spot at 1.1550) remains valid. As highlighted, “the sharp increase in momentum suggests EUR could decline toward 1.1490.” On the upside, a breach of the ‘strong resistance’ at 1.1585 (level was at 1.1600 yesterday) would indicate that the downward pressure from late last week is easing."

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

• The British Pound falls back from day’s high to near 209.15 after the UK CPI data repot release.
• The UK CPI report showed that price pressures accelerated in line with expectations.
• Investors expect the BoE to leave interest rates unchanged on Thursday.

The British Pound (GBP) retreats from its day’s high of around 209.45 against the Japanese Yen (JPY) to near 209.15 after the release of the United Kingdom (UK) Consumer Price Index (CPI) report of August.

The British currency faces selling pressures even as the CPI report showed that prices pressures accelerated in line with expectations. The UK headline CPI arrives higher at 3.1% Year-on-Year (YoY), as expected, from 2.9% in July. The CPI – which excludes the volatile components of food, energy, alcohol and tobacco – grew in line with estimates and the previous reading of 2.6% YoY.

On a monthly basis, the headline inflation rose at an expected pace of 0.5%, faster than the previous reading of 0.3%.

A further acceleration in UK inflationary pressures is expected to prompt expectations of an interest rate hike by the Bank of England (BoE) in the near term.

Meanwhile, the BoE is all set to announce the September’s monetary policy decision on Thursday.

BoE seen on hold again

Strategists at Brown Brothers Harriman (BBH) note that the BoE is “widely expected to keep the policy rate at 3.75% for a sixth straight meeting” at Thursday’s decision. They anticipate “another 6-3 vote,” with Megan Greene, Catherine L Mann and Huw Pill “backing a 25bps hike,” even as the majority opts to stay on hold.

On the Tokyo front, investors await the Bank of Japan’s (BoJ) interest rate decision on Friday. The BoJ is highly anticipated to hike interest rates by 25 basis points (bps) to 1.25%. On the same day, financial markets will also pay attention to the National CPI data for August, which will be published before the BoJ’s policy decision.