Forex News

ING’s Chris Turner highlights a busy week of European Central Bank speakers before the blackout period, with officials signalling readiness to hike if needed but preferring more time. Markets have removed a 30 April move and see roughly 50% odds of a June hike, which ING expects. ING sees a steady state for EUR/USD closer to 1.17.

ECB communication and data-heavy week

"We have a flurry of European Central Bank speakers in the early part of this week, ahead of the blackout period starting this Thursday. The main message continuing to come through is that the ECB is prepared to act (hike rates) should it be necessary, but that more time is needed. That means the market has priced out a 30 April hike and now attaches only roughly a 50% probably to a June hike."

"Our team think the ECB will indeed hike in June."

"Away from ECB speakers, the eurozone calendar is dominated by business and investor surveys. This starts with the German ZEW tomorrow, builds through the eurozone April PMIs on Thursday, and then sees the Ifo on Friday."

"March business surveys were not as bad as they could have been, and it will be interesting to see whether they deteriorated much this month."

"We are a little cautious on risk at the moment and see a steady state for EUR/USD closer to the 1.17 area."

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

MUFG's Lee Hardman highlights that the Pound (GBP) has underperformed alongside the US Dollar (USD) and Euro (EUR), leaving GBP/USD and EUR/GBP relatively stable near 1.3500 and 0.8700. He attributes Sterling’s weakness to sharply lower UK yields as Bank of England (BoE) rate hike expectations are scaled back, and to renewed United Kingdom (UK) political uncertainty ahead of local elections.

Sterling pressured by yields and politics

"The pound has been one of the worst performing G10 currencies over the past week alongside the US dollar and euro."

"The pound has been undermined in part by the sharp decline in UK yields over the past week as market participants have moved to scale back BoE rate hike expectations."

"Most notably Governor Bailey stated last week that markets got ahead of themselves with rate hike bets while emphasizing that it is too early to form strong judgement."

"The comments strongly imply that rates are likely to be held on hold at the next policy meeting at the end of this month."

"So far the negative impact on the pound has been limited, but UK political developments have the potential to trigger a sharper sell-off in the month ahead."

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

Rabobank’s Senior FX Strategist Jane Foley notes that Governor Ueda’s earlier hawkish signals have been tempered by more cautious comments at the IMF meetings, leading some forecasters to doubt an April Bank of Japan (BoJ) rate hike. Surveyed BoJ watchers still mostly expect tightening by end-June, while stronger real wages and upcoming Consumer Price Index (CPI) data are seen as key inputs for the policy path.

Ueda signals and domestic data watched

"Governor Ueda has provided various hawkish signals this year. That said, the remarks he made at the Washington IMF meetings last week were interpreted by some commentators as a deliberate attempt to steer clear of providing the market direct guidance on interest rate policy."

"In contrast, many commentators had expected the Governor to use the opportunity to prepare the market for a rate hike at the April 28 policy meeting. As a result some forecasters have become more dubious as to whether the BoJ will push forward with a rate hike next week."

"The result of the most recent Reuters survey indicated that 2/3rds of BoJ watchers are confident that the BoJ will hike rates by the end of June. The survey suggested that similar probabilities are assigned to the move coming in April or June."

"Other recent economic data releases have shown a stronger than expected 1.9% y/y rise in February real wages, marking the second consecutive gain. This will encourage optimism that Japan was moving towards an environment of improved domestic demand ahead of the war which strengthens the case for a rate hike this month."

"Japanese March national CPI inflation data are due for release on April 24. This release will likely be watched carefully by policymakers."

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

Royal Bank of Canada (RBC) economist Abbey Xu notes that Canadian headline Consumer Price Index (CPI) rose to 2.4% year-over-year, mainly on higher energy prices linked to conflict in the Middle East and tax distortions. However, Bank of Canada (BoC) core measures, including CPI-trim and CPI-median, show easing underlying inflation. Xu argues this gives the Bank of Canada flexibility given a still soft economic backdrop.

Core measures signal easing inflation trend

"The rise in headline CPI growth to 2.4% year-over-year was primarily driven by higher energy prices due to conflict in the Middle East, but broader underlying inflation pressures showed further signs of easing under the surface."

"In contrast, the Bank of Canada's own measures of core inflation (which exclude the impact of tax changes, as well as volatile swings in energy prices) remain consistent with cooling underlying inflation momentum."

"CPI-trim, CPI-median and trim services excluding shelter averaged 1.7% on an annualized three-month rolling average basis."

"That marks a continuation of the gradual easing trend in underlying inflation pressures, and the share of products with larger-than-usual month-over-month price increases has been lower year-to-date in 2026."

"While some components, particularly grocery prices and rent, are still running well above (~4%) year-ago levels, the March report reinforces our view that recent increases in oil prices can push headline inflation higher in the near term but are unlikely to re-ignite broader inflation pressures."

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

HSBC strategists highlight this year’s sharp volatility, with prices swinging between about USD 4,405 and USD 5,450 per ounce before stabilising near USD 4,800. They see near-term price action as highly headline-driven, but expects a softer US Dollar (USD) and structural risks to support Gold over the longer term.

Volatility, geopolitics and structural supports

"Gold has been highly volatile this year, rising to a record cUSD5,450 per ounce on 30 January before falling to a 2026 low of cUSD4,405 per ounce on 23 March, and recovering to cUSD4,800 per ounce."

"The pullback reflects heavy liquidation amid USD strength, higher US yields, elevated oil prices, weaker equities, alongside the ongoing Middle East conflict. Since the escalation, markets have priced out at least 25bp of expected easing from the Federal Reserve (Fed) by end-2026, which is also a headwind for gold."

"Over the near term, our precious metals analyst expects gold to remain headline driven. FX is also likely to remain sensitive to shifts in geopolitical risk, with increased tensions typically supporting the USD and vice versa."

"But over the longer term, we still see a soft USD, which should be supportive for gold. Even if energy-market after-effects persist, a post-conflict environment could allow gold to maintain upward momentum, underpinned by geopolitical risk, economic policy uncertainty, potential USD weakness, shifts in the global order, and ongoing central bank demand."

"Mine supply is expected to increase modestly in 2026-27, while recycling should rise more meaningfully after a muted response to date. On the demand side, elevated prices are weighing on jewellery and coin purchases, particularly in price-sensitive emerging markets and increasingly in developed markets. These shifts have not yet undermined the broader rally, but risks would increase if investment demand remained subdued for an extended period."

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

BNP Paribas expects Eurozone Gross Domestic Product (GDP) growth to edge up to 1.6% in 2026 from 1.5% in 2025, supported by German fiscal measures, higher military spending and AI-related investment. However, an energy shock linked to Middle East developments leads the bank to project three European Central Bank (ECB) rate hikes in 2026, taking the deposit rate to 2.75% and raising uncertainty around the outlook.

Energy shock drives ECB rate hikes

"After holding up well in 2025 (1.5%), growth is expected to strengthen in 2026 (+1.6%)."

"It is expected to grow at a stable quarterly rate of 0.5% over the year."

"The roll-out of fiscal measures in Germany and the planned increase in military spending and AI-related investment in Europe, against a backdrop of labour market resilience, underpin this scenario."

"This momentum will nevertheless be undermined by the energy shock linked to developments in the Middle East, which leads us to revise our monetary policy scenario for 2026: the ECB would implement three successive rate hikes (June, July, September), bringing the deposit rate to 2.75%."

"In this context, this tightening would increase uncertainty regarding our growth outlook, without invalidating it at this stage."

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

Quoting a senior Iranian official, Reuters reported on Monday that Iran is positively reviewing its participation in the next round of peace talks with the United States, but no final decision has been made.

"Positive efforts are underway by Pakistan to end the US blockade, ensure Iran's participation in talks," the official said.

Market reaction

This headline seems to be helping the market mood improve slightly. At the time of press, the US Dollar Index (DXY) was down 0.1% on the day at 98.12.

• EUR/GBP trades around 0.8700, showing little change on the day.
• Political scrutiny of UK Prime Minister Keir Starmer weighs on the Pound Sterling.
• German Producer Price Index rises 2.5% in March, its strongest monthly increase since August 2022.

EUR/GBP trades around 0.8700 on Monday, remaining broadly stable on the day at the time of writing as opposing forces between the Euro (EUR) and the Pound Sterling (GBP) keep the cross within a narrow range.

The British currency is facing some pressure as political scrutiny intensifies around UK Prime Minister Keir Starmer. The Prime Minister is due to address the House of Commons regarding the vetting process linked to the appointment of former UK ambassador to the US Peter Mandelson. The appointment triggered controversy last year because of Mandelson’s past ties with convicted sex offender Jeffrey Epstein. Opposition parties accuse Starmer of misleading Parliament over the security checks conducted for the position, increasing political uncertainty in the United Kingdom (UK) and limiting support for the Pound Sterling.

At the same time, the broader market environment remains cautious as investors monitor geopolitical developments in the Middle East. The peace process between the United States (US) and Iran appears fragile after Washington seized an Iranian cargo ship attempting to cross the Strait of Hormuz. Iranian authorities have suggested they may not attend the next round of talks scheduled for Tuesday, accusing the US of violating the ceasefire. This backdrop is encouraging a generally cautious tone across currency markets.

On the macroeconomic front, the Euro receives some support from inflation-related data in Germany. Germany’s Producer Price Index (PPI) increased by 2.5% on a monthly basis in March, marking its strongest reading since August 2022. On a yearly basis, however, the index declined by 0.2% following a 3.3% drop in February. The sharp monthly increase highlights the inflationary effects of rising energy prices linked to tensions in the Middle East and could reinforce expectations that the European Central Bank (ECB) may need to consider tighter monetary policy later this year.

In the United Kingdom, the economic calendar is relatively light at the start of the week, but attention will quickly shift to a series of key releases. Investors are awaiting the labour market report for the three months ending in February, due on Tuesday, followed by Consumer Price Index (CPI) data for March on Wednesday and Retail Sales figures on Friday. Economists expect wage growth to slow while the Unemployment Rate is forecast to remain steady at 5.2%, developments that could give the Bank of England (BoE) room to keep interest rates unchanged at its upcoming policy meeting.

ING’s Warren Patterson and Ewa Manthey note that Aluminium prices briefly dropped as Iran pledged to keep the Strait of Hormuz open during a ceasefire, but renewed closure has refocused markets on supply risk. They stress that Middle East disruptions, including at major smelters, have pushed Aluminium into structural deficit, with tight supply likely to underpin prices despite near-term volatility.

Middle East supply shock drives deficit

"LME aluminium prices fell by over 5.5% at one point on Friday after Iran announced it would keep the Strait of Hormuz open during a 10‑day ceasefire between Israel and Hezbollah. The move briefly fuelled optimism for de-escalation. The critical route for global aluminium trade had been closed since late February following US and Israeli strikes on Iran. Prices climbed to a four‑year high last week amid supply disruptions."

"However, the Strait was closed again over the weekend, highlighting the fragility of the ceasefire and keeping geopolitical risks firmly in focus. The region accounts for roughly 9% of global aluminium production. It’s a key supplier to Europe, leaving the market highly exposed to renewed disruptions."

"As outlined in our latest note, the shock is no longer just logistical. Aluminium has moved into a structural deficit, with risks skewed to the upside if disruptions persist."

"Disruptions at Emirates Global Aluminium’s Al Taweelah smelter, reduced output at Alba, and earlier curtailments at Qatalum could remove nearly 3 mtpa of capacity, almost half of Middle East production. This would potentially widen the global supply deficit to 2Mt."

"Given the difficulty of restarting smelting capacity, tight supply conditions are likely to continue supporting aluminium prices despite near‑term volatility."

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

MUFG’s Lee Hardman notes that the US Dollar (USD) has rebounded at the start of the week, lifting the Dollar Index (DXY) back towards its 200-day moving average near 98.500 after Friday’s low around 97.63. He links the move to renewed uncertainty over the US–Iran situation, which has also supported Brent and weighed on high beta commodity currencies.

Middle East risks support Dollar recovery

"The US dollar has staged a modest rebound at the start of this week helping to lift the dollar index back up closer to the 200-day moving average at around 98.500 after it fell to a low of 97.632 on Friday."

"The US dollar has been supported by fresh uncertainty over the Middle East conflict which has dampened recent optimism over further deescalation and the re-opening of the Strait of Hormuz."

"Tensions between the US and Iran picked up over the weekend after the US navy fired upon and boarded an Iranian-flagged cargo ship in the Gulf of Oman. It was the first seizure since the US blockade of the Strait was put in place."

"At the same time, it has been reported that Iran’s Islamic Revolutionary Guard Corps (IRGC) fired on multiple commercial vessels in the Strait as Iran reimposed “strict control” after briefly announcing on Friday that it has re-opened."

"The latest developments have cast doubt on whether further talks will take place between the US and Iran before the two-week ceasefire comes to an end tomorrow."

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