Forex News
European Central Bank (ECB) Governing Council member and President of the Deutsche Bundesbank, Joachim Nagel, said during the European trading session on Thursday that the central bank could raise interest rates if the outlook for the Eurozone economy doesn’t improve markedly. The ongoing conflicts between the United States (US) and Iran have dampened the global growth outlook and have de-anchored inflation expectations.
Market reaction
No immediate response from the Euro (EUR) after ECB Nagel's comment. As of writing, EUR/USD trades 0.15% higher to near 1.1765 due to weakness in the US Dollar (USD).
(This story was corrected at 07:50 GMT to say in the first paragraph that Joachim Nagel said during the European trading session on Thursday, and not Friday.)
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
Danske Research Team expects the central bank of Norway, Norges Bank to raise its policy rate by 25bp to 4.25% at the interim meeting, arguing there is little reason to delay given earlier hawkish signals. They also look for verbal guidance towards a second hike in June, while noting housing and labour data suggest the cost of re-anchoring inflation expectations remains manageable.
Policy rate hike and June guidance expected
"In Norway, we expect Norges Bank to raise the policy rate by 25bp to 4.25%. The March meeting indicated a rate hike was likely at one of the forthcoming monetary policy meetings, with the rate path suggesting a higher probability for June."
"However, the hawkish stance, aimed at re-anchoring inflation expectations, supports an earlier move. Given this, we see little reason for Norges Bank to delay the increase, particularly as two of the five committee members had already voted for a rate hike at the March meeting."
"Additionally, Statistics Norway will release Q1 wage figures, where monthly data point to annual growth slowing to 3.5%, noticeably below this year's wage estimates. This suggests that wage drift from late last year into this year may have been weaker than anticipated."
"In Norway, Norwegian house prices increased by 0.6% month-over-month in April, surpassing Norges Bank's forecast of 0.2%. While partially influenced by Easter effects, the annual growth rate of 3.8% remains below wage growth, highlighting the restrictive impact of monetary policy. Additionally, the vacancy rate rose to 3.0% in Q1, the highest since Q1 2025, underscoring strong labour demand and a tightening labour market."
"Despite these developments, the cost of re-anchoring inflation expectations appears manageable, supporting Norges Bank's cautious approach."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
BNY’s Geoff Yu argues that changing gilt ownership patterns limit downside for the Pound (GBP) even as United Kingdom (UK) fiscal risks rise. Foreign investors have already reduced exposure, leaving domestic buyers dominant. While markets price stronger fiscal impulse after local elections, BNY expects any fiscal loosening to avoid a repeat of 2022’s minibudget shock for GBP.
Gilt ownership shifts temper Pound risk
"If we assume that inflation premia will be reduced across European government bond curves, then fiscal premia will return to the fore, and this is where the challenges for the gilt market will be more pronounced."
"Depending on local election results, markets are pricing in policy uncertainty, with most scenarios tilting toward a stronger fiscal impulse."
"Even if fiscal loosening is the outcome, we don’t foresee an impact along the lines of the 2022 minibudget shock, and GBP’s downside may be more contained this time."
"Our data indicate that aggregate gilt demand is at its highest levels in years – yet gilt selling by cross-border investors also hit multi-year highs."
"If the months ahead point to a need to add to U.K. fiscal risk via gilts, cross-border institutional investors likely do not have the scale to do so."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- USD/CAD posts modest gains near 1.3635 in Thursday’s early European session.
- The negative outlook of the pair remains intact below the key 100-day EMA, with bearish RSI momentum.
- The first upside barrier emerges at 1.3678; the initial support level is seen at 1.3548.
The USD/CAD pair trades with mild gains around 1.3635 during the early European trading hours on Thursday. Hopes for a US-Iran peace deal to end the war drag crude oil prices lower, weighing on the commodity-linked Canadian Dollar (CAD) against the US Dollar (USD).
US President Donald Trump said on Wednesday that he had “very good talks” with Iran, adding that “it’s very possible we’ll make a deal.” Meanwhile, Iran’s Foreign Ministry spokesman, Esmaeil Baghaei, stated that a US proposal to end the war is still “under review," and Tehran will convey its response to mediator Pakistan after "finalizing its views.”
Technical Analysis:
In the daily chart, USD/CAD keeps a bearish near-term tone as spot holds beneath the 20-period simple moving average (SMA) and the 100-period exponential moving average (EMA) near 1.3740. Price is consolidating in the lower half of the recent Bollinger envelope, while the Relative Strength Index (14) at about 42 suggests waning downside momentum but not yet an oversold condition.
On the topside, initial resistance is aligned with the Bollinger midline at 1.3678, followed by the 100-period EMA at 1.3740, with a stronger cap emerging near the upper Bollinger band around 1.3808. On the downside, the next notable support sits at the lower Bollinger band around 1.3548, where a clear break would open the way to deeper losses, while holding above this floor would keep the pair in a corrective range under the cited moving averages.
(The technical analysis of this story was written with the help of an AI tool.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
OCBC strategists Sim Moh Siong and Christopher Wong highlight that recent USD/JPY moves likely reflect Japanese intervention, with 158 replacing 160 as the key line. They argue that intervention alone will not change the broader trend without stronger Bank of Japan (BoJ) policy and lower US yields or Oil. OCBC sees scope for further intervention to push USD/JPY into 150–155 and keeps its end‑2026 target at 155.
Intervention signals and policy limits
"USD weakened broadly overnight, but JPY price action stood out as the clearest policy signal. Moves were consistent with Japanese intervention, though authorities have not confirmed activity either overnight or last week."
"Market behaviour suggests official involvement. If 160 in USD/JPY marked the line in the sand previously, the latest trigger appears closer to 158."
"The key question is whether the Ministry of Finance will continue to defend the yen or has already deployed sufficient firepower. Intervention alone is unlikely to shift the broader trend unless backed by stronger policy support like a more assertive BoJ hiking cycle or better alignment with external drivers such as lower oil prices and US yields"
"Further intervention could push USD/JPY into the 150 to 155 range, especially if oil prices further decline. However, we remain cautious. A June BoJ hike looks likely, but policy still lags the curve, limiting sustained JPY support. We maintain our end-2026 USD/JPY target at 155."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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