Forex News
Citing Iranian sources, several news outlets reported on Friday that Iran has prepesented a new proposal to end the war and a response to the United States' (US) amendments through Pakistani mediators on Thursday.
Market reaction
With the immediate reaction to this headline, the US Dollar (USD) weakened against its rivals. At the time of press, the USD Index was down 0.23% on the day at 97.88. Meanwhile, US stock index futures continue to trade mixed, with the S&P 500 Futures rising 0.15% and the Nasdaq Futures losing about 0.2% on the day.
Minneapolis Federal Reserve President Neel Kashkari explained on Friday that he dissented at the April policy meeting because the uncertainty around the Strait of Hormuz means the Fed should acknowledge the risk of rate hikes in its statement.
Key takeaways
"A large enough price shock could put inflation expectations at risk, potentially requiring a series of rate increases for the Fed to keep credibility in defending its 2% inflation target."
"The price shock from a prolonged closure of the strait could put inflation expectations at risk, require a strong policy response."
"Even the bening scenario where Strait of Hormuz opens soon would leave inflation so high rates would need to stay on hold for an extended period."
"Prior to war, had seen inflation likely to decline and warrant another rate cut this year; situation had not changed enough in March to modify the policy statement.
Market reaction
The US Dollar struggles to gather strength following these comments. At the time of press, the USD Index was down 0.2% on the day at 97.90.
Bank of England (BoE) Chief Economist Huw Pill said on Friday that a tightening in financial conditions seem as a reasonable response to the inflation risk from the US-Iran war, per Reuters.
Key takeaways
"Monetary Policy Committee (MPC) does not want to lock itself in on rates, needs to remain flexible."
"But MPC has also stressed it is ready to act if necessary."
"Main difference between my position and majority of MPC is that I was more concerned about stalling of disinflation before Iran war."
"As a result, I thought we should be acting more promptly in response to new inflation pressure."
Market reaction
GBP/USD showed no immediate reaction to these comments and was last seen rising 0.1% on the day at 1.3617.
US ISM Manufacturing PMI Overview
The United States (US) Institute of Supply Management (ISM) Manufacturing Purchasing Managers’ Index (PMI) data for April is scheduled to be published today at 14:00 GMT.
According to estimates, the ISM is expected to report that the manufacturing activity expanded at a faster pace. The Manufacturing PMI is seen higher at 53.0 from 52.7 in March.
Theoretically, better-than-projected US ISM Manufacturing PMI data prompt expectations for interest rate hikes by the Federal Reserve (Fed) in the near term. On the contrary, soft figures diminish hawkish Fed prospects. However, weak figures are unlikely to weigh on hawkish Fed bets, as the recent commentary from Fed Chair Jerome Powell indicates that the central bank is more concerned about rising inflationary pressures.
Apart from the Manufacturing PMI, investors will also focus on sub-components of data, such as Employment Index, Prices Paid, and New Orders Index. ISM Manufacturing Prices Paid – which reflects changes in expenditure for inputs such as labor and raw material – is estimated higher at 80.0 from the previous reading of 78.3. This appears to be the consequence of elevated energy prices in the wake of the prolonged closure of the Strait of Hormuz. The ISM Employment Index is seen arriving at 49.0, higher than 48.7 in April.
How could US ISM Manufacturing PMI affect the EUR/USD?
EUR/USD trades 0.17% higher at around 1.1750 ahead of the US ISM Manufacturing PMI data release, close to the 50% Fibonacci retracement at 1.1745 of the 1.1408-1.2082 leg. The major currency pair holds a constructive bullish bias as it stays above the 20-day exponential moving average (EMA), which is around 1.1703. This positioning suggests that pullbacks could be considered for dip-buying.
The Relative Strength Index (RSI) at about 56 leans to the topside without yet signaling overbought conditions.
On the topside, immediate resistance emerges at the 61.8% Fibonacci retracement near 1.1825, followed by 1.1938 at the 78.6% retracement and the recent cycle high region around 1.2082.
Looking down, initial support is seen at the 20-period EMA at 1.1703; a break lower would expose deeper Fibonacci supports at 1.1666 and then 1.1567, with 1.1408 acting as a more distant structural floor.
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
ISM Manufacturing PMI
The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI), released on a monthly basis, is a leading indicator gauging business activity in the US manufacturing sector. The indicator is obtained from a survey of manufacturing supply executives based on information they have collected within their respective organizations. Survey responses reflect the change, if any, in the current month compared to the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the US Dollar (USD). A reading below 50 signals that factory activity is generally declining, which is seen as bearish for USD.
Read more.Next release: Fri May 01, 2026 14:00
Frequency: Monthly
Consensus: 53
Previous: 52.7
Source: Institute for Supply Management
The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) provides a reliable outlook on the state of the US manufacturing sector. A reading above 50 suggests that the business activity expanded during the survey period and vice versa. PMIs are considered to be leading indicators and could signal a shift in the economic cycle. Stronger-than-expected prints usually have a positive impact on the USD. In addition to the headline PMI, the Employment Index and the Prices Paid Index numbers are watched closely as they shine a light on the labour market and inflation.
- GBP/JPY returns to levels beyond 213.00 after bouncing from 211.78 lows earlier on Friday.
- The Yen spiked up during the early European session amid another alleged intervention by Japan.
- The BoE warned about the complicated combination of high inflation and lower growth.
The Pound (GBP) has turned positive on the daily chart against the Japanese Yen (JPY) on Friday, trading at levels a few pips above 213.00 at the time of writing, up from session lows at 211.78 earlier in the day.
The pair plunged about 200 pips without any clear fundamental reason during the early European trading session, with all Yen pairs depreciating simultaneously in what is likely to be the second intervention by the Japanese Ministry of Finance (MOF) in the last two days.
A senior Japanese official had warned markets that Tokyo could act again, taking advantage of thinned trading volumes due to the May 1 Labour Day holiday, to enhance the impact, as Japan heads into the Golden Week holidays.
The pair dropped a maximum of nearly 600 pips on Thursday, although it managed to regain almost half of the lost ground by the end of the day. The Yen surged across the board, also without a clear fundamental reason to justify it, after the USD/JPY crossed the 160.00 line, a key level considered a trigger for action by the Japanese authorities.
In the UK, the Bank of England (BoE) left its benchmark interest rate on hold at the current 3.75% rate with 8 votes to 1, and Governor Andrew Bailey warned about the “most difficult combination,” referring to higher energy prices and weakening economic growth. The Pound, however, appreciated against its main currency peers following the event.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
- Japanese Yen falls back against the US Dollar, with the USD/JPY pair rebounding to near 156.55.
- Japan’s FM Katayama warned of possible intervention on Thursday.
- The Fed is largely expected to keep interest rates at their current levels by the year-end.
The Japanese Yen (JPY) gives up gains recorded in the early European trade against the US Dollar (USD) during the early North American trading session on Friday. The USD/JPY pair rebounds to near 156.55 after sliding to around 155.50, but is still marginally down.
In the early European session, a sudden spike was observed in the Japanese Yen, which was expected to be due to possible Japanese intervention in forex markets. However, there had been no official announcement regarding the same.
A stealth intervention by Japan was highly anticipated as Finance Minister (FM) Satsuki Katayama said on Thursday that they are moving closer to taking decisive action in the foreign exchange markets.
Meanwhile, the upside in the USD/JPY pair is expected to be limited as the US Dollar (USD) is broadly underperforming despite expectations that the Federal Reserve (Fed) will not cut interest rates for the entire year.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.16% | -0.08% | -0.05% | -0.11% | 0.07% | 0.27% | -0.13% | |
| EUR | 0.16% | 0.08% | 0.11% | 0.03% | 0.25% | 0.42% | 0.03% | |
| GBP | 0.08% | -0.08% | 0.02% | -0.03% | 0.15% | 0.32% | -0.02% | |
| JPY | 0.05% | -0.11% | -0.02% | -0.06% | 0.12% | 0.27% | -0.07% | |
| CAD | 0.11% | -0.03% | 0.03% | 0.06% | 0.17% | 0.36% | 0.00% | |
| AUD | -0.07% | -0.25% | -0.15% | -0.12% | -0.17% | 0.18% | -0.16% | |
| NZD | -0.27% | -0.42% | -0.32% | -0.27% | -0.36% | -0.18% | -0.36% | |
| CHF | 0.13% | -0.03% | 0.02% | 0.07% | -0.00% | 0.16% | 0.36% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
According to the CME FedWatch tool, the odds of the Fed keeping interest rates unchanged in the current range of 3.50%-3.75% by the year end is 83.6%.
In Friday’s session, investors will focus on the US ISM Manufacturing Purchasing Managers’ Index (PMI) data for April, which will be published at 14:00 GMT. The US ISM Manufacturing PMI is expected to come in higher at 53.0 from 52.7 in March.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
European Central Bank (ECB) governing council member and Governor of the Central Bank of Ireland, Gabriel Makhlouf, said in his blog on the Irish central bank's website on Friday that he will be vigilant to the indirect effects of higher energy prices on production, transportation, and services, Reuters report.
Remarks
I will be paying close attention to indirect effects, that is how higher energy prices are contributing to cost-push inflation in production, transportation, and services.
Potential second-round effects via wages will take longer to show up, given the staggered nature of wage-setting in Europe. In the meantime, inflation expectations need to be closely monitored for signs of de-anchoring.
Market reaction
There seems to be no impact of ECB Makhlouf's comments on the Euro (EUR). As of writing, EUR/USD trades 0.2% higher to near 1.1755 due to weakness in the US Dollar (USD).
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.
- EUR/USD extends gains on Friday, approaching weekly highs, at 1.1755.
- Another alleged Yen intervention has hit the US Dollar on a holiday-thinned market.
- The Euro bounced up on Thursday amid hot Eurozone inflation and a hawkish hold by the ECB.
The Euro (EUR) has turned positive against a weaker US Dollar (USD) on Friday, and is trading at 1.1742 at the time of writing, a few pips short of the top of the weekly trading range, at 1.1755. An alleged intervention by Japanese authorities, presumably the second in the last two days, hit the USD/JPY earlier on Friday, hammering the Greenback in thinned Labour Day trading.
The USD/JPY dropped nearly 200 pips in a matter of seconds at the early European session, in a move that reverberated throughout the market, sending the US Dollar lower across the board. The EUR/USD, which hitherto was featuring moderate losses, resumed its positive trend from Thursday's lows at 1.1655.
The pair regained lost ground on Thursday, as investors prioritised the hot Eurozone inflation figures over the weakening Gross Domestic Product (GDP) figures. Later on, the European Central Bank (ECB) delivered a "hawkish hold," keeping interest rates unchanged but hinting at a rate hike in the near term.
The ECB's stance was reaffirmed by the Bundesbank president and committee member, Joachim Nagel, who said on Friday that the baseline scenario entails a more restrictive monetary policy and flagged the possibility of a rate hike in June.
Meanwhile, the situation in the Middle East remains stalled. The US and Iran have continued exchanging threats, with the Strait of Hormuz entering its third month of blockade and no credible plan to reopen it at sight. Oil prices are above the key $100, with Brent Oil at $113.94 at the time of writing, a very painful level for Eurozone Crude-importing economies, which will, highly likely, weigh on the Euro in the long run.
Technical Analysis: EUR/USD keeps looking for direction around 1.1700
From a technical perspective, the EUR/USD remains trapped within a broadly 100-pip range, with support above 1.1650 holding bears and upside attempts limited below 1.1750.
Technical indicators on the 4-hour chart are showing an improving momentum. The Relative Strength Index (RSI) reaches the 60 level, and the Moving Average Convergence Divergence (MACD) is showing a widening green histogram, suggesting that the bullish momentum is gathering pace.
Bulls, however, would need to break the mentioned 1.1755 resistance (April 27 high) to confirm that the bearish correction from 1.1850 highs has been completed. Further up, the April 20 high near 1.1790 is likely to test the Euro's recovery ahead of April's peak, right below 1.1850.
Bears, on the other hand, are struggling to extend dips below a cluster of supports between 1.1675 and the April 8 intraday low, near 1.1645. A confirmation below here would clear the way to the 61.8% Fibonacci retracement of the early April rally, at 1.1580, and the April 2 and 3 low, near 1.1500.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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