Forex News

Danske Research Team notes that EUR/USD has modestly rebounded above 1.16 following recent Dollar strength after Fed Chair Kevin Warsh’s Jackson Hole speech. They also highlight contained underlying inflation pressures across major euro-area economies, while markets await the region’s flash inflation, unemployment and final manufacturing PMI data.

Pair recovers above 1.16 level

"In the euro area, we receive the flash inflation data for August. National releases from France and Spain were broadly as expected in headline terms, while the German print came in slightly lower than expected."

"In Germany, HICP inflation increased to 2.9% y/y in August (cons: 3.1%, prior: 2.8%), slightly below expectations. The details showed higher energy and core goods inflation, while services and food inflation declined, leaving core CPI unchanged at 2.4% y/y. "

"Goods prices increased strongly for the second consecutive month, suggesting we are starting to see some indirect effects from higher energy prices, but services momentum remained very low at 0.15% m/m s.a. Overall, core inflation momentum is still contained at 2.5% 3m/3m SAAR, indicating that energy prices are not transmitting broadly to underlying inflation - similar to the picture in France and Spain last week."

"Importantly, underlying inflation pressures remained contained across the three countries: core inflation either declined or was unchanged with a continued muted momentum. This suggests that the energy price shock has not yet spilled over to underlying inflation. We therefore expect headline inflation to rise to 3.2% y/y, while core inflation should decline to 2.4% y/y."

"In the currency market there was a modest rebound in the EURUSD, which is back above 1.16, while USDJPY moved below 160 after the strengthening of the dollar on the back Fed Chairman Warsh's speech on Friday at the conference at Jackson Hole."

"Also from the euro area, we get data on unemployment which is expected to stay at 6.3% and the final manufacturing PMI for August that is expected to confirm the flash release of 52.8."

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

• The USD/CAD pair ticks higher to near 1.3863 as US-Canada trade frictions weigh on the Canadian Dollar.
• The BoC is expected to leave interest rates unchanged at 2.25% on Wednesday.
• Higher US Treasury Yields provide a cushion to the US Dollar.

The US Dollar (USD) trades slightly higher to near 1.3863 against the Canadian Dollar (CAD) during the European trading session on Tuesday. The Loonie pair remains broadly as ongoing trade tensions between the United States (US) and Canada have put the Canadian Dollar under pressure.

USD/CAD upside seen as trade tensions reinforce loonie’s funding role

According to TD Securities, the latest escalation in US–Canada trade tensions "reinforces the CAD's role as a carry funding currency" and leaves them cautious on the Loonie. In a punchier assessment, TD sums up the backdrop as "elbows up, USD/CAD up," noting that the trade tension escalation between the US and Canada "presents asymmetric upside risk in USD/CAD and reinforces CAD's role as a carry funding currency in the FX market."

This week, investors will pay close attention to the Bank of Canada’s (BoC) monetary policy decision on Wednesday.

BoC seen holding at 2.25% with balance sheet policy unchanged

Analysts at National Bank of Canada expect the BoC to stay firmly on the sidelines at the upcoming decision, noting that "the Bank of Canada is set to leave its overnight target unchanged at 2.25%, a decision widely expected by forecasters and OIS markets." They highlight that such an outcome "would mark the seventh consecutive hold," underscoring the central bank’s steady policy stance, and add that "we don't expect any changes to balance sheet policy," reinforcing the view that the current framework will be maintained.

Meanwhile, surging US Treasury Yields due to rising oil prices in the wake of renewed US-Iran war continue to offer support to the US Dollar.

On the domestic front, investors await the US ISM Manufacturing PMI data for August and the JOLTS Job Openings data for July, which will be published at 14:00 GMT.

USD/CAD Technical Analysis

In the daily chart, USD/CAD trades at 1.3865, maintaining a mildly bearish near-term tone as it holds below the 20-period Exponential Moving Average (EMA) at 1.3896 and the 50.0% Fibonacci retracement at 1.3900. The pair’s inability to reclaim these nearby overhead levels keeps the latest rebound in check, while the Relative Strength Index (14) at 43.5 stays below the neutral 50 line, hinting that upside momentum remains subdued for now.

On the topside, immediate resistance is clustered at the 20-period EMA at 1.3896 and the 50.0% retracement at 1.3900, followed higher by the 38.2% Fibonacci level at 1.3982 and the 23.6% retracement at 1.4084. On the downside, initial support emerges at the 61.8% Fibonacci retracement at 1.3817, ahead of deeper structural levels at the 78.6% retracement at 1.3700 and the prior swing low area aligned with the 100% retracement at 1.3551.

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

• EUR/USD remains steady above 1.1600, with upside attempts contained below 1.1620.
• German Retail Sales dropped 3.4% in July, their worst performance in more than four years.
• The focus now is on the Eurozone's preliminary HICP figures for August, due later on Tuesday.
  

The Euro (EUR) nudges lower against the US Dollar (USD) on Tuesday, giving away some of Monday's gains, with the EUR/USD pair hovering just above 1.1600, following rejection at the 1.1620 area. German Retail Sales data have not been particularly supportive, but the market might await the Eurozone Harmonized Index of Consumer Prices (HICP) release, due later on the day to make investment decisions.

Data released by the German Statistics Office on Tuesday revealed that German retail consumption dropped 3.4% in July, its sharpest decline in more than four years, against market expectations of a 0.4% increase and following a flat performance in June.

Eurozone inflation on tap

Later on the day, the Eurozone’s preliminary Harmonised Index of Consumer Prices (HICP) is expected to show that inflationary pressures accelerated to a 3.3% year-on-year rate in August, from 2.9% in July. These numbers would provide further reasons for the European Central Bank to hike interest rates at its monetary policy meeting due later in August.

The euro, however, is facing headwinds from the higher Oil prices stemming from the escalating tensions between the US and Iran. The price of the Brent barrel remains above $90, after rising more than 6% from last week’s lows, boosted by the resumption of hostilities between the US and Iran. These prices pose serious pressure on the Eurozone's economic growth.

In the Middle East, a tense calm reigned on Monday, but tensions remain high. US President Donald Trump threatened further action, as the US military attempts to curb Iranian capabilities to control sea traffic through the Strait of Hormuz, a corridor used to transport about a fifth of the global Oil supply before the war.

Political pressure on the Fed is weighing on the US Dollar

The US Dollar was boosted last week by hawkish comments from the Federal Reserve Chairman, Kevin Warsh, at the Jackson Hole meeting, but concerns about the independence of the US central bank remain alive and keep weighing on the US Dollar, which is failing to rally as it did in previous times when geopolitical tensions rose.

Analysts at BNP Paribas note that "President Trump has been relentlessly attacking the Federal Reserve and its leadership out of anger that they have not cut interest rates more." Against this background, markets are "unsure whether the Chairman he appointed will deliver the policy tightening that appears likely to be needed to restore price stability," say the BNP Paribas experts, underscoring concerns that persistent political interference could further undermine confidence in the central bank’s policy trajectory.

Commerzbank strategists argue that stronger-than-expected Q2 2026 Gross Domestic Product (GDP) at 7.8% yoy reinforces India’s relative growth advantage and reduces expectations of Reserve Bank of India (RBI) easing. They see upside risk to RBI’s FY2026-27 growth forecast, but warn about Oil, food and external demand risks. They maintain a near-term USD/INR range of 94–96, noting modest post-data Indian Rupee (INR) gains.

Rupee aided by robust GDP

"The economy expanded by a stronger-than-expected 7.8% yoy in Q2 2026 (Bloomberg consensus: 7.3%), while Q1 was revised up to 8.6% from 7.8% initially. The expansion was relatively broad-based, pointing to continued strength in both household demand and investment. It underscores the economy’s resilience despite the Middle East conflict and higher energy costs. "

"The strong report puts calendar H1 2026 growth at around 8.2% on a GDP basis and 8.4% on a GVA basis. More importantly, the 7.8% April-June print, the first quarter of FY2026-27, is comfortably above RBI’s 6.7% full-year growth forecast. Some moderation is likely as favourable base effects fade and higher energy costs weigh on real incomes and corporate margins."

"However, given the stronger-than-expected starting point and continued momentum in investment and manufacturing, there is now an upside risk to RBI’s FY2026-27 growth forecast, and the central bank could revise it higher at its 7 October meeting."

"We continue to look for a 94-96 range in the near term. A sustained INR appreciation would likely require a more durable decline in oil prices and an improvement in the external risk backdrop."

"For monetary policy, positive growth momentum further reduces the need for the RBI to provide additional accommodation and gives policymakers more room to focus on inflation risks. RBI is projecting FY2026-27 CPI inflation at 5.0%. It can remain in a wait-and-see mode for now, while a renewed spike in oil prices and evidence of second-round inflation effects remain the key risks."

"For INR, the growth surprise is modestly supportive as it reinforces India’s relative growth advantage, reduces expectations of monetary easing, and could encourage portfolio inflows. USD/INR eased around 0.2% to near 95.20 following the release."

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

German Retail Sales, a key measure of consumer spending, showed a downside in July. The consumer spending measure fell 3.4% month-on-month (MoM), according to official data released by Destatis, while it was expected to have increased 0.4%. In June, Retail Sales arrived at 0% (revised from -1.1%).

On an annualized basis, Retail Sales dropped 2.5% in July, compared to the prior release of a 0.2% decline. 

Market reaction

The Euro (EUR) edges slightly lower following the Germany’s Retail Sales release. As of writing, the EUR/USD pair is down 0.09% on the day at 1.1607.