Forex News
- GBP/USD struggles to capitalize on its recent goodish recovery from over a one-month trough.
- Geopolitical uncertainties and Fed rate hike bets support the USD, capping gains for spot prices.
- Expectations for a less hawkish BoE and UK political chaos undermine the GBP, favoring bears.
The GBP/USD pair seesaws between tepid gains/minor losses through the Asian session on Thursday, though it remains close to the weekly high touched the previous day. Spot prices currently trade around the 1.3430 region, nearly unchanged for the day, as traders seem hesitant to place aggressive directional bets amid mixed signals over the US-Iran peace deal.
US President Trump said on Wednesday that the US is in the "final stages" of talks with Iran. Adding to this, US Vice President JD Vance also struck an optimistic tone and stated that Iran wanted to make a deal. The initial optimism, however, turned out to be short-lived on the back of Trump's warning of more military action if Iran did not agree to a peace deal. Furthermore, major disagreements over Iran's nuclear program and the critical Strait of Hormuz keep geopolitical risk premium in play, supporting the safe-haven US Dollar (USD) and keeping a lid on the GBP/USD pair.
Meanwhile, Minutes from the Federal Reserve’s (Fed) April 28–29 meeting revealed that a majority of policymakers believe that policy firming would likely become appropriate if inflation continued to run persistently above the 2% target. This reaffirms market bets that the US central bank will raise borrowing costs by 25 basis points (bps) in 2026 and turns out to be another factor underpinning the USD. This marks a significant divergence in comparison to diminishing odds for immediate policy tightening by the Bank of England (BoE) and contributes to capping the GBP/USD pair.
Traders pushed back their expectations for the next BoE rate hike to December following the release of softer-than-expected UK consumer inflation figures on Wednesday. The UK Office for National Statistics (ONS) reported that the headline Consumer Price Index (CPI) inflation eased to 2.8% over the year in April from 3.3% in March, missing estimates for a reading of 3%. This, along with an unexpected rise in the UK Unemployment Rate to 5.0%, backs the case for a cautious "hold" on interest rates by the BoE for the remainder of 2026 amid a deepening UK political crisis.
Traders now look forward to BoE Governor Andrew Bailey's appearance for some impetus later during the US session. In the meantime, the flash PMIs from the UK and the US will be looked upon to grab short-term trading opportunities. Nevertheless, the fundamental backdrop makes it prudent to wait for strong follow-through buying before positioning for an extension of the GBP/USD pair's recovery from the 1.3300 mark, or the lowest level since April 8, touched on Monday.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
European Central Bank (ECB) official and Finnish Central Bank Governor Olli Rehn said that under adverse circumstances, it might be necessary to raise interest rates to maintain credibility, Reuters reported on Thursday.
Key quotes
No major shift in medium- to long-term inflation outlook.
Wage growth continues to ease.
We are heading toward a negative scenario.
Raising rates may be needed in adverse scenario to maintain credibility.
Market reaction
At the press time, the EUR/USD pair is up 0.01% on the day to trade at 1.1625.
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.
- NZD/USD falls despite a record-high NZD 1.92 billion April Trade Surplus that beat market expectations.
- The RBNZ is expected to remain cautious on tightening to avoid choking off a fragile recovery following a recent recession.
- FOMC April Meeting Minutes indicated that the Fed may raise interest rates if inflation stays stubbornly above their 2% target.
NZD/USD depreciates after registering 0.62% gains in the previous day, trading around 0.5860 during the Asian hours on Thursday. The New Zealand Dollar (NZD) may regain its ground against the US Dollar as Statistics New Zealand reported that the country's Trade Surplus widened sharply to a record high of NZD 1.92 billion month-over-month (MoM) in April, up from NZD 0.43 billion in March. This stellar performance comfortably beat market expectations of a much smaller NZD 0.98 billion surplus.
The record-breaking surplus was driven by a powerful surge in outbound shipments, with exports rising to an all-time high of NZD 8.6 billion. In contrast, annual imports declined to NZD 6.7 billion. This trade imbalance underscores highly resilient external demand for New Zealand's goods, offering a buffer against broader global geopolitical uncertainties.
Despite the strong export performance, the domestic economic picture remains mixed, which could limit the NZD's upside. Recent indicators point to softening economic momentum at home, prompting the Reserve Bank of New Zealand (RBNZ) to maintain a cautious stance regarding further policy tightening. Because the domestic economy has only recently emerged from a recession and continues to operate with significant spare capacity, policymakers are hesitant to choke off the fragile recovery.
The NZD/USD pair loses ground as the US Dollar (USD) gains ground amid increased risk aversion, which could be attributed to United States (US)-Iran uncertainty and hawkish monetary policy signals.
Traders adopt caution due to tense United States (US)-Iran peace negotiations against renewed threats to the critical Strait of Hormuz shipping lane. A Bloomberg report on Wednesday stated that US President Donald Trump said that negotiations with Iran were in their final stages. This raised market expectations that the strategically vital Strait of Hormuz could soon reopen.
However, President Trump also reiterated to resume military actions within days if Iran rejects his terms. In response, Iranian President Masoud Pezeshkian struck a defiant tone on the social media platform X, stating that Tehran has no intention of capitulating and calling any attempt to force a surrender through coercion "nothing more than an illusion."
The Federal Open Market Committee (FOMC) Minutes for the April meeting, released on Wednesday, indicated that a majority of Federal Reserve (Fed) officials warned that the central bank would likely need to consider raising interest rates if inflation remains persistently above their 2% target. The minutes underscored deepening concerns within the Fed regarding inflation risks driven by the ongoing geopolitical conflict.
Economic Indicator
Trade Balance NZD (MoM)
The Trade Balance released by the Statistics New Zealand is a measure of balance amount between import and export, and it is published in New Zealand dollar terms. A positive value shows a trade surplus while a negative value shows a trade deficit. Any variation in the figures influences the domestic economy. If a steady demand in exchange for exports is seen, that would turn into a positive growth in the trade balance, and that should be positive for the NZD.
Review Alex Nekritin's Article - Trading New Zealand Dollar with New Zealand Trade Balance
Last release: Wed May 20, 2026 22:45
Frequency: Monthly
Actual: $1,920M
Consensus: $842M
Previous: $698M
Source: Stats NZ
- EUR/JPY holds steady near 184.75 in Thursday’s early European session.
- The cross keeps a neutral outlook, while RSI momentum hovers around the midline.
- The immediate resistance level emerges at 185.00; the initial support level to watch is 184.32.
The EUR/JPY cross trades on a flat note around 184.75 during the early European session on Thursday. Markets remain cautious over further currency intervention after Japanese Finance Minister Satsuki Katayama stated that the official is prepared to take action at any time against excessive FX volatility.
The stronger-than-expected Japanese Gross Domestic Product (GDP) growth for the first quarter (Q1) might support the Japanese Yen (JPY) and act as a headwind for the cross. Japan’s Q1 GDP beat forecasts, growing at an annualized rate of 2.1% against the estimated 1.7%.
On the other hand, hawkish comments from the European Central Bank (ECB) policymakers could lift the Euro (EUR) against the JPY. ECB policymaker Joachim Nagel said on Tuesday that the central bank may have to act at its June meeting as the Iran energy shock proves persistent and the probability of broader inflation spreading continues to rise.
The majority of economists from the Reuters poll, around 85%, indicated that the ECB would raise its deposit rate by 25 basis points (bps) to 2.25% in June, up from just over half expecting that before the April meeting.
Technical Analysis:
In the daily chart, EUR/JPY is consolidating in a sideways tone, holding above the 100-day simple moving average (SMA) while trading just under the 20-day Bollinger mid-line, which keeps the immediate bias broadly neutral after the recent pullback from the highs. The Relative Strength Index (RSI) at 47 is hovering around the midline, hinting at a lack of directional conviction rather than strong selling pressure.
On the topside, initial resistance is located at the Bollinger mid-band around 185.00, with a stronger cap emerging at the May 12 high of 185.46 if bulls regain traction. The next hurdle to watch is the upper Bollinger band near 187.15. On the downside, the 100-day SMA at 184.32 offers first support, ahead of the May 7 low of 183.50. The critical support level is seen at the lower Bollinger band around 182.88, where a sustained break would likely expose a deeper correction.
(The technical analysis of this story was written with the help of an AI tool.)
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.
The preliminary reading of India’s HSBC Manufacturing Purchasing Managers Index (PMI) declines to 54.3 in May versus 54.7 prior, the latest data published by S&P Global and HSBC Bank showed on Thursday.
The India’s HSBC Services PMI rose to 58.9 in May from the previous reading of 58.8, while the Composite PMI eased to 58.1 in May versus 58.2 prior.
Market reaction
At the press time, the USD/INR pair is down 0.15% on the day to trade at 96.40.
Indian economy FAQs
The Indian economy has averaged a growth rate of 6.13% between 2006 and 2023, which makes it one of the fastest growing in the world. India’s high growth has attracted a lot of foreign investment. This includes Foreign Direct Investment (FDI) into physical projects and Foreign Indirect Investment (FII) by foreign funds into Indian financial markets. The greater the level of investment, the higher the demand for the Rupee (INR). Fluctuations in Dollar-demand from Indian importers also impact INR.
India has to import a great deal of its Oil and gasoline so the price of Oil can have a direct impact on the Rupee. Oil is mostly traded in US Dollars (USD) on international markets so if the price of Oil rises, aggregate demand for USD increases and Indian importers have to sell more Rupees to meet that demand, which is depreciative for the Rupee.
Inflation has a complex effect on the Rupee. Ultimately it indicates an increase in money supply which reduces the Rupee’s overall value. Yet if it rises above the Reserve Bank of India’s (RBI) 4% target, the RBI will raise interest rates to bring it down by reducing credit. Higher interest rates, especially real rates (the difference between interest rates and inflation) strengthen the Rupee. They make India a more profitable place for international investors to park their money. A fall in inflation can be supportive of the Rupee. At the same time lower interest rates can have a depreciatory effect on the Rupee.
India has run a trade deficit for most of its recent history, indicating its imports outweigh its exports. Since the majority of international trade takes place in US Dollars, there are times – due to seasonal demand or order glut – where the high volume of imports leads to significant US Dollar- demand. During these periods the Rupee can weaken as it is heavily sold to meet the demand for Dollars. When markets experience increased volatility, the demand for US Dollars can also shoot up with a similarly negative effect on the Rupee.
- EUR/USD bulls seem hesitant as geopolitical uncertainties and Fed rate hike bets underpin the USD.
- The mixed technical setup warrants some caution before positioning for any meaningful downfall.
- A sustained strength beyond the 50% Fibo. is needed to negate the near-term negative outlook.
The EUR/USD pair struggles to capitalize on the previous day's bounce from the 1.1585-1.1580 region, or its lowest level since April 7, and seesaws between tepid gains/minor losses during the Asian session on Thursday. Spot prices, however, manage to hold above the 1.1600 mark as traders await further developments surrounding the Middle East crisis.
Despite renewed hopes for a de-escalation in the Iran conflict, investors remain skeptical about a US-Iran peace deal amid major disagreements over Tehran's nuclear program and a standoff over the critical Strait of Hormuz. Furthermore, hawkish FOMC Minutes reaffirmed bets for an interest rate hike in 2026, which helps limit the US Dollar's (USD) corrective pullback from a six-week low and acts as a headwind for the EUR/USD pair.
From a technical perspective, spot prices maintain a bearish near-term bias beneath the 200-period Simple Moving Average (SMA) on the 4-hour chart and the 50% Fibonacci retracement level of the March-April upswing. Adding to this, the 14-period Relative Strength Index (RSI) hovers in the low-40s, hinting at subdued upside momentum. However, the overnight resilience below the 61.8% Fibo. level warrants some caution for the EUR/USD bears.
Moreover, the Moving Average Convergence Divergence (MACD) (12, 26, close, 9) stabilizes slightly above the zero line with modest positive readings. This suggests that recent downside pressure is easing but not yet reversing the broader capped tone. Hence, any subsequent slide might continue to find support at the 61.8% Fibo. around 1.1591; a break there would expose the 78.6% level at 1.1522 ahead of the structural floor near 1.1433.
On the topside, immediate resistance emerges at the 50.0% retracement at 1.1640, followed by the 38.2% Fibo. near 1.1689, with the 200-period SMA at 1.1712 and the 23.6% retracement at 1.1749 reinforcing a dense supply zone higher up.
(The technical analysis of this story was written with the help of an AI tool.)
EUR/USD 4-hour chart
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | -0.80% | 0.14% | 0.08% | 0.31% | -0.31% | 0.03% | |
| EUR | 0.01% | -0.81% | 0.22% | 0.08% | 0.30% | -0.24% | 0.01% | |
| GBP | 0.80% | 0.81% | 0.98% | 0.89% | 1.12% | 0.57% | 0.81% | |
| JPY | -0.14% | -0.22% | -0.98% | -0.12% | 0.09% | -0.51% | -0.16% | |
| CAD | -0.08% | -0.08% | -0.89% | 0.12% | 0.23% | -0.39% | -0.10% | |
| AUD | -0.31% | -0.30% | -1.12% | -0.09% | -0.23% | -0.54% | -0.20% | |
| NZD | 0.31% | 0.24% | -0.57% | 0.51% | 0.39% | 0.54% | 0.23% | |
| CHF | -0.03% | -0.01% | -0.81% | 0.16% | 0.10% | 0.20% | -0.23% |
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).
- Gold attracts some sellers on Thursday amid the underlying bullish sentiment surrounding the USD.
- Hawkish FOMC Minutes reaffirm rate hike bets and underpin the USD amid geopolitical uncertainties.
- The downside, however, seems cushioned amid mixed signals over a potential US-Iran peace deal.
Gold (XAU/USD) struggles to capitalize on a modest Asian session uptick on Thursday and, for now, seems to have stalled its recovery from the vicinity of the $4,450 level, or the lowest since March 30. Wednesday's hawkish FOMC Minutes reaffirmed market bets for an interest rate hike by the end of this year, which keeps the US Dollar (USD) close to a six-week high and acts as a headwind for the non-yielding bullion. The downside, however, remains cushioned as traders seem hesitant and opt to wait for further developments surrounding the Middle East crisis amid mixed signals over a potential US-Iran peace deal.
Minutes from the Federal Reserve’s (Fed) April 28–29 meeting revealed that a majority of policymakers believe that policy firming would likely become appropriate if inflation continued to run persistently above the 2% target. Officials broadly agreed that inflation risks were skewed to the upside and also acknowledged that the conflict in the Middle East could materially alter the balance of risks and complicate the appropriate policy path going forward. According to the CME Group's FedWatch Tool, traders are pricing in over a 50% chance that the US central bank will raise borrowing costs by 25 basis points (bps) in 2026.
The hawkish outlook, in turn, helps limit the overnight USD corrective slide triggered by renewed hopes for a de-escalation in the Iran conflict. In fact, US President Trump said on Wednesday that the US is in the "final stages" of talks with Iran. Adding to this, US Vice President JD Vance also struck an optimistic tone and stated that Iran wanted to make a deal. This, in turn, boosted investors' confidence, which undermined the Greenback's reserve currency status and offered some support to the Gold. The optimism, however, remains capped amid Trump's warning of more military action if Iran does not agree to a peace deal.
Iran criticized Trump's threat and warned against renewed US and Israeli attacks, saying that any such move could greatly escalate the war. Furthermore, investors remain skeptical about an elusive US-Iran peace deal amid major disagreements over Tehran's nuclear program and a standoff over the critical Strait of Hormuz. In fact, Iran launched a new “Persian Gulf Strait Authority” to control traffic through the strategic waterway. This keeps geopolitical risks in play, which contributes to limiting the downside for the USD and keeping a lid on any meaningful appreciating move in the Gold price, warranting caution for bulls.
XAU/USD 4-hour chart
Gold traders seem non-committal amid a mixed technical setup
From a technical perspective, the XAU/USD pair maintains a modest bearish bias within a downward parallel channel and remains well under the upper boundary around $4,682.12. Meanwhile, the Relative Strength Index (14) at 46.60 has recovered from oversold territory, though it still points to only neutral-to-soft momentum. However, a mildly positive turn in the Moving Average Convergence Divergence (MACD) suggests corrective upside rather than a completed bearish phase.
On the topside, initial resistance emerges at the prior channel reference around $4,632.58, with stronger supply anticipated at the upper parallel boundary near $4,682.12, which is likely to cap advances unless it decisively broken. On the downside, the immediate focus is on the $4,500 psychological mark as the nearest tactical floor. A sustained break lower would expose the lower boundary of the channel near $4,380.81, where buyers may attempt to rebuild a more durable base.
(The technical analysis of this story was written with the help of an AI tool.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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