The EUR/USD pair fell towards 1.1417, its lowest since last March, as the US Dollar (USD) soared following the first Federal Reserve (Fed) monetary policy meeting chaired by Kevin Warsh. EUR/USD got to recover some ground on Friday, finishing the week, however, well below the 1.1500 mark.

Two factors put the Greenback on the bullish track: an agreement between Iran and the US to end the war, and a surprisingly hawkish announcement from the Fed, forcing investors to rethink their views on the American currency’s future.

Winds of change

The Fed announced its monetary policy decision on Wednesday, and as widely anticipated, the central bank left the Fed’s fund rate unchanged, floating between 3.50% and 3.75%. The Summary of Economic Projections (SEP) delivered the first surprise, as, out of 19 members, dots came from only 18 voters: of course, the one that refrained from providing forward guidance was Chair Kevin Warsh.

The document included upward revisions to inflation and interest rates forecasts, alongside modest downward revisions to growth perspectives. No news there, as it reflected policymakers’ focus on inflationary pressures. And indeed, Warsh press conference revolved around it: he repeatedly noted that the central bank’s goal is to restore price stability, while inflation remains well above target. His hawkish words boosted speculation of upcoming rate hikes.

Also, the usual Federal Open Market Committee (FOMC) statement was halved, as Warsh removed all hints of future Fed action. He also announced a broad review of the Fed’s framework. Alongside that line, he clarified that five task forces will focus on communications, the balance sheet, data sources, productivity and employment, and the Fed’s inflation framework, and are expected to propose recommendations for future changes.

Warsh made it clear that a new communications regime has begun, in which market players won’t be able to speculate about what the Fed will or won’t do: it will all depend on macroeconomic data and economic health. At this point, officials’ views on growth and employment seem confident, while those on inflation are worrisome.

Following the announcement, speculative interest rushed to price in rate hikes coming and probably more than one before year-end, driving US Dollar demand.

Iran’s war on a firmer pause

Beyond the Fed’s announcement, investors welcomed news that US President Donald Trump and his Iranian counterpart, President Masoud Pezeshkian, signed an agreement that restores traffic through the Strait of Hormuz and opens a 60-day period for negotiations toward a final deal. The agreement also includes Iran resuming Oil exports and the US waiving sanctions on the Middle East country.

On Friday, a senior US official reported that Israel and Hezbollah have agreed to a ceasefire, according to headlines coming from Reuters, although markets hardly reacted to the headlines, taking them with a pinch of salt. The other one is Iran’s nuclear power, something to discuss in the 60-day window. Generally speaking, however, markets are optimistic, limiting USD strength by the end of the week.

European Central Bank hike fading into oblivion

Market players seem to have forgotten that the European Central Bank (ECB) delivered interest rate hikes just one week before the Fed’s monetary policy announcement. Indeed, ECB officials delivered a more cautious decision, repeating that they will remain data-dependent. But it’s also true that the ECB was left alone. Different European central banks announced their monetary policy decisions this week, including the Bank of England (BoE), the Swiss National Bank (SNB), and Norges Bank, and all kept rates unchanged.

Besides, growth in the Old Continent has become sluggish, and fears of persistent stagflation spread. That said, it’s clear that the US economy is in a much better place than the European one, while even after the ECB hike, rates are still higher in the US. The ECB rate hike is meaningless and investors finally saw it.

Macroeconomic data in the docket

Confirming Eurozone tepid performance, Industrial Production rose a modest 0.1% in May. The bloc also confirmed that inflation, as measured by the Harmonized Index of Consumer Prices (HICP), rose by 3.2% YoY in May, while the core annual HICP hit 2.6%. The US reported May Retail Sales, which rose 0.9% MoM in May.

In the upcoming days, focus will return to ECB and Fed officials’ words, with ECB President Christine Lagarde opening the calendar on Monday. The European Union (EU) will publish the preliminary estimate of June Consumer Confidence, while the Hamburg Commercial Bank (HCOB) will unveil the preliminary estimates of the June Purchasing Managers’ Indexes (PMIs).

Germany has scheduled the June IFO survey on Business Climate and the GfK Consumer Confidence survey for the same month. As for the US, investors will be looking for clues coming from the preliminary estimates of the June S&P Global PMIs and May Personal Consumption Expenditures (PCE) Price Index data. The country will also publish the final revision of the Q1 Gross Domestic Product (GDP), May Durable Goods Orders, and the final reading of the June Michigan Consumer Sentiment Index.

EUR/USD Technical Outlook:

In the daily chart, EUR/USD trades beneath all the key moving averages, keeping a clear bearish near-term bias. The 20-day Simple Moving Average (SMA) at 1.1579, together with the 100-day SMA at 1.1667 and the 200-day SMA at 1.1672 overhead, suggests rallies are likely to be capped while the pair remains entrenched below this stacked resistance zone. Momentum stays negative, with the indicator lacking directional strength in negative territory and the Relative Strength Index (RSI) indicator hovering just above oversold levels near 35 without signaling downward exhaustion.

Bigger time frames also support the bearish case, as EUR/USD moved further below the 20-week SMA at 1.1654. The longer moving averages remain far below the current level, with the 100-week SMA at 1.1285 and the 200-week SMA at 1.0986. Weekly Momentum has just turned marginally positive, but the Relative Strength Index heads south near 42, suggesting that rebounds may struggle while the 20-week SMA caps the topside.

On the topside, initial resistance is located at the 20-day SMA around 1.1579, where any recovery would first be tested. A sustained break above that area would then expose the 1.1660 region, followed closely by the 200-day SMA at 1.1672, which together define a more decisive bearish threshold; only a daily close above this cluster would start to ease the downside pressure. On the downside, immediate support is seen at the 1.1400 threshold, with a break below ti exposing the 100-week SMA near 1.1285.

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

Platinum price formed several negative waves yesterday, benefiting from the alignment of the main indicators in providing negative momentum. As a result, the price has now reached the first target at $1,655.00, which has recently acted as an obstacle to further bearish movement.

The price may be forced to move sideways for a period in the short term. However, the continued presence of negative factors encourages expectations of a break below the current barrier, which would strengthen the chances of reaching additional bearish targets starting at $1,605.00 and then $1,565.00.

The expected trading range for today is between $1,605.00 and $1,745.00

Trend forecast: Bearish

The Pound to Euro (GBP/EUR) exchange rate traded modestly higher on Friday after the Bank of England left interest rates unchanged, while markets also absorbed the fallout from Andy Burnham’s landslide Makerfield by-election victory.

At the time of writing, GBP/EUR was trading around €1.1542, up 0.2% on the day as investors weighed the Bank’s policy outlook against the prospect of renewed political uncertainty following Burnham’s return to Westminster. Burnham’s victory has intensified speculation over a potential challenge to Prime Minister Keir Starmer’s leadership.

DAILY RECAP:

The Pound (GBP) came under modest pressure following the Bank of England’s latest policy announcement.

As widely expected, policymakers voted 7-2 to leave interest rates unchanged at 3.75%.

Investors focused on the Bank’s updated assessment of inflation, with policymakers noting that lower energy prices and the easing of geopolitical tensions have reduced some of the upside risks to inflation.

This led markets to conclude that there is less immediate pressure on the Bank to tighten monetary policy further.

Sterling’s losses were partially limited by stronger-than-expected UK labour market data released earlier in the day.

The unemployment rate unexpectedly fell, while wage growth accelerated beyond forecasts, helping to reinforce the resilience of the labour market despite signs of softer economic growth elsewhere.

Meanwhile, the Euro (EUR) gained ground against Sterling despite facing pressure from a stronger US Dollar.

The single currency remained constrained by the Euro’s inverse relationship with the Greenback following the Federal Reserve’s hawkish policy guidance.

However, EUR sentiment was supported by the signing of an interim peace agreement between the US and Iran.

The agreement includes provisions aimed at restoring energy exports through the Strait of Hormuz and establishing a framework for broader negotiations over the coming months.

Lower energy prices are viewed as particularly beneficial for the Eurozone economy, given the region’s heavy reliance on imported energy supplies.

Near-Term GBP/EUR Forecast: BoE Outlook Remains Key for Sterling

Investors will continue to assess the implications of the Bank of England’s latest policy decision after policymakers voted to leave interest rates unchanged at 3.75%.

While the Bank acknowledged that easing energy prices and reduced geopolitical tensions have lowered some inflation risks, stronger-than-expected wage growth and a resilient labour market may encourage policymakers to remain cautious about signalling future policy easing.

As a result, Sterling could remain supported if markets conclude that UK interest rates are likely to stay elevated for longer than previously anticipated.

For the Euro, investors will continue to monitor comments from European Central Bank policymakers for clues regarding the outlook for monetary policy.

Lower energy prices remain supportive for the Eurozone economy, although the single currency may struggle to gain significant traction if the US Dollar remains underpinned by expectations that the Federal Reserve will maintain a restrictive policy stance.

With central bank policy expectations continuing to drive market sentiment, GBP/EUR is likely to remain sensitive to interest rate developments on both sides of the Channel.

– Written by


Minesh Chaudhari

STORY LINK Pound Sterling to Dollar Forecast: GBP/USD Slides After Fed and BoE Hold Rates

The Pound to Dollar exchange rate (GBP/USD) has fallen sharply to 1.3230, its weakest level in several weeks, as investors responded positively to the Federal Reserve’s policy guidance while remaining cautious over the UK outlook. Although both the Federal Reserve and Bank of England left interest rates unchanged, markets interpreted the Fed’s message as relatively supportive for the Dollar while the Bank of England’s prolonged pause reinforced concerns over UK growth prospects.

GBP/USD Forecasts: Dollar Strength Reasserts Itself

The Pound to Dollar (GBP/USD) exchange rate has fallen back sharply after a volatile week dominated by central bank decisions, slipping below the key 1.3300 level as the US Dollar gained broad support.

The Federal Reserve and Bank of England both left interest rates unchanged at 3.75%, but the market reaction proved markedly different for the two currencies.

According to BBH; “We expect GBP/USD to fall to 1.3100, reflecting a stronger US growth outlook relative to the UK.”

While no immediate policy changes were announced, investors focused on guidance from the Federal Reserve and new Chair Kevin Warsh’s first policy meeting.

Danske Bank commented; “We do not expect firm forward guidance from Kevin Warsh regarding future rate moves. We expect the distribution of individual rate views and inflation forecasts to shift higher from March across the rest of the FOMC, while growth and unemployment rate forecasts will remain steadier.”

The Federal Reserve maintained a cautious stance but stopped short of pushing back aggressively against market expectations that rates may need to remain restrictive for longer.

According to MUFG; “Sentiment has clearly improved for the dollar based on US factors like a more resilient labour market. So, this goes some way to explaining the resilience of the US dollar this week despite the continued sharp falls in crude oil prices.”

The stronger Dollar tone has been reinforced by recent economic releases. Non-farm payrolls exceeded expectations while inflation data has remained elevated enough to keep discussions of further tightening alive.

ING commented; “The view that the Fed will react to this inflation shock has been central to the dollar’s recovery over the last month.”

The bank added; “US real interest rates have risen sharply over recent weeks and that has provided a strong underpinning for the US dollar.”

The Bank of England also left rates unchanged at 3.75%, as expected.

While there were dissenting votes in favour of a hike, the overall tone of the meeting reinforced the view that policymakers are prepared to wait for further evidence before tightening policy.

Recent UK inflation data has been softer than expected, reducing pressure for immediate action. Markets are now much less confident that the BoE will deliver multiple rate hikes this year.

This shift has undermined one of Sterling’s key sources of support over recent months.

The Bank continues to face difficult trade-offs between slowing economic activity and the risk that higher energy prices could eventually feed into broader inflation pressures.

Politics is also becoming a larger influence on the Pound outlook.

The Makerfield by-election remains a major event risk, particularly given speculation that a strong result could increase pressure on Prime Minister Keir Starmer.

BBH commented; “The UK political backdrop can amplify a GBP decline, with Thursday’s Makerfield by-election a key event risk. Polls show Andy Burnham leading Reform UK by anywhere from 3 to 12 points, potentially clearing a path for a leadership challenge to Prime Minister Keir Starmer.”

It added; “A Burnham-led Labour government will likely lead to more spending and borrowing, worsening UK fiscal credibility.”

Investors remain sensitive to any developments that could alter perceptions of future UK fiscal policy, especially at a time when government borrowing costs remain elevated.

The combination of a resilient US economy, firm US yields, expectations that the Federal Reserve may maintain a hawkish bias and ongoing UK political uncertainty has shifted momentum in favour of the Dollar.

GBP/USD has now broken below the 1.3300 area that previously provided support in May. If selling pressure persists, markets will increasingly focus on the next major support zone around 1.3160.

For Sterling to recover meaningfully, investors will likely need to see a deterioration in US economic data, a less hawkish Federal Reserve outlook or a reduction in UK political uncertainty over the coming weeks.

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TAGS: Pound Dollar Forecasts

The shape of the candlestick is starting to look pretty negative, so I think if we break down below the Thursday candlestick, that opens up a move down to 0.57. Breaking the Wednesday candlestick is probably what really starts to accelerate things. Keep in mind, though, Friday is Juneteenth in the United States, so liquidity could be an issue. Certainly, looks like we’re favoring the dollar in the US, though.

AUD/USD Technical Analysis