Credit Agricole CIB Research discusses GBP outlook in light of the recent UK political developments.

"Labour Party’s Andrew Burnham won  the Makerfield election last night and can now return to the House of Commons to  launch his leadership bid. We have recently analysed the GBP market impact from  a potential Labour Party leadership contest and concluded that a PM Burnham  could be the most damaging outcome due to the economic and fiscal effects of his  policy agenda. Ahead of the by-election, market betting odds have already moved  firmly in favour of a Burnham victory, suggesting that some negatives are already  in the price. Furthermore, the UK CDS credit spread has recently hit a three-month low, further signalling that gilt investors expect bond vigilantes to be able to instil  ‘fiscal discipline’ on any future government," CACIB notes.

"The above being said, FX investors may be complacent about the extent to which  a PM Burnham would go in pursuit of his policy objectives. We worry that, at least  initially, he may antagonise bond market vigilantes as he implements his fiscal  policy agenda. We therefore believe that a potential victory for Burnham would  force FX investors to shift their attention to the looming political risks and their  negative fiscal and economic consequences," CACIB adds,

• EUR/CHF extending higher, clearing long-term resistance at the 200DMA cluster

• Immediate topside focus shifts to 0.9250-66 (Apr-May highs)

• Daily close above 200DMA is key, given it would reinforce the bullish momentum if sustained

• Note prior breaks above the 200DMA have lacked follow-through, thus durability remains in question

• For now, the lower vol backdrop favours carry trades, which will be a headwind for CHF

• Near-term support at 0.9200 with a deeper cushion below at 0.9100
EURCHF daily chart


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

HSBC Research marked to market its FX forecasts to reflect a stronger USD for longer on the back of this week's June FOMC meeting.

"The USD has strengthened following the June FOMC meeting, which showed policymakers are split on whether a shift to rate hikes may be needed this year. While that even split could be read as a "neutral" outcome, the rise in front-end US yields and the USD suggests markets interpreted the message as more hawkish than expected...An important takeaway from both the summary statement and Chair Warsh's press conference was that the FOMC is unambiguous in its pursuit for price stability. Warsh explicitly ruled out re-examining the Fed's current inflation target," HSBC notes.

"We believe the lack of forward guidance and more focus on inflation keeps the Fed rate hike scenario alive. This in turn is favouring the USD from a rates differential perspective, as market pricing for Fed hikes has continued to build but pricing for hikes elsewhere has receded due to the recent fall in oil prices...We subsequently update our FX forecasts, reflecting an elevated broad USD across our forecast horizon," HSBC adds.

ANZ Research discusses the outlook for USD and JPY for the coming week.

"USD: The primary focus next week will be the global flash PMIs. Recent US economic resilience has marginally supported the USD, but we expect some of these gains to moderate in coming months as currencies of energy-importing economies recover, reducing the adverse impact of changes in terms of trade. The delayed effects of the US-Iran agreement combined with lower oil prices may contribute to a slightly softer USD in the coming week. Overall, we do not see any catalyst next week for a break above 101. Instead, we think the USD will remain within its recent 99.5– 101 range, but we have a small bias for a USD downside into the week ahead," ANZ notes.

"JPY: Next week, attention will turn to the June flash PMIs. In May, manufacturing showed strength at 54.5, while services were weaker at 50. Service prices reached their highest point since April 2014, mainly due to increased input costs resulting from the Middle East conflict. Overall, we maintain our near-term bias for a weaker JPY. A stronger JPY would likely require a combination of a more hawkish BoJ stance, reduced uncertainty around fiscal spending plans, declining energy prices and a weaker USD," ANZ adds.

• Cable has traded a 76.5 pip range thus far Friday; 1.31635-1.3240 (low first)

• 1.31635 is the lowest level since March 31 (1.3160 was the low that day)

• Catalyst for low was news Friday's US-Iran peace talks had been scrapped

• USD is safe-haven. New lawmaker Burnham calls for fundamental change in UK

• Burnham won Makerfield by-election, with 54.8% of the vote

• UK PM Starmer says he will stand in any Labour leadership contest

• Ally of Burnham urges talks with Starmer on leadership handover

GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• AUD/USD hits 0.7020 intra-day high after extending north from 0.6990

• 0.6990 was late Asia low, as safe-haven USD rose after Iran-US peace talks postponed

• Lift from 0.6990 aided by pre-weekend position adjustments

• Wednesday high was 0.7075 - before USD jumped on Warsh-led Fed's hawkish hold

• 0.6990 is the lowest level since 0.6979 (two-month low last week)

• Australian May CPI and employment data will be released next week

AUDUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• EUR downside bias firmly intact as spot nears YTD lows (1.1409)

• Move still primarily USD-driven. Markets continue to react to hawkish Fed decision

• Dollar broke out from range tops to trade at a fresh 1-year high, exacerbating the move

• Spot has caught up with rate differentials, raising questions on incremental downside from here

• 1.1390-1.1410 marks support - price action around this zone should be instructive for directional follow-through

• A clean break below opens extension towards 1.1300

• Tactically, bias is likely for rallies to be faded rather than chasing downside at current levels

• Resistance seen at 1.1620 (pre-Fed level) and 1.1673 (200DMA)
EURUSD vs rate spreads


Justin McQueen is a Reuters market analyst. (The views expressed are his own). ((Email: ))

• Cable hits 1.3232 after pushing its recovery envelope from 1.31635 (Asia low)

• Recovery aided by profit-taking on shorts after 1.3160 support point respected

• 1.3160 was March 31 low (GBP/USD was on a 1.34 handle 48 hours ago)

• Resistance levels include 1.3253 (Thursday's NY session high) and 1.3264

• 1.3264 was Wednesday low, after dollar jumped on Warsh-led Fed's hawkish hold

• Burnham wins UK by-election with 54.8% of vote; sets up bid to oust Starmer

GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

(adds link in 1st bullet)

• Cable fell to 1.31635 in Asia, its lowest level since March 31, on further USD buying

• 1.31635 is 3.5 pips shy of March 31 base (lowest level since November 2025)

• GBP/USD was on 1.34 handle before dollar jumped on Warsh-led Fed's hawkish hold

• 1.3193 was Thursday low, after BoE's relatively dovish hold (1.3225 was pre-BoE low)

• Burnham wins UK by-election with 54.8% of vote; sets up bid to oust PM Starmer

• UK May budget deficit much bigger than expected; retail sales up 1.2% vs 0.5% f/c

GBPUSD


(Robert Howard is a Reuters market analyst. The views expressed are his own)

• FX options expire at 10am New York/15:00 GMT on Friday June 19

• EUR/USD: 1.1350 (1.1B), 1.1400 (300M), 1.1410-15 (357M), 1.1425 (206M), 1.1440 (310M), 1.1450 (1.8B), 1.1470-75 (560M)

• EUR/USD: 1.1490 (1.1B), 1.1500-05 (3.5B), 1.1520-25 (2.0B), 1.1530-35 (1.0B), 1.1540-45 (634M), 1.1550-55 (2.9B)

• EUR/USD: 1.1560-65 (422M), 1.1570-75 (1.4B), 1.1600-05 (805M), 1.1650-55 (1.1B)

• USD/JPY: 160.75-80 (317M), 161.0000 (279M), 161.50 (276M), 161.75-80 (401M), 162.00 (411M), 162.50 (215M)

• GBP/USD: 1.3250 (200M), 1.3350 (323M). EUR/GBP: 0.8630-35 (284M), 0.8660-65 (202M), 0.8680-85 (206M), 0.8750 (256M)

• USD/CHF: 0.7900 (621M), 0.7925-30 (378M), 0.7980 (594M)

• AUD/USD: 0.6995-00 (438M), 0.7035-40 (321M), 0.7045-50 (323M), 0.7055 (385M), 0.7075-80 (212M), 0.7175-80 (721M)

• NZD/USD: 0.5800 (351M), 0.5840 (248M), 0.5880 (299M), 0.5935 (243M), 0.6000 (250M)

• USD/CAD: 1.3960-65 (282M), 1.3970-75 (547M), 1.4000 (621M), 1.4030-35 (639M)
(Martin Miller is a Reuters market analyst. The views expressed are his own)

• USD/JPY on back foot after surge to 161.81 EBS overnight, Asia 160.99-161.41

• Profit-taking by longs, defence of option KOs at 162.00, exporters tipped

• Japan FX intervention threat too, fresh jaw-boning from FinMin Katayama

• BOJ DepGov Himino hawkish in Diet testimony, April 27-28 minutes hawkish too

• Pre-weekend Tokyo fix Japan importer demand with Gotobi falling on Saturday

• Foreign investor currency hedging of Japan equity buys continuing

• Japanese retail investor foreign currency demand too, NISA and other flows

• Support now seen from around 161.00, 161 the 'new' 160 after 159?

• JPY crosses on back feet with USD gains against other majors even larger

• EUR/JPY 184.58-90 EBS in Asia, at lower end of recent 184.00-186.31 range

• Ensconced in 184.36-95 daily Ichimoku cloud, 185.33-43 hourly cloud cap?

• GBP/JPY 213.28 to 212.57 in Asia after fall to 212.42 yesterday

• Looking to hold below 212.84-213.03 daily Ichimoku cloud now

• CHF/JPY 200.67 to 199.84 in Asia, continuing moves lower from overnight

• Now clear of 200.94-201.03 daily Ichimoku cloud above

• AUD/JPY 112.82-113.28, now ensconced in 111.73-113.21 daily Ichimoku cloud

• Pivoting around 112.90 200-HMA, 112.89-99 hourly Ichi cloud

• NZD/JPY 93.02 to 92.51 in Asia, to base of 92.47-93 daily Ichimoku cloud

• Capped by 92.92-93.07 descending hourly Ichimoku cloud, 100-DMA at 93.11

• Related comment , also ,

• On BOJ Himino/minutes ,

• FinMin Katayama-speak , on Japan CPI
USD/JPY hourly:


EUR/JPY hourly:


AUD/JPY hourly:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

• GBP/USD -0.15% in Asia Fri as leadership challenge brews and USD firms

• Andy Burnham's election clears route to oust UK Prime Minister Starmer

• BoE votes 7-2 to keep 3.75% policy rate on hold, wary of climbing inflation

• USD index hits 100.92 13-month high as Strait of Hormuz oil starts moving

• Increasing probability of Fed rate hikes underpins strengthening USD

• GBP downside extension in full swing, 1.3160 now looks like easy target

• UK May retail sales due Fri, Reuters poll consensus +0.5% m/m, +1.9% y/y

• Range Asia 1.3186-1.3211, support 1.3160 1.3040, resistance 1.3867 1.4250
GBP Daily 55-DMA


DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• NZD/USD flatlines Fri as broad USD index remains elevated in Asia

• NZ balance of trade +0.8 bln in May, annual deficit 3.4 bln (prior -2.8 bln)

• Ratcheting Fed rate-hike bets post-Fed's hawkish hold underpins USD rally

• USD index reaches highest level since May 2025, hits 100.92 overnight

• Traffic begins to flow through Strait of Hormuz following U.S.-Iran deal

• U.S. initial jobless claims +226k, Reuters poll consensus +225k

• NZD remains under pressure overall, targeting 0.5680 support zone

• Range Asia 0.5748-599, support 0.5680 5580, resistance 0.5990-95 0.6012
NZD Daily 55-DMA


DXY Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

• Australian gold stocks fall as much as 2.9%, on track for their second consecutive session of losses, if trend holds

• Bullion prices fell overnight, pressured by hawkish policy signals from the U.S. Federal Reserve and a stronger dollar [GOL/]

• Shares of gold miners Northern Star Resources and Evolution Mining down 2.2% and 3.8%, respectively

• However, sub-index on track for its best week since mid-August 2025

• .AXGD down 10.1% this year, including session moves

(Reporting by Roshan Thomas in Bengaluru)

• USD surged across the board yesterday on hawkish Fed expectations

• USD/JPY as high as 161.81, Japan's MOF conspicuous in absence on FX action

• USD/JPY highest since 161.96 recorded on July 3, 2024

• Asia so far today 161.18-41 EBS, 161 handle the new 160?

• Threat of intervention still especially ahead of massive 162.00 option KOs

• Break above 162.00 could see USD/JPY shoot up towards 165.00

• Even more option KOs tipped at this level, Japan importers stops above both

• In expiries, little nearby today but massive Monday - 160.00, 161.00, 163.00

• JGB-US Treasury rate differentials wider in 2s at @277, 10s still @183 bps

• Japanese importer demand likely strong at pre-weekend Tokyo fix

• This especially with Gotobi falling on Saturday, USD/JPY downside limited?

• Related comments , , ,

• Also , on US economic data ,

• US markets , , ,

• On foreign holdings of US debt ,
USD/JPY:

(Haruya Ida is a Reuters market analyst. The views expressed are his own)

Goldman Sachs Research summarizes its latest Fed and ECB calls following the June policy meetings.

"We expect the Fed to leave the policy rate unchanged at 3.5-3.75% this year, though the hawkish June FOMC meeting raises the risk of interest rate hikes later this year," GS notes.

"We expect the ECB to deliver one more 25bp hike in September to a peak policy rate of 2.5% before cutting back to 2% in 2027," GS adds.

• AUD/USD +0.1% late Thur despite Fed rate-hike bets invigorating USD buyers

• Broad USD index reaches 100.92, highest level since May 2025

• Traffic begins to flow through Strait of Hormuz following U.S.-Iran deal

• Short-term AUD support forms 0.6995-00, but 0.7089 likely to cap rallies

• U.S. initial jobless claims +226k, Reuters poll consensus +225k

• Overnight Range 0.7001-39, support 0.6995 0.6834, resistance 0.7089 0.7200
DXY Daily 55-DMA


AUD Daily 55-DMA

(James Connell is a Reuters market analyst. The views expressed are his own.)

The dollar index rose to a one-year high on Thursday, extending gains made on hawkish interpretations of Fed Chair Kevin Warsh's first policy meeting, to about 1.3%.

U.S. data did little to undermine the rally, with weekly jobless claims easing more or less as expected, though continued claims rose more than expected.

The Philly Fed business index rebounded slightly more than expected, with employment, prices paid and new orders all rising. The Conference Board's Leading Economic index came in as expected with a slight revision higher. Some 12.5 million barrels of crude sailed through the Strait of Hormuz overnight, U.S. Vice President JD Vance said, but in Lebanon, Israeli forces launched fresh airstrikes early on Thursday, potentially raising some doubts about the path to permanent peace.

The Bank of England kept interest rates on hold at 3.75%, as it has since the start of the U.S.-Iran war, judging it would be premature to raise rates now given uncertainty about the strength of increased inflation pressures. GBP/USD softened on dovish interpretations of the BoE's decision to hold rates steady and event risk as the northern English area of Makerfield voted in a local election that could return Greater Manchester Mayor Andy Burnham to parliament, paving the way for him to launch a bid to take over as prime minister. AUD/USD managed to overcome the robust U.S. dollar with the help of yen sales that propelled AUD/JPY higher. EUR/USD hit a 2-1/2-month low of 1.1454, with techs leaning bearish. USD/JPY surged past 161 to a 2026 high at the London close as U.S. shares advanced.

The S&P 500 was trading 1.04% higher in New York afternoon with semiconductor shares leading gains as optimism about a Middle East peace deal offset worries about a hawkish Federal Reserve under new Chair Kevin Warsh.

WTI crude oil fell 0.7%, touching its lowest since early in the Iran war as the interim deal to end fighting and reopen the Strait of Hormuz boosted the global supply outlook.

Copper was down 1.52% and gold fell 0.78%, both undermined by the stronger dollar.

Heading toward the close: EUR/USD -0.32%, USD/JPY +0.48%, GBP/USD -0.66%, AUD/USD +0.06%, =USD +0.45%, EUR/JPY +0.18%, GBP/JPY -0.13%, AUD/JPY +0.54%.(Robert Fullem)

• NY opened near 0.7010 after 0.7042 traded overnight, pair's slide extended early

• 0.7001 hit as USD was bought, USD/CNH rallied & gold, silver turned lower

• AUD/USD buyers emerged however and the pair turned positive, 0.7040 was neared

• AUD/JPY rally above 113.35, equity gains, US yield

drop buoyed AUD/USD

• The pair dipped and sat near 0.7025 late in the session, AUD/UDS traded up +0.16%

• Daily RSI is rising but the pair remains below the 10- & 21-DMAs; monthly RSI is falling
audusd


(Christopher Romano is a Reuters market analyst. The views expressed are his own)

Danske Research reviews today's June BoE meeting.

"The Bank of England (BoE) kept Bank Rate unchanged at 3.75% as widely expected. The decision was taken with a 7-2 vote, with Pill and now also Greene voting for a hike to "insure against the possibility of larger second-round effects". Mann, although not voting for hike, was singled out with more inflation worries than the rest of the hold camp. Convinced, "a forceful Bank Rate decision can have a quick effect on inflation and inflation expectations", she stuck with a hold decision. The deciding vote is often Governor Bailey's and as he puts it, he is "content at the present time with holding"," Danske notes.

"The meeting today has not changed our view that the most likely outcome is an unchanged Bank Rate for the coming year. Although, core PPI inflation remains quite modest, risks to the inflation outlook remains to the upside given businesses' intention to increase prices quite steeply according to the PMI survey. An uncomfortable period with elevated inflation also lies ahead due to increased energy price caps. The slowing economy, cooling labour market and now also lower oil prices suggest that core price pressures will not increase more than what the BoE will accept, though," Danske adds.

Sterling faces an increasingly challenging near-term outlook, navigating a fluid monetary policy landscape and lingering geopolitical risks as dollar strength and domestic political risks weigh on the pair.

Wednesday's signing of the U.S.-Iran memorandum of understanding, aimed at ending regional hostilities and reopening the Strait of Hormuz to shipping, offers a tentative glimmer of hope for alleviating persistent UK and global inflation. Should improved shipping conditions materialise, they could, in time, allow the Bank of England (BoE) and other central banks to begin lowering rates to stimulate growth. However, immediate headwinds remain formidable. The Federal Reserve held rates steady as expected but struck a decidedly hawkish tone, with members signaling a potential rate hike into year-end 2026. Markets have interpreted this as possibly more than one 25 basis point increase, catapulting the dollar higher and pressuring GBP/USD through the key 1.33 support level. Today's BoE rate hold, while couched in somewhat more cautious language, offers limited offsetting support. The central bank has adopted a decidedly more reserved near-term outlook on rates — a narrative reinforced by recent below-forecast UK CPI data that, for now, keeps the BoE firmly in wait-and-see mode. Adding to sterling's vulnerability, today's Makerfield by-election presents potential political and fiscal risks for GBP/USD.

Technically, with 1.33 broken, traders now look to Thursday's low at 1.3206 as immediate support, followed by the 100-week moving average at 1.3188. To the upside, resistance sits at the falling 21-day moving average at 1.3405 and the 100-day moving average at 1.3454.
Sterling Chart:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)

JP Morgan Research reviews yesterday's June FOMC meeting.

"For now, the Fed is not providing forward guidance, but that didn't matter as the FOMC's dot plot delivered a clear message, and it was much more hawkish than expected. Chair Warsh did not submit a dot, and with an even number of participants the median for this year fell between no change and one hike. Next year's dots were also generally above expectations, with the median unchanged from the current rate setting. The decision to leave rates unchanged was reached by a unanimous 12-0 vote. The post-meeting statement was trimmed down significantly, eliminating a lot of boilerplate language that seemed unnecessary to begin with.

"The forward guidance was dropped entirely, with the only thing close being a reference that: "The Committee will deliver price stability." Given the terse statement that focused on getting inflation back down, one might wonder why the Committee didn't hike," JPM addds.

Yen bears are finding support from global inflation dynamics, and they may expect Japanese policymakers may be more tolerant of currency weakness as a result.

USD/JPY’s break to two fresh year-to-date highs following central bank meetings this week signals renewed upside potential after a long stretch of consolidation, during which implied volatility and the average true range fell to the lowest level since 2022. The pair is underpinned by rising short-term Treasury yields after unexpectedly hawkish comments about inflation from Fed Chair Kevin Warsh, alongside similar concerns voiced by the Bank of England, even as oil slides to a three-month low and shares advance. DXY pushing to a one-year high above its upper Bollinger on short-covering adds to the bullish bias.

Despite the move, Japanese officials have offered only limited verbal resistance. Chief Cabinet Secretary Minoru Kihara said authorities can act “at any time,” while noting a weaker yen supports corporate profits but raises costs for firms and households. While MOF officials may comment on FX before the weekend, the subdued tone from Kihara suggests intervention may not be imminent, even as yen shorts stretch, with dollar strength driven by Fed policy divergence.

Option convexity points to a choppy but still upward-biased move, with scope to test the 2024 high of 161.96 even as yen shorts employee options to hedge. The key concern for officials may be the psychological normalization of the 160 level, which could open the door to a deeper move toward the November 1986 high near 165 as it retraces a multi-decade decline. A close below 160 would help change this developing mindset.
Yen OI


Yen Monthly


Yen


(Robert Fullem is a Reuters market analyst. The views expressed are his own.)

MUFG Research reviews today's June BoE meeting.

"Macro view: The BoE left rates unchanged at 3.75%, as expected, with a 7-2 vote split and no change to the core guidance. The tone of the statement and messaging reinforced a clear ‘wait and see’ stance. Since the last meeting, softer UK data and the retracement in energy pricing after the US-Iran deal have reduced the urgency for action. The majority of officials are still comfortable that tighter financial conditions will sufficiently counter energy-driven inflation risks. It now seems that the hawks have lost the argument for a proactive, ECB-style hike and we ultimately believe that second-round risks will remain contained given the extent of UK labour market slack. We are therefore dropping our call for tightening this year with the BoE set for a prolonged hold before resuming gradual easing in 2027," MUFG notes.

"Markets view: UK yields and the GBP have continued to correct lower after today’s MPC meeting. The recent US-Iran deal and softer UK economic data have helped to ease pressure on the BoE to raise rates in response to the energy price shock. The BoE indicated today that they were not in a hurry to tighten policy and wanted time to assess the fallout for the UK economy. We have dropped our own forecast for two BoE hikes this year. It leaves room for the UK yields and the GBP to continuing moving lower as BoE rate hike expectations are scaled back especially against the USD after the Fed opened the door for hikes overnight. UK political uncertainty could add to downside risks for the GBP and gilts after today’s Makerfield by-election," MUFG adds.