• GBP$ firm in NorAm afternoon, +0.36% at 1.3440; Wed range 1.3463-1.3376

• Pair slid early in session after softer than expected UK price data

• Surge in NY afternoon based on Pres Trump comment on Mideast deal progress

• Risk broadly higher, US equities rally, UST yields move lower, precious metals surge

• Despite upbeat Mideast view, UK remains mired in political, fiscal, inflation woes

• GBP$ res 1.3464 Wed high, 1.3479 /85 100-/10-DMA area, 1.3523 61.8% Fib of 1.3658-1.3304

• Supt 1.3400 psychological lvl, 1.3379/76 daily cloud base/Wed low, 1.3304 daily low May 18

GBP Chart:


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

• NY opened near 0.7125 after 0.7088 traded overnight & AUD/USD rallied above the 55-DMA

• Pair dipped toward 0.7115 early but buyers emerged as risk-on sentiment intensified

• Hopes for a deal between the US & Iran helped to drive riskier assets upward

• USD, US yields , USD/CNH & oil all traded downward

• Gold, silver, copper and stocks rallied which helped weigh down the USD

• AUD/USD hit 0.7175 then neared 0.7155, the pair traded up +0.65% late in the day

• Techs lean bearish; daily chart shows possible head & shoulders topping pattern

• Falling monthly RSI, pair's hold below 10- & 21-DMAs add to bearish signals
audusd


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

Goldman Sachs Research adopts a bearish bias on GBP in the near-term.

"UK political newsflow has picked up following local elections and, as is often the case, a rise in political uncertainty has been accompanied by FX underperformance. n this context, it is worth noting that prediction market pricing of a leadership transition by year-end has already been elevated for some time, so we attribute the recent underperformance mostly to a narrowing in the timeline, as well as the confluence of realising this political pressure with macro factors that are already challenging the UK fiscal outlook at this point," GS notes.

"Our economists note that the macro repercussions of the energy shock have already driven a further erosion of fiscal headroom, and energy futures have continued to move higher for the rest of the year. This presents a more durable risk to Sterling, and can also amplify the pass-through from political uncertainty relative to last year. It is also less clear to us that recent sources of Sterling resilience, namely a sharp rebound in global risk sentiment and larger-than-usual cross-border M&A inflows, can remain as supportive as they have been over the past few weeks," GS adds.

Sterling is likely to remain tipped to the downside, sledding around its recent 1.3304-1.3450 range in the near term, as a convergence of cooling domestic inflation, fiscal anxiety, and political instability limits upside potential.

Today's weaker-than-expected UK CPI and RPI data significantly cooled Bank of England rate expectations, driving the probability of a June hike down to near 20%.

While a lower policy path removes a key pillar for GBP bulls, the reduced rate outlook may ultimately offer a silver lining by suggesting a growth resurgence could arrive sooner — depending on the volatile war-oil-inflation function.

However, even as UK front-end rates turn less hawkish, a shifting global inflation narrative has adjusted Fed expectations, stirring UK-U.S. rate convergence, as dovish Fed expectations ebb, which will temper GBP/USD gains.

Meanwhile, the softer inflation data does little to soothe deeper structural worries. UK 10-year yields remain anchored near trend highs above 5%, heightening fiscal concerns. This is compounded by a precarious political horizon as Prime Minister Keir Starmer faces challenges to his leadership. This political instability has raised fears of higher spending, stirring memories of the gilts market meltdown under PM Liz Truss in 2022.

Technically, GBP/USD faces immediate resistance at today's high of 1.3407, followed by the bruised 200-DMA at 1.3425 and the May 18 high at 1.3450. Conversely, support rests at the daily cloud base and Wednesday low area of 1.3379/76, with more significant demand at Monday's six-week low of 1.3304.

Given the Middle East conflict overhang, severe domestic headwinds, and more hawkish Fed policy expectations GBP/USD risks remain considerably skewed to the downside.
Sterling Chart:


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

MUFG Research discusses the scope for additional round of Japan's MoF intervention to cap USD/JPY upside.

"The probable intervention in Japan that took place on 30^th April and 6^th May was always about buying time and hoping that external factors would turn in favour of a stronger yen.

In previous interventions that happened – in 2022 and July 2024 US yields fell notably in the weeks following intervention and USD/JPY fell sharply. In April/May 2024 that didn’t happen and yields remained stable at elevated levels and intervention failed. This time, the external backdrop is even more challenging – US yields are rising sharply and in these circumstances the need for additional intervention is increasing by the day," MUFG notes.

It is also likely that the US believe the real issue is the monetary stance in Japan and Scott Bessent has been vocal in the past, criticising the excessively loose monetary stance, blaming it on the weakness of the yen. Bessent met with BoJ Governor Ueda at the G7 gathering in Paris and expressed confidence that Governor Ueda would “successfully” guide monetary policy. The BoJ is likely coming under increased US pressure to hike rates, and we suspect Ueda’s tone is set to turn hawkish ahead of the next BoJ meeting on 16^th June," MUFG adds.

EUR/USD is poised for further declines as bearish momentum continues to build, with key technical studies suggesting increased selling pressure could emerge.

The pair fell to a fresh 1-1/2-month low Wednesday, even in the face of improved risk sentiment, which typically supports riskier assets. However, this environment has not translated into strength for the euro, as multiple bearish indicators remain in play.

Both daily and monthly RSI readings are declining and not yet in oversold territory, indicating that downward momentum persists. EUR/USD is trading below former support levels, which now act as resistance in the 1.1650-1.1680 range, alongside a slew of consistently declining moving averages across several time frames.

The development of a potential head-and-shoulders topping pattern on the monthly charts along with contracting 15-month Bollinger bands raises concerns about the sustainability of the current uptrend that began in early 2025.

The recent decline from the May 6 high has left the uptrend line from the March 16 low vulnerable. If this support line breaks, attention will turn to the 1.1450-1.1500 zone, where the neckline of the head and shoulders pattern resides. A breach of this neckline could unleash significant bearish pressure, potentially driving EUR/USD towards the 1.0900-1.1000 area.
eurusd


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

Barclays Research flags the increasing risks of another round of Japan's MoF intervention to cap USD/JPY upside.

"Intermittent moves suggestive of intervention have continued to be observed in USDJPY even after 30 April, when the government and the BoJ are believed to have conducted JPY-buying intervention. As USDJPY has climbed towards 159. the highest level since 30 April, risks of another round of FX interventions are mounting. The MoF is scheduled to release its monthly intervention figures on 29 May, covering the period from 28 April to 27 May, but interventions since 30 April are already estimated at around JPY10tn.

Looking at the MOF's available resources for FX intervention, it held USD162bn in cash and deposits as of end-April, in addition to around USD1tn in securities. Even if it continues to intervene in FX markets, available resources remain sufficient for a while," Barclays notes.

"The summary of opinions from BoJ's April meeting struck a hawkish tone and BoJ board member Masu said in a speech on 14 May that it is desirable to raise rates "at the earliest stage possible". However, the OIS market is already pricing a c.80% probability of a 25bp hike at the BoJ's June meeting, which in turn implies that the JPY-positive impact of a rate hike itself is likely to remain limited (at least absent further communication nuance). BoJ board member Koeda is scheduled to speak on Thursday this week," Barclays adds.

Morgan Stanley Research previews today's FOMC minutes from the April 29 meeting.

"We think it is likely to see a shift toward a more neutral stance next meeting, with increasingly symmetrical guidance. The three dissents opposing the easing bias language in the statement likely understate the broader discomfort within the Committee. The minutes should provide additional color on this issue, particularly on how widespread the preference for neutral guidance is across both voters and non-voters. More clarity on the Fed's reaction function will also be a key focus. Powell suggested that further cuts require more convincing evidence from realized data, not just forecasts," MS notes.

"In light of repeated supply shocks and several years of above-target inflation, the Committee appears increasingly reluctant to rely on model-based arguments about "looking through" shocks, instead requiring clearer confirmation in the data. We interpreted these remarks as pointing toward a greater emphasis on year-on-year inflation measures, rather than extrapolations from shorter-term (e.g., three-month annualized) trends. We will look for discussion along these lines in the minutes," MS adds.

• AUD/USD fell below the 55-DMA overnight, hit 0.7088 then rallied & turned positive

• 0.7126 traded, NY opened near that overnight high, the pair was up +0.23% early NY

• Softer USD, US yields & USD/CNH drop helped underpin AUD/USD

• Rallies in gold, silver, equities & oil's drop drove risk-on sentiment, boost AUD/USD

• Daily RSI turned up, daily bull hammer formed after pair rallied back above the 55-DMA

• Monthly techs lean bearish though; RSI is falling, monthly inverted hammer in place
audusd


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

• EUR/USD has been posting lower daily lows since May 11- down from 1.1794 to 1.1583 (EBS) May 20

• Wed's range is a tight 1.1583-1.1612 - helped by hedging of 1.1 billion euros of 1.1600 option expiries for 10-am New York

• 20dma has crossed below 100-dma - a bearish signal. Tech support 7 April low 1.1524, April 2, 3, 6 triple low by 1.1506

• Regaining and closing above 55-dma 1.1644 may relieve the bearish bias

• Forward-looking FX options recognise and adapt to downside EUR/USD risks, but no panic as yet
EUR=EBS


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• AUD/USD has traded a 26.5 pip range thus far Wednesday; 0.7114 is intra-day peak

• 0.7114 is 2.1 pips shy of the rally high from Tuesday's five-week low of 0.7080

• Drop to 0.7080 was prompted by 30-year UST yield's rise to a 19-year high

• Nikkei fell 1.2% on Wednesday, its fifth consecutive daily loss (AUD is risk-sensitive)

• 0.7272 was AUD/USD high on May 13 - the last positive day for Nikkei

• Australia's tax changes will re-wire investors to chase income

AUDUSD


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

• EUR/USD revisits early April lows below 1.1600 amid souring risk appetite and higher US yields - lifting FX option premiums

• A huge EUR 1.1 billion 1.1600 FX option expiry and related hedging flows may help contain price action Wednesday

• Benchmark 1-month expiry implied volatility tests 6.0 from last week's new low since January at 5.35 - still well below 9.0 March peak

• Risk reversals nudge up to 0.6 EUR puts over calls in 1-month expiry — but that's less than half the 1.5 peaks seen in early March

• Mild hedging flows covering potential to the 1.1500 triple bottom from early April have been reported, but there's certainly no panic

• Bottom line: FX options are telling a story of measured EUR/USD caution — recognising the risk but not expecting a rapid decline

• Related - There's still value despite higher AUD/USD option prices
EUR/USD FXO implied volatility


EUR/USD 25 delta risk reversals


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• Cable dips to 1.3377, then rallies to 1.3406, after cooler than expected UK inflation data

• CPI up 2.8% YY in April vs 3.0% forecast. 1.3377 = fractionally fresh two-day low

• 1.3406 is intra-day high. 1.3378-1.3401 was Asian session range (pre-UK CPI data)

• Cooler CPI print is boost for doves opposed to BoE rate hike in June

• BoE's Bailey, Breeden, Mann and Dhingra to address UK TSC from 1315 GMT

• UK PMQs 1100-1130GMT; first since Labour's poor local election results

GBPUSD


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

• FX option implied volatility is underpinned but overall gains limited amid recent souring of risk sentiment and firmer USD

• AUD/USD implied vol sees biggest G10 gains given its high sensitivity to risk-off flows

• Last week's low AUD/USD vol prices highlighted value for hedgers — spot drop and vol gains proved them right

• EUR/USD vol gains modest by comparison, but risk reversals increase EUR put over call premium to recognise downside risks

• EUR/USD benchmark 1-month 25 delta risk reversals reach 0.6 - will support vols on any deeper spot declines

• However, overall G10 FX vol gains contained — levels remain closer to Mid-East conflict lows than the early March highs
Benchmark 1-month expiry FXO implied volatility


EUR/USD 25 delta risk reversals


(Richard Pace is a Reuters market analyst. The views expressed are his own)

• FX options expire at 10am New York/14:00 GMT on Wednesday May 20

• EUR/USD: 1.1500 (510M), 1.1575 (270M), 1.1600 (1.1BLN), 1.1620-25 (578M), 1.1640-50 (805M)

• USD/CHF: 0.7800 (368M), 0.7905 (175M). GBP/USD: 1.3450 (200M)

• AUD/USD: 0.7050 (505M), 0.7200 (275M)

• NZD/USD: 0.5850 (950M). AUD/NZD: 1.2090 (226M)

• USD/CAD: 1.3600 (516M), 1.3630 (200M), 1.3875 (1.1BLN)

• USD/JPY: 157.50 (760M), 157.75 (415M), 158.00 (1.2BLN), 158.25 (534M), 158.45-60 (947M)

• 159.40 (495M), 160.00 (698M), 161.00 (1.1BLN)

• EUR/JPY: 183.50 (200M)(Richard Pace is a Reuters market analyst. The views expressed are his own)

• Australian gold stocks fall as much as 4.6% to their lowest point since March 30, tracking easing bullion prices

• Gold prices nudge lower as rising Treasury yields and a firm dollar outweigh optimism over a potential U.S.-Iran peace agreement [GOL/]

• Evolution Mining sheds as much as 5.3% to fall to a 5-month low; Northern Star Resources loses 3%

• Broader market down 1.1%

• YTD, sub-index's ~16% loss compares with the benchmark's 2.4% loss

(Reporting by Shruti Agarwal in Bengaluru)

• GBP/USD trades with a soft tone in Asia after closing 0.3% lower Tuesday

• Undermined by surging U.S. yields and rising Fed rate hike expectations

• Chances of a December rate hike now at 60% on CME's FedWatch tool

• 100k fall in Apr UK payrolls weighs on GBP; biggest since start of COVID-19

• April inflation data Wed key for BoE rate outlook as stagflation risks rise

• Former lows at 1.3450-60 is now strong resistance; more at 1.3480, 1.3500

• Support 1.3350, 1.3300; ranges Tue 1.3379-1.3435, Asia 1.3378-1.3400
UK payrolls:

(Krishna Kumar is a Reuters market analyst. The views expressed are his own.)

• AUD/USD -0.2% Wed as softening global risk appetite continues to weigh

• Pair teasing break below 0.7090 55-DMA, confirmation would invigorate bears

• AU Apr employment update Thur, Reuters poll: +15k jobs, 4.3% unemployment

• CN leaves prime loan rates on hold (3.00% 1y, 3.50% 5y) as expected

• Fed hike expectations continue to rise, 30-year yields highest since 2007

• Trump refreshes threats against Iran, claims Iran 'begging' for a deal

• Range Asia 0.7092-0.7113, support 0.7080 0.6834, resistance 0.7283 0.7661
`AUD Daily 55-DMA

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

• USD/JPY remained bid yesterday, up to 159.25 EBS, Asia today 159.00-11

• Market still wary of MOF-ordered FX intervention, BOJ watch on too now

• US TsySec Bessent again chimed in on BOJ hike, said government should allow

• Most in Tokyo already see 25 bp June hike to 1% in policy rate

• Combination of FX intervention, BOJ hike to help push yen higher?

• MOF, for its part, seems to holding on to ammunition

• Likely to act when it deems market most long USD, most vulnerable

• Specs in meantime will likely buy dips/sell rallies in nifty trading

• Japanese importer bids today too, another Gotobi Tokyo fix

• JGB-US Treasury short-end rate differentials off recent high, 2s @262 bps

• Longer-end rate differentials still on narrow side, 10s @181 bps

• Option expiries today 157.95-158.00 $1.5 bln, 158.25-55 $1.7 bln

• Some at 159.40 and then 160.00, $1.1 bln up at 161.00

• Daily Ichimoku cloud 156.37-158.97, more supportive than not currently

• Related comments , , ,also

• US markets , , ,

• On Bessent , BOJ Fed-speak

• And , on US data , for more click on [FXBUZ]

USD/JPY:

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

• NZD/USD -2.6% From May 6 0.5991 high as confidence in economy abates

• NZ government says will target 8.7k public service job cuts by 2029

• Tighter fiscal policy working against RBNZ efforts to revive economy

• Fed hike expectations continue to rise, 30-year yields highest since 2007

• Trump refreshes threats against Iran, claims Iran 'begging' for a deal

• NZ Apr trade balance update due Thur, prior 3.2 bln deficit

• Range NZ 0.58344-375, support 0.5815 0.5680, resistance 0.5991 0.6012
NZD Daily 55-DMA

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

ANZ Research adopts a negative bias on GBP/USD in the near-term.

"From an FX standpoint, the main question goes beyond Starmer's time in office to whether any new leader will uphold the UK's fiscal policies and keep investor confidence in government bonds. Yields on longer term UK debt have risen last week, which is important as increased borrowing costs limit the government's financial flexibility. This episode is different from the Truss crisis in 2022, but parallels are being drawn. No formal policy changes or unfunded fiscal packages have emerged this time. The issue is primarily political, with fiscal risks dependent on future decisions,": ANZ notes.

"Overall, our outlook for GBP/USD is negative in the near term. Any upward movement is likely to be limited unless political risks diminish and gilt yields decline. GBP/USD has broken below the key moving average and key support now lies around 1.329," ANZ adds.

• AUD/USD -1.0% from Tue 0.71774 high, hits 55-DMA for first time since Apr 13

• Metals softness fanning downside momentum, Copper -5.5% from May 13 peak

• RBA sees breathing space post-May hike to assess economic impact of Iran war

• Trump revisits threats against Iran, claims Iran 'begging' for a deal

• CN loan prime rate decisions Wed, prior: 3.00% 1y, 3.50% 5y

• AU Apr employment update Thur, Reuters poll: +15k jobs, 4.3% unemployment

• Overnight range 0.7080-0.71365, support 0.6834, resistance 0.7283 0.7661
Shanghai Copper Daily 21-DMA


AUD Daily 55-DMA

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

(Adds headline)

• NY opened near 1.1625 after 1.1662 traded overnight, pair extended its slide

• USD, US yield gains weighed as did USD/CNH's rally to 6.8200

• The USD buying got a boost from drops in gold, silver and equities

• Wider US-German yield spreads added weight on EUR/USD

• EUR/USD fell below Monday's daily low, hit a 1-1/2-month low of 1.1592

• USD selling emerged & riskier assets bounced which helped lift EUR/USD

• The pair rallied toward 1.1610 late in the session, it traded down -0.40%

• Techs are bearish; RSIs indicate downward momentum & EUR/USD is below the 55-DMA

• The monthly inverted hammer for May reinforces the bearish tech signals
eurusd


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

• NY opened near 0.7115 after 0.7177 traded overnight, drop extended in NY

• US yield gains drove broad based USD which weighed on AUD/USD

• USD/CNH rally to 6.8200, drops in gold, silver, copper, stocks also weighed

• AUD/USD fell below the 55-DMA, hit 0.7080 then bounced after Europe's close

• Softer USD, US yields & a bounce in risk lifted AUD/USD toard 0.7110 late

• The pair traded down -0.80% in NY's afternoon & techs leaned bearish

• Falling RSIs, monthly inverted hammer, hold below 10- & 21-DMAs are bear signs
audusd


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