The pound held steady at $1.344 as investors awaited Middle East developments amid optimism over a potential US-Iran peace deal and diminishing expectations for Bank of England rate hikes. Investors remain focused on the region, heartened by the recent lack of negative signals from both sides and lingering hopes that an agreement to ease tensions and reopen the Strait of Hormuz remains possible despite recent strikes. Traders have trimmed their bets on BoE rate hikes, now expecting about 40 basis points of tightening by year-end, with a roughly 50% chance of a hike next month. Attention now turns to upcoming BoE policymaker speeches for monetary policy signals and political developments around Prime Minister Keir Starmer following Labour’s regional election setbacks.
Euro Near Six-Week Low Amid US-Iran Optimism
The euro hovered around $1.164, close to a six-week low, amid optimism over a potential US-Iran peace deal and reduced expectations for ECB rate hikes. Investors continue to monitor Middle East developments, encouraged by the recent lack of negative signals from both sides and persistent hopes that an agreement to ease tensions and reopen the Strait of Hormuz remains possible despite recent strikes. Money markets now expect the ECB deposit rate to reach 2.6% by December, up from the current 2% but below last week’s 2.75% projection, with an 80% chance of a rate hike next month. Meanwhile, ECB official Isabel Schnabel told Reuters the central bank should still raise interest rates in June even if a peace deal is reached, citing the scale and persistence of the energy shock.
Euro hits fresh monthly highs with Japanese Yen weakness raising intervention concerns
- EUR/JPY rallies for the fourth consecutive day and hits fresh monthly highs above 185.46.
- BoJ Ueda’s comments backing an upcoming rate hike have failed to support the Yen.
- In Europe, ECB policymakers have endorsed hopes of a tightening move in June.
The Euro (EUR) extends its rally against the Japanese Yen (JPY) for the fourth consecutive day on Wednesday, reaching above 185.46 for the first time since an alleged intervention on April 30. The JPY has failed to draw support from Bank of Japan Governor (BoJ) Ueda’s hawkish comments and is dropping against its main peers, raising concerns of another intervention.
Ueda warned about second-round effects from inflation on Wednesday and stated that central banks should not look at Oil prices in isolation, because a temporary energy shock “may turn lasting if it alters wages, expectations and price-setting behaviour.”
These comments feed expectations that the BoJ will tighten its monetary policy at its June 15 meeting. The positive impact on the Yen, however, was minimal, with investors’ concerns about the Japanese economy’s exposure to high Crude prices and the comparatively low yield of Japanese Government Bonds (JGB) undermining speculative demand for the Yen.
In the Eurozone, recent comments from European Central Bank (ECB) policymakers strengthened the case for a rate hike in June and provided support for the Euro. ECB Board member Isabel Schnabel said on Tuesday that “looking through the inflation spike is no longer an option” and that a June rate will be needed. Also on Tuesday, ECB Chief Economist Philip Lane showed comfortable when asked about market speculation about an upcoming rate hike at an interview with Nikkei.
NZD the strongest currency after a hawkish surprise from the RBNZ
RBNZ: hawkish hold The RBNZ delivered a decision that the market interpreted as a classic “hawkish hold.” The Official Cash Rate (OCR) was kept unchanged at 2.25% , but only after a rare 3–3 split within the Monetary Policy Committee. Governor Anna Breman, Karen Silk, and Paul Conway voted to keep rates unchanged, while Carl Hansen, Hayley Gourley, and Prasanna Gai supported an immediate 25 bp hike to 2.50% . Breman’s deciding vote left policy unchanged, but the broader message was clear: the easing phase is over, and the next move will be upward. The RBNZ explicitly stated that the OCR will need to rise sooner and by more than the bank expected as recently as February. A more challenging macroeconomic environment The macroeconomic backdrop has become significantly more complicated. The central bank is now dealing with a negative supply shock stemming from the Middle East conflict — primarily through higher oil, gas, and petrochemical prices — while domestic demand is already beginning to weaken. Inflation is now expected to peak at 4.3% in Q3 2026 , with a return to the 2% inflation target not expected until mid- 2027 . At the same time, business and consumer sentiment indicators, housing market activity, and corporate hiring plans have all deteriorated. In practice, this means that the RBNZ is facing a difficult combination of factors:
- inflation risks are clearly higher, especially if firms and workers begin treating the energy shock as permanent;
- growth risks are clearly lower, as higher fuel costs reduce real incomes, margins, and consumption;
- spare capacity and elevated unemployment should partially limit second-round effects, but not enough for the bank to ignore the risk of inflation becoming entrenched.
Implications for investors The key takeaway for investors is that the decision was not dovish despite rates being left unchanged. All six MPC members agreed that rate hikes at upcoming meetings will likely be necessary to prevent short-term inflation from feeding into medium-term inflation expectations. The updated rate path points to a significantly more restrictive stance in the future, and market commentary suggests a high probability of hikes at the July, September, and October meetings. New Zealand dollar reaction The New Zealand dollar reacted with gains. The market focused more on the hawkish forward guidance than on the hold itself. NZDUSD rose 0.70% toward the 0.5870 area following the decision release. Such a reaction is logical: the split vote, higher OCR path, and clear suggestion that hikes are likely later this year support the currency through expectations of wider interest rate differentials. At the same time, the upside potential may not be one-directional. The same statement also emphasized weaker domestic growth, fragile economic sentiment, and risks to activity, while the RBNZ itself pointed to high volatility in the trade-weighted NZD exchange rate.
Indian Rupee ticks higher as oil prices decline while Iran uncertainty persists
- The Indian Rupee ticks higher against the US Dollar as oil prices decline.
- Iran alleges that the US is violating the ceasefire.
- FIIs turned out to be net sellers on Tuesday, offloading the stake worth Rs. 2,407.87 crore.
The Indian Rupee (INR) trades marginally higher against the US Dollar (USD) in the opening session on Wednesday. The USD/INR pair ticks lower to near 95.70 as oil prices fail to hold their Tuesday’s recovery move, with market participants remaining confident that the United States (US) and Iran are close to reaching a deal.
At press time, the WTI Oil price trades 1.8% lower to near $90.80. Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, attract bids following a sharp correction in oil prices.
US-Iran negotiations continue despite US defensive attacks on Iran
On Tuesday, Iran’s Islamic Revolutionary Guard Corps (IRGC) threatened retaliation after the US carried out strikes on southern Iran, which were described as “self-defense” by the US Central Command. The Iranian Foreign Ministry condemned the US attacks, calling them a “gross violation” of the ceasefire.
However, negotiations between the US and Iran regarding an end to the Middle East war and the reopening of the Strait of Hormuz, a vital passage to almost 20% of global energy supply, continue through mediators.
An Iranian official said on Tuesday that the unfreezing of Iran’s funds is the last serious sticking point with the United States (US) being resolved through Qatar mediation, Fars agency reported. However, there had been no official confirmation.
Earlier this week, US Secretary of State Marco Rubio said that the Strait of Hormuz has to be open “one way or the other,” and finalizing the deal with Iran may take a few days.
FIIs remained net sellers on Tuesday
There seems to be a mixed sentiment of Foreign Institutional Investors (FIIs) toward the Indian stock market the entire month. Overseas investors have been seen turning out net sellers on alternative days, with no clear pattern. On Tuesday, FIIs offloaded their stake worth Rs. 2,407.87 crore after increasing by Rs. 821.75 crore on Monday.
US Dollar wobbles ahead of US PCE Inflation data
The US Dollar trades in a tight range around 99.00 as investors await clear signals from the US and Iran regarding the progress in negotiations toward a permanent deal.
On the domestic front, investors await the US Personal Consumption Expenditure Price Index (PCE) data for April, which will be released on Thursday. Investors will pay close attention to the US PCE inflation data to get fresh cues on the Federal Reserve’s (Fed) monetary policy outlook.
The US core PCE inflation – which is the Fed’s preferred inflation gauge – is estimated to have grown at an annualized pace of 3.3%, faster than 3.2% in March, with monthly figures growing steadily by 0.3%.
Technical Analysis: USD/INR attracts bids near 20-day EMA
USD/INR trades slightly lower at around 95.70 as of writing. The pair holds a constructive bullish bias as spot remains above the 20-period Exponential Moving Average (EMA) at 95.4387.
The EMA’s upward slope hints that the recent advance is still supported, while the Relative Strength Index (RSI) near 56 suggests positive but not overbought momentum, allowing room for further gains if buyers stay in control.
On the downside, initial support is located at the 20-day EMA around 95.44, where a break would signal fading short-term momentum and expose a deeper corrective move towards 95.00. Looking up, the pair would attempt to return to the all-time high around 97.00 if it manages to recover above the May 22 high at 96.37.
Australian Dollar: Softer CPI backs RBA pause – Commerzbank
Commerzbank’s Volkmar Baur contrasts the Reserve Bank of Australia (RBA) with the Reserve Bank of New Zealand (RBNZ), noting Australia has already hiked three times and that April Consumer Price Index (CPI), including a monthly fall and lower annual rate, supports a pause. While trimmed-mean inflation is a mild warning, its three‑month average near target should give the RBA confidence to hold and monitor developments around Iran.
Inflation data justify holding rates
“Unlike the Reserve Bank of New Zealand, the Reserve Bank of Australia (RBA) has already raised its key interest rate three times in recent months. However, this morning’s inflation data confirms our assessment that a pause is now likely to follow.”
“Prices fell unexpectedly in April, declining by 0.1% month-over-month. This was driven by a drop in transportation costs, partly due to falling gasoline prices compared to the previous month. After rising by 33% in March, prices fell by 7% in April.”
“Overall, prices are of course still significantly higher than before the Iran conflict. But at least this development provides some relief. As a result, the annual rate also fell from 4.6% to 4.2% – though it remains well above the RBA’s target of 2-3%.”
“The central bank’s preferred measure of inflation, trimmed-mean inflation – which excludes outliers at both the high and low ends of the calculation – rose slightly compared to the previous month. This is certainly a small warning sign.”
“However, over the last three months, trimmed-mean inflation averaged just 3.1% on an annualized basis, only slightly above the central bank’s target. This should give the RBA the confidence to let the already implemented interest rate hikes take effect for now and to wait and see how the situation in Iran develops.”
British Pound remains close to monthly peak vs Japanese Yen amid Mideast tensions
- GBP/JPY regains positive traction on Wednesday and draws support from a combination of factors.
- A modest USD downtick benefits the GBP, while economic concerns due to Iran risks weigh on the JPY.
- Bulls seem rather unaffected by divergent BoJ-BoE expectations and JPY intervention speculations.
The GBP/JPY cross attracts some dip-buyers following the previous day’s modest pullback from the 214.65-214.70 region, or a fresh monthly peak, and sticks to its modest intraday gains through the early European session on Wednesday. Spot prices currently trade around the 214.35-214.40 area, up 0.10% for the day, and seem poised to appreciate further amid a supportive fundamental backdrop.
The British Pound (GBP) benefits from a modest US Dollar (USD) downtick, which, along with the underlying bearish sentiment surrounding the Japanese Yen (JPY), validates the near-term positive outlook for the GBP/JPY cross. In fact, the JPY has been underperforming against major global currencies amid economic concerns stemming from the ongoing Middle East conflict and the continued disruptions to energy supplies.
In fact, shipping traffic through the critical Strait of Hormuz remains drastically reduced due to Iran’s restrictions and the US naval blockade of Iranian ports. Furthermore, the US and Iran remain at odds over key issues, including Tehran’s nuclear program and the strategic waterway. This keeps geopolitical risk premium in play and continues to undermine the JPY, despite hawkish Bank of Japan (BoJ) expectations.
BoJ Deputy Governor Himino Ryozo said on Tuesday that the central bank will continue to raise the policy rate based on economic activity, prices, and financial conditions. Even speculations that Japanese authorities will step in again to prop up the domestic currency do little to impress the JPY bulls, suggesting that the path of least resistance for the GBP/JPY cross is to the upside and backing the case for further gains.
Meanwhile, traders pushed back expectations for the likely timing of the next interest rate hike by the Bank of England (BoE) to December after the UK Consumer Price Inflation (CPI) unexpectedly slowed to the 2.8% YoY rate in April. Adding to this, the UK political chaos and growing calls for Prime Minister Keir Starmer to step down might hold back the GBP bulls from placing aggressive bets and cap the GBP/JPY cross.
Japanese Yen Price This Month
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this month. Japanese Yen was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.75% | 1.15% | 1.77% | 1.78% | 0.73% | 0.60% | 0.48% | |
| EUR | -0.75% | 0.38% | 0.96% | 0.98% | 0.00% | -0.12% | -0.30% | |
| GBP | -1.15% | -0.38% | 0.58% | 0.64% | -0.40% | -0.52% | -0.69% | |
| JPY | -1.77% | -0.96% | -0.58% | 0.00% | -1.03% | -1.26% | -1.33% | |
| CAD | -1.78% | -0.98% | -0.64% | -0.00% | -1.04% | -1.27% | -1.30% | |
| AUD | -0.73% | 0.00% | 0.40% | 1.03% | 1.04% | -0.13% | -0.30% | |
| NZD | -0.60% | 0.12% | 0.52% | 1.26% | 1.27% | 0.13% | -0.17% | |
| CHF | -0.48% | 0.30% | 0.69% | 1.33% | 1.30% | 0.30% | 0.17% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
AUD/NZD Price Forecast: Retreats below 1.2200 on hawkish RBNZ, weak Australian data
- AUD/NZD retreats from 1.2286 highs to levels below 1.2200.
- A hawkish RBNZ and soft Australian CPI figures are hammering the Aussie.
- The pair approaches the neckline of a Double Top pattern.
The Aussie Dollar (AUD) is dropping sharply against the New Zealand Dollar (NZD) on Wednesday. The pair has lost more than 0.8% so far today, hitting session lows at 1.2173, hammered by a combination of a hawkish hold by the Reserve Bank of New Zealand (RBNZ) and softer-than-expected Australian inflation figures.
The RBNZ left interest rates on hold, as widely expected earlier on Wednesday, but a split monetary policy committee hints at upcoming rate hikes. RBNZ Governor, Anna Breman, who used her casting vote to hold on Wednesday, affirmed that policymakers are concerned about second-round effects on inflation, and that further “OCR increases are likely at coming meetings.”
In Australia, April’s Consumer Prices Index (CPI) showed softer-than-expected inflationary pressures. These figures provide some leeway for the Reserve Bank of Australia (RBA) to wait and see for a clearer assessment of the consequences of the war in Iran, and have prompted investors to pare back hopes of an August rate hike.
Technical Indicator: A potential double top warns of a trend shift
AUD/NZD has lost more than 120 pips on Wednesday and is showing signs consistent with a trend shift. A bearish engulfing candle on the daily chart, and a potential double top at the 1.2285 area are clear indicators that bulls are giving up.
The 4-hour Relative Strength Index (RSI) has slipped to the mid-30s, hinting at persistent downside pressure. At the same time, the Moving Average Convergence Divergence (MACD) indicator has turned slightly negative, reinforcing the notion that sellers are taking control.
Immediate support is located at the 1.2125-1.2135 area, where May 7, 12, and 21 lows meet the neckline of the mentioned double top pattern. Further down, the April 9 and 14 lows, around 1.2045, would come into focus. The double top’s measured target is right below the 1.2000 psychological level. On the upside, in the unlikely case of a break above 1.2285, the 127.2% Fibonacci extension of the April-May rally lies at the 1.2380 area.
(The technical analysis of this story was written with the help of an AI tool.)
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.13% | -0.04% | 0.03% | 0.05% | 0.30% | -0.65% | -0.11% | |
| EUR | 0.13% | 0.09% | 0.15% | 0.17% | 0.39% | -0.52% | 0.01% | |
| GBP | 0.04% | -0.09% | 0.04% | 0.08% | 0.32% | -0.60% | -0.06% | |
| JPY | -0.03% | -0.15% | -0.04% | 0.02% | 0.25% | -0.67% | -0.12% | |
| CAD | -0.05% | -0.17% | -0.08% | -0.02% | 0.23% | -0.67% | -0.14% | |
| AUD | -0.30% | -0.39% | -0.32% | -0.25% | -0.23% | -0.90% | -0.35% | |
| NZD | 0.65% | 0.52% | 0.60% | 0.67% | 0.67% | 0.90% | 0.53% | |
| CHF | 0.11% | -0.01% | 0.06% | 0.12% | 0.14% | 0.35% | -0.53% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
