The Bank of Japan (BoJ) published the Summary of Opinions from the April monetary policy meeting, with the key findings noted below.
Key quotes
One member states real interest rates low enough to support further policy rate hikes.
BOJ member says bank may need to tackle risk of rising price deviations.
One member said impact of Middle East situation hard to predict, bank to take wait-and-see stance at meeting.
One member said a policy rate increase focused on controlling inflation is likely to harm economic progress at this stage.
Rate hike likely from next meeting despite uncertain Middle East outlook.
One BoJ member signals no rush to act now but favors rate hike soon barring clear economic slowdown.
One member says Japan’s real policy interest rate is by far the lowest globally, BoJ must continue adjusting negative real rate ahead of second-round effects. One member said BoJ must prevent significant risk of inflation rising sharply in conducting monetary policy.
One member said policy rate remains below neutral, so BOJ must keep raising rates every few months.
One member said if upside risks to prices rise, BoJ must speed up rate hikes without delay.
One member said prolonged Middle East tensions could prompt earlier policy rate increase to neutral level.
One member said Middle East situation remains uncertain, all scenarios indicate greater upside risks to price .
One member warns supply-side constraints could cause sharp price surges.
Market reaction
Following the BoJ’s Summary of Opinions, the USD/JPY pair is up 0.36% on the day to trade at 157.25 as of writing.
EUR/USD weakens to around 1.1775 in Tuesday’s early Asian session.
Trump said the US-Iran ceasefire was on ‘massive life support.’
Hawkish expectations for the ECB might help limit the Euro’s losses.
The EUR/USD pair loses ground to near 1.1775 during the early Asian session on Tuesday. The Euro (EUR) softens against the US Dollar (USD) as traders turn cautious ahead of the US April inflation report and ongoing geopolitical tensions in the Middle East.
Reuters reported on Monday that Iranian Parliament speaker Mohammad Bagher Ghalibaf warned that Iran’s military was fully prepared to retaliate against any future attacks after rising tensions threatened the fragile ceasefire in the Middle East.
Earlier Monday, US President Donald Trump said the ceasefire between the US and Iran is on “massive life support” after he rejected Tehran’s latest peace offer, which he called “simply unacceptable.” Signs of a prolonged conflict between the US and Iran could boost a safe-haven currency such as the Greenback and act as a headwind for the major pair in the near term.
On the other hand, a hawkish stance from the European Central Bank (ECB) could provide some support to the shared currency. ECB Governing Council member Martin Kocher said on Monday that there’s no need to delay the interest rate hikes if energy prices don’t improve swiftly.
Financial markets are now pricing in a 92% chance of a 25 basis point (bps) hike at the June meeting, with a total of three hikes anticipated by the end of 2026, according to Reuters.
ING’s Chris Turner notes Sterling is softening after UK local elections, as Labour’s losses fuel talk of a leadership contest and a leftward policy shift. He highlights the risk of developments around Manchester Mayor Andy Burnham re-entering parliament. Turner says markets will focus on Prime Minister Keir Starmer’s policy speech and expects EUR/GBP to revisit the overnight high at 0.8675.
Sterling pressured by Labour uncertainty
“Sterling is softening a little as markets digest the fall-out from local UK elections held late last week. While Labour losses were not quite as bad as feared, they have failed to quell speculation over a Labour leadership contest and a clear leftward drift in government policy.”
“Manchester Mayor Andy Burnham remains waiting in the wings and the markets will react to any news such as Burnham resigning as mayor or a sitting Labour MP resigning to make way for Burnham’s return to parliament.”
“The key focus this morning will be a policy speech from PM Keir Starmer on how he plans to address Labour’s falling popularity and take the party into the next election. The wild card here is how far he intends to embrace a return to Europe, whether that be rejoining the customs union or more controversially, the single market. “
“It will be tough for Starmer to win over his critics, and we suspect EUR/GBP finds its way back to the overnight high at 0.8675.”
The political crisis surrounding Keir Starmer has become one of the key market drivers for the pound today. The situation is evolving rapidly and is having a direct impact on government bond yields and the value of the pound, with the markets closely monitoring the Prime Minister’s every word. Internal party pressure The scale of Starmer’s problem is best illustrated by a single figure: 42 Labour MPs had already officially called on him to resign by Sunday evening, whilst former Deputy Prime Minister Angela Rayner described the current situation as “Labour’s last chance” to change course.
The emergence of potential challengers, such as Wes Streeting and Andy Burnham, means that the market now views the internal dispute within the Labour Party as a real risk, rather than mere political noise. In his speech on Monday, Starmer focused on several key themes. Firstly, a firm defence of his own position: “I will fight in every internal vote.” Secondly, a political agenda aimed at closer ties with the EU, the nationalisation of British Steel and a new mobility agreement for young people with Europe. The market viewed this speech primarily through the prism of one question: will the Prime Minister stabilise his position sufficiently to halt the sell-off of gilts?
You can watch the UK Prime Minister’s live address here. Source: Sky News, YouTube
Starmer, gilts in pounds
The yield on 10-year gilts rose on Monday morning to 4.954%, an increase of 3 basis points from the previous close, when it stood at 4.904% immediately after Starmer refused to resign on Friday. Economists surveyed by Bloomberg say that were it not for the political component, yields would be 10–15 basis points lower. This shows just how much the market has already begun to price in the risk of political instability, rather than solely macroeconomic fundamentals. The UK currently has the highest debt servicing costs of all G7 countries, a consequence of inflation remaining above target and weak economic growth. The situation is further complicated by the economic fallout from the armed conflict in Iran, which has led to higher energy prices and a further weakening of business activity. In such an environment, any political uncertainty acts as a risk multiplier for funds holding gilts.
Implications for the GBP
The pound finds itself in a difficult position, both technically and fundamentally. On the one hand, structural factors such as the Bank of England’s relatively high interest rates compared to the ECB and the marked inflationary divergence from the rest of Europe may continue to support it in the medium term. On the other hand, the political risk premium, which has just begun to be priced into gilt yields, is a factor that directly affects the currency’s valuation: higher bond yields against a backdrop of a weakening government is a scenario that has historically been negative for the pound, as it suggests a lack of a fiscal anchor. If Starmer survives the coming weeks politically and manages to quell the internal rebellion, the risk premium should gradually decline, and the GBP/USD pair could test higher resistance levels once again. An alternative scenario, namely a genuine battle for party leadership, would, however, mean further rises in gilt yields and pressure on the pound, particularly as global markets are now highly sensitive to any signs of political fiscal instability following the experiences of the Truss era. For sterling traders, therefore, today is a test not so much of Starmer himself as of the resilience of the political risk premium that the market has already priced in.
GBP/USD is trading at 1.3608 on the daily chart, within an uptrend that has been in place since the low around 1.22 at the turn of 2024/2025, and the price remains above the anchored VWAP from early 2025, which runs in the 1.31–1.32 region. The volume profile indicates a Point of Control in the 1.3450–1.3480 zone, where a black horizontal line marks a key support level that has been tested repeatedly on both sides. The RSI(14) at 57.17 suggests neutral-bullish momentum with no signs of overbought conditions, which technically leaves room for further gains towards the 1.3800–1.3850 resistance zone, where the price reversed at the 2025 peak.
Today’s speech by Starmer and his political survival are factors that will directly determine the short-term direction: government stability paves the way upwards, whilst an escalation of the crisis and a rise in gilt yields would push the pair back towards the POC zone at 1.3450, and, in the event of a deeper sell-off, even towards the VWAP. Technically, the bulls have the upper hand as long as the price remains above 1.34, and the bears will only regain the initiative after a break below this zone with volume. Source: xStation
What is the technical outlook for USDCAD, AUDUSD and EURNZD?
This analysis from the Overbalance series aims to identify three financial instruments, analysed primarily on the daily/four-hour (D1/H4) timeframe. The analysis utilises only the Overbalance methodology, which helps to identify points where a trend may continue or where a reversal may occur. Today’s analysis covers three instruments, assessed solely in terms of 1:1 correction structures. USDCAD USDCAD prices remained in a downtrend throughout April, but in recent days the 1:1 downtrend pattern has been negated at the 1.3630 level, which, according to the Overbalance methodology, may signal a significant upward correction or even a trend reversal. Currently, the key support level remains at 1.3655, where the lower boundary of the local 1:1 pattern is located. As long as the price remains above this level, the bullish scenario remains in place. Conversely, a return below 1.3630, i.e. below the polarity of the previously negated pattern, could once again open the way for further declines.
USDCAD – H4 timeframe. Source: xStation AUDUSD The AUDUSD exchange rate has been on an upward trend since the beginning of April. The key support level for the exchange rate is currently 0.7170. According to the Overbalance methodology, as long as the price remains above this level, the upward trend remains in place.
AUDUSD – H4 chart. Source: xStation EURNZD Since 7 April, the EURNZD has been trading in a downtrend. Should the upward correction extend, the key resistance level remains at 1.9872. As long as the price stays below this level, the bearish scenario remains in place. Conversely, for a return to the uptrend to be considered, the price would need to rise above the 1.9969 level, where the polarity of the previously negated 1:1 upward geometry is located.
EUR/USD picks up to the 1.1775 area but remains within previous ranges below 1.1800.
The Euro faltered at Monday’s opening after Trump dismissed Iran’s peace plan.
The recent jump in Oil prices is likely to keep Euro bulls in check.
The Euro (EUR) is trading moderately higher against the Dollar (USD), yet moving within previous ranges on Monday. The pair has returned to the upper side of the 1.1700s range, and is trading at 1.1775 at the time of writing after a negative opening, following US President Donald Trump’s rejection of Iran’s peace plan.
Trump posted on social media that Tehran’s latest peace proposal was “totally unacceptable”, crushing market hopes of a swift end to the war in the Middle East and the reopening of the Strait of Hormuz. Oil prices jumped after the news, with the barrel of Brent returning above $100, which puts the Eurozone’s Crude-importing economies under pressure and undermines the Euro’s upside attempts.
On the macroeconomic front, US Nonfarm Payrolls beat expectations on Friday, showing a 115K increase, almost twice the 62K expected. These figures strengthen the case for Federal Reserve (Fed) hawks and ease pressure on the bank to cut interest rates, which provides support to the Greenback.
The economic calendar is thin in the US and Europe on Monday. Later this week, US Consumer Prices Index (CPI) data, due on Tuesday, and US Retail Sales on Thursday, together with Fed speakers throughout the week, will provide the fundamental guidance for the USD. In Europe, Germany’s final consumer inflation data on Tuesday, but above all, Wednesday’s Eurozone Gross Domestic Product (GDP) and European Central Bank (ECB) President Lagarde’s speech, will be the highlights of the week.
Technical Analysis: Bulls to be tested at 1.1800
, EUR/USD shows a modest bullish bias with momentum readings backing this constructive tone. The 4-hour Relative Strength Index is near 60, and the Moving Average Convergence Divergence (MACD) remains in positive territory, hinting that buyers retain control.
Bulls, however, are likely to meet significant resistance at the area between 1.1790 and 1.1800 (around April 20, May 6, 8 highs), which, so far, is closing the path to April’s high, in the 1.1850 area. Further up, February’s top, at the 1.1930 area, would come into focus.
On the downside, session lows at the 1.1750 area and Friday’s lows, near 1.1725, are likely to provide some support to a potential bearish reversal, although the key support is at the area between 1.1645 and 1.1675, which contained downside attempts in April.
Deutsche Bank’s Jim Reid and team say markets are digesting a firm US payrolls report that reinforced views of a resilient labour market and persistent inflation risks. They highlight a dense United States (US) data calendar, led by April Consumer Price Index (CPI), Producer Price Index (PPI), retail sales and industrial production, which will shape expectations for the US Dollar (USD) and US yields over coming days.
US data and inflation in focus
“Before that, the new week arrives with markets still processing last Friday’s US payrolls report, which came in broadly firm and reinforced the view that labour market conditions remain resilient.”
“While not strong enough to decisively alter the policy outlook, the release did little to ease concerns that underlying inflation pressures could persist, especially given still-solid wage dynamics.”
“Against this backdrop, outside of the Iran War developments which will of course take centre stage, the coming week will remain centred on the US, with a dense run of data and policy developments.”
“The focal point will be tomorrow’s April CPI report.”
“Our economists expect headline inflation to rise by +0.58% month-on-month, moderating from March’s +0.9%, but still relatively firm.”
“In contrast, the core measure is projected to accelerate to +0.39% MoM from +0.2%, suggesting underlying price pressures remain sticky even as energy-related effects fade.”
“The YoY rates would move from 3.3% to 3.8% for the former and from 2.6% to 2.8% for the latter.”
“Producer price data follows on Wednesday and then the remainder of the week shifts towards activity indicators.”
“Our economists expect retail sales to decline by -0.3% MoM after March’s strong +1.7% increase, pointing to some payback in consumer spending.”
“Meanwhile, industrial production is forecast to rise modestly by +0.2% MoM following a -0.5% drop previously, suggesting a tentative stabilisation in manufacturing output.”
GBP/USD attracts fresh buyers following a modest bearish gap down opening to mid-1.3500s.
Easing UK political risks and the BoE’s hawkish signal underpin the GBP, supporting spot prices.
Iran tensions and reviving Fed rate hike bets benefit the safe-haven USD and might cap the pair.
The GBP/USD pair fills a major part of its weekly bearish gap opening on Monday and is now looking to extend the momentum further beyond the 1.3600 mark. Spot prices, however, remain below the 1.3635 horizontal resistance and the highest level since February 16, touched earlier this month, warranting caution for bullish traders amid a modest US Dollar (USD) strength.
Against the backdrop of renewed hostilities in the Strait of Hormuz, disagreements over Tehran’s nuclear program dampen bets for a US-Iran peace deal. US President Donald Trump and Iran both rejected each other’s peace proposals for ending the war and the gradual reopening of the Strait of Hormuz. This keeps geopolitical risks in play, which, along with hawkish US Federal Reserve (Fed) expectations, turn out to be key factors underpinning the safe-haven USD.
The US-Iran standoff triggers a fresh leg up in Crude Oil prices, fueling inflationary concerns and keeping hopes alive for at least one 25-basis-point (bps) rate hike by the US central bank in 2026. In fact, the CME Group’s FedWatch Tool indicates a nearly 20% chance that the Fed will raise borrowing costs by the end of this year. That said, easing UK political uncertainty underpins the British Pound (GBP) and might continue to act as a tailwind for the GBP/USD pair.
In fact, UK Prime Minister Keir Starmer said he would not resign after local election results in Britain confirmed expectations of significant losses for the ruling Labour Party. Furthermore, the Bank of England’s (BoE) signal last week that rate hikes could be appropriate if inflation remains persistent turns out to be another factor lending some support to the GBP and contributes to the GBP/USD pair’s goodish intraday move up from the 1.3550 horizontal support zone.
The BoE’s MPC member Megan Greene said earlier today that the central bank needs to wait to see how Middle East conflicts will flare before making any monetary policy adjustments, and that Inflation risks are skewed entirely to the upside. This, in turn, backs the case for a further appreciating move for the GBP/USD pair, though traders might opt to wait for the release of the latest US consumer inflation figures on Tuesday and the Trump-Xi summit later this week.
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