Commerzbank reports that South Korea’s advance Q2 GDP rose 0.6% quarter-on-quarter and 3.7% year-on-year, beating expectations. Robust AI-related semiconductor demand and resilient domestic spending underpin growth. The strong data support prospects of a further 25bp Bank of Korea hike in August. USD/KRW fell to 1,475, with the Won aided by portfolio inflows into bonds and equities.
Growth surprise bolsters BoK hike case
“The advance Q2 GDP rose 0.6% qoq sa (Bloomberg consensus: 0.4%) vs 1.8% in Q1. This suggests that growth momentum remained resilient despite energy supply disruptions.”
“On an annual basis, the economy expanded 3.7% yoy (Bloomberg consensus: 3.5%) vs 3.8% previously. The Ministry of Economy and Finance (MoEF) recently upgraded its 2026 growth forecast to 3.0% from 2.0%, reflecting the stronger outlook for exports and investment.”
“On monetary policy, the strong Q2 GDP reading supports the case of another 25bp hike to 3.0% by the Bank of Korea (BoK) at the 27 August meeting. At the previous meeting, Governor Shin Hyun-sung described August as a “live” meeting, reinforcing the BoK’s data-dependent approach.”
“With growth remaining resilient, inflation above target, and the AI-driven export boom broadening into wages and domestic demand, policymakers have scope to continue normalising policy.”
“In FX, USD-KRW fell 0.2% to 1,475 yesterday. The pair initially dropped 0.9% following the GDP release before paring some of its losses later in the session. Portfolio inflows provided support for KRW, with foreign investors purchasing USD1.0bn of domestic bonds and USD3.7bn of equities so far this week.”
Break above 187.00 exposes YTD high and 190.00 resistance.
The EUR/JPY consolidates around 186.00, edges down by 0.06% amid a souring of risk appetite amid the escalation of the US-Iran war, and strengthens safe-haven assets like the Japanese Yen.
EUR/JPY Price Forecast: Technical outlook
The EUR/JPY trades sideways after reaching the year-to-date (YTD) high of 187.95. The cross-pair dipped toward the 183.00 area following the Bank of Japan’s (BoJ) last intervention, and since then buyers have reclaimed key resistance levels to reach the 186.00 mark.
At the time of writing, the EUR/JPY remains capped within the 186.00-187.00 range, amid fears that Japanese authorities could intervene in the foreign exchange markets. But bulls seem to be gaining momentum as indicated by the Relative Strength Index (RSI) in bullish territory.
Buyers need to clear 187.00 to challenge the YTD high at 187.95. Once those levels are taken out, the next resistance would be the 189.00 mark ahead of the 190.00 psychological level.
On the other hand, if sellers push the EUR/JPY below the July 20 low of 185.35, it exacerbates a move toward the 50-day Simple Moving Average (SMA) at 185.20, followed by the 100-day SMA at 185.05. Still lower lies the 200-day SMA at 183.29.
The Mexican peso strengthened to around 17.48 per USD in late July from 17.52 earlier in the month as investors viewed Mexico’s trade position with the US as relatively favorable. The US announced new tariffs ranging from 10% to 12.5% on imports from roughly 60 economies. For Mexico, imports that do not qualify for preferential treatment under the USMCA will face a 10% tariff, while goods that comply with the agreement’s rules of origin will remain exempt, preserving the country’s preferential access to the US market. Existing exemptions also remain in place for products already covered by sector-specific tariffs, including automobiles, steel, aluminum, and pharmaceuticals. Mexico was included among the countries subject to the minimum 10% tariff, while many economies without trade agreements will face 12.5% duties, preserving Mexico’s competitive advantage over several export rivals. The peso also found support from a pullback in global energy prices.
The USD/JPY pair edges lower on Friday as bulls turn cautious in anticipation of a potential government intervention to prop up the Japanese Yen (JPY). Nevertheless, spot prices remain within striking distance of the four-decade high, touched on Thursday, and the 164.00 mark amid a supportive fundamental backdrop.
A stark contrast in monetary policy between Japan and the rest of the world keeps the so-called carry trade active, which might continue to undermine the JPY. Despite the recent Bank of Japan (BoJ) rate hike to 1%, or the highest since 1995, borrowing costs in Japan remain exceptionally low relative to other major economies, including the US. Furthermore, economic risks stemming from energy supply disruptions due to the Middle East conflict contributed to the JPY’s relative underperformance.
The US military announced that it has completed another round of strikes against Iran on Thursday, marking the 13th straight night of operations. Meanwhile, Iran and its allies launched retaliatory strikes against US-linked military assets in Kuwait, Bahrain and Jordan. Adding to this, Iran-aligned Houthis extended the Middle East war to a second major shipping chokepoint and struck two Saudi oil tankers in the Red Sea, describing the action as part of a naval blockade against Saudi Arabia.
This comes on top of the closure of the Strait of Hormuz and further exacerbates supply disruption concerns, lifting crude oil prices to a fresh high since June 11 on Thursday. Investors remain worried that elevated energy prices will rekindle inflationary pressure and force major central banks, including the US Federal Reserve (Fed), to adopt a more hawkish stance. Moreover, data showed on Thursday that US Jobless Claims fell to the lowest level since September 1969, pointing to a resilient labor market.
This reaffirmed market expectations that the US central bank will raise borrowing costs by the end of this year, which favors the US Dollar (USD) bulls and backs the case for the emergence of dip-buying around the USD/JPY pair. Traders, however, seem hesitant and opt to move to the sidelines ahead of the highly anticipated FOMC policy meeting next week. Nevertheless, spot prices remain on track to register strong weekly gains for the third straight week and seem poised to climb further.
Japanese Yen Price This week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the Swiss Franc.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.39%
0.99%
0.87%
0.45%
-0.33%
0.83%
0.99%
EUR
-0.39%
0.61%
0.43%
0.06%
-0.71%
0.44%
0.59%
GBP
-0.99%
-0.61%
-0.17%
-0.54%
-1.30%
-0.16%
0.03%
JPY
-0.87%
-0.43%
0.17%
-0.32%
-1.14%
-0.09%
0.22%
CAD
-0.45%
-0.06%
0.54%
0.32%
-0.74%
0.24%
0.58%
AUD
0.33%
0.71%
1.30%
1.14%
0.74%
1.16%
1.35%
NZD
-0.83%
-0.44%
0.16%
0.09%
-0.24%
-1.16%
0.20%
CHF
-0.99%
-0.59%
-0.03%
-0.22%
-0.58%
-1.35%
-0.20%
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).
The Indian rupee weakened to around 96.58 per dollar, hovering near record lows as a sharp surge in crude oil prices and fresh US tariff measures weighed on sentiment. Brent crude jumped more than 7% to above $100 per barrel after Yemen’s Houthis attacked two Saudi oil tankers in the Red Sea, exacerbating supply concerns as trade through the Strait of Hormuz remained severely disrupted. Sentiment was further dampened after the US imposed new tariffs of 10% to 12.5% on imports from around 60 economies under a forced-labor investigation, including a 10% duty on Indian goods, fueling concerns over global trade, India’s export outlook, and broader emerging-market assets. Investor focus also remained on the Reserve Bank of India, with traders watching for further intervention after state-run banks were reportedly seen selling dollars on the central bank’s behalf to curb volatility and prevent the rupee from breaching record lows.
The Philippine peso weakened to around 61.84 per US dollar in late July, moving closer to a fresh record low as surging oil prices and broad US dollar strength weighed on the currency. Crude prices have jumped more than 30% this month as the escalating US-Iran conflict spilled over into key other shipping routes, heightening concerns over deeper disruptions to global energy supplies. This has intensified pressure on oil-importing economies, including the Philippines, raising concerns over imported inflation and the country’s trade balance. The Bangko Sentral ng Pilipinas intervened in the foreign exchange market this week to support the peso, while the Marcos administration expressed confidence that the central bank would act decisively if needed. Fitch Group’s BMI Research forecasts the peso to trade within the 61–63 per US dollar range this year, making it one of Asia’s weakest-performing currencies. The peso has fallen nearly 5% against the US dollar so far this year.
The US Dollar Index holds gains near 101.50 on the resurgence of Fed’s interest rate hike prospects.
Surging oil prices have revived hawkish Fed bets.
US President Trump warns of major military punishment to Iran and Houthis.
The US Dollar (USD) clings to the previous day’s gains in the Asian session on Friday, as surging oil prices due to intensified Middle East energy supply risks have revived Federal Reserve (Fed) interest rate hike expectations.
At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades firmly near an over three-week high at 101.50.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Swiss Franc.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.43%
1.05%
0.92%
0.45%
-0.13%
0.98%
1.08%
EUR
-0.43%
0.63%
0.43%
0.02%
-0.53%
0.57%
0.64%
GBP
-1.05%
-0.63%
-0.22%
-0.62%
-1.17%
-0.06%
0.05%
JPY
-0.92%
-0.43%
0.22%
-0.38%
-0.99%
0.00%
0.25%
CAD
-0.45%
-0.02%
0.62%
0.38%
-0.54%
0.39%
0.66%
AUD
0.13%
0.53%
1.17%
0.99%
0.54%
1.10%
1.23%
NZD
-0.98%
-0.57%
0.06%
-0.01%
-0.39%
-1.10%
0.13%
CHF
-1.08%
-0.64%
-0.05%
-0.25%
-0.66%
-1.23%
-0.13%
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
In the Asian trade, the WTI Oil price trades 0.5% lower to near $90.60, but is close to its over six-week high of $92.25 posted on Thursday. Higher oil prices boost inflation expectations, a scenario that discourages Fed officials from considering loose monetary conditions.
The closure of the Bab el-Mandeb Strait, along with the Strait of Hormuz, has disrupted 27% of global energy supply.
Meanwhile, no signs of a diplomatic breakthrough between the US and Iran indicate that supply shocks could last long. On Thursday, US President Donald Trump said that Washington would hold Iran responsible for the Yemen-based Houthis’ actions and warned that Iran and its Houthi allies would both soon receive a “major military punishment”.
According to the CME FedWatch tool, the odds of the Fed delivering an interest rate hike in the policy meeting next week stand at 35.8%, significantly higher from 11.8% recorded last week. Fed’s interest rate hike prospects were similar to the current state a month ago, but they eased later after the release of the soft US Consumer Price Index (CPI) data for June.
GBP/USD rebounds to around 1.3325 in Friday’s Asian session.
The US launched the 13th consecutive night of strikes against Iran.
Traders await the UK June Retail Sales report on Friday for fresh impetus.
The GBP/USD pair recovers some lost ground to near 1.3325, snapping the five-day losing streak during the Asian trading hours on Friday. However, the potential upside might be limited amid heightened military tensions in the Middle East. Traders brace for the release of the UK Retail Sales data, which will be published later on Friday.
Renewed geopolitical tensions in the Middle East could underpin the US Dollar (USD) as a safe-haven currency. The US Central Command (CENTCOM) said it launched its 13th consecutive night against Iranian targets. US President Donald Trump said on Thursday that the US would hold Iran responsible for the Houthis’ actions and warned Iran and its Houthi allies would both soon receive a “major military punishment,” per the Guardian.
Traders expect the Bank of England (BoE) to keep its benchmark interest rate steady at 3.75% next week as it continues to assess the impact of the Middle East conflict. Financial markets were pricing in one or possibly two quarter-point interest rate hikes by the end of 2026, little changed from Tuesday, according to Reuters.
The UK Retail Sales data could offer more clues about the UK interest rate path. Retail Sales are expected to show a decline of 0.3% MoM in June, compared to a rise of 1.2% in May. In case of a surprise upside reading, this could reinforce the Bank of England (BoE) to maintain an aggressive tightening stance, supporting the Cable.
Pound steadies as markets look for BoE to hold Bank Rate at 3.75%
Analysts at Scotiabank note that policy expectations remain firmly anchored ahead of next week’s BoE decision, with “markets … expecting no policy change at the next MPC rate decision, where the Bank Rate is expected to be held at 3.75%.” This steady policy outlook, they suggest, continues to frame near-term trading conditions for the Pound against the US Dollar as investors look toward upcoming UK data for further direction.
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