Daily Forex Highlights – Jun 18 – Fed cut bets pushed further out; BI delivers expected hike

📌 What Moves Markets Today

Wall Street banks are pushing Fed rate cut expectations further into the future. Goldman sees a potential hike by September if inflation stays hot. Citi and Barclays have also delayed their rate cut forecasts. Meanwhile, BI hiked rates to 5.75% as expected. The US-Iran peace deal is supporting risk sentiment, keeping the dollar on the defensive.

🟡 Neutral for USD near-term, but the longer the Fed holds, the stronger the dollar could become.

🟢 Positive for risk-sensitive currencies (AUD, GBP) on peace deal sentiment.

🔥 Quick Takes

Dollar

- US May retail sales beat forecasts, supported by tax refunds and stock market gains → Consumer spending remains resilient. A hawkish signal for the Fed.

- Goldman: If inflation does not cool, the Fed could hike as early as September → A warning shot. Markets are not pricing a hike yet, but the risk is growing.

- Citi: Now expects Fed cuts in October 2026, December 2026, and January 2027 (previously September, October, December 2026) → A significant delay. Rate cuts are moving further out.

- Barclays: Now expects no Fed rate cuts in 2027 (previously a 25bp cut in March) → The most hawkish forecast yet. The Fed may stay on hold for years.

Euro

- ECB's Slepen: Based on current analysis, even if the ECB hikes again to 2.5%, rates would still be in neutral territory → The ECB has room to hike without hurting growth. A hawkish signal.

Pound

- UK labor market shows signs of stabilizing; markets are dialing back BOE rate hike bets → Less pressure on the BOE to act. The pound may find support.

Yen

- Japan's Kihara: Always ready to take necessary action in FX markets; must fully consider the impact of yen weakness → Strong verbal intervention. Markets are on notice.

Other

- G7 leaders reaffirm existing FX commitments → No new policy. A standard statement.

- Brazil cuts rate to 14.25%, as expected → No surprise. Still easing.

- Philippines hikes 25bps to 4.75%, as expected → A second consecutive hike. The peso may get support.

- Hong Kong holds base rate at 4% → Tracking the Fed.

- Korea: Gap between overseas investment returns and FX repatriation is weighing on won support → Won weakness may persist.

💡 Technical Analysis

EUR/USD

The pair is consolidating its recovery from late March lows, holding above 1.1500. The intraday move is supported by a broadly weaker dollar as risk sentiment improves on the US-Iran peace deal, which offsets the hawkish Fed hold.

Technically, price remains well below the 200-period SMA on the 4-hour chart, keeping the near-term bias tilted to the downside. MACD is in negative territory. RSI is hovering around 38, suggesting downside pressure persists even as the pair attempts to stabilize.

Resistance: 1.1575-1.1580 (broken support), 1.1600, 1.1638 (200-period SMA). A break above 1.1600 would be needed to ease the bearish bias. Support: 1.1500. A break below that level could open the door to further weakness.

GBP/USD

The pair is holding near 1.3300 after mixed UK jobs data. Traders are cautious ahead of the BOE policy announcement. Price is trading higher near 1.3460. The near-term bias has turned mildly bullish as price is now above the 20-period EMA at 1.3425.

RSI at 53 is just above the midline, suggesting steady upside momentum rather than aggressive buying.

Resistance: 1.3500 (May 26 high), 1.3580 (descending trendline). Support: 1.3425 (20-EMA), 1.3327 (uptrend line).

USD/IDR

Bank Indonesia delivered the expected 25bp hike to 5.75% . This could provide some near-term support for the rupiah. However, the currency remains vulnerable to external factors. Markets will watch for any follow-through measures from BI.

AUD/USD

The pair remains supported by the US-Iran peace deal and the RBA's hawkish hold. However, technicals continue to cap upside, with resistance at 0.7085 (100-day SMA) and 0.7124 (55-day SMA). A break above these levels would be needed for a sustained recovery.

🔮 What to Watch This Week

- Fed speakers – will they echo Goldman's hawkish warning?

- BOE policy announcement – any shift in tone?

- More Fed forecasts – will other banks follow Citi and Barclays?

- G7 FX commitments – any follow-through?

- Korea FX situation – further weakness?