Daily Forex Highlights May 11

🎯 Top Story

BOJ may not have intervened last Thursday; bearish yen positions shrink sharply

What happened: Markets now suspect Japan did not step in last Thursday. Even so, bearish positioning on the yen has fallen sharply after earlier intervention.

Why it matters: Fears of further intervention are easing, but short positions have already taken a hit. The yen's recent strength may have more to do with traders covering bets than with official action.

Market impact: Neutral to slightly bearish for the yen. Further gains will need a fresh catalyst.

🔥 Quick Takes

🇺🇸 Dollar

Fed financial stability report: Private credit redemption risks are "manageable" → Officials see limited spillover risk from non-bank lending. No immediate policy concern.

"Fed whisperer": Payrolls data shifts Fed's focus from jobs to inflation → A signal that price data will drive policy from here. Markets should watch inflation closely.

White House NEC director Hassett: We favor a strong dollar. Rate cuts will come this year thanks to Warsh. No sign inflation is running hot. The Fed does not need to hike. → Clear official backing for a strong dollar and rate cuts in 2026.

Fed's Goolsbee: Rate cuts will follow progress on inflation, but we are not there yet. When price pressures rise, that is what we have to watch. → A hawkish lean. The bar for a near-term cut remains high.

BofA Global Research: Now expects two 25bp cuts in July and September 2027, versus September and October 2026 previously → Rate cut expectations pushed back sharply. Bullish for the dollar.

Goldman Sachs: Now expects two 25bp cuts in December 2026 and March 2027, versus September and December of this year previously → Also delaying rate cuts. In line with BofA's shift.

CITIC Securities: Baseline case sees one 25bp cut in the second half of 2026 → A more optimistic take from the Chinese bank, but still a modest easing path.

🇪🇺 Euro

ECB's Nagel: The ECB remains highly vigilant on inflation. It will do what is needed to contain rising energy prices. → A hawkish stance. Further tightening is on the table.

ECB's Lagarde: The ECB is caught between moving too early or too late. More data are needed to understand the impact of the conflict. → A neutral tone. No action anytime soon.

ECB's Knot: Asked whether the ECB could hike at the next meeting — unless the situation improves markedly, a hike in the near future is unavoidable. → A strong hawkish signal. Supportive for the euro.

ECB's Guindos: I think we should wait a bit longer before deciding on the next rate move. → A dovish counterpoint. The ECB is split.

🇬🇧 Pound

UK ruling Labour Party suffers heavy losses in local elections; the Reform Party gains momentum. → Rising political uncertainty. Near-term pressure on sterling.

🇯🇵 Yen

Japan likely did not intervene in the currency market last Thursday. → Speculation about intervention is cooling. The yen has given back some of its gains.

BOJ appoints monetary policy expert Kazuhiro Masaki to head international affairs. → A personnel change. Markets are watching for any signal of a policy shift.

Bearish yen positions have shrunk sharply after authorities stepped in. → Intervention worked. Speculators have covered shorts.

BOJ: Governor Ueda will visit Switzerland from May 9 to 13 to attend BIS meetings. → A routine international trip. Markets will listen for any policy signals.

🌍 Other

Iceland central bank decides to resume regular FX purchases in the interbank market. → Building reserves. Supportive for the krona.

Malaysia and Indonesia central banks sign agreement to strengthen bilateral cooperation. → Deeper ties between two regional central banks. Positive for financial stability.

Trader: India's central bank may be selling dollars to stem the rupee's decline. → Intervention signs. The rupee remains under pressure.

📊 Key Data Snapshot

💡 Final Take

Three themes stand out in FX markets today: delayed rate cuts, central bank divergence, and intervention talk.🇺🇸 Dollar: BofA, Goldman and CITIC all pushed back their rate cut forecasts — the earliest is now late 2026. Hassett talked up a strong dollar and rate cuts this year, but Goolsbee said the conditions are not there yet. The gap between Wall Street and the Fed remains wide.

🇪🇺 Euro: The ECB is deeply split. Knot said a hike is "unavoidable" unless things improve. Guindos wants to wait. Lagarde is caught in the middle. Markets will watch incoming data closely.

🇬🇧 Pound: Labour's heavy election loss has raised political uncertainty. Near-term pressure on sterling.

🇯🇵 Yen: Thursday's intervention may not have happened, but short positions have already been cleaned out. The yen needs a new driver to push higher from here.

Final takeaway: Rate cut expectations across major central banks are being pushed further out. The dollar is getting support. The ECB is divided. Sterling faces political headwinds. Yen intervention fears are fading, but the damage to shorts is done.

Daily Forex Highlights — May 11