Forex News
OCBC’s Christopher Wong notes the US Dollar (USD) strengthened after hotter United States (US) Consumer Price Index (CPI) data lifted UST yields and revived Fed hike expectations, with focus now on US Producer Price Index (PPI). He highlights that higher front-end and long-end yields have restored USD support, though the CPI mix does not yet signal a broad inflation breakout. Wong sees USD dips staying supported if markets keep pricing a more hawkish Fed reaction function.
Rates and inflation keep DXY supported
"Near term, USD may remain supported on dips if markets continue to price a more hawkish Fed reaction function, especially with oil prices still elevated and inflation risks skewed to the upside."
"That said, the CPI mix does not yet point to a broad-based inflation breakout, so USD upside may still require either further upside data surprises, firmer oil, or a deeper deterioration in risk sentiment."
"DXY rose; last seen at 98.30 levels. Mild bearish momentum on daily chart faded while RSI rose. 2-way risks likely."
"Resistance at 98.70 (38.2% fibo), 99 levels (50 DMA). Support at 98.10 (50% fibo retracement of 2026 low to high), 97.50/60 levels (double bottom, 61.8% fibo retracement of 2026 low to high)."
"On the data docket today, PPI is up next (830pm SGT)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Gold remains under some selling pressure for the second straight day amid a bullish USD.
- Tuesday’s hot US CPI report reaffirmed hawkish Fed bets and continues to support the USD.
- Rising US-Iran tensions further benefit the reserve currency USD and weigh on the bullion.
Gold (XAU/USD) sticks to modest intraday losses through the early European session on Wednesday, albeit it lacks bearish conviction and remains confined within the previous day's broader trading range. Hotter-than-expected US consumer inflation figures released on Tuesday reaffirmed market expectations for a more hawkish US Federal Reserve (Fed). This, along with geopolitical uncertainties, helps the US Dollar (USD) to preserve Tuesday’s gains to its highest level in over one week and keeps the precious metal depressed for the second straight day.
The US Bureau of Labor Statistics (BLS) reported on Tuesday that the headline US Consumer Price Index (CPI) rose from 3.3% in the prior month to 3.8% over the 12 months through April, or a nearly three-year high. Adding to this, the core gauge, excluding food and energy, rose 0.4% in April and the yearly rate moved up to a seven-month high of 2.8%, further away from the Fed's 2% target. Traders were quick to react and are now pricing in a roughly 35% chance that the US central bank will hike borrowing costs by the year-end.
This comes on top of concerns that consumer prices are likely to keep rising amid elevated Crude Oil prices, bolstered by the US-Iran stalemate, and pushed US Treasury bond yields higher. In fact, the 30-year US government bond yield briefly touched the 5.0% mark, putting it within reach of the yearly peak, while the rate-sensitive two-year US government bond yield remains close to the 4% threshold. This, in turn, should act as a tailwind for the USD and turns out to be another factor undermining demand for the non-yielding Gold.
Meanwhile, prospects for a US-Iran peace deal diminished further after US President Donald Trump said that the ceasefire was "unbelievably weak" and on "massive life support." Furthermore, Iran rejected a US proposal to end a more than two-month-old conflict amid disagreements over Tehran's nuclear program and a standoff over the critical Strait of Hormuz. This keeps geopolitical risks in play and might continue to benefit the USD's reserve currency status, validating the near-term negative outlook for the Gold price.
The lack of follow-through selling, however, warrants some caution before positioning for an extension of the retracement slide from a three-week high, touched on Tuesday. Traders now seem hesitant and might opt to move to the sidelines ahead of a two-day meeting between Trump and China’s President Xi Jinping. Traders on Wednesday will further take cues from the release of the US Producer Price Index (PPI) and the incoming geopolitical headlines, which will drive the USD and provide a short-term impetus to the Gold price.
XAU/USD 1-hour chart
Gold bulls seem hesitant while below $4,765-$4,770 horizontal resistance
From a technical perspective, the previous day's pullback from the $4,765-$4,770 region constituted the formation of a bearish double-top pattern on the 1-hour chart. The subsequent fall, however, showed resilience near the 200-hour Simple Moving Average (SMA), suggesting that dip-buying interest persists despite the recent consolidation. Moreover, the Moving Average Convergence Divergence (MACD) histogram remains slightly positive, while the Relative Strength Index (RSI) hovers just below the 50 line. This hints at subdued but stabilizing momentum rather than a decisive trend.
Hence, it will be prudent to wait for some follow-through buying and a sustained strength above the $4,770 resistance zone before traders start positioning for any further appreciating move. On the downside, immediate support is seen at the 200-period SMA near $4,655.51, where a break would expose deeper corrective pressure toward prior swing lows.
(The technical analysis of this story was written with the help of an AI tool.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Danske Research Team highlights that EUR/GBP moved higher as United Kingdom (UK) political uncertainty intensified. Over 90 MPs called for Prime Minister Starmer to resign and several ministers and aides stepped down. Bond markets fear looser fiscal policy and potential leadership change, which lifted Gilt yields and led markets to price a more hawkish Bank of England (BoE) stance.
UK politics lift cross higher
"In the UK, more than 90 MPs called for PM Starmer to step down, and four ministers handed in their resignation yesterday."
"Bond markets fear looser fiscal policy in case of a change of leadership, which drove 30Y Gilt yields to the highest levels since 1998."
"If Starmer resigns, it could also open up for a more hawkish policy stance from the Bank of England, which was reflected in market pricing yesterday."
"EUR/GBP was on the rise following mounting pressure for UK PM Starmer to resign."
"With up to 80 Labour MPs having called for Starmer to resign and six ministerial aides quit yesterday, prediction markets have ramped up bets of Starmer being out to around 70% by June and 85% by YE 2026."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Commerzbank highlights that Brent crude surged 3.4% to around USD107.77 as supply disruptions in the Persian Gulf intensified. Satellite imagery shows Iranian exports from Kharg Island nearly halted, with tankers used as floating storage. The bank notes that the ongoing Mideast standoff and US naval actions are key drivers of higher Oil prices.
Iran disruptions drive crude higher
"Brent crude oil prices surged 3.4% to USD107.77 amid the protracted Mideast standoff."
"Satellite imagery indicates that oil shipments from Iran’s primary export terminal at Kharg Island have come to a virtual standstill."
"For the first time since the war began, all berths at the facility were observed lying empty for several consecutive days."
"With passage out of the Persian Gulf blocked by the US Navy, a massive flotilla of tankers is being used as floating storage."
"President Trump arrived in Beijing on Wednesday for a high-stakes summit with Chinese President Xi Jinping on 14-15 May. While China remains the largest purchaser of Iranian oil and a strategic partner to Tehran, President Trump suggested the focus would remain on commercial ties."
"The meeting will test whether Beijing is willing to leverage its influence to help stabilize global energy markets."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- GBP/JPY lost its daily gains due to a severe UK political crisis and leadership uncertainty.
- Traders fear a UK leadership change could spark increased fiscal spending.
- The Japanese Yen may rise as BoJ policymakers weigh a June rate hike.
GBP/JPY pares its daily gains, trading around 213.60 during the Asian hours on Wednesday. The currency cross declines as the British Pound (GBP) loses ground due to a severe political crisis in the United Kingdom (UK), with over 80 Labour MPs calling for Prime Minister Keir Starmer to resign following disastrous local election results. Traders fear a leadership change could spark increased fiscal spending to woo voters, despite Starmer's claim that no contest exists.
The GBP/JPY cross remains flat as the Japanese Yen (JPY) holds losses after the release of Japan’s current account surplus, which increased to JPY 4,681.5 billion in March from JPY 3,625.3 billion in the same month a year earlier. These figures surpassed market expectations of JPY 3,879 billion, marking the largest amount on record.
However, the Japanese Yen may gain ground as the Bank of Japan’s April Summary of Opinions revealed that policymakers are considering further rate hikes as early as their next meeting, driven largely by inflation risks linked to rising oil prices.
The Organisation for Economic Co-operation and Development (OECD) has recommended that Japan primarily utilize consumption tax increases to bolster its national revenue. On the monetary front, the Bank of Japan (BOJ) is projected to raise short-term policy rates to 2% by the end of 2027, though it must remain flexible enough to modify the pace and maturity of its bond-buying activities should financial or bond market disruptions occur. Furthermore, the OECD advised stricter fiscal discipline, suggesting that the government limit the use of supplementary budgets to instances of significant economic shocks.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- EUR/GBP loses ground to around 0.8660 in Wednesday’s early European session.
- Traders will closely monitor the Trump-Xi summit in Beijing later this week.
- The intense political instability in the UK could undermine the British Pound.
The EUR/GBP cross loses momentum to near 0.8660 during the early European trading hours on Wednesday. The Euro (EUR) weakens against the British Pound (GBP) due to fears over the Eurozone's economic exposure to energy shocks from the Middle East and stalled US-Iran peace negotiations.
CNN reported on Tuesday that US President Donald Trump has grown increasingly frustrated with how the Iranians are handling talks to end the conflict, and some Trump aides say that he is now more seriously considering a resumption of major combat operations than he has in recent weeks.
Trump said late Tuesday that he would prioritize trade discussions during his summit with Chinese President Xi Jinping and downplayed the amount of attention they would devote to the Iran war. Signs of escalating tensions between the US and Iran could drag the EUR lower against the GBP as the Eurozone suffers from a higher net dependency on imported energy.
However, hawkish comments from the European Central Bank (ECB) officials might help limit the EUR’s losses. ECB policymaker Joachim Nagel said on Wednesday that the probability that the central bank will need to raise borrowing costs due to the Iran war is rising.
Furthermore, intense political instability in the United Kingdom (UK) could weigh on the British Pound and act as a tailwind for the cross. UK Prime Minister Keir Starmer is facing rising pressure to set a date for his departure after elections across much of the country resulted in massive losses for his ruling Labour Party. The Labour Party suffered a historic wipeout in the local elections, losing more than 1,100 council seats that it previously held.
The preliminary reading of the Eurozone Gross Domestic Product (GDP) for the first quarter (Q1) will be published later in the day. The Eurozone economy is projected to grow 0.8% YoY in Q1.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- The Indian Rupee edges up against the US Dollar, following the increase in import tariffs on Gold and Silver.
- Fears of prolonged Hormuz closure are expected to keep oil prices elevated.
- The US Dollar gains as hot inflation data lifts hawkish Fed bets.
The Indian Rupee (INR) exhibits mild strength against the US Dollar (USD) in the opening session on Wednesday. The USD/INR pair trades mildly lower to near 95.60 as the Indian Rupee gains, following the increase in import duty on Gold and Silver to 15% from 6% by the Indian government.
Import duty on precious metals increases to 15% from 6%
India’s Department of Revenue under the Customs Act released a notification overnight that reflected a significant increase in the import tariffs on Gold and Silver to 15%. The notification also showed that Gold and Silver findings - small components such as hooks, clasps, clamps, pins, and screw backs used in jewellery manufacturing will now attract 5% customs duty.
Market participants had anticipated that the Indian government could hike import duty on precious metals, in an attempt to curb imports of bullion to ease pressure on the country’s foreign exchange reserves.
Over the weekend, Indian Prime Minister (PM) Narendra Modi urged citizens to postpone their non-essential gold purchases for almost a year while warning that India’s forex reserves are draining due to geopolitical tensions. Indian PM Modi also urged reducing fuel consumption and avoiding foreign travel.
The ongoing US-Iran deadlock keeps oil prices broadly higher
In the Asian trade, the WTI Oil price has corrected to near $97.20, but is still over 6% higher so far this week, as negotiations between the United States (US) and Iran failed to achieve a breakthrough. US President Donald Trump rebuffed Iran’s counterproposal, calling it “totally unacceptable” first and then terming it a “stupid proposal”.
While Iran remains firm on its demands regarding a permanent resolution with the US and the reopening of the Strait of Hormuz. Iran’s deputy foreign minister, Kazem Gharibabadi, said earlier in the day that Iran’s position was that any peace deal must include reparations for Iran, Iranian sovereignty over the Strait of Hormuz, and an end to US sanctions.
FIIs continue to remain net sellers
Amid growing concerns regarding India Inc.’s earnings projections due to higher energy prices, foreign investors continue to dump their stake in the Indian stock market. So far in May, Foreign Institutional Investors (FIIs) have remained net sellers in six of seven trading days and have offloaded their stake worth Rs. 21,469.30 crore.
A higher US Dollar could strengthen USD/INR further
While a sudden hike in import duty on precious metals has put slight pressure on USD/INR, the pair could extend its ongoing rally as hot US inflation data for April has strengthened the US Dollar. During the press time, the US Dollar Index (DXY) is close to its weekly high of 98.46 posted on Tuesday.
The data showed on Wednesday that the US headline CPI grew at an annualized pace of 3.8%, stronger than estimates of 3.7% and the March reading of 3.3%. Signs of further acceleration in inflationary pressures have prompted expectations of interest rate hikes by the Federal Reserve (Fed) this year.
Technical Analysis: USD/INR sees more upside above 95.70
USD/INR trades marginally lower at around 95.60 as of writing. However, the pair maintains a bullish near-term bias as spot holds firmly above the 20-period Exponential Moving Average (EMA) at 94.55. The pair has been carving out higher closes in recent sessions, and the Relative Strength Index (14) around 65 suggests persistent upward momentum, though edging toward overbought territory.
On the downside, initial support is now seen at the 20-period EMA near 94.56, which acts as the first line of demand should any corrective pullback unfold. Looking up, the pair is in uncharted territory and could gain further toward 96.00
(The technical analysis of this story was written with the help of an AI tool.)
Economic Indicator
Consumer Price Index (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Last release: Tue May 12, 2026 12:30
Frequency: Monthly
Actual: 3.8%
Consensus: 3.7%
Previous: 3.3%
Source: US Bureau of Labor Statistics
The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
UOB strategists Quek Ser Leang and Lee Sue Ann see AUD/USD consolidating after a brief dip to 0.7209, with intraday trade expected between 0.7215 and 0.7255. The firm underlying tone suggests the pair could edge higher in the coming 1–3 weeks, though gains are seen limited below 0.7280. A break under 0.7180 would instead signal a broader range-trading environment.
Aussie Dollar supported but constrained
"24-HOUR VIEW: When AUD was at 0.7235 yesterday, we highlighted that “there is a chance for AUD to test 0.7220.” We also highlighted that “based on the momentum, AUD is unlikely to threaten the 0.7205 low.” We were not wrong, as AUD subsequently fell to a low of 0.7209 and then recovered to close 0.14% lower at 0.7240. Downward momentum has eased with the recovery, and today, we expect AUD to trade in a range, most likely between 0.7215 and 0.7255"
"1-3 WEEKS VIEW: We continue to hold the same view as yesterday (12 May, spot at 0.7235). As highlighted, “while the firm underlying tone suggests AUD could edge higher, any advance is unlikely to threaten the major resistance at 0.7280.” However, if AUD breaks below 0.7180 (no change in ‘strong support’ level), it would mean that AUD is more likely to trade in a range instead of edging higher."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- USD/CAD holds its ground, with four-week highs, at 1.3724 at a short distance.
- Strong US CPI data crushed hopes of further Fed monetary easing on Tuesday.
- Investors remain cautious on Wednesday, awaiting the outcome of the Trump-Xi meeting.
The US Dollar (USD) is practically flat against the Canadian Dollar (CAD) on Wednesday, hovering at a short distance from the four-week high, at 1.3724. The strong US consumer inflation figures released on Tuesday, and the rally on US Treasury yields are supporting the US Dollar, while the high Oil prices keep the Loonie from falling further.
US Consumer Prices Index (CPI) data from April confirmed the inflationary impact of the Middle East conflict as the yearly rate accelerated to its highest level in nearly three years, at 3.8%, beating expectations of a 3.7% reading, and well above the 3.3% reading seen in March. The core CPI also beat expectations, with a 2.8% growth in the last 12 months from 2.6% in March.
Fed easing expectations fall
These figures prompted investors to abandon any hope of further Federal Reserve (Fed) monetary easing in the foreseeable future, while expectations for a rate hike grow. The CME Group’s Fed Watch Tool reflects a 30% chance of a quarter-point monetary tightening before December this year, up from 15% one week ago. This is fuelling the rally in US Treasury yields, which are right below 2026 highs, and buoying the Greenback.
The Canadian Dollar, on the other hand, is drawing support from the high Oil prices amid the stalemate in the US-Iran peace process. Oil is Canada’s main export, and the WTI Oil barrel remains $97.00, boosting Canada’s trade revenues and underpinning the Loonie.
In the calendar on Wednesday, the main event will be the US Producer Price Index (PPI) for April, which is also expected to show a significant acceleration. The focus, however, will remain on US President Donald Trump's visit to China, where he is expected to discuss Iran’s conflict, Taiwan’s status, and rare earths trade, among other topics, with his Chinese counterpart, Xi Jinping.
(This story was corrected on May 13 at 07:13 GMT to say that Fed rate hike expectations for December were at 15% one week ago, and not at 21% as previously stated.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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