Forex News
- The Reserve Bank of Australia is expected to deliver another 25 bps hike, lifting the interest rate to 4.10% in March.
- Eyes on RBA Governor Bullock’s press conference for cues on the monetary policy path outlook.
- The Australian Dollar is poised for a big reaction to the RBA policy announcements.
The Reserve Bank of Australia (RBA) is set to deliver another 25 basis points (bps) interest rate hike following its March monetary policy meeting on Tuesday, lifting the Official Cash Rate (OCR) to 4.10% from 3.85%.
The decision will be announced on Tuesday at 03:30 GMT, accompanied by the Monetary Policy Statement (MPS). RBA Governor Michele Bullock’s press conference will follow at 04:30 GMT.
The Australian Dollar (AUD) is primed for intense volatility in reaction to the RBA policy announcement and Bullock’s presser.
RBA rate hike is a done deal amid energy-driven inflation risks
As the war in the Middle East continues, central banks globally face a tough call over whether to look through the energy-driven inflation shock or push back against it and risk derailing the economic recovery.
However, the RBA seems well-positioned to counter looming inflation risks by raising the OCR as the economy remains on a solid footing.
Data from the Australian Bureau of Statistics (ABS) showed the Gross Domestic Product (GDP) rose 0.8% in the fourth quarter of 2025, above an upwardly revised 0.5% in the previous quarter and the market consensus of 0.6%. Annual growth accelerated to 2.6%, the fastest pace since early 2023.
Meanwhile, the monthly Consumer Price Index (CPI) rose 0.4% in January, beating estimates of a 0.3% increase. Moreover, the annual inflation reading held at a firm 3.8%, above forecasts for a deceleration to 3.7%.
During a speech at the AFR Business Summit in Sydney on March 2, Governor Michele Bullock said that the Board was uncertain if financial conditions were sufficiently restrictive to return inflation to the midpoint of the target in a reasonable timeframe, highlighting that developments in the Middle East serve as a reminder of persistent geopolitical uncertainty, and warning that a prolonged shock could add to inflation pressures
Last week, RBA Deputy Governor Andrew Hauser warned that Oil price shocks pose upside risks to inflation amid uncertainty tied to the Iran conflict.
“Volatility in Oil prices and tensions in the Middle East pose a genuine challenge for us [the central bank].” However, “The Australian economy in many ways is in good shape,” he said.
Against this backdrop, ANZ, Westpac, Deutsche, Citi and the National Australia Bank (NAB) revised their call, projecting a rate hike this week.
How will the Reserve Bank of Australia’s decision impact AUD/USD?
The AUD is finding its feet against the US Dollar (USD) as it braces for the RBA showdown.
AUD/USD could stage a solid recovery if the RBA’s MPS and Governor Bullock’s words suggest that rate hikes are here to stay.
On the other hand, the Aussie pair could continue to face bearish pressure if Bullock warrants caution on future rate hikes and delivers a wait-and-see guidance.
Dhwani Mehta, Asian Session Lead Analyst at FXStreet, highlights key technical levels for trading AUD/USD following the policy announcement.
“The major has slipped under the 21-day Simple Moving Average (SMA) near 0.7070, signaling a loss of short-term upside momentum. The 14-day Relative Strength Index (RSI) has retreated toward the mid-40s, indicating fading bullish pressure and reinforcing the corrective tone after the pair failed to sustain gains above 0.7100.”
“Immediate resistance emerges at the 21-day SMA around 0.7070, followed by the 0.7120 area, which limited the pair in February, acting as the next barrier, and 0.7150 capping the topside beyond there. On the downside, initial support is at 0.6980, which supported the sharp decline on Friday, guarding a deeper pullback toward 0.6960, where the 50-day SMA currently rises. A break below that zone would expose the 100-day SMA around 0.6770,” Dhwani adds.
Economic Indicator
RBA Interest Rate Decision
The Reserve Bank of Australia (RBA) announces its interest rate decision at the end of its eight scheduled meetings per year. If the RBA is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Australian Dollar (AUD). Likewise, if the RBA has a dovish view on the Australian economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for AUD.
Read more.Next release: Tue Mar 17, 2026 03:30
Frequency: Irregular
Consensus: 4.1%
Previous: 3.85%
Source: Reserve Bank of Australia
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
The Israeli military said on Tuesday that it has detected missiles launched from Iran heading towards Israeli territory. It urged people in affected areas to head to shelters immediately.
"A short while ago, the IDF (Israel Defense Forces) identified missiles launched from Iran toward the territory of the State of Israel. Defensive systems are operating to intercept the threat," the military said.
Meanwhile, the United Arab Emirates’ (UAE) General Civil Aviation Authority announced the temporary and full closure of the country’s airspace as “an exceptional precautionary measure" amid rapidly evolving regional security developments, Bloomberg reported. The UAE's defense ministry said earlier it was responding to incoming missile and drone threats from Iran.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 1.13% on the day at $94.03.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
Japan’s Finance Minister Satsuki Katayama said on Tuesday that there is high volatility in financial markets, adding that she will respond against volatility in financial markets including foreign exchange.
Key quotes
Aware there is high volatility in financial markets.
Will respond always against volatility in financial markets including forex.
Market reaction
At the time of writing, the USD/JPY pair is up 0.09% on the day at 159.20.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
US President Donald Trump said that the US has asked to delay his planned meeting with Chinese President Xi Jinping in Beijing by “a month or so” due to the ongoing war with Iran, CNBC reported on Monday.
Trump added that he didn’t know whether he still planned to travel to China to meet with Xi at the end of March as previously scheduled, citing the war in Iran as a reason.
“I’d love to, but because of the war, I want to be here. I have to be here, I feel. And so we’ve requested that we delay it a month or so,” Trump said. “It’s very simple. We’ve got a war going on. I think it’s important that I be here, so it could be that we delay a little bit, not much,” he added.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
Iran’s Foreign Minister, Abbas Araghchi, on Monday said his last contact with US envoy Steve Witkoff occurred before the US military strike on Iran on February 28.
His remarks followed a report that a direct communications channel between Witkoff and Araghchi had been reactivated in recent days.
"My last contact with Mr. Witkoff was prior to his employer's decision to kill diplomacy with another illegal military attack on Iran," the Iranian minister said in a post on X. “Any claim to the contrary appears geared solely to mislead oil traders and the public,” he said.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 0.96% on the day at $93.87.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
TD Securities’ Alex Loo notes China’s economy started 2026 strongly, with upside surprises in Industrial Production, Exports and a rebound in Fixed-Asset Investment driven by quasi-fiscal policy. However, higher Oil prices from the Middle East conflict and uncertain US-China trade talks, including a possible Trump visit cancellation, pose downside risks to China’s 4.6% 2026 GDP forecast.
Solid data but mounting external risks
"As China faces further external headwinds such as an oil price shock from the Middle East conflict and tough trade negotiation talks with the US, we expect authorities to step up fiscal support if the manufacturing sector faces much higher input prices that may force firms to reduce output in the months ahead."
"If oil prices stay around US$100/bbl for the next 3 months, we expect authorities to roll out targeted policy support measures (e.g., tax cuts and subsidies) to support SMEs/manufacturers."
"As such, we expect Beijing to place more emphasis on the growth impact rather than inflation which would put the onus on fiscal policy rather than monetary policy."
"We maintain our GDP forecast at 4.6% for 2026 as the growth hit from the oil price shock would likely be evident later in the year and authorities do have the fiscal bandwidth to offset this."
"If Trump cancels his China's trip, we believe markets are likely to interpret that US-China relations are on a downhill again and US officials may take a more forceful approach (e.g., re-imposition of tariffs) to get China to the negotiating table which may spook markets."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Gold price edges lower to around $5,000 in Tuesday’s early Asian session.
- Traders dialed back hopes that the Fed would reduce interest rates soon.
- The Fed is widely expected to hold interest rates steady at current levels.
Gold price (XAU/USD) trades with mild losses near $5,000 during the early Asian session on Tuesday. The precious metal extends the decline as hopes fade for the US Federal Reserve (Fed) to lower interest rates this year. All eyes will be on the Fed interest rate decision later on Wednesday.
Oil prices remained above $100 per barrel amid rising tensions in the Middle East as the US-Israeli war on Iran entered its third week. Fears that surging crude oil prices will lead to a rise in inflation have dampened expectations for interest rate cuts in the near term. This, in turn, could exert some selling pressure on a non-yielding asset.
"With higher oil prices comes higher inflation. If we do have higher inflation, central banks are not going to be as motivated as they were six months ago to cut rates, which is a negative for gold prices," said Bob Haberkorn, senior market strategist at RJO Futures.
The US central bank is widely expected to hold the benchmark federal funds rate steady at its current range of 3.50%–3.75% during its upcoming March meeting on Wednesday. Analysts believe that the Fed will reduce the rates again in 2026. However, the number and size of these rate cuts remain to be seen.
Traders in the fed funds futures market have taken even a September cut off the table and now see only one coming, in December, according to the CME FedWatch tool.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- The Pound Sterling recovererd around 0.75% on Monday as broad Dollar weakness offers a brief reprieve from recent selling pressure.
- The BoE is expected to hold rates at 3.75% at Thursday's meeting with a less-dovish tilt than the prior meeting.
- UK January employment data, due Thursday, is forecast to show ILO unemployment steady at 5.2%, with bonused earnings growth expected to ease.
GBP/USD gained almost 0.75% on Monday, bouncing from Friday's low close to 1.3220 to settle on the high side of 1.3300. The session's recovery looks corrective rather than the start of a new trend; the pair remains in a clear downtrend from the late-January high near 1.3870, and Monday's candle has yet to challenge the cluster of resistance around the 200-day Exponential Moving Average (EMA). Price has closed below all of its key moving averages for several sessions, and the burden of proof sits with buyers.
Three high-impact events over the next three days will determine whether the bounce has legs. First up is the Federal Reserve (Fed) rate decision on Wednesday, where markets expect a hold at 3.75%, but the accompanying Summary of Economic Projections (SEP) and Chair Powell's press conference carry significant weight for US Dollar (USD) direction; any hawkish signal on the rate path would add downside pressure to the pair.
Thursday brings the Bank of England's (BoE) rate decision, also expected to hold at 3.75%, but with a notable shift in the Monetary Policy Committee (MPC) vote composition; consensus points to a 2-0-7 split (cut-hike-unchanged), a considerably less-dovish reading than February's 4-0-5, suggesting the committee is in no rush to ease. UK employment data drops alongside the BoE on Thursday, with the International Labour Organization (ILO) unemployment rate forecast steady at 5.2%; average earnings growth including bonuses is also expected to ease to 3.9% year-on-year (YoY) from 4.2%. A softer wage print would reduce the BoE's rationale for a prolonged hold and could cap any Sterling recovery.
GBP/USD daily chart
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.
- Spot Gold flattened on Monday as easing Hormuz tensions moderate the fear premium.
- Gold has retreated from the spike high near 5,600, reached at the peak of the Strait of Hormuz supply shock, and is now consolidating close to the psychologically significant 5,000 level.
- The Fed's rate decision on Wednesday, alongside updated SEP projections, is the week's key event for Gold, with the rate path outlook directly influencing US Dollar strength and real yield dynamics.
XAU/USD spun in a flat circle on Monday, settling close to 5,000 in a relatively contained session following last week's sharp decline from the highs. Gold has pulled back meaningfully from its spike high near 5,600, reached at the height of the Strait of Hormuz disruption, with the 5,000 round number now acting as the immediate psychological support. Monday's small-bodied candle at this level suggests the market is in a wait-and-see mode rather than committing to further selling.
Spot Gold's retreat from the 5,600 spike high reflects a gradual cooling of the fear premium that drove prices to record levels when the Strait of Hormuz closure removed a significant portion of global seaborne oil supply from the market. With diplomatic channels showing early signs of progress and the initial shock fading, safe-haven flows have moderated, applying downward pressure on Gold alongside falling crude prices. Central bank reserve buying and structural demand from Asian institutions continue to provide a floor, though the pace of inflows has slowed since the panic peak.
The Federal Reserve (Fed) rate decision on Wednesday is the key near-term catalyst, with markets expecting a hold at 3.75%. The accompanying SEP update and Chair Powell's press conference will be closely watched for any shift in the rate path, given the inflationary risk posed by elevated energy prices from the supply disruption. Higher-for-longer rate expectations would pressure Gold by lifting real yields and the US Dollar (USD), while any dovish signal could reignite the rally.
XAU/USD daily chart
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- The Japanese Yen edged higher as broad US Dollar softness interrupted the pair's recent run to multi-week highs.
- The BoJ is expected to hold its policy rate at 0.75% at Thursday's meeting.
- Japan also has trade balance data due Thursday following a sharp rebound.
USD/JPY backslid around 0.4% on Monday, snapping a four-session winning streak and pulling back to the 159.00 region in otherwise unremarkable market action. The pair has surged from February's lows close to 152.10, but Monday's modest bearish candle near the top of the recent range suggests the intraday high at 159.75 failed to attract sustained follow-through buying. The broader pattern of higher lows since February is still valid, though the pair is visibly stretched relative to its key moving averages.
The Bank of Japan (BoJ) is widely expected to hold its policy rate at 0.75% at Thursday's meeting, keeping the policy gap with the US Federal Reserve (Fed) wide and structurally bullish for Yen shorts. Markets will closely watch BoJ Governor Ueda's press conference for any update on the tightening timeline, particularly given that underlying Japanese inflation continues to run above the 2% target. Thursday's February trade data will also be in focus after exports surged 16.8% year-on-year (YoY) in the prior reading.
On the USD side, easing Strait of Hormuz tensions softened safe-haven demand for the Dollar broadly on Monday. March NY Empire State Manufacturing came in at -0.2 against a 3.2 consensus, adding marginal downside pressure. The Fed's Wednesday decision, expected to hold at 3.75%, and the accompanying SEP update will be the week's central USD event, with the rate path outlook critical for the pair's near-term direction.
USD/JPY daily chart
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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