Forex News
- NZD/USD falls below 0.5600 for the first time since October 15, then recovers.
- The Fed holds too, keeping the US rate 1.00-1.25 points above New Zealand's.
- US growth and price figures come Thursday, before New Zealand confidence data.
Both central banks behind NZD/USD left their rates alone on Wednesday, and the Reserve Bank of New Zealand (RBNZ) kept 2.75% with a hike priced near 90%. NZD/USD fell below 0.5600 on the RBNZ's decision, the first time under that level since October 15. It has climbed back to just above 0.5600 since the low.
The vote was 4-3, with RBNZ Governor Breman among the four who held, and all five of New Zealand's major banks had forecast a third straight hike. The decision took a quarter-point off where traders expected New Zealand's rate to be. The RBNZ's statement said tighter policy is still likely, from a committee that had just voted against it.
The Fed's hold at 3.75%-4.00% later in the session leaves the US rate 1.00-1.25 points above New Zealand's. Fed Chair Warsh wouldn't speculate on December, saying he doesn't prejudge meetings. NZD/USD edged higher while he spoke, but most of its climb from the RBNZ low came before the Fed's decision.
On the calendar
US personal spending for September is forecast up 0.6% after 0.9% in Thursday's 12:30 GMT release, with income forecast up 0.3% after 0.2%. The Chicago Purchasing Managers Index (PMI) follows at 13:45 GMT on Friday, forecast at 56.1 after 58.8. Both feed the Fed's December decision, the US side of NZD/USD's rate gap.
ANZ-Roy Morgan consumer confidence for October is due at 21:00 GMT on Thursday after 97.6, the first New Zealand figure since the hold. The RBNZ's next decision is in December, and a hike then needs one of the four who held to switch.
On the charts
Wednesday's drop took back more than four-fifths of the climb from the October 14 low just above 0.5550 to the October 22 high just above 0.5700. NZD/USD is back inside the range under 0.5650 that it held from October 1 to 15. The pair's 50-day Exponential Moving Average (EMA) is just above 0.5700, and the 200-day is just under 0.5800.
NZD/USD daily chart
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- Gold price loses ground to near $4,050 in Thursday’s early Asian session.
- Fed held interest rates steady and reiterated its commitment to containing inflation.
- Traders await the US September PCE inflation data on Thursday for fresh impetus.
Gold price (XAU/USD) edges lower to around $4,050 during the early Asian session on Thursday. Markets assess comments from Federal Reserve (Fed) Chair Kevin Warsh after the US central bank left benchmark interest rates unchanged at its October policy meeting.
The Fed decided to hold its benchmark federal funds rate steady in a range of 3.75% to 4.00%. According to the statement, policymakers said they hoped incoming data would help inform their next decision.
Fed Chairman Kevin Warsh said during a press conference that officials have “made clear our readiness to act as circumstances require, and we have shown our willingness to act.”
“It’s our responsibility to get inflation down,” Warsh said. “That’s the reason the FOMC’s discussion over the last couple of days focused mainly on the price stability side of our remit,” he added.
While traders maintained bets the Fed will raise rates in December, they trimmed wagers on additional hikes in 2027, according to Bloomberg. Futures markets are no longer fully pricing three more hikes this cycle. Higher rates increase the opportunity cost of holding non-yielding gold.
The US Personal Consumption Expenditures (PCE) inflation data for September will take center stage later on Thursday. This report could offer insight into the monetary policy path.
Gold recovery faces Fed test as markets eye FOMC and core PCE
Strategists at OCBC describe the latest move in gold as a “somewhat encouraging” recovery, noting that it has unfolded “particularly given the firmer USD and US Treasury yield upticks.” They add that “a rebound in technology equities may also have helped ease broader liquidation pressures,” even as “US Treasury yields remain elevated and markets continue to price a high probability of another Fed hike in December.”
According to OCBC, “focus now shifts to the FOMC, where a hold is widely anticipated, but guidance on path trajectory will matter more.” In that context, they flag that “Thursday’s core PCE could either reinforce or temper the Fed’s message,” and argue that “further easing in oil prices, accompanied by softer yields and USD, could help extend gold’s recovery.” However, they caution that “a hawkish Fed or another bout of equity deleveraging could quickly undermine the rebound,” concluding that “for now, we still see some 2-way risks.”
Fed doubles down on 2% goal as ‘monetary medicine’ seen working, keeping Dollar bid
Warsh’s press conference tone is firmly consistent with the established baseline, with the 7/10 FXS Speechtracker score matching the historical average but leaning more confidently hawkish in rhetoric. The emphasis that “ensuring price stability is not about a fixed date on a calendar” and the insistence on a hard 2% PCE target, alongside claims that “new monetary medicine” is working and inflation expectations are “going the right way,” signal a data-dependent but resolutely anti-inflation stance that argues against any imminent pivot to easing. References to tighter financial conditions, widening credit spreads and broadening capex reinforce a narrative that policy is biting but not yet restrictive enough to declare mission accomplished, a mix that tends to underpin the Dollar on dips.
The FXS Fed Sentiment Index jumped by 14.39 points to 141.89, pushing deeper into hawkish territory well above the 100 neutral line and confirming that markets read the press conference as more resolute on inflation than before. With the index firmly elevated and the FXS Speechtracker score steady at 7/10, the overall signal is that the Fed’s reaction function remains skewed toward keeping policy tight for longer, a backdrop that should continue to favor the Dollar against lower-yielding peers.
Technical Analysis: Gold remains capped below the 100-day SMA
In the daily chart, XAU/USD extends a corrective phase below its key moving averages and keeping the near-term bias bearish. Spot gold is holding under the 20-day Bollinger simple moving average and the 100-day simple moving average, suggesting rallies remain capped within a broader consolidation after the recent pullback. The Relative Strength Index (14) hovers near 40, pointing to lingering downside pressure but not yet oversold conditions, which hints that sellers still retain control while room for additional losses remains.
On the topside, immediate resistance is located at the 20-day Bollinger middle band near $4,120, with a break above this barrier exposing the 100-day SMA at $4,218 and the upper Bollinger band around $4,235 as the next levels where supply could re-emerge. On the downside, initial support is aligned with the lower Bollinger band at $4,005; a clear drop through this floor would likely reinforce the bearish bias and open the way for a deeper decline toward lower psychological and historical levels not visible on the current configuration.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- AUD/USD rises 0.40% after the Fed holds interest rates steady.
- Australian trimmed mean CPI accelerates to 3.7%, strengthening expectations for further RBA tightening.
- December Fed hike odds climb to 85% ahead of US PCE and GDP data.
The AUD/USD drifts higher by 0.40% on Wednesday after the Federal Reserve held rates unchanged, while Fed Chair Kevin Warsh hinted that "officials had made clear our readiness to act as circumstances require, and we have shown our willingness to act.” The AUD/USD trades at 0.7053.
AUD/USD extends gains as Australian inflation strengthens the case for November tightening despite Warsh's hawkish stance
The highlight of the week passed, and the financial markets calmly digested the Fed’s decision and Warsh's remarks. Money markets expected a hold, and in the press conference, Warsh reaffirmed the committee’s commitment to drive inflation to the Fed’s 2% goal.
Furthermore, he added that tightening policy is working but refrained from calling financial conditions tight. Warsh said there is no “soft inflation target” and stated that the price stability target is 2%, as measured by the Personal Consumption Expenditures (PCE).
Before, the Fed, in its monetary policy statement, recognized that economic activity is strong, that job market gains “have kept pace with the workforce,” and that, although inflation is high, it would wait for more data to assess the appropriate policy stance.
Aside from the Fed’s decision, the docket remained absent. The swaps market had priced in an 85% chance of a 0.25% rate hike in December, according to Prime Terminal.
In Australia, the Trimmed Mean CPI in September rose by 3.7% YoY, up from 3.5%, cementing the case for another rate increase. After the data release, the Reserve Bank of Australia (RBA) Deputy Governor Hauser said that “inflation is too high.”
ANZ analysts, in a note, commented that they expect a 25 basis points rate hike in November and “expect to see upward revisions to the RBA’s inflation forecasts which will be published in the November SMP.”
On the calendar
The Aussie’s docket is absent. In the US, the schedule is busy with the release of the Fed’s favorite inflation measure, the Core PCE, Gross Domestic Product (GDP) figures and jobless claims.
AUD/USD Price Forecast: Technical outlook
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- EUR/USD stops a five-session slide at its October 14 low and climbs from there.
- The Fed held 10-2, and Fed Governor Cook cast her first dissent, for a hike.
- Euro area GDP for the third quarter is due Friday, forecast to slow to 0.2%.
The European Central Bank (ECB) decides on Thursday with EUR/USD a short way above a low it has hit twice, on October 14 and again on Wednesday. Wednesday's visit, just above 1.1100, followed five straight losing sessions. The pair has climbed back to around 1.1150 since then and is on track for its first gain in six sessions.
The Fed held on a 10-2 vote, with Cleveland Fed President Hammack and Fed Governor Cook, in her first dissent since joining in 2022, voting for a quarter-point hike. The statement upgraded US growth to a strong pace from solid. Traders raised the odds of a December Fed hike to about 81% from 75%, which bears on the US half of EUR/USD's rate gap.
Fed Chair Warsh said he doesn't believe in forward guidance outside a crisis, and that market-set interest rates, the ones the Dollar trades on, have turned lower. EUR/USD made its session high during his press conference. Two votes for a hike and an upgrade to US growth came on the one day in six that EUR/USD is up.
On the calendar
The ECB's decision on Thursday at 13:15 GMT sets the euro half of the pair's rate gap, with the deposit rate forecast to stay at 2.5%. ECB President Lagarde takes questions at 13:45 GMT, and euro area growth for the third quarter, due on Friday at 10:00 GMT, is forecast at 0.2% after 0.6%.
Third-quarter US Gross Domestic Product (GDP) is out on Thursday at 12:30 GMT, just before the ECB announces, forecast at a 3.2% annualised rate after 2.2%. The forecasts have growth speeding up on the US side of the pair and slowing on the euro side in the same quarter.
On the charts
EUR/USD has traded inside a range topped just above 1.1250 since early October, the latest stage of a decline from the August high just above 1.1700. It hasn't been above its 50-day Exponential Moving Average (EMA), now just under 1.1350, since mid-September, and the 200-day EMA is just under 1.1500.
EUR/USD daily chart
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.
- GBP/USD breaks a three-session losing run and climbs back above 1.3300.
- Chancellor Healey's first Budget leaves less headroom, and gilt yields ease.
- September's US core PCE inflation is due Thursday, forecast at 3.1%.
GBP/USD's first gain in four sessions came from a weaker Dollar after the Fed's hold, and Chancellor Healey's first Budget had little to do with it. The pair's session low, just above 1.3250 and its lowest since mid-October, came well before the Budget speech. It barely moved while the speech ran and is trading just above 1.3300 after the Fed.
The Office for Budget Responsibility (OBR) puts Chancellor Healey's headroom at £15 billion for 2029-30, down from £24 billion in March, even with new taxes on banks and gambling. The 10-year gilt yield eased anyway, on a Budget with about £14 billion of extra debt interest this year in the OBR's forecast, nearly as much as the headroom. The Pound is down against the Euro on the day, so GBP/USD's gain is the Dollar's fall.
The Fed left its rate at 3.75%-4.00%, and Fed Chair Warsh said tighter credit since September, including dearer borrowing for the technology build-out, shows the Fed's policy is working. The Dollar Index made its low of the session while he took questions, and GBP/USD made its high in the same stretch.
On the calendar
September's core Personal Consumption Expenditures Price Index (PCE) comes out at 12:30 GMT on Thursday, forecast at 3.1% for the year after 3%. The headline rate is forecast at 3.6% after 3.4%, and the third-quarter Employment Cost Index follows on Friday at 12:30 GMT, forecast at 0.8% after 0.9%. They're the first US price and wage figures since the hold, and they bear on whether the Fed hikes in December.
Nothing from the UK is on the calendar before the weekend, so the Bank of England (BoE) decision on November 5 is the next event on the Pound's side. Almost every research house expects it to raise the UK's Bank Rate to 4.00% from 3.75%.
On the charts
GBP/USD climbed from just under 1.3150 on October 14 to just above 1.3400 on October 22, and the slide into Wednesday's low gave back about half of that climb. The pair is below the 50-day Exponential Moving Average (EMA) near 1.3350 and the 200-day EMA just under 1.3400, which it traded around from October 20 to 22. Daily momentum is still overbought after the three down sessions.
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.
- AUD/USD jumps 0.52% to 0.7054 following Warsh's press conference.
- Fed holds rates at 3.75%-4%, with two officials favoring a hike.
- Warsh reaffirms 2% inflation target while acknowledging tightening is working.
The Australian Dollar (AUD) surges 0.52% against the US Dollar (USD) on Wednesday after Federal Reserve (Fed) Chair Kevin Warsh press conference, sending the Aussie Dollar to a one-month high, even though he emphasized the Fed’s commitment to attain 2% inflation. The AUD/USD trades at 0.7054, its highest level since September 23.
AUD/USD rallies despite Warsh's inflation warnings as the Fed pauses tightening following a divided vote
Fed Chair Kevin Warsh said the economy is strong and the FOMC will deliver price stability. The Fed will hold eight meetings next year, though one will not include a vote, and six policy-setting meetings in 2028. He said tightening appears to be working, inflation is not “soft,” and that the price stability target is 2% as measured by PCE.
Before Warsh’s conference, the Fed held rates at 3.75%–4%, with two dissenters: Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack, who voted for a 25-basis-point rate hike.
The Fed acknowledged that economic activity is expanding, domestic spending “has been resilient, that productivity growth is strong and that capital investment is robust,” and that productivity growth is strong. Regarding its employment mandate, the Fed noted that “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
On inflation, the central bank said it remains elevated but chose to hold off on rate hikes while gathering more information and assessing the appropriate policy stance.
AUD/USD Price Chart – Daily
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.
- USD/JPY edges down 0.02% to 157.89 as the Yen recovers.
- Warsh reaffirms the Fed's commitment to 2% inflation despite resilient growth.
- Fed holds rates at 3.75%-4%, with two officials favoring tightening.
The Japanese Yen (JPY) recovers some ground against the US Dollar (USD) on Wednesday after Federal Reserve (Fed) Chair Kevin Warsh crossed the wires, saying the FOMC will deliver price stability and is committed to the 2% inflation goal. USD/JPY trades at 157.89, down 0.02%.
USD/JPY recovers modestly as Fed Chair emphasizes price stability following a divided rate decision
Fed Chair Kevin Warsh said that the FOMC will deliver price stability, that the economy is strong and that the Federal Reserve will hold eight meetings next year, but in one they will not have a vote. For 2028, he expects six policy-setting meetings.
He added that Fed tightening shows signs it’s working, that there is no soft inflation; that there's a target of price stability, and it's 2% as measured by PCE
Earlier, the Fed held rates at 3.75%-4% and acknowledged that economic activity is expanding, that domestic spending “has been resilient, that productivity growth is strong and that capital investment is robust,” and that productivity growth is strong. Regarding its employment mandate, the Fed noted that “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
On inflation, the central bank said it remains elevated but chose to hold off on rate hikes while gathering more information and assessing the appropriate policy stance.
The FOMC’s two dissenters were Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack.
USD/JPY Price Chart – Daily
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.
- Gold retreats 0.21% to $4,039 as Warsh emphasizes inflation risks.
- Fed holds rates at 3.75%-4%, with two officials favoring tightening.
- December Fed hike odds reach 85% ahead of crucial US PCE data.
Gold (XAU/USD) price retreats 0.21% on Wednesday as Federal Reserve (Fed) Chair Kevin Warsh said he can't call financial conditions tight, even though credit conditions have tightened. XAU/USD trades at $4,039 at the time of writing.
XAU/USD remains under pressure as Warsh signals financial conditions may not be sufficiently restrictive
Fed Chair Kevin Warsh said that Fed tightening shows signs it’s working, even as inflation remains elevated. However, he emphasized that the committee is committed to delivering price stability and that there is no soft inflation; that there's a target of price stability, and it's 2% as measured by PCE
On Wednesday, the Fed held rates at 3.75%-4% with two dissenters, Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack, who voted for a 25 basis points rate hike
The Fed acknowledged that economic activity is expanding, domestic spending “has been resilient, that productivity growth is strong and that capital investment is robust,” and productivity growth is strong. Regarding its employment mandate, the Fed noted that “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
On inflation, the central bank said it remains elevated but chose to hold off on rate hikes while gathering more information and assessing the appropriate policy stance.
Tensions between the Houthis and Saudi Arabia remain high, following an attack by the Iran-backed group in Yemen on a Saudi refinery, which pushed energy prices higher on concerns of supply disruptions.
After the Fed’s meeting, Gold traders will also eye the release of the Core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, on Thursday. A hot reading and strong Gross Domestic Product (GDP) figures will cement the case for another rate hike at the December meeting.
The swaps market had priced in 21 basis points of tightening, or an 85% chance that the Fed will hike in the December meeting, according to Prime Terminal.
Meanwhile, higher interest rates are negative for Gold prices, despite its appeal as an inflation hedge.
Of note, analysts polled by Reuters revised their forecasts for Gold downward toward the end of 2026.
XAU/USD technical analysis: Gold consolidates within $4,000-$4,100
Even though Gold formed a ‘bullish harami’ candle pattern, price action on Wednesday puts in doubt the validity of the pattern. If the candle closes the day near current prices, it could open the door to some consolidation.
Momentum has shifted negatively. The Relative Strength Index (RSI) is bearish, pointing downwards, aligned with price action. Given the mixed signals, price action will remain at around familiar levels until the Fed’s decision.
On the upside, the next area of interest is a resistance trendline drawn from the September highs near $4,100. A breach of this level will expose $4,200. The next key resistance levels are the 100-day Simple Moving Average (SMA) at $4,218 and the 50-day SMA at $4,278.
If XAU/USD falls below $4,000, it could test last Friday’s low of $3,975. The next key support levels are the July 17 low of $3,959 and the year-to-date (YTD) low of $3,941.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
- GBP/USD gains 0.17% to 1.3327 during Warsh's press conference.
- Fed holds rates unchanged as Cook and Hammack favor tightening.
- Warsh emphasizes price stability and economic strength despite persistent inflation.
The Pound Sterling (GBP) turns positive on Wednesday as Federal Reserve (Fed) Chair Kevin Warsh highlighted economic resilience after the Fed held rates unchanged amid a split vote. GBP/USD trades near 1.3327, gaining 0.17%.
GBP/USD rebounds as Fed Chair Warsh emphasizes economic resilience
At his press conference, Warsh said that the FOMC will deliver price stability, that the economy is strong and that the Federal Reserve will hold eight meetings next year, but in one they will not have a vote. For 2028, he expects six policy-setting meetings.
The Fed acknowledged that economic activity is expanding, domestic spending has been resilient, productivity growth is strong and capital investment is robust. Regarding its mandate on employment, the Fed noted that “Job gains have kept pace with the workforce, and the unemployment rate has changed little.”
Regarding inflation, the central bank said it remains elevated but decided to skip rate hikes to gather more information and better assess an appropriate policy stance.
The two dissenters in the meeting were Governor Lisa Cook and Cleveland Fed President Beth Hammack, who supported a 25-basis-point rate hike.
GBP/USD 5-minute 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.
The US Dollar (USD) has come under fresh downside pressure on Wednesday as investors continued to digest the latest FOMC event and the mixed performance in US Treasury yields across the curve.
The US Dollar Index (DXY) has interrupted its three-day positive streak, coming under fresh selling pressure and revisiting the vicinity of the 102.00 contention zone. The usual weekly Initial Jobless Claims are due, alongside the PCE, Personal Income/Spending, and the preliminary Q3 GDP Growth Rate.
EUR/USD has managed to regain the smile, reversing five consecutive daily drops and challenging the 1.1170 region. The ECB meets and is expected to keep its policy rate unchanged. Further data will see the final Consumer Sentiment gauge in Euroland.
GBP/USD has traded with modest gains, retesting the 1.3340 area after a decent U-turn from new multi-day troughs near 1.3270. The BoE’s Consumer Credit figures are due along with Mortgage Approvals/Lending and the BoE’s M4 Money Supply and Net Lending to Individuals figures.
USD/JPY could not sustain the bull run past the key 158.00 hurdle, eventually ending the day near 157.80 and slightly in the red. The usual weekly Foreign Bond Investment figures are due along with the Consumer Confidence reading.
AUD/USD has advanced further, hitting new five-week highs and challenging its critical 200-day SMA around 0.7060. Export/Import Prices will be the sole data release in Oz.
Front-month WTI futures (December contract) have regained upside traction, popping to weekly tops past the $103.00 mark per barrel as traders assessed reignited supply concerns in the Middle East.
Gold has resumed its decline, leaving behind two daily advances in a row and trading at shouting distance from the $4,000 mark per troy ounce on the back of rising crude oil prices and a decent uptick in US Treasury yields across the board.
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