Forex News
- EUR/USD holds modest gains as the US Dollar struggles to regain traction.
- Upbeat German GDP and Ifo data offer support to the Euro.
- Traders await US inflation data and Kevin Warsh’s Jackson Hole speech.
EUR/USD holds modest gains on Tuesday as the latest Middle East developments fail to trigger a strong market reaction, while the US Dollar (USD) struggles to recover from last week’s sell-off sparked by the US Treasury’s decision to increase buybacks of longer-dated government securities. At the time of writing, the pair trades around 1.1671, below the three-month high of 1.1711 touched on Friday.
Pakistan’s Interior Minister Mohsin Naqvi said he and Army Chief Asim Munir held a “very positive and productive meeting” with Iranian President Masoud Pezeshkian, adding that “significant progress” was made. Pakistan has been acting as a mediator between the United States and Iran.
The diplomatic push comes after the US Treasury launched “Operation Economic Outcast” on Monday, a wider sanctions campaign aimed at cutting off financial support for the Iranian government.
The Greenback, meanwhile, struggles for traction as the Treasury’s buyback decision revives concerns about the US fiscal outlook and rising government debt, bringing the USD debasement trade back into focus. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 98.95 after briefly climbing above 99.00 earlier in the day.
US labour data released on Tuesday showed that the ADP Employment Change four-week average rose to 11.75K from 9.5K previously. Traders now await the US Personal Consumption Expenditures (PCE) Price Index on Wednesday for fresh clues about inflation and the Federal Reserve’s (Fed) interest-rate path. Attention will then shift to Fed Chairman Kevin Warsh’s speech at the Jackson Hole Symposium on Friday.
Stronger-than-expected German Gross Domestic Product (GDP) and Ifo Business Climate data offer some support to the Euro (EUR). Germany’s economy grew 0.3% in the second quarter, slightly above the preliminary estimate and market expectation of 0.2%. On an annual basis, GDP expanded 1.0%, beating the 0.9% forecast and accelerating from 0.7% previously.
On the monetary policy front, the Fed and the European Central Bank (ECB) are expected to take different paths at their upcoming meetings. The Fed is widely expected to keep rates unchanged, while the ECB is seen raising borrowing costs in September.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger 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.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
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 European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
Scotiabank strategists Shaun Osborne and Eric Theoret describe USD/CAD trading close to their fair value estimate around 1.3842 as the Canadian Dollar (CAD) reacts to trade headlines and weaker Oil prices. They note CAD downside may stay limited absent a major trade shock, while short-term technicals remain neutral with the broader downtrend intact but scope for a push towards the mid to upper 1.39s.
CAD trades near model fair value
"It’s been a bit of a trade whirlwind for the CAD since Friday—tariffs, counter tariffs, more tariffs and (somewhat surprisingly) the concession from VP Vance yesterday that talks are still going on."
"It is notable that Canada’s tariff response won’t take effect until early September while the US threat of 50% tariffs on all autos, auto parts and steel won’t land until January. There’s a built-in cooling off period in both cases."
"The CAD is marginally lower this morning but that may have as much (or more) to do with lower oil prices as with trade worries or other drivers."
"Front-end spreads are little changed on the session and the risk backdrop is positive. Spot is trading right about where our fair value estimate (1.3842 today) says it should be. Absent any major deterioration in the trade backdrop in the short run, downside pressure on the CAD may remain contained. "
"Neutral—Spot has edged a little above the 200-day MA (1.3843) but the broader technical picture remains little changed by the USD rebound. The downtrend in place since late June remains intact while daily and weekly trend oscillators remain bearish."
"There is a mild, bullish crossover evident on the intraday DMI oscillator which supports the outlook for some additional USD gains in the short run, however, and a push towards the mid/upper 1.39s. Support is 1.3825/30 and (stronger) 1.3775/85."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
ING’s Francesco Pesole notes the Dollar is drawing support from the US bond market as long-dated yields stabilise, while US-Canada trade tensions and Iran-related sanctions risks complicate the outlook. He argues renewed US-China trade frictions could hurt the Dollar, and sees downside risks dominating, although USD is expected to consolidate into the upcoming Jackson Hole event.
Dollar steadies with bond-led support
"The dollar continues to take cues from the US bond market, with a good session for the back-end allowing the greenback to find some support."
"CNBC reported yesterday that the Treasury may use its account at the Fed (TGA) to fund its buyback operations for long-dated debt."
"Our rates colleagues argue that this would not be a big deal for the bond market, as buybacks funded through bill issuance today versus buybacks funded by running down the TGA and issuing bills later are largely equivalent."
"Any serious revival of the US-China trade spat would be negative for the dollar in our view, mirroring last year’s USD correlation with the issue."
"The balance of risks for the dollar remains skewed to the downside, but our baseline is for further consolidation into the Jackson Hole risk event later this week."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Commerzbank’s Carsten Fritsch reports that Gold has surged to a three‑month high near USD 4,700 per ounce as US–Canada tariff tensions escalate and concerns over US debt intensify. Silver and Platinum have also rallied. Strong ETF inflows, particularly in North America, suggest sustained investor interest, and the bank sees indications that Gold prices will continue to rise.
Tariffs and ETFs support rally
"The rise in the price of gold continued at the start of the new trading week. Having already risen by more than 5% last week, the price reached almost USD 4,700 per troy ounce overnight, its highest level in more than three months."
"As in previous phases of escalation in the tariff dispute, the price of gold rose significantly, as this could further damage the US dollar’s reputation as a reserve currency and safe haven."
"According to the World Gold Council, gold ETFs recorded their strongest weekly inflows in 10 months, totalling 46.7 tons. Of this, 30.4 tons were attributed to North America and 13.8 tons to Europe."
"Given the current news situation, there are strong indications that ETF purchases will continue and that the price of gold will rise further."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- NZD/USD advances modestly on Tuesday, even as safe-haven demand supports the US Dollar.
- US-Iran tensions keep uncertainty elevated over the Middle East conflict and the Strait of Hormuz.
- Elevated inflation in New Zealand fuels expectations of a September rate hike and supports the Kiwi.
NZD/USD edges slightly higher on Tuesday and trades around 0.5965 at the time of writing, up 0.08% on the day. The pair withstands a firmer US Dollar (USD), which benefits from increased safe-haven demand as geopolitical tensions between the United States (US) and Iran remain at the center of market attention.
The US is stepping up economic pressure on Iran and its international trading partners. US Treasury Secretary Scott Bessent has outlined a strategy aimed at further isolating Tehran from the global economy, including sanctions targeting countries and entities that continue to trade with Iran.
US President Donald Trump has also warned that foreign entities have a limited period to end their commercial ties with Tehran or face US financial sanctions. However, the campaign is keeping markets uncertain, with investors questioning whether it will help bring the conflict closer to a resolution or instead prolong hostilities and delay the reopening of the Strait of Hormuz.
The resulting safe-haven demand supports the US Dollar and limits the advance in NZD/USD. However, the Greenback also faces headwinds after the US Treasury's decision to expand its buyback operations for longer-dated bonds. Scott Bessent could deploy up to $1 trillion from the Treasury General Account to finance these operations, a prospect that could affect US market liquidity and bond yields.
On the economic front, the latest US private employment data points to a modest improvement. The four-week average ADP Employment Change stands at 11.75K jobs per week for the period ending August 8, up from 9.5K previously. The acceleration suggests some recovery in private-sector hiring without triggering a significant move in the US Dollar.
Meanwhile, the New Zealand Dollar (NZD) remains supported by monetary policy expectations. Persistently elevated inflation reinforces the possibility that the Reserve Bank of New Zealand (RBNZ) could raise interest rates again in September, helping limit downside pressure on the Kiwi despite a geopolitical environment that remains unfavorable for risk-sensitive assets.
Investors now turn their attention to several major events in the United States. Consumer confidence data is due on Tuesday, followed by the Personal Consumption Expenditures (PCE) Price Index on Wednesday. Federal Reserve (Fed) Chair Kevin Warsh is then scheduled to speak on Friday at the annual Jackson Hole symposium, an event that could provide fresh clues about the path of US monetary policy.
NZD/USD technical analysis
In the one-hour chart, NZD/USD trades at 0.5964, holding a mild bullish bias as it consolidates above the 100-period simple moving average (SMA) at 0.5956 and the 200-period SMA at 0.5918. The pair has pushed through a recently broken downward trend-line around 0.5959, which now acts as nearby support, while the Relative Strength Index (RSI) around 55 suggests modest positive momentum rather than an overstretched rally.
On the downside, initial support is seen near the broken trend-line zone around 0.5959, followed by the 100-period SMA at 0.5956 and the horizontal floor at 0.5940, ahead of stronger backing from the 200-period SMA at 0.5918. On the topside, immediate resistance is located at the horizontal barrier around 0.5989, and a clear break above this level would open the way for a further recovery toward higher highs in the short term.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Brown Brothers Harriman’s (BBH) Elias Haddad notes the Australian Dollar (AUD) largely ignored the Reserve Bank of Australia's (RBA) August Minutes, which reiterated Governor Michele Bullock’s warning that another rate hike is quite possible. Futures imply around 60% odds of a final 25 bps hike to 4.60% by year-end. Haddad sees risks skewed toward an extended pause but highlights Australia’s attractive carry and strategic commodity exposure as key AUD tailwinds.
RBA path and AUD tailwinds
"AUD ignored the release of the RBA August meeting Minutes. The Minutes reinforced Governor Michele Bullock’s warning that another rate hike was “quite possible.”"
"According to the Minutes “Several members judged that it was quite possible that the upside risks to the inflation forecast would crystallise, requiring some further tightening.”"
"RBA cash rate futures continue to imply 60% odds of one final 25bps hike by year end to 4.60%."
"In our view, the risk is skewed towards a more extended pause in the RBA tightening cycle because policy is already somewhat restrictive."
"Still, Australia’s attractive carry alongside the country’s strategic exposure to commodities linked to energy, AI, and defense remain key AUD tailwinds."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold retreats after setting a fresh three-month high during Asian trading hours.
- Treasury buybacks revive the US Dollar debasement narrative and support demand for bullion.
- XAU/USD maintains a firm bullish bias above the 50-day, 100-day and 200-day SMAs.
Gold (XAU/USD) remains under pressure on Tuesday heading into American trading hours after setting a fresh three-month high of $4,697 earlier in the day. Traders appear to be booking some profits following the recent rally, which has pushed the Relative Strength Index (RSI) into overbought territory. At the time of writing, XAU/USD trades around $4,635 after touching an intraday low of $4,618.
A modest recovery in the US Dollar (USD) also limits demand for the USD-denominated metal. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.02 after falling to 98.56 last week, its lowest level since May 14.
However, the downside could remain limited as both the near-term macroeconomic and technical pictures continue to favour Gold buyers. According to TD Securities, the precious metals complex is drawing strong support from developments in the US bond market, with the firm noting that the market is responding to US Treasury Secretary Scott Bessent's intervention last week, which may see “Treasury buying more than double to $8 billion between September 9 and November 4, as the battle is on to tame long-end yields.”
Strategists argue that this stepped-up buying “has lit a fire under gold and silver,” while “worries about America's fiscal situation are once again resurrecting the USD debasement narrative, which, in turn, is energizing gold bugs.”
Demand for Gold-backed exchange-traded funds also strengthened the previous week. World Gold Council (WGC) data show that global Gold ETFs attracted net inflows of $3.52 billion, equivalent to 23.6 tonnes. Year-to-date inflows now stand at $21.34 billion, or 116.1 tonnes, led by strong demand from Asia and Europe.
Middle East headlines remain at the centre of attention, adding to volatility amid a quiet US economic docket. Tehran is “fully prepared” to counter US sanctions, Iranian Finance Minister Ali Madanizadeh told the state-run media on Monday. His comments came after the US Treasury launched “Operation Economic Outcast,” a wider sanctions campaign aimed at cutting off financial support for the Iranian government.
Oil prices show little reaction to the latest developments. West Texas Intermediate (WTI) trades below its recent highs and is down nearly 3.5% on the day at the time of writing. However, prices remain well above pre-war levels, keeping energy-driven inflation risks alive and adding uncertainty around the Federal Reserve’s (Fed) interest-rate path.
Data released on Tuesday showed that the ADP Employment Change four-week average rose to 11.75K from 9.5K previously. Looking ahead, traders await the US Personal Consumption Expenditures (PCE) Price Index on Wednesday and Fed Chairman Kevin Warsh’s speech at the Jackson Hole Symposium on Friday.
Technical analysis: XAU/USD challenges $4,700 with bullish structure intact
On the daily chart, XAU/USD holds a firm bullish bias as price extends well above the 50-day, 100-day and 200-day Simple Moving Averages (SMAs) clustered between roughly $4,185 and $4,520.
This stacked configuration of underlying SMAs suggests an entrenched uptrend, while the Relative Strength Index (14) near 71 signals overbought conditions and the Moving Average Convergence Divergence (MACD) remains firmly positive, hinting that bullish momentum is strong but potentially stretched as the metal approaches overhead supply.
On the topside, initial resistance emerges at the horizontal barrier around $4,700, with the next cap seen at $4,850 if buyers extend the advance. On the downside, immediate support is provided by the 200-day SMA near $4,520, ahead of the 100-day SMA around $4,379 and the 50-day SMA near $4,186, while a deeper correction would meet more substantial demand at the horizontal floor around $4,000.
(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.
Rabobank's Senior FX Strategist Jane Foley discusses the British Pound's (GBP) recent performance, noting it is currently the top G10 currency on a 1‑day view but only middling over longer horizons. Foley expects EUR/GBP to trade in a range over the coming weeks, with a mild upside bias later in the year as fiscal realism and reduced BoE rate hike risk weigh on Sterling.
Sterling resilience and fiscal constraints
"The pound is sitting pretty this morning as the top performing G10 currency on a 1-day view, though its performance in most other time frames can be better described as ‘middling’."
"There have been some better-than-expected UK economic data released in recent weeks. This means that the UK economy, along with that of the Eurozone, can be described as ‘resilient’ through Q2 and into the summer."
"We expect further range trading in EUR/GBP over the coming weeks, with a mild upside bias later in the year as fiscal realism weighs and BoE rate hike risk is further priced out."
"In view of the energy price crisis stemming from the Iran war, this is a better outcome than most forecasters had expected."
"It remains Rabobank’s central view that the MPC will continue to side-step a rate hike this year."
"Since the market still sees some risk of higher rates this year, steady policy, in line with our view, could undermine the pound."
"We maintain a 3-month EUR/GBP forecast of 0.87."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- US private employers added an average of 11.750K jobs per week in early August.
- Job gains pick up momentum, reversing the previous week’s pullback.
Private-sector hiring in the US has gained some pace in early August. According to the NER Pulse, the weekly companion to the ADP National Employment Report, companies added an average of 11.750K jobs per week in the four weeks ending August 8.
That marks an acceptable rebound from the prior reading (9.5K), showing some recovery in hiring.
Market reaction
The Greenback alternates gains with losses in the wake of the ADP release, with the US Dollar Index (DXY) gyrating around the key 99.00 region amid a generalised lack of volatility in the global markets.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
Michael Wan at MUFG discusses US threats of economic punishment on countries dealing with Iran and new sanctions on over 60 entities. He argues that rising geoeconomic fragmentation encourages countries to diversify reserves, trade and financial links away from reliance on any single system, including the Dollar-based one. Wan also references ongoing US–Canada trade tensions and perceived uncertainty around US trade agreements.
Geoeconomic fragmentation and reserve shifts
"US 10-year yields fell a touch to 4.69% as news reports emerged that the US Treasury could use the Treasury General Account – essentially the US Treasury’s “savings account” at the Fed – for buyback auctions."
"This is even as Treasury Secretary Scott Bessent refrained from providing any further signals on revamping US debt management, and that the US Treasury will continue with regular program of debt auctions as announced in the last quarterly refunding."
"All this comes as the US threatened economic punishment against any country doing business with Iran as part of an “economic D-Day” campaign to isolate the country, with Scott Bessent saying that countries will face a specific timeline to shutdown links with Iran or face unilateral US punishment."
"The US also unveiled sanctions against more than 60 entities, focusing on five of Iran’s “most vital lifelines”, including digital assets, technology, gold, aviation and shipping."
"Beyond whether these measures will be effective in achieving the US’ aims and objectives, the broader macro picture is that with greater geoeconomic fragmentation, it seems rational for countries around the world to diversify their reserves, trade and financial linkages further to prevent themselves from being too reliant on any one system, including our current Dollar-based one."
"This also perhapsincludes ongoing trade tensions that we see playing out right now between the US and Canada, and certainly in Asia there is also a quiet and unspoken sense that trade deals and agreements with the US are written more on pencil rather than with a pen, as Canada Prime Minister Mark Carney said."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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