Forex News
- Silver struggles to gain any meaningful traction and oscillates in a range at the start of a new week.
- The technical setup favors bears and suggests that the path of least resistance is to the downside.
- A sustained move and acceptance above the 200-SMA on H4 is needed to negate the negative bias.
Silver (XAG/USD) kicks off the new week on a subdued note and oscillates in a narrow band above the $64.00 mark through the Asian session as traders seem hesitant to place directional bets ahead of key central bank event risks.
The US Federal Reserve (Fed) is scheduled to announce its rate decision on Wednesday, which will be followed by the Bank of England (BoJ) meeting on Thursday and the Bank of Japan (BoJ) policy update on Friday. Investors will look for more cues about central banks' future policy path, which, in turn, will play a key role in driving demand for the non-yielding XAG/USD.
From a technical perspective, the white metal holds below the 200-period Simple Moving Average (SMA) on the 4-hour chart at $64.91 and the 38.2% Fibonacci retracement at $64.78, which together cap the near-term tone and keep the bias bearish. Moreover, the Moving Average Convergence Divergence (MACD) indicator remains below zero with a slightly negative latest reading.
Adding to this, the Relative Strength Index (RSI) around 42 suggests waning momentum after the recent pullback, reinforcing the idea of a market that is struggling to regain topside traction. The setup, in turn, suggests that any meaningful bullish attempts would face immediate resistance at the 38.2% retracement at $64.78, closely followed by the 200-period SMA at $64.91.
A further move up could lift the XAG/USD pair to the next relevant hurdle near the 23.6% Fibo. retracement at $67.15 and the cycle high region around $70.99. On the downside, initial support appears at the 50% retracement near $62.86, ahead of the 61.8% Fibo. at $60.94, with deeper structural floors at $58.21 and $54.74.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
XAG/USD 4-hour chart
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- Rising crude oil prices near four-month highs provide strong fundamental support to the commodity-linked Canadian Dollar.
- Saudi pipeline shutdowns and delayed regional shipping corridor talks keep global energy supply concerns elevated.
- The broader currency pair faces upside pressure as aggressive Federal Reserve rate-hike bets could boost the US Dollar.
USD/CAD halts its three-day winning streak, trading around 1.3870 during Asian hours on Monday. The pair inches lower as the commodity-linked Canadian Dollar (CAD) receives support from elevated oil prices.
Crude oil prices are rising toward nearly four-month highs following a drone attack that forced Saudi Arabia to shut down a major crude pipeline. This disruption has heavily impacted a critical route traditionally used to bypass the Strait of Hormuz. As a precautionary measure, Saudi operations on the East-West pipeline were suspended immediately following Thursday's attacks, and officials have not yet indicated when normal operations will resume.
Canada front-end stability offers near-term anchor for the Dollar
Analysts at Scotiabank note that front-end rate differentials are providing some support for the currency, observing that “front-end US/Canada spreads have held quite stable in the past few days, despite the elevated focus on US rate policy,” a backdrop they believe “should provide some anchoring for the CAD in the short run.”
However, the USD/CAD pair may rebound as the US Dollar (USD) gains support amid aggressive Federal Reserve (Fed) rate-hike bets for Wednesday’s decision following hotter US inflation reports. Financial markets have priced in nearly an 87% probability of a quarter-point rate hike at the Fed's September meeting, up from 59% a week ago, according to the CME FedWatch tool.
The US Consumer Price Index (CPI) accelerated in August, reinforcing expectations that the US central bank will raise interest rates next week. Data released by the Bureau of Labor Statistics on Friday showed that the US CPI rose 0.4% MoM in August, putting the 12-month increase at 3.4%. Both readings came in line with market expectations. Meanwhile, the core CPI, which excludes volatile food and energy prices, increased by 0.3% on a monthly basis, versus 0.2% prior, beating the forecast of 0.2%.
Technical Analysis:
In the daily chart, USD/CAD trades at 1.3870. The pair remains capped in the near term, with the 50-day Exponential Moving Average (EMA) acting as overhead resistance while price holds just above the short-term nine-day EMA at 1.3842. The 14-day Relative Strength Index (RSI) at 49 suggests neutral momentum after the recent recovery, hinting at consolidation below the medium-term trend line rather than a decisive bullish break.
On the topside, a daily close above the 50-day EMA at 1.3913 would be needed to ease the current bearish cap and open the way for a more sustained advance. On the downside, immediate support is seen at the nine-day EMA at 1.3842, and a drop back below this level would reinforce selling pressure and expose further weakness toward recent lows, keeping USD/CAD vulnerable while it trades beneath its primary trend gauge.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- USD/JPY gains some positive traction as Fed rate hike bets and Middle East tensions support the USD.
- A hawkish repricing of the BoJ’s tightening path should underpin the JPY and cap gains for spot prices.
- Traders might also opt to move to the sidelines ahead of the Fed and BoJ policy decisions later this week.
The USD/JPY pair attracts some buyers at the start of a new week and climbs closer to the 154.00 mark during the Asian session, reversing a part of Friday's losses. Spot prices, however, remain confined in a range held over the past week or so and within striking distance of a nearly seven-month low, touched last Tuesday, as traders await this week's key central bank events.
The US Federal Reserve (Fed) and the Bank of Japan (BoJ) are heading into high-stakes policy meetings on September 15–16 and September 17–18, 2026, respectively. The latest US inflation figures, released last week, reaffirmed market bets that the Fed will raise borrowing costs on Wednesday. Adding to this, a further escalation of tensions between the US and Iran supports the safe-haven US Dollar (USD), which, in turn, is seen as acting as a tailwind for the USD/JPY pair.
In the latest developments, Yemen’s Iran-backed Houthi fighters said that they used drones and missiles to attack a military base in southern Saudi Arabia. Moreover, an Iranian cargo vessel was struck early Sunday in the Strait of Hormuz, while a planned regional meeting between Gulf states and Iran regarding the Strait of Hormuz has been postponed. This keeps the geopolitical risk premium in play, which turns out to be another factor benefiting the safe-haven buck.
That said, a more hawkish repricing of the BoJ's policy tightening path might continue to underpin the Japanese Yen (JPY) and cap the upside for the currency pair. In fact, traders have fully priced in a 25-basis-point (bps) rate hike later this week and are assigning a high probability of a follow-up move in December. Expectations gained traction after BoJ's Kazuyuki Masu said last week that underlying inflation is approaching 2% and the policy rate is still below the neutral rate.
USD/JPY daily chart
Technical Analysis
The USD/JPY pair maintains a bearish near-term bias beneath the 38.2% Fibonacci retracement level and the 155.30-155.20 horizontal support breakpoint. Only a firm recovery back above the said area would begin to ease the current bearish pressure.
On the downside, immediate support is now located at the 50% retracement at 152.00, ahead of the deeper 61.8% level at 149.17. A sustained break under 149.17 would expose the 78.60% retracement at 145.14.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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 price drifts lower to around $4,340 in Monday’s early Asian session.
- US inflation persisted in August, raising prospects that the Fed will hike interest rates at its September meeting.
- Traders await the Fed interest rate decision on Wednesday.
Gold price (XAU/USD) loses ground to near $4,340 during the early Asian trading hours on Monday. The precious metal remains under selling pressure as hotter-than-expected US inflation data raised prospects that the Federal Reserve (Fed) will hike interest rates later this week.
The core US Consumer Price Index (CPI), which excludes food and energy costs, rose 0.3% MoM in August, compared to 0.2% in July, according to the Bureau of Labor Statistics on Friday. This figure came in above the market consensus of 0.2%.
The latest inflation readings pile pressure on the US central bank to make its first rate hike in three years when it meets on Wednesday. Higher interest rates typically weigh on gold because the precious metal does not pay interest, making yield-bearing assets relatively more attractive.
Probability for a rate hike jumped to nearly 86.2%, up from 72% before the US PPI data, according to the CME FedWatch tool.
The Fed interest rate decision will take center stage on Wednesday. Traders will take more cues from the Fed Chair Press Conference after the policy meeting. Any dovish comments from Fed policymakers could help limit gold’s losses in the near term.
“While the markets appear to be placing their proverbial bets on a hike, it's likely that members of the FOMC won't be quite as unequivocal. The doves on the committee, of which there are many, are likely to argue the case that the dip in annual core inflation justifies patience. As a result, this data will probably increase uncertainty going into the Fed decision rather than decrease it,” said Kyle Rodda, Senior Financial Market Analyst at capital.com.
Gold holds firm despite renewed energy upside and higher Fed hike odds
According to TD Securities, the yellow metal “has been able to hold support in the higher range, even as the market grapples with renewed energy upside and the near-term increase in Fed hike probabilities,” underscoring gold’s resilience within the precious metals complex despite shifting macro headwinds.
Technical Analysis: Gold retains a neutral tone in the near term
In the daily chart, XAU/USD consolidates in a neutral tone, holding just above the 100-day moving average (MA) at $4,332.30 while remaining capped beneath the Bollinger Bands’ 20-day simple moving average (SMA) middle band. This placement suggests a market caught between recovering trend support and overhead range resistance, with the Relative Strength Index (14) at 47.11 hinting at balanced momentum after the recent pullback.
On the topside, initial resistance is located at the Bollinger 20-day SMA middle band at $4,460, with a clearer bullish extension only opening if prices advance toward the upper Bollinger band at $4,680. On the downside, immediate support is offered by the 100-day MA at $4,330, while a deeper decline would expose the lower Bollinger band as the next key demand area around $4,238.07.
(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.
- Saudi Arabia halted the East-West pipeline following drone attacks, disrupting a vital route avoiding the Strait of Hormuz.
- Regional diplomatic talks to establish a temporary shipping corridor through the Strait of Hormuz were postponed.
- The closed pipeline, boasting a seven million barrel daily capacity, highlights ongoing Middle East energy security risks.
West Texas Intermediate (WTI) oil price rebounds after falling nearly 4% in the previous trading day, hovering around $99.40 per barrel during Asian hours on Monday. Crude oil prices are rising toward nearly four-month highs following a drone attack that forced Saudi Arabia to shut down a major crude pipeline.
This disruption has heavily impacted a critical route traditionally used to bypass the Strait of Hormuz. As a precautionary measure, Saudi operations on the East-West pipeline were suspended immediately following Thursday's attacks, and officials have not yet indicated when normal operations will resume.
Concurrently, diplomatic efforts have stalled in the region. According to Oman's Foreign Minister Badr Albusaidi, talks between Iran and several Gulf nations aimed at establishing a temporary shipping corridor through Hormuz have been postponed. Reports indicate that Saudi Arabia harbored concerns regarding the proposal, while Bahrain officially stated it would not participate.
The unexpected closure of the East-West pipeline underscores its vital role in maintaining steady energy flows across the Middle East, particularly while the US and Iran remain at an impasse over the control of Hormuz. Stretching across Saudi Arabia to deliver oil directly to Red Sea ports, the pipeline boasts a massive capacity of around 7 million barrels per day.
Brown Brothers Harriman’s Elias Haddad cautions that, despite the recent easing in Brent after its latest surge, geopolitical risk remains a key constraint on any sustained downside. BBH argues that “Iran has every incentive to keep the heat on ahead of the November 3 midterms and hurt Republicans,” suggesting that any relief-driven pullback in Oil prices is likely to be shallow and short-lived.
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.
- GBP/USD kicks off the new week on a subdued note as traders await Fed/BoE decisions.
- Traders will also confront the release of the UK jobs data and the UK CPI report this week.
- Rising Fed rate hike bets and Middle East tensions underpin the USD, capping spot prices.
The GBP/USD pair struggles to capitalize on Friday's bounce from the vicinity of the monthly swing low and consolidates above the 1.3500 psychological mark at the start of a new week. Traders seem hesitant to place aggressive directional bets and opt to move to the sidelines ahead of the key central bank event risks.
The US Federal Reserve (Fed) and the Bank of England (BoE) are scheduled to announce their monetary policy decisions on Wednesday and Thursday, respectively. The US inflation figures, released last week, reaffirmed market bets that the US central bank could raise interest rates by 25 basis points (bps). This, along with a further escalation of tensions in the Middle East, is seen as acting as a tailwind for the safe-haven US Dollar (USD) and keeping a lid on the GBP/USD pair.
In the latest developments, Yemen’s Iran-backed Houthi fighters said that they used drones and missiles to attack a military base in southern Saudi Arabia. Moreover, an Iranian cargo vessel was struck early Sunday in the Strait of Hormuz, while a planned regional meeting between Gulf states and Iran regarding the Strait of Hormuz has been postponed. This keeps the geopolitical risk premium in play, which turns out to be another factor underpinning the safe-haven Greenback.
The British Pound (GBP), on the other hand, draws support from Friday's better-than-expected UK GDP report, showing that the economy expanded 0.4% in July, compared to consensus estimates for a flat reading. Traders now look to the UK jobs report on Tuesday and the UK CPI report on Wednesday for short-term impetus. However, expectations that the BoE will leave rates unchanged at 3.75% hold back GBP bulls from placing fresh bets and cap the upside for the GBP/USD pair.
GBP/USD 4-hour chart
Technical Analysis
The GBP/USD pair holds just under the 200-period Simple Moving Average (SMA) at 1.3522 and the 38.2% Fibonacci retracement at 1.3516. This keeps the near-term tone mildly bearish and suggests that upside attempts are currently capped unless buyers can decisively reclaim this cluster.
A sustained break above these would open the way toward the 23.6% Fibo. retracement at 1.3575 and, later, the cycle anchor near 1.3671. On the downside, initial support emerges at the 50.0% retracement at 1.3468, with deeper floors at the 61.8% level at 1.3420 and the 78.6% retracement at 1.3352, ahead of a more important base around 1.3265.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
On Monday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.7698 compared to Friday's fix of 6.7743 and 6.7083 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
- EUR/USD weakens to around 1.1585 in Monday’s early Asian session.
- Traders ramp up bets that the Fed will increase its benchmark interest rate by a quarter percentage point on Wednesday.
- ECB's hawkish stance prompts expectations of further rate hikes.
The EUR/USD pair declines to near 1.1585 during the early Asian session on Monday. The pair extends the decline amid aggressive Federal Reserve (Fed) rate-hike bets following hotter US inflation reports. Traders brace for the Fed interest rate decision later on Wednesday.
The US Consumer Price Index (CPI) accelerated in August, reinforcing expectations that the US central bank will raise interest rates next week. Data released by the Bureau of Labor Statistics on Friday showed that the US CPI rose 0.4% MoM in August, putting the 12-month increase at 3.4%. Both readings came in line with market expectations.
Meanwhile, the core CPI, which excludes volatile food and energy prices, increased by 0.3% on a monthly basis, versus 0.2% prior, beating the forecast of 0.2%.
Financial markets have priced in nearly a 91% probability of a quarter-point rate hike at the Fed's September meeting, up from 72% before the US PPI data, according to the CME FedWatch tool.
“There’s no guarantee that the Fed will hike next week, but it’s hard to see how the central bank can justify leaving rates on hold,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management.
The European Central Bank (ECB) raised the interest rate on the deposit facility to 2.50% at its September policy meeting last week, as widely expected. It was the ECB’s second hike this year, after policymakers raised borrowing costs in June for the first time since 2023.
Barclays analysts expect the ECB to hike further after a hawkish policy decision reinforced concerns that inflation could remain elevated for longer.
Euro under pressure as ECB hawkish tone keeps tightening expectations elevated
Analysts at Scotiabank note that the latest European Central Bank decision delivered “messaging from the ECB [that] was mixed but hawkish overall,” with policymakers publishing “a fresh forecast that saw inflation remaining above target through the end of the projection horizon.” According to the bank, the communication from ECB President Christine Lagarde, alongside “subsequent comments from key members of the governing council,” has “leaned toward further near-term hikes and pushed markets to price nearly 40bpts of additional tightening by year end,” reinforcing the market’s perception that the ECB remains firmly focused on inflation risks despite softer Euro price action.
Technical Analysis: EUR/USD is well-supported above the 100-day SMA
In the daily chart, EUR/USD sits above the Bollinger Bands’ lower band and the 100-day simple moving average (SMA), hinting at a modest underlying bid, but price remains below the Bollinger middle band, which keeps the topside capped. The Relative Strength Index (14) at 48.8 is close to neutral, suggesting that momentum is balanced and leaving the near-term bias broadly sideways while the pair consolidates between nearby support and overhead resistance.
On the topside, initial resistance is located at the Bollinger middle band SMA near 1.1628, followed by the upper band around 1.1695, where selling interest could intensify if tested. On the downside, immediate support aligns with the lower Bollinger band at 1.1560 and the 100-day SMA at 1.1555, forming a tight demand zone; a daily close below this cluster would expose the pair to deeper losses, while holding above it keeps the door open for another attempt toward the 1.1628 barrier.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- AUD/USD softens to near 0.7160 in Monday’s early Asian session.
- US CPI accelerated in August, reinforcing expectations that the Fed will raise interest rates on Wednesday.
- Hawkish RBA signals might help limit the Aussie’s losses.
The AUD/USD pair edges lower to around 0.7160 during the early Asian session on Monday. Stronger-than-expected US inflation reports provide some support to the US Dollar (USD) against the Australian Dollar (AUD). All eyes will be on the US Federal Reserve (Fed) interest rate decision on Wednesday.
The US Consumer Price Index (CPI) rose 0.4% MoM in August, putting the 12-month increase at 3.4%, the Bureau of Labor Statistics reported Friday. Both readings were in line with the market consensus.
The core CPI, which excludes volatile food and energy prices, increased by 0.3% on a monthly basis, compared to the market consensus of 0.2%, and 2.4% on a yearly basis, down slightly from 2.5% in July.
The CPI inflation data followed strong readings in several components of the Producer Price Index (PPI) released on Thursday, raising the specter of a Fed interest rate hike next week and supporting the Greenback.
Financial markets initially priced in an 86.2% odds of a quarter-point rate hike at the Fed's September meeting, up from 72% before the CPI data, according to CME's FedWatch tool.
A hawkish tone from the Reserve Bank of Australia (RBA) might help limit the Aussie’s losses. RBA Assistant Governor Sarah Hunter said on Tuesday that the central bank may need to raise interest rates again if inflation proves more persistent than expected, keeping alive the prospect of another hike at its September meeting.
Aussie slides as UOB flags growing downside risks in AUD/USD
Strategists at UOB Group note that their medium-term stance on AUD/USD remains intact, even as price action has turned sharply lower. They recall that since last Friday, when spot was at 0.7205, their view was that the Aussie “could edge higher, but any advance is likely to stay within a 0.7160/0.7240 range.” After the pair “edg[ed] higher for several days and reach[ed] a high of 0.7238 two days ago,” UOB highlights that AUD then “plunged and closed 0.83% lower at 0.7157 yesterday.”
The bank stresses that this “rapid increase in downward momentum indicates that AUD could decline toward 0.7120,” marking a shift toward a more bearish near-term bias. However, UOB also cautions that if AUD were to break above “0.7210 (‘strong resistance’ level), it would mean that it is likely to continue to trade in a range,” keeping the broader 0.7160–0.7240 consolidation scenario in play over the next one to three weeks.
Technical Analysis: AUD/USD keeps a bullish vibe ni the near term
In the daily chart, AUD/USD holds above the 100-day moving average (MA) and the lower Bollinger Band, suggesting a constructive near-term tone, while price is testing the area just under the middle Bollinger band. The Relative Strength Index (14) at 54 leans slightly positive, hinting that buyers retain control but without overstretched momentum.
On the topside, immediate resistance emerges at the middle Bollinger band at 0.7170, followed by the upper band near 0.7235, where upside attempts could begin to stall. On the downside, initial support is located at the lower Bollinger band around 0.7100, ahead of the 100-day MA at 0.7080, a break of which would weaken the bullish bias and expose deeper retracements.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
(This story was corrected on September 14 at 00:50 GMT to say, in the second bullet point, that US CPI accelerated in August, reinforcing expectations that the Fed will raise interest rates on Wednesday, not next week.)
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.
Iranian state media claimed an Iranian commercial vessel was struck in the Strait of Hormuz on Saturday, killing one person, amid an ongoing conflicts between the United States (US) and Iran for control over the crucial energy chokepoint, CNN reported.
Separately, the United Kingdom Maritime Trade Operations Centre (UKMTO) said another vessel was hit by an unknown projectile in the strait late on Saturday.
Meanwhile, Saudi Arabia has faced escalating attacks from Iran-allied groups, including a Houthi strike on energy facilities in their efforts to control a second vital waterway in the region, which could put further pressure on global oil prices.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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