Forex News
- DJIA touched a fresh intraday record before reversing to close lower on Tuesday.
- A rotation out of AI and semiconductor names dragged the index off its highs.
- A jump in Crude Oil prices after a Strait of Hormuz attack added to the risk-off tone.
The Dow Jones Industrial Average spent Tuesday arriving late to a party the rest of the market had already begun to leave. The index tagged a fresh intraday record near 53,300 at the New York open around 13:30 GMT, then handed the gains straight back as a rotation out of artificial intelligence (AI) and semiconductor names swept the tape. By the close it had shed more than 500 points from that high, finishing near 52,850 and down about 0.35%, which on Tuesday counted as resilience.
The awkward part is that the record barely outlasted the opening auction, and it survived at all only because of the same stodgy, tech-light makeup that has made the index this year's laggard. The Nasdaq Composite lost more than 1% and the S&P 500 roughly half that, while the Dow's heavier weighting in healthcare, financials and consumer staples did exactly what it is built to do when the fashionable trade breaks.
The chip trade cracked in Asia and travelled west
None of this started on Wall Street; it simply arrived there. South Korea's Kospi fell almost 5% overnight after Samsung slid close to 7%, its record quarterly profit buried beneath fresh worry about spending and chip demand. European technology stocks then shed more than 3%, so US chips opened already carrying two sessions of selling. Micron dropped around 6% and the wider complex fell more than 5%, pulling the Dow's few technology names down with it.
DeepSeek reopens the oldest fear in the trade
Adding to the discomfort, reports that China's DeepSeek is building its own inference chip revived the fear that has always sat beneath the rally, that the sector's biggest customers are quietly designing their own way out. Nvidia slid more than 1%, and the speed of the reaction showed how crowded and one-directional the trade had become.
Crude Oil reopens a file the market had closed
Layered on top of the equity rotation, Crude Oil pushed higher after Iran struck a Qatari liquefied natural gas tanker near the Strait of Hormuz, the chokepoint through which close to a fifth of the world's Crude Oil moves. Brent traded above $73 and West Texas Intermediate (WTI) above $70, both up more than 2%. The market had quietly filed the conflict under resolved; one tanker attack was enough to remind it the US-Iran peace is still only interim.
The money went somewhere less exciting
The cash did not simply leave the AI trade; it went hunting for the parts of the market everyone had been ignoring. Eli Lilly gained about 3%, with JPMorgan and Microsoft also advancing and Walmart up more than 1% after cutting prices on staples such as ground beef and Coca-Cola. That defensive tilt cushioned the Dow, but research desks warn the second-quarter earnings bar now sits uncomfortably high, so the gap between healthy rotation and the first real crack may come down to how the coming results land.
The week still belongs to the minutes
Wednesday brings the Federal Open Market Committee (FOMC) minutes at 18:00 GMT. After a run of hawkish official commentary, including one voting member who leaned notably hawkish on Monday, the market will comb them for any sign the pause has a firm floor beneath it. Weekly initial jobless claims follow Thursday at 12:30 GMT, with the consensus near 218K against 215K prior. Hawkish minutes on stretched valuations and a wobbling AI trade is not the backdrop bulls would have chosen.
Levels to watch
Resistance: The record zone near 53,300 now caps the tape. Rallies into that band are likely to be sold until the semiconductor complex steadies. A daily close back above there reopens room toward 53,500.
Support: The reversal low near 52,750 is the first line to watch. A break there exposes 52,500 and then 52,000. The 50-day Exponential Moving Average (EMA) sits far below near 51,000, keeping this a pullback within an uptrend unless price loses the low 52,000s. The daily Stochastic Relative Strength Index (Stoch RSI) sat near the top of its range as the record printed, so some unwind was overdue.
Bias: Lower in the near term. The trend structure is still higher and the Dow's defensive tilt hands it a cushion the Nasdaq lacks, but a record that could not outlast the opening bell, an overnight semiconductor unwind and Crude Oil back on the geopolitical radar argue for chop and downside rather than fresh highs until the AI trade proves Tuesday was noise, not a turn.
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
- The New Zealand Dollar weakens against the US Dollar ahead of the Reserve Bank of New Zealand's policy decision.
- Renewed geopolitical tensions in the Strait of Hormuz boost demand for the US Dollar.
- Markets expect the RBNZ to deliver a 25-basis-point rate hike but remain skeptical about further policy tightening.
NZD/USD trades around 0.5685 at the time of writing on Tuesday, down 0.26% on the day. The pair remains under pressure as the US Dollar (USD) attracts renewed demand following fresh geopolitical tensions in the Middle East, while investors await the Reserve Bank of New Zealand's (RBNZ) monetary policy decision.
According to Bloomberg, citing a US official, Iran fired at least two missiles at commercial vessels transiting the Strait of Hormuz late Monday. Two ships sustained significant damage without any reported casualties, while the UK Maritime Trade Operations also confirmed that a tanker was struck by an unidentified projectile. The escalation in tensions has supported safe-haven flows and strengthened the US Dollar.
Meanwhile, expectations for Federal Reserve (Fed) monetary policy continue to evolve following the recent slowdown in the US labor market. Investors now expect the Fed to keep interest rates unchanged at its July and September meetings, while lower Oil prices, driven by an output increase from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) and the US-Iran peace agreement, continue to ease inflationary pressures.
Attention now turns to the Reserve Bank of New Zealand's (RBNZ) policy decision due on Wednesday. ING expects the central bank to deliver a 25-basis-point rate hike, taking the Official Cash Rate to 2.5%, describing the move as an "insurance" hike. However, the bank believes the increase could prove to be a one-off move, limiting its positive impact on the New Zealand Dollar (NZD).
Several institutions share this cautious view. Commerzbank believes a rate hike could provide initial support to the Kiwi but argues that markets are already pricing in around 3.5 rate hikes over the next 12 months, a scenario it considers overly optimistic. Rabobank also believes that tightening expectations have become too aggressive and warns that a repricing of those expectations could weigh on the currency in the coming months. Meanwhile, BBH expects a 25-basis-point rate hike as well but argues that any NZD strength is likely to be short-lived before markets shift their focus to the central bank's forward guidance.
New Zealand Dollar Price Today
The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.20% | 0.18% | -0.10% | -0.09% | 0.28% | 0.28% | 0.25% | |
| EUR | -0.20% | -0.03% | -0.30% | -0.30% | 0.10% | 0.10% | 0.04% | |
| GBP | -0.18% | 0.03% | -0.26% | -0.25% | 0.13% | 0.14% | 0.08% | |
| JPY | 0.10% | 0.30% | 0.26% | 0.02% | 0.41% | 0.39% | 0.35% | |
| CAD | 0.09% | 0.30% | 0.25% | -0.02% | 0.37% | 0.40% | 0.33% | |
| AUD | -0.28% | -0.10% | -0.13% | -0.41% | -0.37% | 0.00% | -0.07% | |
| NZD | -0.28% | -0.10% | -0.14% | -0.39% | -0.40% | -0.00% | -0.06% | |
| CHF | -0.25% | -0.04% | -0.08% | -0.35% | -0.33% | 0.07% | 0.06% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).
Commerzbank’s Dr. Ralph Solveen notes that German industrial output rose 0.9% in May versus April, leaving April–May production slightly above the first-quarter average. With manufacturing sales outperforming output and energy prices having spiked only temporarily, he argues there is a growing likelihood that the German economy avoided contraction in spring and could resume recovery later in 2026 as Oil prices fall.
German industry shows tentative improvement
"Industrial output rose by 0.9% in May compared with the previous month. As a result, output in April and May was slightly above the Q1 average. Since sales have performed even slightly better, there is a growing likelihood that the German economy did not contract in the spring, despite the massive temporary spike in energy prices."
"Once again, German industry has reported quite encouraging figures: Following yesterday’s report of a significant increase in industrial orders, industrial output in May was also higher than in April, even though the 0.9% increase was slightly smaller than that seen in orders. However, this is not yet enough to suggest that the sideways trend in production has come to an end."
"After all, production in April and May was, on average, 0.5% higher than in the first quarter. In addition, manufacturing output – that is, production excluding construction and energy production – performed significantly better than production in this sector. Thus, the currently available figures certainly offer hope that the German economy did not contract in the second quarter, despite the massive rise in energy prices due to the war in Iran and the increased uncertainty."
"In the second half of the year, it is likely to resume its recovery in light of the recent sharp drop in oil prices."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- WTI climbs over 2.5% on Tuesday as renewed attacks near the Strait of Hormuz revive supply concerns.
- Three tankers were hit near the key shipping route over the past 24 hours.
- Technically, WTI retains a bearish bias despite improving momentum indicators.
West Texas Intermediate (WTI) crude Oil edges higher on Tuesday as fresh attacks near the Strait of Hormuz threaten the recovery in shipping seen in recent weeks following the interim US-Iran peace deal. At the time of writing, WTI is trading around $70.44, up about 2.65% on the day.
Iran has repeatedly stated that only vessels using its approved route through the Strait of Hormuz are considered safe and must coordinate with the Islamic Revolutionary Guard Corps (IRGC).
Three tankers were hit in the Strait of Hormuz over the past 24 hours, according to the United Kingdom Maritime Trade Operations (UKMTO). The incidents have revived some of the geopolitical risk premium in the Oil market.
Traders now turn their attention to Wednesday's US Energy Information Administration (EIA) weekly inventory report. US crude inventories have fallen for ten straight weeks, pointing to a tight supply outlook despite improving shipping through the Strait of Hormuz.
Technical Analysis:
On the daily chart, WTI US Oil maintains a bearish near-term bias as it holds below the 200-day Simple Moving Average (SMA) near $73 and well under the 100-day SMA around $86.
The recent bounce from sub-$69 levels has lifted the Relative Strength Index (RSI) toward a neutral 35 zone, while the Moving Average Convergence Divergence (MACD) has crossed marginally above zero, which hints at fading downside momentum but not yet a bullish reversal while price remains capped by these higher averages.
On the topside, initial resistance is located at the 200-day SMA at $73, ahead of the prior horizontal ceiling near $80, with the 100-day SMA at $86 reinforcing a broader medium-term supply area.
On the downside, immediate support is seen at the horizontal level at $67.00, with a deeper bearish extension exposing the next structural floor around $60.00.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- Hormuz ship attacks lift Oil, supporting Greenback demand.
- NY Fed survey shows households expect higher inflation.
- Burnham's fiscal pledge limits deeper Sterling political pressure.
The Pound Sterling (GBP) retreats against the US Dollar (USD) on Tuesday as tensions in the Middle East rise, following reports of attacks on two ships in the Strait of Hormuz. The GBP/USD pair trades at 1.3373, down 0.11%.
GBP/USD falls as Oil spike lifts Fed hike worries
The Greenback remains steady after the Islamic Revolutionary Guard Corps (IRGC) attacked ships that attempted to pass through the Omani route, ignoring the IRGC’s repeated warnings. These developments underpinned Oil prices and consequently the US Dollar, as high energy prices could force the US Federal Reserve (Fed) to raise interest rates.
The US Dollar Index (DXY), which measures the buck’s performance against six currencies, is up 0.05% at 100.93.
Data from the US showed that the trade deficit widened in May, driven by a jump in imports and a decline in exports. The Goods and Services Trade Balance deficit came at $-77.6 billion, more than the $-54.6 billion printed in April.
Aside from this, the New York Fed Survey of Consumer Expectations indicated that households foresee higher prices, with one-year inflation expectations rising from 3.5% in May to 3.7% in June. The data suggests that the Fed might still opt to keep rates unchanged, but could also increase the likelihood of a rate hike.
Money markets have increased the chances for a rate hike at the September meeting, with odds standing at 60.42%. For the July 29 meeting, there’s a nearly 75% chance that the Fed will keep rates unchanged.
In the UK, the economic docket remained absent, yet Sterling has benefited from the drop in Oil prices, which so far remained positively correlated with the Greenback, exerting downward pressure on the Pound.
Furthermore, the likely next Prime Minister, Andy Burnham, reiterated tha the will commit ot the fiscal rules, easing fears amongst traders, who feared that further spending could trigger a jump in UK GILTS and weakness in the GBP/USD.
GBP/USD Price Forecast: Technical outlook
On the daily chart, GBP/USD trades at 1.3375, keeping a mildly bearish tone as it remains capped beneath the latest reading of the 50/100/200-day simple moving average cluster at 1.3403. The pair is trading between the reclaimed upward support trend line anchored near 1.3159 and the descending resistance trend line that comes in at 1.3511, suggesting a consolidative phase within a broader corrective setup. The Relative Strength Index (14) at about 55 has lifted back into positive territory but only hints at stabilizing momentum rather than a clear bullish shift while price action holds below the stacked moving averages.
On the topside, initial resistance is seen at the triple simple moving average cluster around 1.3403, and a sustained break higher would open the way toward the descending trend-line barrier near 1.3511. On the downside, the next meaningful structural floor is the rising support trend line originating from 1.3159, where buyers are likely to defend the broader medium-term uptrend; a daily close below that area would reinforce the bearish bias and expose deeper losses toward the mid-1.31 region.
(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.
Royal Bank of Canada (RBC) economists Abbey Xu and Nathan Janzen note that Canada’s merchandise trade surplus increased to $4.2 billion in May from $3.4 billion in April, as exports grew and imports slipped. They highlight weaker energy price support, falling export volumes, and rising industrial machinery imports as signs of shifting demand and improving business investment within an uncertain trade environment.
Surplus grows as volumes soften
"Canada's merchandise trade surplus widened to $4.2 billion in May from $3.4 billion in April (revised upward from $2.7B), as exports rose 0.9% while imports declined 0.2%."
"Still, monthly trade data are heavily influenced by commodity prices and individual product categories, making it important to look beyond headline values when assessing underlying conditions."
"Export volumes excluding price effects fell 0.5% in May, providing a clearer read on underlying foreign demand, but are still tracking a large increase in the second quarter as a whole."
"Industrial machinery and equipment imports jumped 6.1% from April (up 12.8% year-over-year), offering a signal that business investment is edging higher as firms navigate an uncertain trade environment."
"Trade flows continue to be shaped by uncertainty surrounding U.S. trade policy, although our broader expectation remains that trade will become less of a drag on Canadian growth than it was in 2025 as the international environment gradually stabilizes."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Scotiabank strategists Shaun Osborne and Eric Theoret report the Euro (EUR) is slightly softer versus the US Dollar (USD) but supported by a sharp recovery in yield spreads and stronger German industrial production. Renewed hawkishness from European Central Bank (ECB) policymakers is lifting Euro area rate expectations. They see near-term upside for EUR/USD, with technicals pointing to a drift toward 1.15 within a 1.1400–1.1500 range and limited resistance before 1.1580.
Hawkish ECB supports Euro
"Bearish/neutral – the recovery in the RSI is important, reflecting a clear fade in bearish momentum and a drift back toward the neutral threshold around 50. The near-term balance of risk appears to favor gains and a drift toward 1.15 and we note the absence of any material resistance ahead of 1.1580. The medium-term trend is flat, and we look to a near-term range bound between 1.1400 and 1.1500."
"The EUR is soft, down a fractional 0.1% vs. the USD as it consolidates within its range from last Thursday with congestion in the mid-1.14s. Tuesday’s releases have been limited to stronger than expected German industrial production data for May (0.9% m/m vs. 0.1% exp.)."
"The outlook for relative central bank policy is providing renewed support for the EUR and yield spreads are showing a sharp recovery from last Wednesday."
"Euro area rate expectations are climbing sharpy, reflecting renewed hawkishness from a range of ECB policymakers, including executive board member Schnabel who specifically pushed back on the idea of softening the central bank’s guidance in response to the latest decline in oil prices."
"We see near-term upside for the EUR as markets reprice their outlooks for both the ECB (higher) and the Fed (lower)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- AUD/USD declines toward 0.6940 as Aussie momentum weakens.
- Softer ADP data fails to pressure the US Dollar.
- Iran warning revives risk aversion across currency markets.
AUD/USD declines toward 0.6940 as the Australian Dollar (AUD) loses momentum, while the US Dollar (USD) remains supported by cautious remarks from the Federal Reserve (Fed) and lingering uncertainty over inflation.
The latest United States (US) labor data showed that the ADP Employment Change 4-week average eased to 21K from 24.25K, pointing to a softer pace of private hiring. The figure suggests that labor market momentum is cooling, which could normally weigh on the Greenback. However, the USD held firm as investors remained cautious ahead of more important US data and continued to price in a data-dependent Fed stance.
New York Fed President John Williams said the US economy is showing steady trend-like growth and that the job market remains stable. However, he warned that inflation is still quite high, keeping pressure on the Fed to maintain a restrictive policy stance. Williams added that monetary policy is well-positioned to achieve the Fed’s goals while stressing that future policy decisions will depend on incoming data and risks.
Hostilities resurfaced in the Strait of Hormuz as the United States and Iran have yet to reach a final peace agreement. Early Tuesday, Iranian Foreign Minister Araqchi said that negotiations on the final deal will not commence if threats continue. Iran allegedly attacked an Oil tanker in the Strait of Hormuz overnight, sending Oil prices higher and markets into risk-averse mode.
Short-term technical analysis:
On the 4-hour chart, AUD/USD trades at 0.6940, consolidating just above the 20-period Simple Moving Average (SMA) at 0.6936 while remaining capped by a dense band of nearby resistances. The 100-period SMA at 0.6957 sits overhead and, together with the horizontal barriers at 0.6943, 0.6949 and 0.6955, suggests the pair faces a topside hurdle despite the Relative Strength Index (RSI) holding around 54. This hints at mildly constructive but not impulsive momentum.
On the downside, immediate support is clustered around the short-term 20-period SMA at 0.6936 and the nearby horizontal floor at 0.6935, where a break would expose deeper corrective risk. On the topside, initial resistance comes at 0.6943, ahead of 0.6949 and 0.6955, with the 100-period SMA at 0.6957 marking a stronger cap. Only a sustained move above this upper band would open the way for a more decisive bullish extension.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
- Silver extends its correction and trades around $60.70 after last week's rebound.
- Rising US Treasury yields and uncertainty over the Fed are weighing on precious metals.
- Investors are now focused on the FOMC minutes due on Wednesday for fresh clues on the interest rate path.
Silver (XAG/USD) extends its decline for a second consecutive day on Tuesday, trading around $60.70 at the time of writing, down 2.21% on the day. The precious metal is giving back part of last week's gains as investors adopt a cautious stance ahead of the release of the Federal Reserve (Fed) meeting minutes.
Higher US Treasury yields continue to reduce the appeal of non-yielding assets, while the US Dollar (USD) remains broadly supported by expectations that the Fed will maintain a restrictive monetary policy. According to the CME FedWatch tool, markets largely expect the Fed to leave interest rates unchanged at its upcoming meeting, and expectations for a rate hike later this year have eased slightly following the latest US labor market data.
Recent US employment indicators continue to point to a gradual slowdown in the labor market. Job growth has recently fallen short of expectations, but the data has done little to alter the Fed's broader policy outlook. Fed of New York President John Williams said that labor market risks remain balanced and that inflation is still too high.
On the geopolitical front, tensions in the Middle East remain elevated. Reports of attacks on commercial vessels in the Strait of Hormuz continue to fuel concerns about global energy supplies. The situation is supporting Oil prices and reviving inflation concerns, a backdrop that is generally unfavorable for precious metals that are sensitive to interest rate expectations.
Investors will now turn their full attention to the Federal Open Market Committee (FOMC) meeting minutes due on Wednesday. The minutes could provide fresh insight into the future path of monetary policy and help determine the next directional move for Silver prices.
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.
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