Forex News
- NZD/USD loses ground to around 0.5985 in Friday’s Asian session.
- China told the US to cancel all unilateral tariffs if it wants talks.
- China's Finance Ministry said current world economic growth momentum was insufficient due to tariff threats and trade wars.
The NZD/USD pair edges lower to around 0.5985 during the Asian session on Friday, pressured by the firmer Greenback. The lack of progress toward defusing the US-China trade deal exerts some selling pressure on the China-proxy Kiwi. The final reading of Michigan Consumer Sentiment is due later on Friday.
US President Donald Trump said late Thursday that his administration was talking with China on trade. Meanwhile, China said that no negotiations had been held on the economy and trade, and it urged the US to lift all unilateral tariff measures if it really wished to resolve the issue. Concerns over trade tensions between the world’s two largest economies could undermine the New Zealand Dollar (NZD), as China is a major trading partner to New Zealand.
The rising bets that the Reserve Bank of New Zealand (RBNZ) will lower its Official Cash Rate (OCR) at the May meeting might contribute to the NZD’s downside. The markets fully expect the RBNZ to cut its 3.5% OCR by 25 basis points (bps) in May, with a further reduction to 2.75% by year-end.
China's Finance Ministry said on Friday that the current world economic growth momentum was insufficient, with tariff and trade wars further impacting economic and financial stability. Meanwhile, People's Bank of China (PBOC) Governor Pan Gongsheng noted that economic fragmentation and trade tensions continue to disrupt the industrial supply chain and weaken the momentum of global growth. However, any positive developments surrounding Chinese stimulus measures could help limit the Kiwi’s losses in the near term.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- The Australian Dollar remains under pressure amid ongoing US-China trade tensions, given Australia's strong economic ties with China.
- Market sentiment was mixed after reports suggested the Trump administration could consider reducing tariffs on Chinese imports.
- China’s Finance Ministry noted that global economic growth continues to face headwinds, with trade and tariff disputes.
The Australian Dollar (AUD) edges lower against the US Dollar (USD) on Friday, retreating after gains in the previous session. The drop in the AUD/USD pair is driven by persistent US-China trade tensions, as Australia's close trade relationship with China makes it particularly sensitive to developments between the two economic giants.
Traders continued to track the fluid global trade landscape. Market sentiment remained mixed following reports that the Trump administration might reduce tariffs on Chinese imports, depending on the progress of potential talks with Beijing. China expressed a willingness to engage in discussions, provided the US stops issuing new threats. However, US Treasury Secretary Scott Bessent downplayed the optimism, clarifying that no unilateral tariff cuts had been proposed and that formal negotiations have not yet commenced.
China's Finance Ministry stated on Friday that global economic growth remains sluggish, with tariff and trade wars continuing to undermine economic and financial stability. The ministry urged all parties to enhance the international economic and financial system through stronger multilateral cooperation, per Reuters.
On Thursday, Westpac forecasted that the Reserve Bank of Australia (RBA) would lower interest rates by 25 basis points at its upcoming May 20 meeting. The RBA has adopted a data-driven approach in recent quarters, making it difficult to predict its actions beyond the next meeting with confidence.
Australian Dollar struggles as US Dollar appreciates due to potential US trade agreements
- The US Dollar Index (DXY), which measures the USD against six major currencies, retraces its recent losses from the previous session, trading near 99.60 at the time of writing. However, the Greenback faced headwinds following the release of the Initial Jobless Claims data on Thursday.
- The US Department of Labor (DOL) reported on Thursday that initial applications for unemployment benefits rose for the week ending April 19. Initial Jobless Claims increased to 222,000, slightly above expectations and up from the previous week’s revised figure of 216,000. Meanwhile, Continuing Jobless Claims declined by 37,000, falling to 1.841 million for the week ending April 12.
- The flash S&P Global Composite PMI for April dropped to 51.2 from 53.5, indicating a slowdown in overall business activity. Although the Manufacturing PMI inched up to 50.7, the Services PMI declined sharply to 51.4 from 54.4, pointing to softening demand in the services sector.
- S&P Global’s Chris Williamson commented that growth momentum is losing steam, while persistent inflationary pressures continue to complicate the Federal Reserve’s efforts to strike a balance.
- According to the Fed’s April Beige Book, concerns over tariffs have worsened the economic outlook across several regions in the United States (US). Consumer spending presented a mixed picture, while the labor market showed signs of softening, with many districts reporting flat or slightly declining employment levels.
- US Treasury Secretary Scott Bessent acknowledged on Wednesday that current tariffs—145% on Chinese goods and 125% on US goods—are unsustainable and must be lowered for meaningful dialogue to begin.
- National Economic Council Director Kevin Hassett, President Trump's chief economic adviser, stated that the US Trade Representative (USTR) has 14 meetings scheduled with foreign trade ministers. Hassett also noted that 18 written proposals have been received from these ministers. According to Hassett, China remains open to negotiations.
- Market sentiment was boosted by US President Donald Trump, who reassured investors that he has no intention of removing Federal Reserve (Fed) Chair Jerome Powell, helping ease concerns about central bank independence and policy direction.
- The White House announced on Tuesday that the Trump administration is making headway in negotiating trade deals aimed at easing the broad tariffs introduced earlier this month. According to US Press Secretary Karoline Leavitt, 18 countries have already submitted trade proposals to the US, and President Trump’s trade team is scheduled to meet with representatives from 34 nations this week to explore potential agreements.
- The Judo Bank Manufacturing PMI edged down to a two-month low of 51.7 in April, compared to 52.1 in March. While manufacturing output remained in expansion territory, the increase in new orders was modest. Meanwhile, the Services PMI dipped slightly to 51.4 from 51.6 in the previous month, and the Composite PMI also eased to 51.4 from 51.6.
Australian Dollar finds resistance near four-month highs, 0.6450 level
The AUD/USD pair is hovering around 0.6410 on Friday, with daily chart technicals maintaining a bullish bias. The pair remains above the nine-day Exponential Moving Average (EMA), while the 14-day Relative Strength Index (RSI) holds steady above the 50 mark, indicating continued upward momentum.
To the upside, immediate resistance is located at the recent four-month high of 0.6439, set on April 22. A clear break above this level could open the door for a rally toward the five-month high of 0.6515.
The initial support lies at the nine-day EMA, currently at 0.6365, with stronger support near the 50-day EMA at 0.6302. A sustained move below these levels would weaken the bullish outlook and may trigger deeper losses, potentially exposing the March 2025 low near 0.5914.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.38% | 0.28% | 0.26% | 0.08% | 0.17% | 0.21% | 0.51% | |
| EUR | -0.38% | -0.10% | -0.08% | -0.31% | -0.22% | -0.15% | 0.12% | |
| GBP | -0.28% | 0.10% | 0.02% | -0.21% | -0.10% | -0.06% | 0.20% | |
| JPY | -0.26% | 0.08% | -0.02% | -0.20% | -0.13% | -0.10% | 0.19% | |
| CAD | -0.08% | 0.31% | 0.21% | 0.20% | -0.00% | 0.14% | 0.39% | |
| AUD | -0.17% | 0.22% | 0.10% | 0.13% | 0.00% | 0.05% | 0.32% | |
| NZD | -0.21% | 0.15% | 0.06% | 0.10% | -0.14% | -0.05% | 0.25% | |
| CHF | -0.51% | -0.12% | -0.20% | -0.19% | -0.39% | -0.32% | -0.25% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
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.
People's Bank of China (PBOC) Governor Pan Gongsheng said on Friday that all parties expressed concern about the negative impact of trade frictions. Pan added that economic fragmentation and trade tensions continue to disrupt the industrial supply chain and weaken the momentum of global growth.
Key quotes
All parties called for the strengthening of dialogue and policy coordination.
All parties support the construction of a more stable, efficient, and resilient international financial architecture.
Economic fragmentation and trade tensions continue to disrupt the industrial supply chain and weaken the momentum of global growth.
Major economies should strengthen participation in policy coordination.
At present, China's economy is off to a good start, continues to rebound to a good trend and financial markets are running smoothly.
Will implement a moderate and loose monetary policy to promote the development of the Chinese economy.
Market reaction
At the press time, the AUD/USD pair was down 0.03% on the day to trade at 0.6407.
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.
On Friday, the People’s Bank of China (PBOC) set the USD/CNY central rate for the trading session ahead at 7.2066 as compared to the previous day's fix of 7.2098.
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.
- GBP/USD drifts lower to near 1.3310 in Friday’s early Asian session, down 0.21% on the day.
- The UK Finance Minister said she was confident Britain could reach a trade deal with the US.
- UK March Retail Sales report will take center stage later on Friday.
The GBP/USD pair attracts some sellers to around 1.3310 during the early Asian session on Friday, pressured by the renewed US Dollar (USD) demand. The UK Retail Sales data for March will be the highlight later on Friday.
The Greenback edges higher amid the optimism about a US trade deal announcement, which acts as a headwind for the major pair for the time being. UK Finance Minister Rachel Reeves said on Thursday she was confident Britain could reach a trade deal with the US.
Reeves is scheduled to meet US Treasury Secretary Scott Bessent on Friday. High on the agenda will be a possible trade deal, which Britain hopes will reduce the hit from Trump's import tariffs to its exporters of goods, including cars and steel. Investors await further developments in the US-UK trade talks.
The gloomy UK economic outlook and rising bets of further rate cuts by the Bank of England (BoE) could drag the Pound Sterling (GBP) lower. The International Monetary Fund (IMF) anticipated three interest rate cuts by the BoE and has revised UK Gross Domestic Product (GDP) growth for 2025 to 1.1% from 1.6% forecast earlier.
The UK Retail Sales data for March will be closely watched on Friday. The figure is expected to decline by 0.4% MoM in March after rising by 1% in February. In case of a stronger-than-expected outcome, this might help limit the GBP’s losses in the near term.
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.
China's Finance Ministry said on Friday that the current world economic growth momentum was insufficient, with tariff and trade wars further impacting economic and financial stability, per Reuters. He called on all parties to further improve the international economic and financial system by strengthening multilateral cooperation.
Key quotes
Tariff wars and trade wars have further affected economic and financial stability.
All parties should further improve the international economic and financial system by strengthening multi-lateral cooperation.
All parties should pool more resources for Africa's development.
Market reaction
At the time of writing, AUD/USD is holding higher ground near 0.6400, losing 0.14% on the day.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- EUR/USD softens to around 1.1380 in Friday’s early Asian session.
- Trump said the US was negotiating with China on trade after Beijing’s denial.
- Traders have become increasingly confident that the ECB will cut interest rates in the June meeting.
The EUR/USD pair weakens to near 1.1380 during the early Asian session on Friday. However, the downside for the major pair might be limited as investors remain concerned about the US-China trade tensions. Later on Friday, the final reading of Michigan Consumer Sentiment will be released.
US President Donald Trump said late Thursday that his administration was talking with China on trade. Meanwhile, China said that no negotiations had been held on the economy and trade, and it urged the US to lift all unilateral tariff measures if it really wished to resolve the issue. Concerns over potential tariff threats by Trump and persistent trade tensions are likely to weigh on the Greenback and act as a tailwind for EUR/USD in the near term.
"It seems like there's a gulf as wide as the Pacific Ocean between how the U.S. and China are viewing trade," said Matt Weller, head of market research at StoneX. "And I think as long as that gulf remains, the rallies in the dollar might be short-lived.”
Across the pond, traders raise their bets that the European Central Bank (ECB) will cut interest rates in the June policy meeting due to the dovish remarks from the ECB policymakers. This, in turn, undermines the shared currency against the USD.
ECB policymaker and Finnish central bank governor Olli Rehn said on Thursday that the central bank should not rule out a "larger interest rate cut". Meanwhile, ECB Governing Council member Madis Muller said on Wednesday that the central bank may have to lower interest rates to levels that stimulate the economy if trade uncertainty proves more damaging to growth.
Euro FAQs
The Euro is the currency for the 19 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.
The headline Tokyo Consumer Price Index (CPI) for April climbed 3.5% YoY as compared to 2.9% in the previous month, the Statistics Bureau of Japan showed on Friday. Meanwhile, the Tokyo CPI ex Fresh Food, Energy came in at 2.0% in April vs. 1.1% in March.
Additionally, Tokyo CPI ex Fresh Food rose 3.4% YoY in April against 3.2% expected and up from 2.4% in the prior month.
Market reaction to the Tokyo Consumer Price Index
As of writing, the USD/JPY pair was up 0.15% on the day at 142.83.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
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