Forex News
United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann note that USD/SGD slipped on Friday but downside momentum remains only tentative. In the very near term, the pair is expected to stay confined between nearby support at 1.2780 and resistance at 1.2815. Over the coming 1–3 weeks, UOB sees scope for modest further Dollar weakness, though a clear break below 1.2765 is viewed as unlikely.
Downward momentum remains only tentative
"24-HOUR VIEW: Last Friday, we expected USD to “trade sideways between 1.2810 and 1.2840.” Instead of trading sideways, USD dipped to 1.2784 before recovering to close 0.14% lower at 1.2804. Downward momentum is increasing, albeit tentatively. Today, USD could edge lower, but it should stay within a 1.2780/1.2815 range."
"1-3 WEEKS VIEW: After USD soared to a high of 1.2871 last Wednesday, we highlighted on Thursday (15 Oct, spot at 1.2845) that USD “must break and hold above 1.2870 before a move to 1.2900 can be expected.” On Friday, USD fell and broke below our ‘strong support’ level at 1.2795. Upward momentum has faded with the breach of the ‘strong support’, and there has been a tentative buildup in downward momentum. From here, USD may edge lower, but based on the prevailing momentum, any decline is unlikely to break the support at 1.2765. On the upside, a breach of 1.2830 (‘strong resistance’ level) would mean that USD is more likely to range-trade rather than edging lower."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/MXN falls 0.44% to 18.41 as Peso buyers return.
- Mexico's 250-basis-point rate advantage faces pressure from future Fed hikes.
- US-Mexico trade uncertainty and upcoming Mexican inflation data remain key risks.
The Mexican Peso appreciates against the US Dollar amid speculation that the interest rate differential between Mexico and the US will remain unchanged, with the Federal Reserve projected to hold rates steady at the October meeting. The USD/MNX trades at 18.41, down 0.44%.
USD/MXN retreats toward 18.40 as October Fed hold expectations support the Peso
Recently, USD/MXN has recovered as the Federal Reserve (Fed) raised rates in September to 3.75%-4%, while the Bank of Mexico (Banxico) has finished its tightening cycle and is expected to hold rates at 6.50% in 2026 and 2027. This lifted the pair from around 16.95 towards the yearly high of 18.60 before settling at current exchange rates.
Even though the differential is 250 basis points, growing speculation that the Fed will hike in December and at least twice next year has reduced the Peso’s “carry trade” appeal, which has been supporting the emerging market currency.
Mexico’s President Claudia Sheinbaum said on Monday that during calls with US President Donald Trump, he insisted on pressuring Mexico to buy Natural Gas and to open PEMEX – Mexico’s Oil company – to investment by US companies.
Meanwhile, progress on a US-Mexico tariff and trade deal has halted, the Wall Street Journal (WSJ) reported in a note on October 15.
Ahead, Mexico’s docket will feature Retail Sales and October’s Mid-Month Inflation report.
In the US, there will be no speeches by Fed officials on the economic docket during October’s Federal Open Market Committee (FOMC) blackout period. However, economic data will still be released, including the ADP Employment Change 4-week average, jobless claims, and S&P Global Flash PMIs.
It’s worth noting that White House National Economic Adviser Kevin Hassett told CNBC that inflation “is needing some work.”
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 18.4378, extending its advance well above the clustered 50/100/200-day Simple Moving Average (SMA) area around 17.4494 and the previously capping downward trend line, now turned support near 18.12. This positioning keeps the near-term bias decisively bullish, with price holding comfortably over all visible structural floors while the 14-day Relative Strength Index (RSI) at 68.29 stays in bullish territory, hinting at strong but gradually stretched upside momentum.
On the downside, initial support is seen around the former trend-line barrier near 18.12, which now acts as the first defensive level on pullbacks. Below that zone, the SMA cluster at roughly 17.45 is the next important base before the more distant horizontal support at 16.89, which together define the broader area that would need to give way to challenge the current bullish structure.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN 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.
Commerzbank’s Volkmar Baur notes China’s reported 4.5% year-on-year Q3 growth, despite weak investment and flat real retail sales. He argues Beijing appears broadly satisfied and unlikely to deliver major new stimulus. The CNY’s appreciation versus the Dollar has slowed, and with weak domestic demand and a strong Dollar, faster CNY gains look unlikely even though the currency is seen as undervalued.
Growth data and controlled currency gains
"China’s economy reportedly grew by 4.5% year-on-year in the third quarter. Where exactly this growth is supposed to have come from is somewhat unclear. After all, fixed-asset investment fell by 10% year-on-year in Q3, while retail sales, adjusted for consumer price inflation, did not increase either. For the currency outlook, however, this is of secondary importance for now."
"The growth figures suggest that the Chinese government is broadly satisfied with the economic performance and probably sees little need for further major stimulus measures. The CNY’s appreciation against the US dollar has already slowed in recent months, and this more gradual pace is likely to continue."
"In the first five months of the year, the CNY appreciated against the USD by an average of 0.6% per month, despite initially weakening in March in response to the outbreak of the Iran conflict. Since June, however, the average monthly pace of appreciation has slowed to 0.2%."
"Despite the CNY’s modest appreciation this year, we continue to consider the Chinese currency significantly undervalued."
"Given weak domestic demand, the Chinese economy remains reliant on a robust contribution from net exports. And as long as the US dollar remains this strong on a trade-weighted basis, a faster appreciation of the CNY appears unlikely, as this would result in an excessive strengthening of the Chinese currency against other currencies as well."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold falls 0.54% to $4,141 as US Dollar strength pressures bullion.
- WTI rises above $99, lifting 10-year Treasury yields to 5.144%.
- October Fed hike odds stand at 16%, while December reaches 92%.
Gold (XAU/USD) falls about 0.54% on Monday as the Greenback drifts higher and market mood shifts to neutral amid tensions in the Middle East, sparking a risein Oil prices, with West Texas Intermediate (WTI) bouncing off daily lows beneath $97 to $99.30. At the time of writing, XAU/USD trades at $4,141.
XAU/USD retreats as rising energy prices and Treasury yields overshadow fading October Fed hike bets
The yellow metal began the week on a lower note as the US Dollar drifts higher even though last week’s US hot-inflation data, particularly the Producer Price Index (PPI), triggered a leg down on the Greenback as money markets priced out a rate hike in October.
Geopolitics continued to play its role as Iran’s navy reported attacks from the US military at the Konarak naval base, reporting that two soldiers were injured, according to Al Jazeera.
That pushed WTI prices higher and US Treasury yields higher. The US 10-year T-note yield is up six basis points at 5.144%.
This week, the US economic docket will be absent of speeches from Federal Reserve (Fed) officials during October’s Federal Open Market Committee (FOMC) blackout period. But economic data will be released, like the ADP Employment Change 4-week average, jobless claims and S&P Global Flash PMIs.
Worth noting that the White House National Economic Adviser Kevin Hassett said that inflation looks like “it is needing some work” at CNBC.
Even though Gold is used as a hedge against high inflation, rising US yields undermine the yellow metal due to its non-yielding nature.
Money markets trimmed the odds of an October Fed rate hike to 16% following September's 25-basis-point increase. For the December meeting, the odds are nearly 92%, according to Prime Terminal data.
XAU/USD technical analysis: Gold trapped within $4,100-$4,200
Gold continues to trade laterally within the $4,100-$4,200 range, and although it appears to have bottomed near the range’s lower end, nothing is certain amid growing speculation that the Fed could increase rates in December.
The Relative Strength Index (RSI) remains bearish, though it has shifted to a flattish level, indicating that neither buyers nor sellers are in charge.
For a bullish reversal, XAU/USD’s first resistance is at $4,200, followed by the 100-day Simple Moving Average (SMA) at $4,238. Above that is the 50-day SMA at $4,326, followed by the $4,500 mark.
If XAU/USD continues lower, initial support is at $4,100. If sellers push Gold below that level, it would put the October 14 low of $4,073 in play, followed by the July 29 cycle low at $3,996, ahead of the July 17 low at $3,959. The yearly low at $3,941 lies below these levels.
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.
The US Dollar (USD) has managed to regain some composure, leaving behind two daily drops in a row helped by rising US Treasury yields and reignited social/political concerns in France.
The US Dollar Index (DXY) has reclaimed the area above the key 102.00 barrier on Monday, setting aside part of last week’s decline. The ADP Employment Change Weekly is due next, seconded by Pending Home Sales, Housing Starts, Building Permits and the API’s weekly report on US crude oil inventories.
Renewed concerns in France have weighed on the single currency, prompting EUR/USD to fade part of its recent improvement and recede toward the 1.1200 region. The EMU’s Current Account results and Construction Output readings are next on tap, followed by the ZEW’s Economic Sentiment in both Germany and the bloc.
GBP/USD has given away part of its recent two-day recovery, meeting some decent support near the 1.3300 zone. The labour market report will take centre stage across the Channel.
USD/JPY has further extended its consolidative phase, this time leaving behind three daily drops in a row and advancing past the 158.00 hurdle. The Balance of Trade results will be the salient event on the Japanese docket.
Firm Chinese data releases have boosted AUD/USD, sending it to the vicinity of the key 0.7000 threshold, adding to Friday’s rebound. Next on the Australian calendar will be the flash S&P Global Manufacturing and Services PMIs on October 23.
Front-month WTI futures have met some fresh selling pressure on Monday, briefly piercing the $97.00 mark per barrel amid some profit-taking mood and traders’ assessment of developments in the Middle East, the Russia-Ukraine conflict, and the impact on Russian crude oil exports from US waivers on tariffs and sanctions.
Gold has added to Friday’s correction and retreated below the $4,150 mark per troy ounce on the back of the US Dollar’s rebound and higher US Treasury yields across the curve.
- The New Zealand Dollar holds firm as risk sentiment improves, although a steady US Dollar limits gains.
- New Zealand inflation data take centre stage as traders assess prospects for another RBNZ interest rate hike.
- NZD/USD remains below its 50-, 100- and 200-day SMAs, keeping the broader technical bias bearish.
NZD/USD trades with a mild positive bias on Monday as the New Zealand Dollar (NZD) benefits from improved risk sentiment. However, a rebound in US Treasury yields following last week’s pullback supports the US Dollar (USD), capping the pair’s upside. At the time of writing, the pair trades around 0.5663, up 0.20% on the day.
The benchmark 10-year US Treasury yield rises around 9 basis points to 5.14%, recovering from Thursday’s low of 5.03%, its lowest level since September 23. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.95 after falling to 101.58 on Friday.
The US Dollar also attracts demand from hawkish Federal Reserve (Fed) expectations after September’s Consumer Price Index and Producer Price Index reports came in hotter than expected. Traders widely expect the Fed to leave interest rates unchanged at its October 27-28 meeting but see a strong probability of another increase in December.
On the New Zealand side, the Reserve Bank of New Zealand (RBNZ) remains on a tightening path as inflation stands above its 1%-3% target range. The central bank raised the Official Cash Rate to 2.75% in September and will announce its next decision on October 28. Traders now await New Zealand’s third-quarter Consumer Price Index (CPI) data later this week, which could shape expectations for another RBNZ rate hike.
Strategists at Brown Brothers Harriman highlight that attention will focus on “New Zealand Q3 CPI (Wednesday),” with “headline CPI… expected at 0.8% q/q (RBNZ projection: 0.8%) vs. 1.5% in Q2 to be up 3.8% y/y (RBNZ projection: 3.9%) vs. 4.1% in Q2.” They stress that “above-target inflation argues for additional RBNZ rate hikes and offers NZD support,” noting that “the swaps curve prices in 80% odds of a 25bps RBNZ rate hike to 3.00% on October 28.”
Technical Analysis
On the daily chart, NZD/USD retains a broadly capped tone as it remains under the 50-, 100- and 200-day Simple Moving Averages (SMAs) clustered between roughly 0.58 and 0.58. The Moving Average Convergence Divergence (MACD) has turned positive and the Relative Strength Index (RSI) hovers just below the 50 line, hinting that downside momentum is fading, yet the strong Average Directional Index (ADX) above 47 suggests the prevailing bearish trend is still dominant unless key overhead levels are reclaimed.
On the topside, initial resistance is located at the horizontal barrier near 0.5700, ahead of the 50-day SMA at 0.5771 and the 100-day SMA at 0.5779, while the 200-day SMA at 0.5838 marks a more substantial cap if gains extend. On the downside, immediate support emerges at 0.5629, followed by last week’s low of 0.5556. A decisive break below this level could open the door to a deeper decline.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
RBNZ FAQs
The Reserve Bank of New Zealand (RBNZ) is the country’s central bank. Its economic objectives are achieving and maintaining price stability – achieved when inflation, measured by the Consumer Price Index (CPI), falls within the band of between 1% and 3% – and supporting maximum sustainable employment.
The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) decides the appropriate level of the Official Cash Rate (OCR) according to its objectives. When inflation is above target, the bank will attempt to tame it by raising its key OCR, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the New Zealand Dollar (NZD) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken NZD.
Employment is important for the Reserve Bank of New Zealand (RBNZ) because a tight labor market can fuel inflation. The RBNZ’s goal of “maximum sustainable employment” is defined as the highest use of labor resources that can be sustained over time without creating an acceleration in inflation. “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise more and more quickly, requiring the MPC to raise interest rates to keep inflation under control,” the bank says.
In extreme situations, the Reserve Bank of New Zealand (RBNZ) can enact a monetary policy tool called Quantitative Easing. QE is the process by which the RBNZ prints local currency and uses it to buy assets – usually government or corporate bonds – from banks and other financial institutions with the aim to increase the domestic money supply and spur economic activity. QE usually results in a weaker New Zealand Dollar (NZD). QE is a last resort when simply lowering interest rates is unlikely to achieve the objectives of the central bank. The RBNZ used it during the Covid-19 pandemic.
- WTI climbs through Friday's high and is on track for an eighth straight gain.
- Houthis claim hits on a Saudi oilfield and an Aramco site at the port of Yanbu.
- The EIA's weekly count is due Wednesday, with distillates 12% below average.
Unconfirmed reports of new US strikes on Iran have turned West Texas Intermediate (WTI) Oil higher on Monday, and it's on track for an eighth straight gain. It has climbed from a session low just above $96.50 to just above $99.00, its highest since September 16. The last leg came in two short bursts, and the second took it through Friday's high.
The US hadn't confirmed the reports, and Iran said it has no choice but to control the Strait of Hormuz and will only let friendly nations through. US President Donald Trump posted on October 8 that the US wouldn't attack Iran at any time before the November 3 midterms, and the price is up on reports that it has.
The Houthis said they hit the Shaybah oilfield and an Aramco site at Yanbu, though Saudi Arabia hadn't confirmed it. Yanbu is where Saudi Arabia's pipeline around Hormuz meets the Red Sea, so the claims put both Gulf export routes under threat in one session.
On the calendar
Wednesday's Energy Information Administration (EIA) report at 14:30 GMT follows the American Petroleum Institute (API) figures on Tuesday at 20:30 GMT. The EIA's previous report had distillate stocks 12% below their five-year average with refineries running at 93.5% of capacity, the shortage the Russian diesel deal is meant to ease. Baker Hughes counts US rigs drilling for Crude Oil at 17:00 GMT on Friday, after they fell by three to 459.
On the charts
The 50-day Exponential Moving Average (EMA) is short of $90.50, and WTI's gap of about $9.00 over it is the widest since mid-September, when the price last traded above $100.00. Intraday momentum went overbought on the jump through Friday's high and has cooled since.
WTI spot daily chart
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.
Scotiabank strategists Shaun Osborne and Eric Theoret note GBP/USD is little changed as markets await UK labour data, Consumer Price Index (CPI) and next week’s budget, where investors expect Chancellor Healey to maintain fiscal discipline. Technically, the British Pound (GBP) has staged a strong bullish weekly reversal from the lower end of its sideways range, with scope to retest 1.3650/75 and initial resistance at the 200-day moving average near 1.3435.
Pound eyes retest of range top
"The GBP is little changed on the session. Spot is marking time ahead of tomorrow’s jobs and wage, with CPI released on Wednesday."
"Next week’s budget is starting to attract a little attention as well, with local reports suggesting that investors are banking on Chancellor Healey maintaining a steady hand on spending and borrowing to boost Gilts."
"Bullish – Solid GBP gains from Wednesday’s post-US CPI low drove a huge bullish weekly reversal on the chart (outside range week)."
"Follow through demand so far has been limited but the scale of last week’s rebound from the weekly low and net gain is hard to ignore."
"With recent price action basing around the low point of the sideways range in place since April, the pound’s solid gain last week should put spot on course to retest the upper end of the range (1.3650/75) in the coming weeks."
"Initial, key resistance sits at 1.3435 (200-day MA)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Silver gains 0.34% on Monday, supported by persistent geopolitical tensions and safe-haven demand.
- Rising US Treasury yields and a recovering US Dollar limit the precious metal's upside.
- Persistent inflation pressures reinforce expectations of further Federal Reserve tightening before year-end.
Silver (XAG/USD) trades around $57.20 on Monday, gaining 0.34% on the day at the time of writing. The white metal maintains a positive tone despite a modest recovery in the US Dollar (USD) and US Treasury yields, as persistent geopolitical uncertainty continues to support demand for safe-haven assets.
The rebound in the Greenback and US bond yields limits the upside potential for Silver, as investors reassess the monetary policy outlook of the Federal Reserve (Fed). Higher interest rates typically weigh on non-yielding assets such as precious metals, while a stronger US Dollar makes Silver more expensive for buyers holding other currencies.
The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, trades around 101.95 after falling to 101.58 last week. Meanwhile, the benchmark 10-year US Treasury yield recovers to approximately 5.12%, following Thursday's low of 5.03%.
The recovery comes after last week's sell-off in technology stocks, driven by concerns surrounding artificial intelligence valuations, prompting investors to seek safety in government bonds and precious metals. However, expectations of additional monetary tightening continue to limit the appeal of Silver.
Inflation remains a major concern for policymakers. Elevated energy prices, linked to the ongoing conflict in the Middle East, continue to fuel price pressures across the US economy. Both the September Consumer Price Index (CPI) and Producer Price Index (PPI) exceeded market expectations, reinforcing concerns that inflation could remain above the Fed's 2% target for longer than anticipated.
Against this backdrop, analysts at Nordea maintain their expectations for further monetary tightening, forecasting one additional Fed interest rate hike before the end of the year and another in 2027. The bank argues that monetary policy remains insufficiently restrictive given the resilience of the US economy and persistent inflationary pressures.
Market expectations also reflect this increasingly hawkish outlook. According to the CME FedWatch tool, traders assign a 17% chance to an interest rate increase at the October 27-28 meeting, while the chance of a hike in December stands at 90%.
Fed Chair Kevin Warsh has refrained from providing clear guidance on the timing of future policy decisions. Speaking in Bangkok on Friday, Warsh stated, "I don't prejudge meetings," leaving investors uncertain about the central bank's next move.
Meanwhile, geopolitical developments continue to provide some support for Silver prices. Tensions in the Middle East remain elevated as negotiations between Washington and Tehran over reopening the Strait of Hormuz face significant obstacles.
Iran has offered to reopen the strategic waterway within seven days if the United States accepts its conditions. However, disagreements surrounding Tehran's nuclear programme continue to prevent a diplomatic breakthrough. Attacks on commercial vessels and ongoing fighting between Saudi Arabia and the Houthis further reinforce concerns about global energy supplies.
These developments sustain demand for safe-haven assets, helping Silver resist pressure from rising Treasury yields and a firmer US Dollar. Nevertheless, US President Donald Trump's decision to temporarily ease sanctions on Russia raises the prospect of additional energy supplies, which could alleviate some inflationary pressures.
For now, Silver remains supported by geopolitical uncertainty, although expectations of further Fed interest rate hikes could continue to restrain its upward momentum.
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.
- USD/CAD bounces off its lowest since September 23 as Canadian inflation misses.
- Core inflation eases to 2.2%, and gasoline is up 27.8% from a year earlier.
- Canadian retail sales are due Friday, the last release before the BoC meets.
Canadian inflation came in under forecast on Monday, and USD/CAD rose off its lowest level since September 23 on the release, though it's still on track for a third straight loss. The low just above 1.4050 came in the bars before the numbers, and the price went back above 1.4100 in the release bar. It has slipped back under 1.4100 since, with Friday's last trade just under 1.4150.
Headline inflation rose to 3.1% in September against a 3.2% forecast, with gasoline up 27.8% from a year earlier. The Bank of Canada (BoC) core measure eased to 2.2% from 2.4%, and core prices were flat on the month. Analysts read the flat core month as a reason to keep the BoC's 2.25%, unchanged all year, below the Fed's 3.75%-4.00% on October 28.
BoC surveys published after the release showed consumers' five-year inflation expectations up to 3.91% from 3.39%, and firms' expectations climbed after Canada-US trade talks failed. Scotiabank and Bank of Montreal then both called for a quarter-point hike on October 28, which would cut the gap to the Fed by the same amount. The BoC published two business surveys on the same day, and sentiment rose in the one taken mostly before the talks collapsed.
On the calendar
Canada's August retail sales are due at 12:30 GMT on Friday, forecast up 1.3% after a 0.7% fall, with sales excluding autos forecast up 1% after the same fall. It's the last Canadian release before the BoC's October 28 decision.
Fed officials are in their quiet period before the October 27-28 meeting, where futures put a hike near 15% and one by December near 89%. US weekly jobless claims are due at 12:30 GMT on Thursday, forecast at 200K after 199K. The S&P Global flash Purchasing Managers' Index (PMI) surveys follow at 13:45 GMT on Friday, with services forecast at 57.9 after 58.8.
On the charts
USD/CAD went just under its 50-day Exponential Moving Average (EMA) at the session low, its first trade below the average since mid-September. The slide from the two highs near 1.4300 on October 9 and October 14 has given back about two-fifths of the climb from the September 8 low near 1.3750.
USD/CAD daily chart
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.
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