Forex News
- AUD weakens on safe-haven shift due to geopolitical tensions in the Strait of Hormuz.
- China's Trade Balance beat expectations, though moderating export and import growth presents a mixed picture.
- AUD/JPY could rebound as Japanese Yen retreats despite joint Tokyo-Washington currency intervention efforts.
AUD/JPY halts its three-day winning streak, trading around 111.30 during the Asian hours on Friday. The currency cross depreciates as the Australian Dollar (AUD) loses ground, driven by a surge in global safe-haven demand. Escalating tensions in the Strait of Hormuz have rattled market stability, sparking widespread skepticism over whether this vital shipping route will reopen anytime soon.
Meanwhile, China’s latest trade figures present a mixed economic picture that could carry significant implications for Australia, given the close trading relationship between the two nations. China's June Trade Balance in US Dollar terms came in at $112.5 billion, topping expectations of $107.0 billion though falling short of the previous $125.62 billion figure. In Chinese Yuan terms, the Trade Surplus widened to 767 billion, beating the estimated 740 billion, but trailing the prior 859.05 billion reading. July exports grew 23.9% year-over-year compared to June's 27% rise, while imports expanded by 27.5% over the same period, moderating from the previous 36% growth rate.
RBA hike risk keeps modest upside bias in AUD
Rabobank’s FX strategists continue to see scope for further RBA tightening, arguing that “there is still risk of one more rate hike this year in November.” They note that “the market will be hoping that the RBA’s August 11 policy meeting will provide more clarity on rate hike risks,” particularly in light of shifting expectations around the policy path. Against this backdrop, Rabobank maintains “a modest upside bias in Australian Dollar out to 12 months.
Despite these pressures, the AUD/JPY cross could regain traction as the Japanese Yen (JPY) gives back some of its recent gains. Those initial gains were sparked by joint currency intervention from Tokyo and Washington, which has fueled speculation that authorities might step in again.
However, the JPY's quick retreat highlights ongoing skepticism about whether official intervention can overcome its structural weakness, a weakness continually dragged down by wide interest rate differentials, escalating fiscal concerns, and stubbornly high energy and import costs.
Asian currency slide seen as catalyst for US Dollar intervention
Analysts at ING argue that the recent bout of weakness across key Asian currencies may have been a key trigger for official action in the US Dollar/Japanese Yen pair. They note that "large falls in the Japanese yen, Korean won and Taiwanese dollar might have been one of the reasons the US Treasury stepped in with USD/JPY intervention," and suggest the move "could be well-timed if the Fed doesn't hike and the Dollar falls," potentially aligning policy dynamics with efforts to stabilise the Yen.
- Scotiabank analysts warn that narrowing UK-US yield spreads are weakening fundamental support for the British pound.
- Rising oil prices revive UK stagflation fears, posing a dilemma for the Bank of England.
- Safe-haven demand from escalating Strait of Hormuz tensions boosts the US Dollar as global market instability grows.
GBP/USD extends its losses for the second consecutive day, trading around 1.3450 during the Asian hours on Friday. The pair depreciates as the British Pound (GBP) softens even as United Kingdom (UK) political risk fades.
Analysts at Scotiabank observe that "fundamentals appear to be somewhat less supportive for the GBP, as we note the renewed softening in yield spreads," tempering the near-term backdrop for the currency. However, they also highlight that "sentiment continues to improve" as "market participants continue to fade politically-motivated concerns following the recent political transition and arrival of PM Burnham." In their view, "the new PM’s commitment to fiscal responsibility appears to be much stronger than expected," helping to offset the drag from softer yield differentials and underpinning a more constructive tone toward the Pound.
Rising oil prices have reignited fears of sticky inflation and sluggish economic growth in the UK, presenting the Bank of England (BoE) with a challenging "stagflationary" dilemma. This pressure directly tests the central bank's stance following last week’s monetary policy meeting, where Governor Andrew Bailey downplayed the necessity for further rate hikes. At the time, Bailey expressed confidence that the UK's disinflation process remains firmly on track, even against a backdrop of ongoing geopolitical uncertainty.
The GBP/USD pair faces downward pressure as the US Dollar (USD) gains strength, propelled by renewed safe-haven demand among global investors. Escalating tensions in the Strait of Hormuz have rattled market stability and created significant skepticism regarding the reopening of this critical shipping route. Market caution remains elevated as Iran's parliament evaluates a draft proposal that seeks to prohibit US and Israeli vessels, levy a 20% cargo penalty on hostile nations, and maintain restrictions on the corridor until the US blockade is removed.
Musalem flags upside inflation risks and defends surprise moves, keeping Dollar bulls alert
Fed’s Musalem delivers a slightly more hawkish tone, with a 7.4/10 FXS Speechtracker score relative to the historical average of 7/10, emphasizing that inflation expectations risk losing their anchor even as they currently align with the 2% target. The focus on core inflation amid energy volatility, a preference for incremental rate hikes, and an assessment that core inflation likely sits between 2.5% and 3% underscore the concern that inflation may stay above target, while the assertion that sometimes it is acceptable for the central bank to surprise markets signals a willingness to prioritize the mandate over market guidance. Musalem’s view that the Dollar’s reserve status is secure, the labor market is strong but not an inflation driver, and financial conditions remain highly accommodative reinforces a backdrop where upside rate risks remain on the table.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still distinctly hawkish level of 138.69, indicating that Musalem’s remarks fit comfortably within the prevailing hawkish bias rather than shifting it further. The combination of a slightly above-baseline FXS Speechtracker score and a stable, elevated FXS Fed Sentiment Index suggests the speech consolidates existing expectations for a Fed inclined to keep policy tight, supporting the Dollar while limiting fresh directional impetus.
- Silver price trades higher to near $62.20 ahead of the US NFP data for July.
- The US NFP data will influence the Fed’s interest rate prospects.
- A sharp recovery in oil prices could limit the Silver price’s upside.
Silver price (XAG/USD) trades 1% higher to near $62.20 during the Asian trading session on Friday. The white metal rises ahead of the United States (US) Nonfarm Payrolls (NFP) data for July, which will be published at 12:30 GMT.
TD Securities looks for a modest July payrolls rebound with unemployment steady
According to TD Securities, July’s jobs report is expected to show only a slight improvement after June’s downside surprise. The bank’s economists anticipate that "July NFP picked up modestly to 70k after surprising to the downside with 57k in June," pointing to a still subdued pace of hiring. They also expect the jobless rate to hold its recent gains, noting that "the UE rate likely went sideways at 4.2% after declining in June," consistent with a labor market that remains broadly stable rather than decisively weakening.
The official employment data is expected to have a significant influence on the Federal Reserve’s (Fed) interest rate expectations in the absence of “forward-guidance” from the central bank.
On the global front, a sharp recovery in oil prices due to diminished hopes of an immediate reopening of the Strait of Hormuz, a vital passage to almost 20% of global energy supply, could limit the upside in the Silver price.
At press time, the WTI Oil price holds on Thursday’s recovery move to near $77.00.
Higher oil prices boost global inflation projections, a scenario that prompts fears of interest rate hikes by central banks, which is unfavorable for non-yielding assets, such as Silver.
Silver technical analysis
XAG/USD trades at around $62.20 above the 20-period exponential moving average (EMA) at $59.66, keeping the near-term bias constructive as price holds over this key trend reference.
The Relative Strength Index (14) at 56.27 sits in positive territory without being overbought, hinting that bullish momentum remains in place but not yet overstretched.
On the downside, immediate support is seen at the 20-day EMA at $59.66, which reinforces the broader bullish structure as long as it holds. The white metal could return to the Year-To-Date (YTD) low at 54.77 if it fails to hold the 20-day EMA. On the upside, the July 6 high at $63.28 is the immediate barrier; a decisive break above the same would open the door towards the June 22 high at $67.17.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- NZD/USD remains depressed for the second straight day as geopolitical risks underpin the USD.
- Recovering oil prices revive inflation fears, bolstering Fed hike bets and also supporting the buck.
- China’s trade data do little to provide any impetus to the Kiwi as the focus remains on the US NFP.
The NZD/USD pair sticks to a negative bias for the second consecutive day and trades near the lower end of its weekly range, around the 0.5865 region, during the Asian session on Friday. Spot prices move little following the release of China's trade data as traders opt to wait for the crucial US monthly employment details.
In fact, China's Trade Balance for June, in US Dollar (USD) terms, showed a surplus of $112.5 billion, higher than the $107.0 billion expected, but lower than the prior release of $125.62 billion. Additional details revealed that exports rose 23% YoY, compared to a 27% increase seen in June, while imports climbed 27.5% vs. 36% recorded previously. The data fails to provide any impetus to antipodean currencies, including the New Zealand Dollar (NZD), as geopolitical uncertainties continue to underpin the safe-haven US Dollar (USD) and weigh on the NZD/USD pair.
In fact, a Saudi official said that some Iraqi militia factions, in coordination with Yemen's Iran-backed Houthis, are planning to attack the kingdom in the very near future, raising the risk of a wider regional conflict. This comes a day after Houthis claimed responsibility for an attack on a Saudi oil tanker in the Gulf of Aden. Furthermore, reports suggest that Iran is reviewing a plan that would ban US and Israeli vessels from the Strait of Hormuz. This led to the overnight rise in oil prices, fueling inflation fears and bolstering US Federal Reserve (Fed) rate hike bets.
Hawkish Fed expectations, in turn, remain supportive of elevated US Treasury bond yields and turn out to be another factor supporting the Greenback. USD bulls, however, seem hesitant to place aggressive bets and look to the crucial US Nonfarm Payrolls (NFP) report for more cues about the Fed's future policy path. In the meantime, the Reserve Bank of New Zealand's (RBNZ) hawkish tilt could support the Kiwi and help limit the downside for the NZD/USD pair, warranting some caution before positioning for any further intraday depreciating move.
NZD/USD daily chart
Technical Analysis
The NZD/USD pair holds above the 100-day Simple Moving Average (SMA) at 0.5823, suggesting that the underlying demand is still in place despite recent consolidation around the 0.5860 area. A daily close below this level, however, would hint at fading upside momentum and expose deeper retracements toward the mid-0.5700s, while holding above it keeps the door open for a continuation of the advance toward the 0.5900 handle over the coming sessions.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
Trade Balance USD
The Trade Balance released by the General Administration of Customs of the People’s Republic of China is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the CNY. As the Chinese economy has influence on the global economy, this economic indicator would have an impact on the Forex market. In general, a high reading is seen as positive (or bullish) CNY, while a low reading is seen as negative (or bearish) for the CNY.
Read more.Last release: Fri Aug 07, 2026 03:00
Frequency: Monthly
Actual: $112.5B
Consensus: $107B
Previous: $125.62B
Source: National Bureau of Statistics of China
China's Trade Balance for July, in US Dollar (USD) terms, arrives at $112.5 billion, higher than the $107.0 billion expected, but lower than the prior release of 125.62 billion.
Exports surge 23.9% year-over-year (YoY) in July from a 27% increase seen in June. The country’s imports surge 27.5% YoY in the same period vs. 36% recorded previously.
In Chinese Yuan (CNY) terms, the Trade Surplus widened by 767 billion, more than the 740 billion estimate, but lower than the previous release of 859.05 billion. Exports (CNY) grew at a moderate pace of 17.8% against the previous reading of 20.8%.
Market reaction
No immediate reaction is seen in the Australian Dollar (AUD), the liquid proxy of the Chinese economy, following the China Trade Balance data release. At press time, AUD/USD trades 0.1% lower to near 0.7024.
Economic Indicator
Trade Balance CNY
The Trade Balance released by the General Administration of Customs of the People’s Republic of China is a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the CNY. As the Chinese economy has influence on the global economy, this economic indicator would have an impact on the Forex market. In general, a high reading is seen as positive (or bullish) CNY, while a low reading is seen as negative (or bearish) for the CNY.
Read more.Last release: Fri Aug 07, 2026 03:00
Frequency: Monthly
Actual: 767.07B
Consensus: 740B
Previous: 859.05B
Source: National Bureau of Statistics of China
- DXY preserves the previous day’s modest gains amid persistent geopolitical uncertainties.
- Recovering oil prices fuel inflation fears and lift Fed hike bets, further supporting the USD.
- Bulls seem hesitant and keenly await the release of the crucial US NFP report later today.
The United States Dollar Index (DXY), which tracks the Greenback against a basket of currencies, consolidates during the Asian session on Friday as traders keenly await the release of the closely-watched US monthly jobs data. In the meantime, persistent geopolitical uncertainties and bets for at least one rate hike by the US Federal Reserve (Fed) hold the index steady around the 100.00 psychological mark.
In the latest developments surrounding the Middle East crisis, a Saudi official said that some Iraqi militia factions, in coordination with Yemen's Iran-backed Houthis, are planning to attack the kingdom in the very near future. This raises the risk of a wider regional conflict and prompts traders to again price in the geopolitical risk premium, which, in turn, is seen as a key factor acting as a tailwind for the safe-haven US Dollar (USD).
Meanwhile, Houthis claimed responsibility for an attack on a Saudi oil tanker in the Gulf of Aden. Moreover, reports suggested that Iran is reviewing a plan that would ban US and Israeli vessels from the Strait of Hormuz. The latest developments led to the overnight rise in oil prices, reviving inflation fears and fueling hawkish Fed expectations. This remains supportive of elevated US bond yields and further underpins the USD.
Bullish traders, however, seem hesitant to place aggressive bets and look to the crucial US Nonfarm Payrolls (NFP) report for more cues about the Fed's policy path. The outlook, along with headlines surrounding the Middle East crisis, will play a key role in influencing the USD. Nevertheless, the DXY seems poised to register modest weekly gains, though a break above the weekly range is needed to back the case for further gains.
DXY daily chart
Technical Analysis
The DXY holds above the 100-day Simple Moving Average (SMA) at 99.74, keeping a mildly bullish near-term tone as price respects this dynamic floor after recovering from the recent sub-99.80 lows. A close above this moving average would keep the path open for further recovery, while a decisive break below 99.74 would hint at a deeper corrective phase.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
- AUD/USD is seen consolidating on Friday as traders seem hesitant ahead of the US NFP report.
- Geopolitical uncertainties and Fed hike bets underpin the USD, capping the upside for the pair.
- Spot prices remain on track to end the week on a flattish note and look to the RBA next week.
The AUD/USD pair steadies around the 0.7030-0.7025 region during the Asian session on Friday as traders opt to wait for the release of the closely watched US monthly employment details before placing fresh directional bets. Nevertheless, spot prices, for now, seem to have stalled the previous day's retracement slide from the highest level since June 17 and seem poised to end the week on a flattish note amid mixed cues.
The optimism over a potential US-Iran peace deal seems to have faded amid reports Iran is reviewing a plan that would ban US and Israeli vessels from the Strait of Hormuz. According to the initial draft published by Iranian state news agency Fars on Thursday, other nations that have harmed Iran would not be allowed to transit until compensation is paid. This, in turn, prompts traders to price in the geopolitical risk premium, which supports the safe-haven US Dollar (USD) and caps the AUD/USD pair.
Meanwhile, Iran’s Houthi allies in Yemen struck a Saudi tanker in the Red Sea, fueling concerns about energy supply disruptions through another key route. This led to the overnight spike in crude oil prices and revives inflation fears, bolstering bets for a rate hike by the US Federal Reserve (Fed). The outlook remains supportive of elevated US Treasury bond yields, which is seen as another factor acting as a tailwind for the Greenback and keeping the AUD/USD pair depressed for the second consecutive day.
USD bulls, however, seem hesitant and look to the key US Nonfarm Payrolls (NFP) report for more cues about the Fed's future policy path. The crucial data will play a key role in influencing the near-term USD price dynamics and provide some impetus to the AUD/USD pair. The market attention will then shift to the Reserve Bank of Australia (RBA) policy meeting next week. Apart from this, further developments surrounding the Middle East crisis would help in determining the near-term trajectory for the pair.
Analysts at Standard Chartered expect the RBA to leave the cash rate unchanged at 4.35% at its 11 August meeting, noting that “Q2 trimmed mean inflation held steady at 0.8% q/q – as we had expected – and below the RBA’s prior forecast (0.9%).” They add that this outcome, “together with the recent retracement in oil prices, should take the pressure off the RBA to tighten policy further in the near term.”
Against that backdrop, Standard Chartered says “our base case remains that the RBA is done with rate hikes in the foreseeable future,” although it cautions that “the risk to our view is skewed towards another RBA rate hike in Q4, if the central bank remains unconvinced that demand is slowing sufficiently to contain underlying price pressures.”
AUD/USD daily chart
Technical Analysis
The AUD/USD pair is consolidating between its key moving averages, holding above the 200-day Simple Moving Average (SMA) at 0.6923 while remaining capped by the 100-day SMA at 0.7052. This keeps the near-term bias neutral and hints at a range-bound tone rather than a directional breakout.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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 depreciates as rising geopolitical tensions in the Strait of Hormuz disrupt global markets.
- Market caution rises as Iran considers banning US and Israeli ships and penalizing hostile cargo until blockades lift.
- Rebounding oil prices threaten expectations that falling energy costs would ease pressure on the ECB to cut rates.
EUR/USD extends its losses for the second consecutive day, trading around 1.1520 during the Asian hours on Friday. The currency pair faces downward pressure as the US Dollar (USD) gains strength, propelled by renewed safe-haven demand among global investors.
Escalating tensions in the Strait of Hormuz have rattled market stability and created significant skepticism regarding the reopening of this critical shipping route. Market caution remains elevated as Iran's parliament evaluates a draft proposal that seeks to prohibit US and Israeli vessels, levy a 20% cargo penalty on hostile nations, and maintain restrictions on the corridor until the US blockade is removed.
Adding to the market volatility, rising US Treasury yields and a rebound in crude oil prices have stoked fears that the Federal Reserve might implement another interest rate hike next month. Despite these inflationary signals, the CME FedWatch Tool currently reflects a 54.5% probability of a 25-basis-point rate increase in September, down from 63.4% last week. Investors and traders are now closely eyeing the upcoming July Nonfarm Payrolls (NFP) report to gauge the health of the labor market and better anticipate the Fed's monetary policy path.
Across the Atlantic, economic indicators in the Euro Area present a challenging backdrop. Eurozone Retail Sales unexpectedly contracted by 0.3% month-on-month in June, missing market projections for a 0.1% growth and almost completely unwinding May's revised 0.4% gain. On an annual basis, Retail Sales rose by merely 0.7%, the weakest performance since July 2024, falling short of the expected 1.0% expansion and decelerating sharply from May's 1.9% increase.
Furthermore, the recovery in oil prices could dampen hopes that declining energy costs would alleviate pressure on central banks to keep policy tight. Following the European Central Bank's (ECB) decision to hold interest rates steady at its most recent meeting, markets expect only one more ECB rate hike by the end of the year, alongside a roughly 40% chance of a second increase.
Kocher flags autumn data focus as geopolitical risks cloud Euro inflation
ECB's Kocher scores 5.6/10 on FXS Speechtracker, below the historic average of 6.3/10, pointing to a slightly less forceful tone than usual. The emphasis on how quickly geopolitical developments can alter energy prices and the inflation outlook highlights upside risks to Euro-area prices, which leans modestly hawkish despite the softer score.
The commitment that in autumn the ECB Governing Council will base decisions on incoming data to bring Euro-area inflation back to 2% on a sustainable basis reinforces a data-dependent but vigilant stance. Overall, the speech suggests a cautious hawkish bias, with Kocher keeping the door open to renewed tightening or a slower easing path if energy-driven inflation pressures re-emerge.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- Gold stalls the previous day’s retracement slide from its highest level since June 18.
- Geopolitical risks, inflation fears and Fed hike bets underpin the USD, capping gains.
- Traders also seem hesitant to place aggressive bets ahead of the key US NFP report.
Gold (XAU/USD) consolidates below $4,250 during the Asian session on Friday and, for now, seems to have stalled the previous day's retracement slide from its highest level since June 18. Traders seem hesitant to place aggressive directional bets and opt to wait for the release of the crucial US Nonfarm Payrolls (NFP) report amid persistent geopolitical uncertainties.
In fact, Saudi Arabia said that an intelligence report indicates Iraqi militias coordinating with the Houthis in Yemen for an imminent attack on the kingdom. Furthermore, Iranian state news reported that a framework agreement over the management of the Strait of Hormuz would prohibit passage of US, Israeli, and hostile vessels until compensation was paid. This dampens hopes for a diplomatic resolution to end the five-month-old US-Iran war, which supports the safe-haven US Dollar (USD) and should cap the upside for Gold.
Meanwhile, the US-Iran standoff, along with missile attacks on Saudi oil tankers by Yemen's Iran-aligned Houthis, further adds to worries about energy supply disruptions and helps crude oil prices to preserve Thursday's strong gains. Investors remain concerned that elevated oil prices will rekindle inflationary pressures and force major central banks, including the US Federal Reserve (Fed), to adopt a more hawkish stance.
According to the CME Group's FedWatch Tool, traders are still pricing in over an 80% chance that the US central bank will raise borrowing costs by the end of this year. This favors the USD bulls and warrants caution before positioning for the resumption of the XAU/USD pair's recent move up from the $4,000 psychological mark. Traders now look to the US jobs data for more cues about the Fed's policy path and fresh impetus.
Analysts at OCBC note that “near-term momentum has improved,” with the upcoming US payrolls report now seen as “key to whether the decline in yields, USD and gold’s breakout can be sustained.” They point out that gold was “last seen at 4247 levels,” with “daily momentum is mild bullish while RSI rose to near overbought conditions.” On the technical front, OCBC highlights “resistance at 4333 (23.6% fibo retracement of 2026 high to low), 4393 (100 DMA)” and “support at 4160 (50 DMA), 4077 (21 DMA),” suggesting a constructive bias while acknowledging that the sustainability of the recent move will hinge on the tone of US data.
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.
- USD/CAD rises as uncertainty around Federal Reserve rate hikes tempers broader market sentiment.
- Shipping restrictions in the Strait of Hormuz continue to drive global energy prices higher.
- Rising crude prices increase dollar inflows into Canada, providing fundamental support to the Canadian Dollar.
USD/CAD extends its gains for the second successive day, trading around 1.4020 during the Asian hours on Friday. The pair continues to gain ground as the US Dollar (USD) benefits from revived safe-haven demand.
Tensions in the Strait of Hormuz have unsettled global markets and cast fresh doubt over efforts to fully reopen the vital shipping route. Market participants remain highly skeptical about the corridor's prospective opening, especially as Iran’s parliament reviews a draft agreement. The proposed draft would bar United States (US) and Israeli vessels, impose 20% cargo penalties on hostile nations, and keep the trade route restricted until the U.S. blockade is lifted.
Meanwhile, rising US Treasury yields and rebounding oil prices have reignited concerns that the Federal Reserve (Fed) could raise interest rates next month. Hawkish comments from Federal Open Market Committee (FOMC) members were reinforced by reports indicating that Fed Chair Warsh is prepared to hike rates if inflation accelerates further.
Musalem flags upside inflation risks while backing incremental Fed tightening
Fed’s Musalem delivered a moderately more hawkish tone, with a 7.4/10 FXS Speechtracker score relative to the historical average of 7/10, underscoring concern that inflation expectations risk losing anchor even as Musalem judges them currently stable and aligned with the 2% target. The emphasis on core inflation amid energy volatility, a preference for incremental rate hikes, and the view that inflation is more likely to stay above target, alongside the assertion that the Dollar’s reserve status remains secure and financial conditions are still highly accommodative, collectively point to a bias toward further tightening and a willingness for the central bank to occasionally surprise markets.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated 138.69, signaling that despite the lack of incremental shift, Fed rhetoric remains firmly in hawkish territory. The combination of a slightly above-baseline FXS Speechtracker score and a high FXS Fed Sentiment Index level suggests that markets should continue to price a risk of additional rate hikes rather than an imminent pivot toward easing.
Nevertheless, the CME FedWatch Tool shows that markets are currently pricing in a 54.5% chance of a 25-basis-point rate hike in September, down from 63.4% a week ago. Traders now await the closely watched July Nonfarm Payrolls (NFP) report for key insights into labor market conditions and the Fed's future policy trajectory.
Despite these bullish factors for the Greenback, the upside for the USD/CAD pair may remain constrained. As one of the world's largest crude exporters, Canada earns substantial US Dollar inflows when energy prices climb, providing fundamental support to the commodity-linked Canadian Dollar (CAD).
Positioning shifts as Dollar longs meet heavy Euro, Yen and Canadian Dollar shorts
Societe Generale points out that recent positioning has been heavily skewed, noting that “just as the market was long USD, so it was short other currencies – notably, the Euro, the Yen and Canadian Dollar.” This highlights a broader pattern of investors crowding into Dollar strength while simultaneously building sizeable short exposure in key counterparts, including the Euro, Yen and Canadian Dollar.
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.
Forex Market News
Our dedicated focus on forex news and insights empowers you to capitalise on investment opportunities in the dynamic FX market. The forex landscape is ever-evolving, characterised by continuous exchange rate fluctuations shaped by vast influential factors. From economic data releases to geopolitical developments, these events can sway market sentiment and drive substantial movements in currency valuations.
At Rakuten Securities Hong Kong, we prioritise delivering timely and accurate forex news updates sourced from reputable platforms like FXStreet. This ensures you stay informed about crucial market developments, enabling informed decision-making and proactive strategy adjustments. Whether you’re monitoring forex forecasts, analysing trading perspectives, or seeking to capitalise on emerging trends, our comprehensive approach equips you with the insights needed to navigate the FX market effectively.
Stay ahead with our comprehensive forex news coverage, designed to keep you informed and prepared to seize profitable opportunities in the dynamic world of forex trading.
