Forex News
The Boston Fed President, Suan Collins, crossed the wires on Thursday as the Jackson Hole Symposium began. She said that the recent PCE report does not change the view that policy is restrictive and will lead to gradual disinflation.
Collins added that the jump in US bond yields is “still consistent with price stability,” and added that she has no comment on Bessent’s intervention.
Recently, Collins added via an interview with the Wall Street Journal that a rate hike is warranted if inflation disappoints.
Key highlights:
RECENT PERSONAL CONSUMPTION EXPENDITURES REPORT DID NOT CHANGE MODAL OUTLOOK THAT CURRENT MONETARY POLICY IS RESTRICTIVE AND WILL LEAD TO A GRADUAL DISINFLATION
PORTFOLIO MANAGEMENT FEES HAD AN OUTSIZED INFLUENCE ON HEADLINE INFLATION, WITH MARKET-BASED PRICES MORE IN LINE WITH FED'S TARGET
RECENT INFLATION DATA 'MIXED,' WITH HEADLINE FIGURE STRONGER THAN EXPECTED BUT 'PROMISING SIGNS' IN THE DETAILS
RECENT INCREASE IN BOND YIELDS STILL CONSISTENT WITH PRICE STABILITY, NOT A SIGN INFLATION EXPECTATIONS ARE INCREASING
ABSENT NEW TARIFF AND OIL SHOCKS, THERE ARE REASONS TO THINK INFLATION WILL EASE
SHE IS WATCHING BOND YIELDS, BUT HAS NO COMMENT ON BESSENT'S INTERVENTION
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
US President Donald Trump held a press conference at the White House, in which he insisted that Canada has been ripping off the US on trade and that it wants to be “treated like a state.”
During the press conference, in addition to discussing Canada, he spoke about Putin and that “millions of barrels of Oil are coming through Hormuz daily.”
Key highlights:
Canada has been ripping US off on trade for a long time.
Canada wants to be treated like state, but not a state.
We don't want Canada to make cars for the US.
Tariffs on (Canadian) cars at a substantial level.
Canada is the worst to deal with on trade.
Putin will not attack nato territory.
Has had good talks with Putin.
On Iran: They're in big trouble.
Russia has behaved quite well with the Strait of Hormuz.
On punishing Putin for Iran business: Who says I'm not
Trump: Millions of barrels of oil are coming through Hormuz daily.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- WTI trades near $83.50, up 2.52% and more than $3.00 off its session low.
- Revolutionary Guard ties any reopening to the deal Washington has dropped.
- Blockade in force, no talks scheduled, mediators left without a framework.
Crude Oil trades near $83.50 on Thursday, ahead 2.52% and more than $3.00 above a session low just above $80.00 printed at 07:00 GMT. The final leg is the loud one, better than a dollar inside the twenty minutes before 18:00 GMT, carrying the barrel through its own earlier ceiling in the $82.50 area and into a high just short of $84.00.
Both capitals now quote the same dead document
The June framework signed at Versailles is the only reopening mechanism on the table, and Thursday's reporting has each side refusing it on the other's reading. Washington has told mediators it will not go back to the memorandum, judging it soft, and has turned instead to economic pressure under a named campaign to cut the regime's remaining financial lifelines. Tehran's Revolutionary Guard said Wednesday the Strait of Hormuz stays shut until the United States resumes implementing that same document, export waivers and blockade relief included.
Iranian conservatives read the agreement's fifth paragraph as their licence to set the terms of any opening, which is exactly the reading Washington will not accept. Pakistan's army chief left Tehran this week with nothing, Oman's foreign minister followed on transit lanes and drew a rebuke from Washington for conceding too much, and Qatar's prime minister arrived Thursday to discuss heading off escalation rather than a deal.
What the barrel is pricing
Three sessions of selling into Tuesday's corridor headline priced a reopening that never carried a signature, and Thursday takes roughly half of it back. That makes it another de-escalation this tape has bought and returned since April, on the same pattern each time. The physical constraint has not moved through any of them, with a tanker struck off Oman on Tuesday and the blockade stated to be in full force, and the two governments reading one paragraph in opposite directions are the pair that control the lanes.
Levels
Resistance: The session high just short of $84.00 is the first mark, with the August peak just above $86.00 above it and the July spike near the $92.00 handle beyond that.
Support: The 50-day Exponential Moving Average (EMA) near $81.50 is the line that matters, the session low just above $80.00 beneath it, and the 200-day near $78.50 under that.
Bias: Bullish above $81.50. The daily Stochastic Relative Strength Index (Stoch RSI) near 76 is climbing into the upper band with price back above both averages, and a deadlock without a framework is not a condition that sells barrels. Invalidation on a daily close beneath the $81.00 handle.
WTI 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.
- The Australian Dollar extends its advance as hotter-than-expected inflation strengthens RBA rate hike expectations.
- Hawkish RBA expectations contrast with steady Fed rate expectations for September.
- Traders await Fed Chair Kevin Warsh’s Jackson Hole speech for fresh clues on the US interest rate outlook.
The Australian Dollar (AUD) outperforms its major peers on Thursday, buoyed by hawkish Reserve Bank of Australia (RBA) expectations after Australian inflation data released on Wednesday surprised to the upside. A softer US Dollar (USD) provides additional support. At the time of writing, AUD/USD trades around 0.7197, at levels last seen in mid-May.
The stronger-than-expected inflation figures have reinforced expectations that the RBA could raise interest rates as soon as September. The central bank left the cash rate unchanged at 4.35% at its August meeting after three increases earlier this year, but warned that inflation is likely to stay elevated for some time and that risks to the inflation outlook remain tilted to the upside, particularly due to higher Oil prices amid tensions in the Middle East.
Reuters reported on Thursday that three of Australia’s four major banks now expect another RBA rate hike this year. NAB forecasts a 25-basis-point (bps) increase in September, while Commonwealth Bank and ANZ expect the next move in November. Westpac, meanwhile, expects rates to remain unchanged.
On the US side, the latest PCE inflation data released on Wednesday failed to alter expectations for the Federal Reserve’s (Fed) September meeting. Although headline PCE came in above forecasts, traders focused more on the core reading, which was in line with expectations. The CME FedWatch Tool shows around a 62% chance that the Fed will leave interest rates unchanged next month.
As a result, the Greenback struggles to attract strong buying interest despite hawkish comments from Fed officials on Thursday and remains in consolidation mode ahead of Fed Chair Kevin Warsh’s speech at the Jackson Hole Symposium on Friday. The event could provide fresh clues on the Fed’s interest rate outlook and offer the next directional catalyst for AUD/USD. In the near term, diverging RBA-Fed policy expectations are likely to keep the Australian Dollar supported.
On Friday, traders will also keep an eye on the preliminary Nonfarm Payrolls (NFP) benchmark revision, along with the University of Michigan Consumer Sentiment, Consumer Expectations and inflation expectations data.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
Cleveland Federal Reserve (Fed) President Beth Hammack said on Thursday on Fox Business that the job market is broadly in balance, while adding that “we need restrictiveness in policy.”
Key highlights:
The job market is broadly in balance
It's time to act; we need restrictiveness in policy.
I expect slow progress on inflation, should end year around 3%.
Next year inflation might ease to around 2.5% at best.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- DXY holds just above 99.00, unchanged on its tightest range in weeks.
- Spot sits 2.6% beneath the June peak with both moving averages overhead.
- Jackson Hole keynote at 14:00 GMT Friday, prepared text, no questions taken.
The US Dollar Index trades just above 99.00 on Thursday, unchanged on the session across a range of less than a fifth of a point. That sits roughly 2.6% beneath the June peak just under 102.00 and beneath a rolling 50-day Exponential Moving Average (EMA) near 100.00 and a flat 200-day near 99.75. Three policymakers reached the wires from Jackson Hole before the New York open, two of them scored hawkish on the calendar, and none of them moved the basket a tick.
Sold on the hawkish outcome, sold on the dovish one
The July 29 decision was the most hawkish result of this chairmanship, a fifth consecutive hold decided nine to three with the first dissents of the term, all of them from regional presidents wanting an immediate quarter point. That is the textbook currency-positive surprise. The index broke close to 1.7 points in the session that followed, from just beneath 101.50 into the 99.75 area, by a wide margin the largest daily move on the summer window, and it has not taken any of it back in the month since.
The August 19 leg went the other way and produced the same result. The Treasury doubled the ceiling on its long-end buyback operations, the thirty-year gave back more than nine basis points, and the index broke again to just above 98.50 the following day, its weakest since May. Higher yields did not bid this currency and the relief on those yields did not bid it either, which rules out the rate path as the thing being traded.
The seller of the bond is the seller of the currency
What did the running in the long end was the real yield rather than inflation compensation. Of the 67 basis points the thirty-year added between late February and mid-August, 63 are real and four are breakeven, so roughly 94% of the move is the price of capital. A rising real yield is meant to be the cleanest carry argument a currency can be handed, and this one has been handed it for six months.
The flow explains why it does not land. June foreign holdings of Treasuries fell 72.1 billion Dollars, with Japan trimming 26.4 billion while defending its own currency and China 25.9 billion, close to three quarters of the decline between two holders. A foreign holder selling the bond and taking the proceeds home lifts the yield and sells the Dollar in the same transaction. On that arithmetic the yield is a premium being charged rather than carry being offered, and the currency is on the paying side of it.
The other side of the basket is not helping
The index is a basket before it is a Dollar view, and the Euro carries close to 58% of it. The Euro area composite Purchasing Managers Index (PMI) printed 52.1 in August, the strongest reading since November, against a European Central Bank that has already moved its deposit rate to 2.25% and shows no sign of walking it back. The Yen carries close to 14% and swaps price roughly an 80% chance of a Bank of Japan increase on September 18.
Both of the index's largest weights therefore sit behind central banks still leaning toward tightening, while the Fed's own tightening is being administered by the bond market and then partly reversed by the fiscal authority. A committee that will not move and an issuer that steps in when the market does is a poor combination for the denominator of a currency pair. That is a structural drag no single speech resolves.
Friday puts two red bands in one minute
Friday at 14:00 GMT carries the Fed Chair's first Jackson Hole keynote, delivered as prepared text with no questions taken and set against a symposium theme of financial innovation in payments rather than the policy path. The same minute brings the preliminary estimate of the annual benchmark revision to the establishment survey, the exercise that has taken 818K and then 911K off the payroll level in the past two rounds. Around them the Chicago PMI lands at 13:45 GMT with a 57 consensus from 57.6 prior, and the final August Michigan readings follow at 14:00, sentiment 51 and expectations 50.6, each matching the preliminary.
Positioning going in leans toward a neutral tone, and web-sourced pricing puts a September increase near one chance in three. The risk is not that the keynote reads hawkish or dovish but that it addresses payments rails and says nothing at all about the question this currency is actually asking, which is who sets the price of US duration when the committee declines to and the issuer volunteers.
Levels
Resistance: The moving-average band between 99.75 and the 100.00 handle is the first barrier and it is also the shelf lost on August 19, so a reclaim would take back the whole buyback break. Above it the July range floor near 100.50 and the June peak just under 102.00.
Support: The 99.00 handle is the immediate line, then just above 98.50 where the August 20 low sits, with nothing structural beneath that until the spring base.
Bias: Bearish while the 99.75 to 100.00 band caps. The daily Stochastic Relative Strength Index (Stoch RSI) near 24 is turning up out of oversold, which prices a bounce rather than a base while the 50-day EMA rolls over toward the 200-day. Invalidation on a daily close above 100.00.
DXY daily chart
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- Gold edges higher as falling yields support bullion above $4,600.
- Fed hawks stress sticky inflation, but Gold barely reacts.
- Warsh's speech and sentiment data could reset Fed expectations.
Gold (XAU/USD) drifts higher on Thursday, up 0.25% after US jobs data was solid, while the trade deficit widened the most since US President Donald Trump's “Liberation Day.” Also, falling US Treasury yields and muted price action as investors eye Federal Reserve (Fed) Chair Kevin Warsh's speech keep the precious metal near familiar levels. XAU/USD trades at $4,610 at the time of writing.
XAU/USD steadies above $4,600 as traders await Warsh’s remarks
The yellow metal resumed its uptrend on Thursday, even though the US jobless claims report was better than expected, indicating a strong labor market. The number of Americans filing for unemployment benefits dipped from 207K to 203K in the past week, below forecasts of 208K, according to the US Department of Labor.
At the same time, the US trade deficit widened from $102.1 billion to $118.8 billion in July, according to the US Census Bureau.
Worth noting that Gold barely flinched following hawkish statements by Federal Reserve officials attending the Jackson Hole Symposium.
Cleveland Fed's Beth Hammack stated that “now is the time to act given the persistence of inflation.” Earlier, Kansas City Fed's Jeffrey Schmid described inflation as "still stubborn" and "still sticky,” while Chicago Fed's Austan Goolsbee also said inflation is his top concern.
Aside from this, the focus shifts towards Fed Chair Kevin Warsh. Traders should remember that he is against forward guidance, though any remarks about the economy could hint at the future path of interest rates.
As of writing, money markets expect the Fed to hold rates unchanged at the September 16 meeting, with odds standing at 68%. However, for the December meeting, traders eye a rate hike, with the chances at 72%, according to Prime Terminal.
The US Dollar Index (DXY), which tracks the dollar's performance against six currencies, remains steady at 99.14 after strong data were released over the past two days.
The Greenback recovered some ground, as recent US Core PCE data show that inflation remains stickier than expected and far from reaching the Federal Reserve’s 2% target.
On Friday, the US economic docket, besides featuring Warsh, also includes the University of Michigan Consumer Sentiment data and Nonfarm Payrolls benchmark revision.
XAU/USD technical analysis: Gold reclaims $4,600, but it's poised for consolidation
Gold has climbed above $4,600, but it remains shy of a decisive break. Momentum, although bullish, is failing to propel the yellow metal towards a retest of weekly highs near $4,697, as indicated by the Relative Strength Index (RSI). Given the backdrop, further sideways action lies ahead, while traders remain uncertain about Bullion’s direction.
On the upside, the first key resistance is the psychological $4,650 mark. Above, the next ceiling level is $4,700, before buyers drive XAU/USD to May’s 7 peak at $4,764.
Downwards, bullion's first support is $4,600. A breach of the latter would expose the August 24 daily low of $4,594. If XAU/USD achieves a daily close beneath the latter, this clears the path for a move to the 200-day Simple Moving Average (SMA) at $4,376. Ahead of challenging the August 19 swing low of $4,324 and $4,300.
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 Treasury Secretary Scott Bessent said on Thursday that he will ask finance ministers at the G20 meeting to cut off economic flows that sustain the Iranian regime and the Islamic Revolutionary Guard Corps, according to Fox Business News.
Bessent will discuss Iran-related activity identified by the Treasury in specific countries, emphasizing that the US will target any source of Iran’s illegal income.
The source commented that Bessent is scheduled to hold almost a dozen bilateral meetings with various foreign finance ministers, during which he will discuss the matter.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.01% | 0.02% | 0.02% | -0.13% | -0.37% | -0.04% | -0.18% | |
| EUR | -0.01% | 0.00% | 0.00% | -0.16% | -0.38% | -0.16% | -0.20% | |
| GBP | -0.02% | 0.00% | 0.00% | -0.19% | -0.38% | -0.17% | -0.22% | |
| JPY | -0.02% | 0.00% | 0.00% | -0.16% | -0.36% | -0.18% | -0.19% | |
| CAD | 0.13% | 0.16% | 0.19% | 0.16% | -0.21% | -0.00% | -0.03% | |
| AUD | 0.37% | 0.38% | 0.38% | 0.36% | 0.21% | 0.21% | 0.15% | |
| NZD | 0.04% | 0.16% | 0.17% | 0.18% | 0.00% | -0.21% | -0.01% | |
| CHF | 0.18% | 0.20% | 0.22% | 0.19% | 0.03% | -0.15% | 0.00% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- Silver rises nearly 3% on Thursday and returns toward the upper end of its weekly range.
- Investors await Kevin Warsh’s Jackson Hole speech for fresh clues about the US interest rate outlook.
- Hawkish comments from several policymakers and persistent inflation could limit the white metal’s upside potential.
Silver (XAG/USD) accelerates on Thursday and trades around $69.50 at the time of writing, up 2.74% on the day. The white metal is approaching the upper end of the range that has contained price action this week, as investors turn their attention to the Jackson Hole Symposium.
The main catalyst is now the speech from Federal Reserve (Fed) Chair Kevin Warsh, scheduled for Friday. Markets will look for indications about how the US central bank assesses persistent inflationary pressures and what they could mean for the interest rate outlook.
At the July monetary policy meeting, Kevin Warsh did not provide specific guidance on the Fed’s next moves but reaffirmed the central bank’s commitment to bringing inflation back toward its 2% target. A similar message on Friday could reinforce expectations that interest rates will remain elevated for longer, an environment generally unfavorable for Silver, which offers no yield.
Recent US data continue to point to persistent inflationary pressures. The Personal Consumption Expenditures (PCE) Price Index released on Wednesday suggests that inflation remains above the Fed’s target, although recent price indicators do not show a renewed sharp acceleration. According to the CME FedWatch tool, markets currently see around a 62% chance that the Fed will leave interest rates unchanged in September.
Several Fed officials are also maintaining a cautious stance on inflation. Cleveland Fed President Beth Hammack said on Thursday that now is the time to act given persistent inflation and indicated that she does not view current monetary policy as restrictive for the US economy. She also highlighted the risk that households could lose confidence in the Fed’s ability to bring inflation back to 2%.
Meanwhile, Kansas City Fed President Jeff Schmid said the energy shock is starting to feed through to the economy and reiterated the need to return inflation to target. Chicago Fed President Austan Goolsbee, for his part, said that the biggest short-term concern remains that inflation is not fully under control.
These comments could support the US Dollar (USD) and US Treasury yields if investors scale back expectations for monetary easing. A stronger US Dollar and elevated interest rates tend to weigh on Silver by increasing the opportunity cost of holding a non-yielding asset.
However, geopolitical uncertainty in the Middle East continues to provide some support to precious metals. Tensions surrounding the Strait of Hormuz remain elevated despite talks between Iran and Oman, while concerns about energy flows are sustaining both safe-haven demand and inflation risks. Silver therefore remains supported on Thursday, but Warsh’s speech could determine whether the precious metal can extend its advance beyond the $70 area.
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.
The US Dollar (USD) has navigated an inconclusive range on Thursday, struggling to build on the previous day’s gains and briefly reaching multi-day peaks. In the meantime, geopolitical tensions have been simmering on the back burner, while investors have geared up for Friday’s US Nonfarm Payrolls revision and the speech by Fed's Warsh at Jackson Hole.
Here is what you need to know on Friday, August 28:
The US Dollar Index (DXY) has managed to maintain the weekly recovery in place, looking to extend the recent breakout above the 99.00 hurdle. The better tone in US Treasury yields and steady geopolitical uncertainty have also bolstered the uptick. Next on tap on the US docket will be the release of the Nonfarm Payrolls Annual Revision, the final U-Mich Consumer Sentiment gauge and the speech by Chair Warsh at the Jackson Hole Symposium.
EUR/USD has extended its weekly downtrend, at some point flirting with its key 200-day SMA, although it managed to attempt some recovery past 1.1650 afterward. Closer to home, Germany’s labour market report should gather all the attention alongside the final prints of the Consumer Confidence in Euroland and the speech by the ECB’s Schnabel.
GBP/USD has slipped back to fresh multi-day lows, challenging 1.3570 prior to recovering ground and reclaiming the 1.3600 region. The next event across the Channel will be the release of the Nationwide Housing Prices.
USD/JPY further extended its weekly recovery, up for the fourth day in a row and revisiting the 159.50 zone. The Unemployment Rate, Consumer Confidence, Housing Starts, Construction Orders and inflation figures in Tokyo will be on top of the agenda in the 'Land of the Rising Sun.'
AUD/USD has remained well bid and approached 0.7200, the figure to challenge three-month highs. Data-wise in Oz, quarterly Business Inventories figures, Housing Credit and Private Sector Credit data are next on tap on August 31.
Prices of WTI added to Wednesday’s recovery and surpassed the $83.00 mark per barrel, always closely following developments surrounding the Middle East crisis.
Gold has built on Wednesday’s losses, trading closer to the $4,560 mark per troy ounce, or four-day lows. The precious metal’s decline has followed the US Dollar’s vacillating price action, higher US Treasury yields and steady caution pre-Jackson Hole event.
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