Forex News
- Silver price holds gains near $61.10 as US President Trump confirms Russia-Ukraine ceasefire.
- 10-year US Treasury Yields have come under pressure due to lower oil prices.
- Investors shift their focus to the US CPI data scheduled for Wednesday.
Silver price (XAG/USD) trades higher at around $61.10 in the Asian trade on Monday, holding onto Friday’s gains. The white metal reflects strength as United States (US) bond yields have come under pressure due to a decline in oil prices in the wake of Russia-Ukraine ceasefire, announced by President Donald Trump.
As of writing, the WTI Oil price is down 2% to near $89.00. 10-year US Treasury Yields remained lower to near 5.24% from its over two-decade high of 5.36% on Friday. US bond markets are closed on Monday due to Columbus Day.
Theoretically, the scenario of correction in US bond yields provides relief to non-yielding assets, such as Silver.
Over the weekend, US President Trump announced through a post on Truth Social that both Russia and Ukraine have agreed to an energy ceasefire, a temporary agreement in which both parties agree to stop attacking energy facilities. Ukraine had been excessively attacking Moscow’s energy infrastructure to curtail its funding.
“Effective immediately, there is an ENERGY CEASEFIRE in the War between Russia and Ukraine. Both parties have agreed. Do not break it!” Trump wrote.
The Russia-Energy energy ceasefire provides some relief for global markets at a time when energy supplies have remained extremely tight due to Middle East tensions.
This came after US President Trump stated on Friday that he struck a deal with Russian President Vladimir Putin for Russia to supply diesel in stages.
Meanwhile, investors await the US Consumer Price Index (CPI) data for September, which will be released on Wednesday.
Silver Technical Analysis
In the daily chart, XAG/USD trades at $61.02, keeping a bearish near-term bias as spot holds beneath the 20-day Exponential Moving Average (EMA) at $62.07. The metal has retreated from recent highs and now trades under this short-term trend gauge, suggesting rallies are likely to face selling interest while the Relative Strength Index (RSI) at 44 stays in neutral-to-soft territory, hinting at persistent downside pressure rather than oversold exhaustion.
On the topside, immediate resistance is located at the 20-day EMA around $62.07, and a daily close above this barrier would be needed to ease the current downside bias and open the way for a more sustained recovery. In the absence of nearby technical support levels from the provided indicators, the focus remains on how price reacts to this moving average, with failure to reclaim it likely to keep XAG/USD vulnerable to further downside probes toward prior price lows on the chart.
(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 depreciates as oil prices spike due to Middle East tensions.
- US Dollar may struggle amid softening US consumer sentiment and cooling Fed rate hike expectations.
- Resurfacing Middle East tensions add broader macroeconomic uncertainty, keeping traders cautious ahead of key US inflation data.
NZD/USD remains subdued for the second successive day, trading around 0.5610 during Asian hours on Monday. The currency pair depreciates as the New Zealand Dollar (NZD) struggles, with traders continuing to monitor the escalating conflict in the Middle East and its upward impact on global oil prices. These geopolitical developments have reinforced broader market concerns regarding persistent inflationary pressures.
Investor caution mounted ahead of key domestic data releases scheduled for later in the week, including New Zealand's food inflation metrics and the latest business PMI report. At the same time, market participants maintained a watchful eye on upcoming US inflation data to gauge the Federal Reserve's (Fed) likely direction on interest rates at its next monetary policy meeting. Additionally, market sentiment remained anchored by anticipation surrounding China's September Consumer Price Index (CPI) and Producer Price Index (PPI) releases, against a backdrop of sluggish domestic demand and elevated energy costs.
The downside of the NZD/USD pair could be restrained as the US Dollar (USD) declines due to softening domestic economic sentiment. The University of Michigan's Consumer Sentiment Index dropped to 46.3 in October from 48.1 in September, falling short of the market expectation of 47.6.
Monetary policy expectations for the Federal Reserve (Fed) remain cautious, with CME FedWatch indicating only a 17.7% chance of a rate hike of at least 25 basis points this month, down from 24.4% a week prior. Conversely, market participants are pricing in an 84.1% probability of a hike at the Fed's December meeting. Adding to broader macro uncertainty, energy market concerns resurfaced after US President Donald Trump indicated he was considering joining Saudi Arabia in its campaign against Iran-backed Houthi militants in Yemen following another deadly attack on Riyadh's international airport.
Fed's Musalem flags need for more tightening as strong demand keeps rates elevated
Fed's Musalem delivered a slightly more hawkish-than-usual message, with a 7.3/10 FXS Speechtracker score edging above the 7.2/10 historical average, emphasizing that elevated inflation is being driven by persistent demand pressures and supply shocks. The insistence that “more monetary policy firming will be required” and that the current level of inflation forces the Fed to “think about rate increases,” alongside a “pretty strong” economy and a balanced job market that does not need cooling, underscores a bias toward additional tightening even as market inflation expectations remain anchored. Musalem’s comments that strong demand for capital, AI-related investment, and unsustainable fiscal deficits are pushing real yields and nominal yields higher reinforce a narrative of structurally higher rates for longer, supportive of the Dollar on a relative policy stance basis.
The FXS Fed Sentiment Index slipped by 0.25 points to 138.33, signaling a modest pullback in perceived hawkishness despite the still-firm rhetoric captured by the FXS Speechtracker. With the index firmly above the 100 neutral line, the Fed remains in clearly hawkish territory, and the slight decline suggests markets are fine-tuning rather than reversing expectations for further tightening and higher-for-longer Dollar rates.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- DXY kicks off the new week on a weaker note amid the recent pullback in US bond yields.
- The Fed’s hawkish stance and geopolitical uncertainties support the safe-haven USD.
- The technical setup warrants caution for bearish traders and positioning for deeper losses.
The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, attracts fresh sellers at the start of a new week, sliding back closer to the 102.00 mark during the Asian session. The index, however, remains confined in a familiar range, warranting caution before positioning for any meaningful corrective fall from the highest level since April 2025, touched last week.
The recent minor pullback in US bond yields keeps US Dollar (USD) bulls on the defensive, though the US Federal Reserve's (Fed) hawkish tilt offers some support and warrants caution for bearish traders. In fact, Minutes of the September FOMC meeting, released last Wednesday, confirmed that policymakers still view inflation as the dominant threat to the economy and back the case for further policy tightening.
US data and FOMC minutes underscore lingering inflation risks
Analysts at Nordea highlight that, in the US, “the latest ISM services data point to a renewed pick-up in price pressures,” with “the prices index” rising “to its highest level since July 2022,” while “the employment index returned to expansion.” They add that “the September FOMC minutes also highlighted policymakers’ concerns that inflation could remain elevated, although views differed on the implications for future policy.”
According to the CME Group's FedWatch Tool, traders are still pricing in over an 85% chance that the US central bank will raise borrowing costs again in December. Adding to this, the US-Iran standoff could help limit deeper losses for the safe-haven Greenback. In the latest developments, Iran’s top security official declared Washington’s response to its proposal for reopening the strategic Strait of Hormuz insufficient.
Moreover, a deadly Houthi attack on Riyadh’s main airport drew a Saudi vow of retaliation on Saturday, as President Donald Trump raised the possibility of joining strikes on the group and resuming attacks on Iran. This keeps the geopolitical risk premium in play, making it prudent to wait for strong follow-through selling before confirming that the DXY has topped out and positioning for any corrective decline.
Traders might also opt to wait on the sidelines amid holiday-thinned trading volumes and ahead of this week's key data/event. The US inflation figures – the Producer Price Index (PPI) and the Consumer Price Index (CPI) – will be published on Wednesday and Thursday, respectively, while the Fed Chair Kevin Warsh is scheduled to speak at the annual meetings of the IMF and World Bank in Bangkok on Friday.
DXY 4-hour chart
Technical Analysis
The recent range-bound price action witnessed over the past week or so might still be categorized as a bullish consolidation phase against the backdrop of a strong rally from the September monthly swing low. The DXY, however, is showing more of a corrective drift than an impulsive decline, suggesting that any subsequent slide might continue to attract fresh buyers near the 101.80-101.70 horizontal resistance breakpoint. On the top side, bulls might await a breakout through the year-to-date high, around 102.55, before placing fresh bets and positioning for further upside.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.07% | -0.05% | 0.03% | 0.04% | 0.05% | -0.04% | |
| EUR | 0.06% | -0.01% | -0.02% | 0.08% | 0.08% | 0.18% | 0.01% | |
| GBP | 0.07% | 0.01% | 0.02% | 0.09% | 0.10% | 0.17% | 0.04% | |
| JPY | 0.05% | 0.02% | -0.02% | 0.05% | 0.08% | 0.13% | -0.00% | |
| CAD | -0.03% | -0.08% | -0.09% | -0.05% | 0.01% | 0.03% | -0.07% | |
| AUD | -0.04% | -0.08% | -0.10% | -0.08% | -0.01% | 0.07% | -0.09% | |
| NZD | -0.05% | -0.18% | -0.17% | -0.13% | -0.03% | -0.07% | -0.14% | |
| CHF | 0.04% | -0.01% | -0.04% | 0.00% | 0.07% | 0.09% | 0.14% |
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).
India unveiled a new measures to boost the Indian Rupee (INR), redirecting oil companies' US Dollar purchases away from the spot market and tightening hedging rules, Reuters reported on Saturday. The move comes as the domestic currency trades near record lows.
The Reserve Bank of India (RBI) announced the measures amid persistent pressure on the INR, driven by rising oil prices and higher global bond yields. The Indian central bank will establish a special window to meet the daily dollar requirements of three state-run oil-marketing companies, easing pressure on the spot market.
The mechanism, which has been used during periods of currency volatility, allows the RBI to supply dollars directly to oil companies from its foreign exchange reserves. Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation will be eligible to use the facility starting Monday, according to the RBI.
Market reaction
At the time of writing, the USD/INR pair is down 0.02% on the day at 96.77.
RBI FAQs
The role of the Reserve Bank of India (RBI), in its own words, is "..to maintain price stability while keeping in mind the objective of growth.” This involves maintaining the inflation rate at a stable 4% level primarily using the tool of interest rates. The RBI also maintains the exchange rate at a level that will not cause excess volatility and problems for exporters and importers, since India’s economy is heavily reliant on foreign trade, especially Oil.
The RBI formally meets at six bi-monthly meetings a year to discuss its monetary policy and, if necessary, adjust interest rates. When inflation is too high (above its 4% target), the RBI will normally raise interest rates to deter borrowing and spending, which can support the Rupee (INR). If inflation falls too far below target, the RBI might cut rates to encourage more lending, which can be negative for INR.
Due to the importance of trade to the economy, the Reserve Bank of India (RBI) actively intervenes in FX markets to maintain the exchange rate within a limited range. It does this to ensure Indian importers and exporters are not exposed to unnecessary currency risk during periods of FX volatility. The RBI buys and sells Rupees in the spot market at key levels, and uses derivatives to hedge its positions.
- Gold price edges higher to around $4,215 in Monday’s early Asian session.
- Inflows into gold-backed ETFs hit a four-year high.
- Traders brace for the key US inflation reports this week for fresh impetus.
Gold price (XAU/USD) gains ground to near $4,215 during the early Asian session on Monday. The precious metal extends the rally amid rising demand for bullion-backed exchange-traded funds and a weaker US Dollar (USD).
Yellow metal receives some support from rising investment demand, with inflows into gold-backed exchange-traded funds reaching a four-year high, according to Bloomberg data. Furthermore, the People’s Bank of China (PBoC) added 740,000 ounces to its reserves in September, extending its buying streak to 23 consecutive months.
Renewed tensions in the Middle East will be closely watched. The Saudi-led coalition said on Sunday that an unidentified projectile hit a passenger terminal at King Khalid International Airport in Riyadh. The Houthis swiftly claimed the attacks, saying they were a response to “Saudi aggression.”
Traders await the release of key US inflation data this week that could offer fresh clues on the Federal Reserve’s (Fed) next interest rate move. The US Consumer Price Index (CPI) report will be published on Wednesday, followed by the Producer Price Index (PPI) and Retail Sales data on Thursday.
Any signs of hotter inflation in the US could reinforce the Fed to raise the interest rate. This, in turn, could boost the Greenback and weigh on the USD-denominated commodity price. Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.
According to the CME FedWatch tool, traders see a 17.7% probability of an October rate hike, but are pricing in an 84.1% chance of an increase in December.
Gold flows build as TD Securities flags CTA short covering and bull run potential
According to strategists at TD Securities, trend-following funds are shifting stance across the precious metals complex, with “CTAs…covering shorts across gold and platinum as strong fundamental backdrop for precious metals insulates the market.” They note that “the yellow metal is gaining on the day with CTAs back on the bid, covering shorts by some 7% of historic max position size,” underscoring how positioning is turning more supportive. In their view, “geopolitical risk, fiscal concern, dollar debasement, de-dollarization and stagflation concerns all remain major supportive factors for these flows in gold,” helping to underpin demand even as traditional macro drivers fluctuate. Against this backdrop, TD Securities argues that “we continue to see the stage being set for the yellow metal to disconnect from real rates further and begin a new bull run into 2027.”
Musalem flags need for more Fed tightening as inflation stays stubborn
Fed’s Musalem delivered a distinctly hawkish message, with a 7.3/10 FXS Speechtracker score essentially unchanged relative to the historical average of 7.2/10, but firmly reinforcing the case for additional policy firming. The emphasis that “more monetary policy firming will be required” to return inflation to 2% in a timely manner, alongside comments that the economy is “pretty strong” and the job market “balanced and stable,” underscores a bias toward further rate hikes even as Musalem claims to enter each meeting with an open mind. Musalem’s focus on persistent demand pressures, anchored market inflation expectations, and structurally higher real yields driven by strong capital demand and fiscal concerns points to a higher-for-longer rate environment that should be supportive of the Dollar on balance.
The FXS Fed Sentiment Index slipped by 0.25 points to 138.33, signaling a modest pullback in perceived hawkishness despite the still-strong tightening rhetoric captured by the FXS Speechtracker. With the index firmly above the 100 neutral line, the Fed remains in clearly hawkish territory, and the slight decline suggests markets are fine-tuning rather than reversing expectations for further rate increases.
Technical Analysis: Gold remains capped under the 100-day SMA
In the daily chart, XAU/USD maintains a mildly bearish near-term bias as it holds beneath the 20-day Bollinger middle band and below a soft resistance zone defined by the upper band. The latest 14-day Relative Strength Index at 47.08 sits just under the neutral 50 mark, hinting at fading upside momentum rather than outright oversold conditions while price stabilizes after the recent pullback.
On the upside, initial resistance aligns with the 20-day Bollinger middle band around $4,225, followed by the upper band near $4,400 if buyers attempt a stronger recovery. On the downside, the broader trend still finds backing from the 100-day simple moving average at about $4,255, and a deeper slide would expose the lower Bollinger band support near $4,055, where dip-buying interest could re-emerge.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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 fills a modest bullish gap as softer US bond yields keep the USD on the back foot.
- The divergent Fed-BoC stance and Friday’s dismal Canadian jobs data cap gains for the CAD.
- Sliding crude oil prices further undermine the Loonie as geopolitical risks support the USD.
The USD/CAD pair struggles to capitalize on a modest gap-up open at the start of a new week, retreating back to mid-1.4200s during the Asian session. However, a combination of diverging forces warrants some caution before positioning for an extension of Friday's pullback from the 1.4300 neighborhood, or its highest level since April 2025.
The recent minor pullback in US Treasury bond yields keeps USD bulls on the defensive, which, in turn, acts as a headwind for the USD/CAD pair. Meanwhile, crude oil prices come under some renewed selling amid hopes that the Russia-Ukraine energy ceasefire will boost supplies, which could undermine the commodity-linked Loonie. Adding to this, the divergent Bank of Canada (BoC)-US Federal Reserve (Fed) policy outlook might hold back traders from placing aggressive bullish bets on the Canadian Dollar (CAD) and limit losses for the currency pair.
The BoC is expected to maintain a predominantly dovish policy stance amid a sluggish domestic economy, reaffirmed by Friday's dismal jobs data. Traders seem convinced that the BoC has less reason to raise interest rates a weaker economic outlook could contain broader inflationary pressures. In contrast, the Fed has shifted to a more hawkish stance, pointing to one additional 25-basis-point (bps) rate hike in late 2026. This, along with the US-Iran standoff over the Strait of Hormuz, could support the safe-haven USD and act as a tailwind for the USD/CAD pair.
In the latest developments surrounding the Middle East crisis, Iran’s top security official declared Washington’s response to its proposal for reopening the strategic waterway insufficient, while US President Donald Trump considers renewed military strikes against Tehran. This keeps the geopolitical risk premium firmly in play and backs the case for the emergence of some USD dip-buying. Traders might also refrain from placing aggressive directional bets on the USD/CAD pair amid holiday-thinned trading volumes and ahead of this week's key data/events.
The US inflation reports – the Producer Price Index (PPI) and Consumer Price Index (CPI) – will be published on Wednesday and Thursday, respectively. This will be followed by Fed Chair Kevin Warsh and BoC Governor Tiff Macklem's speeches on Friday, at the annual meetings of the IMF and World Bank in Bangkok. Investors will look for any hints about the central bank's future policy path, which, in turn, would provide a fresh impetus to the USD/CAD pair. Nevertheless, the fundamental backdrop seems tilted firmly in favor of bullish traders.
USD/CAD daily chart
Technical Analysis
The range-bound price action witnessed over the past week or so might be categorized as a bullish consolidation phase against the backdrop of a strong rally from the September swing low. However, sustained strength above the 1.4300 mark is needed to reaffirm the constructive outlook and pave the way for additional gains. On the downside, the recent swing area around 1.4200–1.4210 acts as the first line of underlying demand, and a deeper pullback toward the 1.4150 region would still leave the broader uptrend intact.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- Japanese holiday keeps trading light, while the BoJ is expected to hold rates steady in October.
- Softening US consumer sentiment and cooling Fed rate hike expectations weigh on the US Dollar.
- Resurfacing Middle East tensions add broader macroeconomic uncertainty, keeping traders cautious ahead of key US inflation data.
USD/JPY depreciates after registering modest gains in the previous trading day, hovering around 158.10 during Asian hours on Monday. The pair may see limited movement due to thin trading conditions as Japanese markets are closed for the Sports Day public holiday.
Ahead of the Bank of Japan (BoJ) October 29–30 meeting, policymakers will review additional third-quarter data expected to show resilient exports alongside elevated costs for businesses and households. However, a back-to-back interest rate increase is unlikely following their September hike.
BoJ Governor Kazuo Ueda noted that rapid tightening paces were typically seen in North America and Europe during 2022 following pandemic-related supply chain disruptions and a strong demand recovery. Market participants currently anticipate the central bank will raise the overnight interest rate target to 1.50% from 1.25% in December or January, marking the seventh increase in this cycle, before potentially raising it further to 1.75% in March or April.
Meanwhile, the USD/JPY pair lost ground as the US Dollar (USD) faced headwinds from softening domestic economic sentiment. The University of Michigan's Consumer Sentiment Index dropped to 46.3 in October from 48.1 in September, falling short of the market expectation of 47.6. Investors are now looking ahead to key inflation metrics, with the September Consumer Price Index (CPI) and Producer Price Index (PPI) scheduled for release on Wednesday and Thursday.
Monetary policy expectations for the Federal Reserve (Fed) remain cautious, with CME FedWatch indicating only a 17.7% chance of a rate hike of at least 25 basis points this month, down from 24.4% a week prior. Conversely, market participants are pricing in an 84.1% probability of a hike at the Fed's December meeting. Adding to broader macro uncertainty, energy market concerns resurfaced after US President Donald Trump indicated he was considering joining Saudi Arabia in its campaign against Iran-backed Houthi militants in Yemen following another deadly attack on Riyadh's international airport.
Higher US real yields underscore growth and rate expectations
Nordea’s Sara Midtgaard notes that the “recent rise in US Treasury yields has largely reflected higher expected short-term real rate, rather than a large increase in the term premium.” She explains that “real yields are the returns investors require after accounting for inflation” and points out that they “tend to rise when markets expect stronger real growth or a higher path for real interest rates,” underlining how the latest move in yields is being driven more by shifting growth and policy expectations than by a repricing of longer-term risk.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- GBP/USD kicks off the new week on a positive note as softer US bond yields undermine the USD.
- Geopolitical uncertainties could help limit deeper USD losses ahead of key data/event risks.
- The UK GDP, US inflation figures, BoE Bailey and Fed Warsh's speeches are due this week.
The GBP/USD pair attracts some buyers for the third straight day, trading around mid-1.3200s during the Asians session on Monday, though it remains confined in a familiar range held over the past three weeks or so.
The recent minor pullback in US bond yields from multi-year highs keeps US Dollar bulls on the defensive, which, in turn, is seen as a key factor acting as a tailwind for the GBP/USD pair. Meanwhile, UK Chancellor John Healey repeated his commitment to strict fiscal discipline during his upcoming debut budget on October 28, turning out to be another factor supporting the British Pound (GBP) and the currency pair.
Traders, however, might opt to wait for Healey's speech at the annual meetings of the IMF and World Bank in Bangkok. Traders will further take cues from the Bank of England (BoE) Governor Andrew Bailey and the US Federal Reserve (Fed) Chair Kevin Warsh's speeches on Friday. Apart from this, the monthly UK GDP report and the latest US inflation figures should provide a fresh impetus to the GBP/USD pair.
In the meantime, persistent geopolitical uncertainties stemming from the US-Iran standoff could help limit losses for the safe-haven buck. In fact, tensions in the Middle East deepened on Sunday after Iran’s top security official declared Washington’s response to its proposal for reopening the strategic Strait of Hormuz insufficient, while US President Donald Trump considers renewed military strikes against Tehran.
This might hold back traders from placing aggressive bearish bets on the Greenback amid relatively thin liquidity on the back of a holiday in the US and keep a lid on any further appreciation for the GBP/USD pair. Hence, it will be prudent to wait for strong follow-through buying and a breakout through a short-term range before confirming that the currency pair has bottomed out and positioning for further gains.
GBP/USD 4-hour chart
Technical Analysis
The recent range-bound price action witnessed over the past three weeks or so could be categorized as a bearish consolidation phase against the backdrop of the decline from the August swing high. Moreover, the GBP/USD pair trades beneath the 100-period Simple Moving Average (SMA) dynamic barrier on the 4-hour chart, suggesting that rallies remain capped as sellers retain the advantage while spot prices stay below this barrier.
The said barrier is pegged near 1.3260 and is followed by the top boundary of the trading range, around 1.3300. Sustained strength above the latter is needed to ease bearish pressure and open the way toward higher levels. On the downside, bears might await some follow-through weakness below 1.3180 before placing fresh bets and positioning for an extension of the downfall from the August monthly swing high near 1.3675.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
On Monday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.7313 compared to Friday's fix of 6.7330 and 6.6977 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
The Saudi-led military coalition said that it has intercepted and destroyed a ballistic missile fired by Yemen's Houthis towards southern Saudi Arabia, the Time of Israel reported on Sunday.
“The coalition intercepted and destroyed a ballistic missile launched by the Houthi terrorist militia towards Khamis Mushait,” said Maj. Gen. Turki al-Malki, a spokesman for the coalition.
Earlier Sunday, Saudi Civil Defense issueed warning over potential hazard in Abha.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 1.70% on the day at $89.45.
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.
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