Forex News
- WTI attracts some sellers following a strong two-day rally, though the downside seems limited.
- Traders price in geopolitical risk premium amid escalation of tensions between the US and Iran.
- Concerns about supply distributions in the Strait of Hormuz also lend support to the commodity.
West Texas Intermediate (WTI) – the benchmark US Crude Oil price – drifts lower during the Asian session on Thursday and moves away from a two-week high, around the $75.75 region touched the previous day. The commodity currently trades above the $74.00 mark, down 0.30% for the day, though the downside potential seems limited amid a fresh escalation of tensions between the US and Iran.
The US military unleashed a new wave of strikes against Iran in retaliation for Tehran’s attacks on commercial ships in the highly contested Strait of Hormuz. Iran retaliated by targeting approximately 85 US military installations and assets across Bahrain and Kuwait. Adding to this, US President Donald Trump said on Wednesday that the memorandum of understanding with Iran aimed at ending the conflict in the Middle East is now over. Traders were quick to price in the geopolitical risk premium, which, in turn, triggered a sharp two-day rally in Crude Oil prices.
The US also moved to withdraw a key concession that allowed Iran to sell oil on international markets. Furthermore, an informed security source told Iran's Press TV that Tehran is set to close the Strait of Hormuz again in response to the latest US strikes on the Islamic Republic. The source added that Iran has vowed to attack two targets for every one target America hits against its territory. This revives supply disruption worries, offsetting the OPEC+ decision of another production target increase and turning out to be another factor supporting Crude Oil prices.
Meanwhile, the US Energy Information Administration (EIA) reported a larger-than-expected build in inventories for the week ending July 3, marking the first rise in 11 weeks. According to the latest data, commercial Crude Oil stocks rose by 2.998 million barrels, significantly overshooting analyst forecasts. The markets, however, reacted little to the report as the focus remains glued to developments surrounding the Middle East conflict and the strategic Strait of Hormuz.
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 People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead on Thursday at 6.8036 compared to the previous day's fix of 6.8077 and 6.7978 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.
- AUD/USD strengthens as the Australian Dollar finds support before Chinese inflation data.
- FOMC Meeting Minutes reveal policymakers are split over keeping the 3.6% interest rate steady or raising it.
- Escalating US-Iran conflict fuels safe-haven demand and pushes rate hike expectations past 30%.
AUD/USD gains ground after remaining flat in the previous day, trading around 0.6930 during the Asian hours on Thursday. The currency pair gains ground as the Australian Dollar (AUD) finds support ahead of critical consumer inflation data from China, Australia's primary trading partner. Later today, market attention will shift toward the US weekly Initial Jobless Claims report for further direction.
Meanwhile, the US Dollar (USD) faces headwinds following the release of Wednesday's Federal Reserve (Fed) Meeting Minutes. The committee remains deeply divided over the trajectory of inflation, specifically whether it will remain sticky or begin to cool as geopolitical conflict in the Middle East eases.
Notably, during Kevin Warsh’s debut meeting as FOMC Chairman on June 16-17, policymakers were split: while many participants noted the benchmark rate would likely finish the year unchanged or slightly below its current 3.6% level, an equally vocal contingent argued that rates would need to move higher by year-end.
However, the Greenback's downside may be limited. Renewed tensions between the US and Iran are stoking energy-driven inflation fears, boosting safe-haven demand for the USD. This geopolitical friction has reinforced expectations that the Fed may lock in higher interest rates for longer to combat stubborn price pressures. According to the CME FedWatch tool, swap traders have raised the probability of a rate hike at the next Fed meeting to over 30%, a sharp jump from less than 20% just last week.
Adding fuel to the fire, US President Donald Trump stated on Wednesday that an interim agreement to end the conflict with Iran was officially "over." The US President also threatened a second day of airstrikes and vowed to reimpose a US naval blockade in retaliation for recent attacks on oil tankers transiting the Strait of Hormuz.
(The story was corrected on July 9 at 01:20 GMT to say in the last paragraph that Trump said on Wednesday, and not on Thursday.)
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.
- USD/JPY softens to near 162.45 in Thursday’s early Asian session.
- Traders are on high alert for possible Japanese Yen intervention.
- The Fed minutes underscored the deep divisions among Fed officials, particularly over the future path of inflation.
The USD/JPY pair edges lower to around 162.45 during the early Asian session on Thursday. The Japanese Yen (JPY) strengthens against the US Dollar (USD) amid fears of possible intervention from Japanese authorities. The US weekly Initial Jobless Claims report is due later on Thursday.
Japan’s Finance Minister Satsuki Katayama said that Tokyo remains in regular contact with the US on foreign exchange issues and is ready to respond appropriately at any time.
“The yen’s current weakness is excessive and fails to reflect the strong fundamentals of the Japanese economy, a misalignment that could prompt major central banks to launch coordinated intervention,” said Michael Nizard, head of multi-asset and overlay at Edmond de Rothschild Asset Management.
According to Federal Reserve (Fed) Minutes released on Wednesday, the committee is split over whether inflation is likely to stay elevated or whether it will cool once the Iran war winds down. In Kevin Warsh’s first meeting June 16-17 as chairman of the Federal Open Market Committee (FOMC), many participants said its key rate would be unchanged from or slightly below its current level of 3.6% by the end of this year. But “many” also said that it would likely be higher by year-end.
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.
- Gold price drifts lower to near $4,075 in Thursday’s early Asian session.
- Trump said the ceasefire with Iran has ended, stoking energy-driven inflation fears.
- Fed policymakers were split on the future of interest rates at their June meeting, Fed Minutes showed.
Gold price (XAU/USD) declines to around $4,075 during the early Asian session on Thursday. The precious metal extends its downside as US President Donald Trump said the ceasefire with Iran has ended, stoking concerns that a renewal of war could again drive inflation and push up interest rates.
Reuters reported on Thursday that Trump stated that an interim agreement aimed at ending the conflict with Iran was "over." Additionally, US President threatened to bomb Iran for a second day and reimpose the US naval blockade in retaliation for attacks on tankers transiting the Strait of Hormuz.
"The main factor for today's move is the increased escalation in tensions between the U.S. and Iran, with a potential ceasefire over, we've seen risk assets across the board trade lower, gold included," said David Meger, director of metals trading at High Ridge Futures.
Renewed tensions between the US and Iran raise energy-driven inflation fears and could reinforce expectations that the US Federal Reserve (Fed) may keep interest rates higher for longer to combat stubborn inflation. This, in turn, could weigh on gold, which doesn’t pay interest.
Swap traders are now pricing the likelihood of a rate hike at the next Fed meeting at more than 30%, up from less than 20% last Thursday, according to the CME FedWatch tool.
The minutes of the Fed’s June 16-17 meeting released Wednesday showed a few policymakers said there was a case for hiking rates, though they ultimately supported the decision to leave rates on hold. The minutes reflected growing concern among Fed officials over inflation just as worries about the labor market slightly receded.
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.
United Overseas Bank’s (UOB) Senior Technical Strategist Quek Ser Leang notes that USD/CNH has broken higher, with momentum improving after Monday’s move to 6.8051 and a close at 6.8038. The bank now sees scope for a test of resistance at 6.8080 and potentially last month’s high at 6.8195, provided the pair holds above nearby support levels.
Upside risk building above 6.8080
"24-HOUR VIEW: USD rose to a high of 6.7998 on Monday. When USD was at 6.7945 yesterday, we highlighted the following: “Despite the advance, upward momentum has not increased much. However, USD could potentially rise above 6.8000. The major resistance at 6.8080 is unlikely to come under threat. Support is at 6.7900, followed by 6.7850.” We were not wrong, as after dipping briefly to a low of 6.7894, USD rose to a high of 6.8051. USD closed 0.14% higher at 6.8038. The advance has gathered momentum, and today, USD could break above the 6.8080 resistance. However, any further advance is unlikely to reach last month’s high of 6.8195. To sustain the momentum, USD must hold above 6.7960 (minor support is at 6.8000)."
"1-3 WEEKS VIEW: We have held the same view since last Wednesday (01 Jul, spot at 6.7920), when we highlighted that USD “is likely to trade in a range between 6.7750 and 6.8080.” Yesterday, USD rose to a high of 6.8051. Upward momentum is starting to build, and if USD closes above 6.8080, it is likely to head higher toward last month’s high of 6.8195. The upside risk will remain intact as long as USD holds above 6.7830 (‘strong support’ level)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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.
