Forex News
- The Oil price bounces back and flattens around $89.60 during the European trade.
- Iran refuses to have another round of peace talks due to the US blockade.
- US President Trump extends the ceasefire with Iran for an indefinite period.
West Texas Intermediate (WTI), future on NYMEX, claws back its early losses and flattens around $89.60 during the European trading session on Wednesday. The Oil price attracts bids amid uncertainty surrounding the future of the Strait of Hormuz, a vital passage to almost 20% of global energy supply, which remains seized by Iran.
Oil flows near the Hormuz remain suspended due to the military dominance of Iran, and are expected to remain frozen further at least until Tehran agrees to resume peace talks with the US.
Iran remains firm on its stance that it won’t sit down again with the US for another round of peace talks as long as the US continues its blockade of Iranian sea ports.
Meanwhile, US President Donald Trump has announced an extension to the two-week ceasefire on late Tuesday, through a post on Truth Social, which was due to expire on April 22, and has ordered the military department to hold attacks against Iran until Washington receives a unified proposal from Tehran. However, there has been no official response from Tehran towards the ceasefire extension.
WTI technical analysis
WTI US Oil trades flat at around $89.60 as of writing. The near-term tone of the oil price seems neutral as it remains sticky to the 20-day Exponential Moving Average (EMA), which is at $90.45.
The Relative Strength Index (14) wobbles inside the 40.00-60.00 zone, demonstrating a sideways trend.
On the topside, initial resistance is located at the 20-day EMA at $90.45, and a daily close above this barrier would be needed to ease immediate downside pressure and open the way toward the downward-sloping trend line near $100.84. Looking down, the two-day low of $85.17 is the immediate support; however, a breakdown below the same would expose the oil price towards the April 17 low at $78.88.
(The technical analysis of this story was written with the help of an AI tool.)
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.
- USD/CAD hits session lows below 1.3650 with all eyes on the Middle East conflict.
- Trump extended the ceasefire until Iran delivers a unified peace plan.
- US Dollar crosses trade within previous ranges amid a cautious market sentiment.
The US Dollar (USD) posts minor losses against the Canadian Dollar (CAD) on Wednesday, and is testing session lows below 1.3650 at the time of writing, following rejection at the 1.3675 area on Tuesday. The USD/CAD pair, however, remains trading within previous days’ ranges, as investors hold their breath with the ceasefire in the Middle East under threat.
The situation in the Middle East is deteriorating, despite the ceasefire extension announced by US President Donald Trump on Tuesday. The Islamic Revolutionary Guard Corps (IRGC) has stepped up the tone against the US, threatening with “crushing blows” against American assets in the region, and Associated Press (AP) has reported at least one attack by Iranian forces on vessels attempting to cross Hormuz.
Trump prolonged the ceasefire unilaterally on Tuesday until Iran delivers a unified proposal to end the hostilities. The US military, meanwhile, maintains the blockade of Iranian ports, which has been considered by Tehran as an act of war and a violation of the ceasefire.
On Tuesday, the US Dollar received a fresh boost from upbeat US Retail Sales figures and the testimony of the Federal Reserve (Fed) Chair nominee, Kevin Warsh. The former Fed governor assured that he does not have any deal with the US president, who appointed him to the job, and defended the independence of the central bank’s monetary policy.
Earlier this week, Canadian Consumer Prices Index (CPI) figures confirmed the inflationary impact of Iran’s war, but the data came short of the market expectations. This grants the Bank of Canada (BoC) more time to decide thots next monetary policy actions and provided a moderate impulse to the Canadian Dollar.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
- The Indian Rupee declines further against the US Dollar as oil prices rise.
- US President Trump extends a ceasefire for an indefinite period.
- FIIs remain net sellers in the last two trading days.
The Indian Rupee (INR) weakens further against the US Dollar (USD) on Wednesday, extending its losing streak for the third trading day. The USD/INR pair jumps to near 93.85 as the Indian currency underperforms, with oil prices holding the majority of Tuesday’s gains, despite the extension of a ceasefire between the United States (US) and Iran for an indefinite period.
As of writing, the WTI Oil price is down 1% to near $88.70 after surging almost 5% on Tuesday.
Currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs, tend to underperform in a high oil price environment.
On Tuesday, the Indian currency faced sharp selling pressure after the Reserve Bank of India (RBI) withdrew some measures, such as restrictions on offering non-deliverable forwards (NDFs) to resident and non‑resident users, which were meant to support the domestic currency against one-sided depreciation moves.
Trump announces ceasefire extension with Iran
Late Tuesday, US President Donald Trump announced, through a post on Truth Social, that he has extended the two-week ceasefire, which was set to expire on April 22, upon the request of Pakistan, until Washington receives a unified proposal from Tehran. However, Trump clarified that the US blockade of Iranian sea ports will remain intact, a move that is restricting the usual business of Iran and crippling its economy.
Meanwhile, the stance from Iran seems clear that they won’t return to the table with the US for another round of peace talks unless Washington removes the blockade.
The announcement of a ceasefire extension resulted in a broad risk rally; however, oil prices remain significantly higher, as the Strait of Hormuz remains closed.
FIIs turn out net sellers again
Overseas investors remain net sellers in the Indian stock market for the second trading day on Tuesday. In the first two trading days of the week, Foreign Institutional Investors (FIIs) have offloaded their stake worth Rs. 2,978.92 crore. The selling amount is higher than the three-day buying of Rs. 1,731.71 crore in the April 15-17 period, which suggests that the interest of foreign investors toward the Indian stock market remains lackluster despite the US-Iran war appears to be shifted to a prolonged standoff.
Kevin Warsh expresses preference for a smaller balance sheet
On Tuesday, US President Trump nominated Kevin Warsh as the successor of the Federal Reserve (Fed) Chairman Jerome Powell highlighted the need for fundamental policy reforms in his testimony before the Senate Banking Committee. Warsh also expressed a preference for a “smaller balance sheet”, which would mean rates could go lower, inflation get better, economy become stronger.
Technical Analysis: USD/INR aims to revisit all-time high above 95.00
USD/INR trades higher at around 93.85 on Wednesday. The price holds a constructive bullish bias as it remains above the 20-day exponential moving average (EMA) at 93.18. The short-term uptrend from last week’s lows is supported by this dynamic floor, while the Relative Strength Index (14) around 56 suggests moderate positive momentum without overbought conditions, hinting that buyers still retain control in the near term.
On the downside, immediate support is seen at the 20-day EMA near 93.18, where a break would threaten the current upswing and open the door to a deeper correction toward the January 28 high at 92.28. Looking up, the price could reclaim the all-time highs above 95.00 if it manages a decisive break above the 94.00 level.
(The technical analysis of this story was written with the help of an AI tool.)
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
ING strategist Francesco Pesole argues that EUR/GBP has limited further downside after slipping below 0.8700, as United Kingdom (UK) political risks and stretched Bank of England (BoE) tightening expectations offset risk-on pressures. He notes that recent UK inflation data do not alter the outlook, with the BoE still expected to stay on hold through year-end.
Political risk and rates cap Pound gains
"We think EUR/GBP has limited downside potential after breaking below 0.870 over the past 24 hours."
"Risk‑on episodes tend to weigh on EUR/GBP, but rate differentials usually emerge as the more durable driver."
"In that context, the 41bp of tightening priced into the GBP curve looks stretched in our view relative to the 54bp of expected ECB tightening."
"That should be enough to keep the BoE on hold next week and, in our view, until year‑end."
"On our base case, inflation peaks briefly around 4% and oscillates between 3.5‑4% in 2H, though current gas pricing points to a peak closer to 3.5% – still not enough to force a hike."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- EUR/JPY trades around 187.25 on Wednesday, posting a modest 0.05% gain on the day.
- European Central Bank officials adopt a cautious tone amid uncertainty stemming from the energy shock and the Middle East war.
- The Japanese Yen remains influenced by Oil price movements and expectations surrounding Bank of Japan policy.
EUR/JPY trades around 187.25 on Wednesday at the time of writing, up a modest 0.05% on the day. The cross remains supported by relative stability in the Euro (EUR) as investors assess the impact of geopolitical tensions and diverging monetary policy expectations between Europe and Japan.
European Central Bank (ECB) President Christine Lagarde warned that the Eurozone economic outlook remains highly uncertain due to a significant energy supply shock linked to tensions in the Middle East and the blockade of the Strait of Hormuz. Although energy prices have not yet reached their worst-case levels, she stressed that the outlook remains fragile.
ECB Governing Council member Martins Kazaks also said that the central bank is “not in a rush” to move on interest rates. According to him, uncertainty linked to the Middle East war remains very high and its impact on the real economy is only gradually being felt, giving the ECB time to gather more data before making any policy decisions.
Markets are now awaiting several speeches from ECB officials later in the day, including Christine Lagarde. In this context, the central bank is widely expected to maintain a cautious stance at its April meeting, preferring to wait for additional economic data before adjusting monetary policy.
On the Japanese side, the Japanese Yen (JPY) is moving within a complex environment. The currency remains sensitive to energy price fluctuations, as Japan relies heavily on Crude Oil imports from the Middle East.
At the same time, investors widely expect the Bank of Japan (BoJ) to leave interest rates unchanged at its April meeting while assessing the economic fallout from the Middle East conflict. However, according to Reuters sources, the central bank could signal a potential shift toward policy normalization as early as June, while raising its inflation outlook and lowering growth forecasts.
Geopolitical developments also remain closely monitored. United States (US) President Donald Trump said he would extend the ceasefire with Iran at Pakistan’s request while maintaining the US naval blockade of Iranian ports. Any escalation or prolonged tensions in the Middle East could revive demand for safe-haven assets such as the Japanese Yen and create headwinds for the EUR/JPY pair.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.12% | -0.03% | -0.08% | -0.15% | -0.35% | 0.05% | |
| EUR | 0.06% | -0.06% | 0.04% | -0.00% | -0.10% | -0.30% | 0.11% | |
| GBP | 0.12% | 0.06% | 0.09% | 0.06% | -0.03% | -0.22% | 0.16% | |
| JPY | 0.03% | -0.04% | -0.09% | -0.04% | -0.11% | -0.32% | 0.05% | |
| CAD | 0.08% | 0.00% | -0.06% | 0.04% | -0.07% | -0.26% | 0.11% | |
| AUD | 0.15% | 0.10% | 0.03% | 0.11% | 0.07% | -0.20% | 0.17% | |
| NZD | 0.35% | 0.30% | 0.22% | 0.32% | 0.26% | 0.20% | 0.38% | |
| CHF | -0.05% | -0.11% | -0.16% | -0.05% | -0.11% | -0.17% | -0.38% |
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 Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann note that AUD/USD eased to 0.7152 after recent gains, with price action offering few fresh clues. They expect intraday trading between 0.7125 and 0.7175 and see the pair locked in a 0.7060–0.7210 range over the coming weeks. On a multi-month view, a break below 0.6850/0.6870 could trigger a slide toward 0.6765.
Near-term range, medium-term pressure
"24-HOUR VIEW: Yesterday, we highlighted that AUD “is likely to trade between 0.7140 and 0.7195.” AUD then traded within a lower range of 0.7131/0.7185. The price action provides no fresh clues, and we continue to expect AUD to trade in a range, most likely between 0.7125 and 0.7175"
"1-3 WEEKS VIEW: There is not much to add to our update from Monday (20 Apr, spot at 0.7130). As highlighted, “the current price movements are likely part of a range-trading phase between 0.7060 and 0.7210.”"
"1-3 MONTHS VIEW: The overall technical picture points to a lower AUD/USD; a breach of the 0.6850/0.6870 support zone could trigger a decline toward 0.6765. (dated 27 Mar 2026, 0.6885)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Silver prices (XAG/USD) rose on Wednesday, according to FXStreet data. Silver trades at $78.10 per troy ounce, up 1.90% from the $76.64 it cost on Tuesday.
Silver prices have increased by 9.87% since the beginning of the year.
Unit measure | Silver Price Today in USD |
|---|---|
Troy Ounce | 78.10 |
1 Gram | 2.51 |
The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 60.93 on Wednesday, down from 61.59 on Tuesday.
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.
(An automation tool was used in creating this post.)
Societe Generale strategists note that Brent has retreated from recent highs after President Trump extended the Iran ceasefire indefinitely, with Oil prices still seen on an uncertain path back toward normalisation. Their technical team highlights resistance near $120 and the April high around $104, while warning that a failure to hold the 50‑DMA area near $91/90 could trigger a deeper decline.
Oil rebound hinges on key supports
"Oil prices retraced overnight after popping above $100/b intra-day yesterday but even with the indefinite extension of the ceasefire, the path to re-opening the Strait of Hormuz and towards a normalisation in oil prices remains highly uncertain."
"According to Tehran, there have been signs that the US are ready to lift the naval blockade, a condition to participate in the next round of the negotiations in Pakistan. The US will hold of further strikes until Iran submits a new proposal "and discussions are concluded, one way or the other"."
"One line of reasoning for the US willingness to extend is rooted in the view fractures exist within the current Iranian leadership and there is no consensus on the negotiation position with regards to the control of nuclear material. Markets have so far seized every extension as a motivation to wade back into risk."
"Brent has embarked on a phase of pullback after repeatedly encountering strong resistance near $120. It has recently tested the 50‑DMA for the first time since January. A brief consolidation cannot be ruled out."
"The April high near $104 represents the first hurdle; a break above this would be important to confirm a broader rebound. Conversely, failure to hold above the moving‑average around $91/90 denote the risk of a deeper decline."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- EUR/CAD holds losses as the Canadian Dollar gains on improved oil prices.
- Maritime authorities said an IRGC-linked gunboat fired on a Liberia-flagged vessel and two other cargo ships.
- ECB’s Lagarde warns Eurozone outlook is highly uncertain due to a significant energy supply shock.
EUR/CAD extends its losing streak for the sixth consecutive day, trading around 1.6040 during the European hours on Wednesday. The currency cross stays subdued as the Canadian Dollar (CAD) draws support from a stronger risk-on mood after US President Donald Trump extended the ceasefire despite the collapse of second-round US–Iran talks.
Moreover, the commodity-linked CAD is further supported by firmer oil prices amid renewed attacks on shipping near Iran. Maritime authorities reported that a Liberia-flagged container vessel was fired upon by a gunboat linked to Iran’s Islamic Revolutionary Guard Corps, while two additional outbound cargo ships were also targeted.
However, a Bloomberg headline, citing Tasnim News Agency affiliated with the IRGC, noted that Iran has received “some sign” the United States (US) may be willing to ease its naval blockade.
The Canadian Dollar may continue to gain as rising energy prices could boost foreign exchange inflows into Canada’s financial system, reflecting the country’s status as the largest crude exporter to the United States. Higher energy costs could also lift inflation, potentially prompting the Bank of Canada (BoC) to signal a firm stance against persistent price pressures, further underpinning the currency.
European Central Bank (ECB) President Christine Lagarde warned that the Eurozone outlook remains highly uncertain due to a significant energy supply shock tied to Middle East tensions and the Strait of Hormuz blockade. While energy prices have yet to reach worst-case levels, she stressed that the outlook remains fragile.
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.
Commerzbank’s Tatha Ghose sees a binary Turkish central bank (CBT) decision, with markets split between no change and a 300 bp hike, and stresses that corridor tightening would still be de facto tightening. He argues disinflation was already unconvincing, external balances are deteriorating, and warns that failure to deliver significant tightening could trigger a sharper Turkish Lira (TRY) sell-off and raise the odds of abrupt adjustment.
CBT dilemma and Lira vulnerability
"The Turkish central bank’s (CBT’s) rate decision today comes at a point where the disinflation narrative was becoming increasingly unconvincing. The market consensus for today is bi-polar: analysts either expect no change to the official repo rate, or they forecast a 300bp rate hike – the majority expect no change."
"For us, though, it is irrelevant whether the price shock is temporary or permanent. In our view, the current shock makes the pre-existing unsustainable inflation situation all the more urgent. We do not accept that disinflation was working fine until the shock came along.
"Policymakers now acknowledge that the oil price shock will make this situation much worse in the months ahead. It is another matter that some skeptics, who also see disinflation as having failed, think that higher interest rates should not be used in future. We thoroughly disagree."
"But their reluctance confirms market concerns that they may choose the convenience of inaction because of political pressure. If there were no significant tightening step today, we would get concerned about a sharper lira sell-off. More secondary liquidity management measures, such as limits on swap exposures or obligation of exporters to sell FX proceeds to CBT etc., do not count: markets typically interpret such policies to confirm inability to act because of political constraints."
"The TRY exchange rate continues to be heavily managed. This can smooth volatility in the near term, but it does not resolve the underlying imbalances. The probability of a more abrupt currency adjustment will rise materially in the event of no monetary policy change."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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