Forex News
- Silver hits record at $67.46, extending gains despite firm US Treasury yields and a stronger Dollar.
- Bullish momentum remains strong, with overbought RSI signaling scope for further upside toward $68.00.
- Weak US consumer sentiment and softer durable goods demand reinforce macro tailwinds for precious metals.
Silver (XAG/USD) price rallies to a new all-time high of $67.46 even though US Treasury yields and the US Dollar remain firm on Friday, amid the lack of catalysts, except for the US Consumer Sentiment poll made by the University of Michigan, which showed that US households are trimming spending on durable goods, and are worried about the jobs market.
XAG/ÜSD Price Analysis: Technical Outlook
Price action suggests further upside in Silver prices, as traders could target $68.00. Momentum is strongly bullish as depicted by the Relative Strength Index (RSI), which is overbought with an upward slope.
Conversely, if XAG/USD slides below $67.00, the first support would be the December 19 low of $64.50. Once surpassed, the next stop would be the December 12 swing low of $60.82 ahead of the $60.00 milestone.
XAG/ÜSD Price Chart – Daily
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.
- Gold holds near $4,344 after rebounding from $4,309, resilient despite higher yields and a firmer US Dollar.
- US consumer sentiment weakens as households expect rising unemployment and cut spending on durable goods.
- BoJ rate hike lifts global yields, but Fed uncertainty and thin holiday liquidity keep gold supported.
Gold (XA/USD) surges during the North American session on Friday, up 0.30% despite rising US Treasury bond yields and of the US Dollar, which is poised to finish the week with modest gains of 0.25%. At the time of writing, XAU/USD trades at $4,344 after bouncing off daily lows of $4,309.
Bullion advances late Friday despite rising US yields, steadier US Dollar
On Friday, the US economic docket is scarce, as the last 'formal' trading week of the year comes to an end, as most trading desks get off for the Christmas holidays. The Consumer Sentiment Index by the University of Michigan for December missed the mark, as people surveyed see a rise in the unemployment rate, and as buying for durable goods tumbled for the fifth straight month.
Earlier, New York Federal Reserve (Fed) President John Williams said that he doesn’t have a “sense of urgency on changing monetary policy.” Williams' posture shifted from dovish to neutral-hawkish as the Greenback recovered some ground, while Gold prices retreated to $4,320, before hitting a daily high.
In the week, Gold prices hit a weekly high of $4,374 on Thursday, but buyers remained reluctant to test the year-to-date (YTD) high of $4,381, as global bond yields rose. US Treasury yields rose as the Bank of Japan increased rates from 0.50% to 0.75% on Friday.
Next week, the US economic docket will be busy on December 23, due to a shortened week by the Christmas holidays. Traders will digest the ADP Employment Change 4-week average, growth figures for Q3 on its preliminary release, October’s Durable Goods Orders and Industrial Production prints for October and November.
Daily digest market movers: Gold price jumps as Consumer Sentiment dips
- Gold price rallies despite both US yields and the US Dollar are posting solid gains. The US 10-year Treasury note yield is up two and a half basis points to 4.147%. US real yields, which correlate inversely with Gold prices, surge nearly three basis points to 1.907%.
- The US Dollar Index (DXY), which tracks the buck’s value against a basket of six currencies, rises 0.22% to 98.63.
- US Consumer Sentiment was revised down in December from 53.3 to 52.9, felling short of expectations of a print of 53.5. The University of Michigan survey also updated that inflation expectations for one year climbed to 4.2%, while five-year expectations held at 3.2%, indicating that longer-term inflation views remain elevated but stable.
- New York Fed President John Williams said that recent data point to further disinflation, while noting that the uptick in the unemployment rate may reflect temporary distortions, possibly by around one-tenth of a percentage point, and therefore was not a surprising development. He added that he does not sense any urgency to adjust monetary policy at this stage.
- On Thursday, the US Consumer Price Index (CPI) for November rose by 2.7%, below the previous print of 3%. Despite this, economists warned that data should be taken with a pinch of salt, due to the 43-day shutdown of the US government, which could distort some data.
- Expectations that the Fed will cut rates at the next meeting on January 28 remain unchanged at 22%, according to Capital Edge Rate probability data. Nonetheless, for the full year ahead, investors had priced 60 basis points of easing, with the first cut expected in June.
Technical analysis: Gold loses steam as it falls to punch through $4,381 peak
Gold’s uptrend stalled as the yellow metal consolidates ahead of the year’s end. Nevertheless, Bullion is poised to end with an appreciation of more than 60%, set to test $4,500 and $5,000 in the next year.
For a bullish continuation, XAU/USD needs to surpass the record high of $4,381 ahead of $4,400. A breach of the latter exposes $4,450 and $4,500. On the other hand, if Gold slides below $4,300, traders could challenge the December 11 high at $4,285, followed by $4,250, and the $4,200 psychological mark.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
The US Dollar Index (DXY) is on a three-day winning streak, although gains are modest, the index is heading into the weekly close near the 98.60 price region, after a softer-than-expected United States (US) Consumer Price Index (CPI) was released on Thursday, briefly weighing on the US Dollar. Doubts about the quality of the inflation slowdown arose on Friday, following comments from Federal Reserve (Fed) John Williams, who noted that CPI data “may have been pushed down a bit” when speaking on CNBC. The Fed announced its monetary policy decision on Wednesday, and as expected, policymakers cut the interest rate by 25 basis points (bps)
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | -0.06% | 1.20% | -0.01% | -0.08% | 0.16% | 0.09% | |
| EUR | -0.00% | -0.07% | 1.22% | -0.02% | -0.08% | 0.17% | 0.09% | |
| GBP | 0.06% | 0.07% | 1.26% | 0.05% | -0.02% | 0.23% | 0.15% | |
| JPY | -1.20% | -1.22% | -1.26% | -1.18% | -1.26% | -1.02% | -1.09% | |
| CAD | 0.01% | 0.02% | -0.05% | 1.18% | -0.08% | 0.16% | 0.10% | |
| AUD | 0.08% | 0.08% | 0.02% | 1.26% | 0.08% | 0.25% | 0.17% | |
| NZD | -0.16% | -0.17% | -0.23% | 1.02% | -0.16% | -0.25% | -0.08% | |
| CHF | -0.09% | -0.09% | -0.15% | 1.09% | -0.10% | -0.17% | 0.08% |
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).
Additionally, data released by the US Department of Labor (DOL) on Thursday indicated that the number of Americans filing new unemployment claims rose to 236,000 for the week ending December 13. There were 224,000 Initial Jobless Claims, a decrease of 13,000 from the previous week's revised level, the US Department of Labor (DOL) reported on Thursday. This reading came in better than the market expectation of 225,000.
EUR/USD: The pair is trading near the 1.1740 price zone after the European Central Bank (ECB) left interest rates unchanged and ECB President Christine Lagarde refused to commit to any particular rate path on Thursday. Lagarde affirmed that the decision was taken unanimously and that there was no discussion of changing interest rates.
The GBP/USD pair is trading near the 1.3380 price region, ending the week pretty much unchanged. Sales in the United Kingdom (UK) rose by 0.6% YoY in November, unchanged from the previous print but missing estimates of a 0.9% expansion. On a monthly basis, figures fell by 0.1%, below forecasts of a 0.4% expansion. The Office for National Statistics (ONS) reported a day after the Bank of England (BoE) cut rates due to cooling inflation. The BoE cut the interest rate by 25 (bps) to 3.75% from 4%, as expected. The monetary policy statement showed policymakers are less worried about inflation than the numbers suggested, leading to some Sterling Pound gains.
4%, as
USD/JPY is trading near the 157.30 price region, nearing a one-month high as Bank of Japan (BoJ) members unanimously voted to raise the policy rate by 25 bps to 0.75% (widely expected) and reinforced their tightening bias.
AUD/USD is trading near the 0.6620 price region, as data released in Australia earlier this week showed that Consumer inflation expectations rose to 4.7% in December from 4.5% in November. Meanwhile, the case that the RBA might hike interest rates in the first quarter of 2026, but the impact on the Aussie has been minimal.
USDCAD trades in the 1.3780 price region on the Canadian side; domestic data offered little support to the Loonie. Statistics Canada reported that Retail Sales fell by 0.2% MoM in October, missing market expectations for a flat reading and improving from September’s sharp 0.9% decline.
Gold is little changed, still on the greener side of the grass as a dovish Fed outlook and persistent geopolitical risks continue to provide a steady tailwind for prices, keeping the metal on track to end the week with modest gains.
Anticipating economic perspectives: US updates and Japanese data
The UK will release the final estimate of the Q3 Gross Domestic Product (GDP) on December 22.
The United States will publish the October Durable Goods Orders and a preliminary estimate of Q3 GDP on December 23.
The Christmas Holidays will put most of the macroeconomic calendar on pause, except in Japan. The Asian country will release the December Tokyo Consumer Price Index (CPI) data and Retail Trade figures on December 25, when BoJ Governor Kazuo Ueda will also offer a speech.
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.
- USD/JPY jumps to a one-month high as the Yen weakens broadly after the BoJ’s rate hike.
- BoJ raises its policy rate to 0.75% but signals a cautious approach to further tightening.
- US consumer sentiment weakens, with expectations slipping from earlier estimates.
The Japanese Yen (JPY) weakens sharply against the US Dollar (USD) on Friday as the Yen slumps across the board following the Bank of Japan’s interest rate decision. At the time of writing, USD/JPY is trading around 157.48, up nearly 1.20%, its highest level since November 21.
Earlier in the Asian session, the BoJ raised its policy rate by 25 basis points (bps) to 0.75%, marking the highest level in roughly three decades. The central bank stated that Japan’s economy has continued to recover at a moderate pace, with tight labor market conditions and solid corporate profits supporting steady wage increases.
Policymakers also noted that underlying inflation has been rising gradually, helped by firms passing higher labour costs on to prices, increasing confidence that inflation can be sustained around the 2% price stability target over time.
However, the BoJ also stressed that real interest rates remain significantly negative and that accommodative financial conditions will continue to support the economy. The central bank said it will continue to adjust policy in line with developments in economic activity, prices, and financial conditions, signalling a cautious approach to further tightening.
In reaction to the rate hike, Japanese Government Bond (JGB) yields moved higher, with the 10-year JGB yield rising above 2.0%, its highest level since 1999. Higher yields have renewed concerns about Japan’s large public debt, as rising interest rates could gradually lift government debt-servicing costs.
Meanwhile, Japanese authorities reiterated their focus on currency market developments. The central bank said it will pay close attention to movements in financial and foreign exchange markets as part of its ongoing policy assessment. Separately, Japan’s Finance Minister Satsuki Katayama said on Friday that authorities would take appropriate action against excessive foreign exchange moves.
A steady US Dollar is also weighing on the Yen, although expectations of further monetary policy easing by the Federal Reserve (Fed) may limit further gains in the Greenback.
Data released on Friday showed softer US consumer sentiment, with the University of Michigan’s Consumer Expectations Index revised down to 54.6 from 55.0, while the headline Consumer Sentiment Index was finalised at 52.9. On the inflation side, one-year consumer inflation expectations edged up to 4.2%, while the five-year outlook remained unchanged at 3.2%.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- Gold trades sideways after failing to sustain a post-CPI rally.
- Expectations for Fed rate cuts offer support, but a resilient US Dollar keeps Gold confined to a narrow range.
- Technically, XAU/USD continues to consolidate below $4,350, with short-term moving averages providing near-term support.
Gold (XAU/USD) Gold (XAU/USD) regains ground on Friday, edging modestly higher after earlier weakness, even as a resilient US Dollar (USD) caps upside momentum. At the time of writing, XAU/USD trades around $4,345, recovering from a daily low near $4,309.
The precious metal briefly surged toward record highs on Thursday after US inflation data undershot expectations. However, gains quickly faded as softer inflation lifted risk appetite across equity markets and pushed Gold back within the range established earlier this week.
That said, the downside appears limited, as a dovish Federal Reserve (Fed) outlook and persistent geopolitical risks continue to provide a steady tailwind for prices, keeping the metal on track to end the week with modest gains.
Attention now turns to upcoming US economic releases later on Friday, including Existing Home Sales and the University of Michigan Consumer Sentiment and Consumer Expectations surveys, along with one-year and five-year inflation expectations.
Market movers: Fed outlook and geopolitics steer markets
- US data released on Friday painted a mixed picture. Existing Home Sales rose 0.5% MoM in November, slowing from October’s 1.5% increase. The University of Michigan’s final December survey showed softer consumer sentiment, with the Consumer Expectations Index revised down to 54.6 from 55.0 and the headline Consumer Sentiment Index finalised at 52.9. On the inflation front, one-year consumer inflation expectations edged up to 4.2%, while the five-year outlook remained unchanged at 3.2%.
- New York Fed President John Williams said on Friday that recent labour market data show no sign of a sharp deterioration, adding that the rise in the Unemployment Rate may reflect temporary distortions rather than a fundamental weakening. Speaking in a CNBC interview, Williams said policy remains mildly restrictive and still has room to move toward neutral, which he sees as slightly below 1% in real terms, while stressing that he sees no urgency to change the current policy stance and that recent data have not altered his outlook.
- The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is trading around 98.70, its highest level since December 11, extending its rebound after briefly dipping below 98.00 on Tuesday, the weakest level in over two months.
- Data released by the US Bureau of Labor Statistics on Thursday showed that the Consumer Price Index (CPI) rose 2.7% YoY in November, falling short of market expectations of 3.1% and easing from 3.0% in September. Core CPI, which excludes food and energy, also slowed to 2.6% YoY from 3.0%.
- Delayed US Nonfarm Payrolls (NFP) data released earlier this week showed the Unemployment Rate rising to 4.6% in November, its highest level since 2021, indicating a softening labor market. Combined with cooling inflation, the data have strengthened expectations that the Federal Reserve (Fed) may deliver further interest rate cuts sooner than previously expected into 2026.
- Markets are pricing in around 62 basis points of rate cuts in 2026. Even so, the Fed is still widely expected to keep rates unchanged at its January meeting, with the CME FedWatch Tool showing only a 24% probability of a 25-basis-point cut, rising to around 45% for March.
- Geopolitical risks are back in focus, with tentative optimism around progress in US-led Russia-Ukraine peace talks offset by rising tensions between the United States and Venezuela. US President Donald Trump said on Friday that Washington would carry out additional seizures of oil tankers near Venezuela. Trump added that the possibility of a war with Venezuela remains on the table, according to an NBC News interview.
Technical analysis: XAU/USD consolidates below $4,350
Gold remains range-bound below the $4,350 level, with the 4-hour chart showing prices stabilising just above the 21-period Simple Moving Average (SMA), which is helping to limit immediate downside pressure.
A sustained break below the 21-SMA could expose the 50-period SMA near $4,320, with a deeper pullback opening the door toward the $4,250 region, a key short-term support zone.
On the upside, a decisive move above $4,350 would bring Thursday’s high near $4,374 into focus, followed by the all-time high around $4,381. Momentum indicators remain neutral, with the Relative Strength Index (RSI) hovering near the mid-50s, suggesting room for either direction.
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 stays confined to a narrow range amid a steadier US Dollar.
- US data show softer consumer sentiment alongside steady inflation expectations.
- Weak Canadian Retail Sales weigh on the Loonie after both headline and core readings missed expectations
The Canadian Dollar (CAD) trades little changed against the US Dollar (USD) on Friday, as a rebound in the Greenback keeps USD/CAD confined within its week-old range. At the time of writing, the pair is trading around 1.3784, recovering slightly after dipping to an intraday low near 1.3755.
The US Dollar holds firm despite a mixed batch of US economic data released earlier in the day. Existing Home Sales rose by 0.5% MoM in November, slowing from October’s 1.5% increase.
Meanwhile, the University of Michigan’s final December survey showed a modest easing in sentiment. The Consumer Expectations Index was revised down to 54.6 from the preliminary estimate of 55.0, coming in below the market forecast of 55.0. The headline Consumer Sentiment Index was finalised at 52.9, slightly below both the earlier estimate of 53.4 and the forecast of 53.3.
On the inflation front, the University of Michigan’s final December survey showed a modest uptick in short-term inflation expectations. One-year consumer inflation expectations rose to 4.2%, above both the preliminary estimate and the market forecast of 4.1%. Longer-term inflation expectations, however, were unchanged, with the five-year outlook holding steady at 3.2%, in line with both the earlier estimate and market expectations.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 98.70, its highest level since December 11, extending its rebound after briefly dipping below 98.00 to its weakest level in over two months. The index is on track to post its first weekly gain in three weeks.
On the Canadian side, domestic data offered little support to the Loonie. Statistics Canada reported that Retail Sales fell by 0.2% MoM in October, missing market expectations for a flat reading and reversing September’s sharp 0.9% decline.
Core Retail Sales, which exclude autos, fell by 0.6% MoM in October, coming in weaker than the market forecast of a 0.2% increase and reversing September’s modest 0.1% gain.
Beyond the data, diverging monetary policy outlooks between the Bank of Canada (BoC) and the Federal Reserve continue to provide underlying support to the Loonie, potentially limiting upside in USD/CAD. Expectations for further monetary policy easing by the Fed next year may cap US Dollar gains, even as short-term rebounds persist.
Speaking in a CNBC interview, New York Fed President John Williams said policy remains mildly restrictive and still has room to move toward neutral, which he sees as slightly below 1% in real terms. Williams added that he sees no urgency to change the current policy stance and noted that recent data have not altered his broader outlook.
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.
- GBP/USD steady as UK Retail Sales miss forecasts, signaling softer consumer demand after BoE rate cut.
- BoE cut rates on a 5–4 vote, but Governor Bailey struck a cautious tone, stressing uncertainty over inflation persistence.
- Fed officials downplay easing urgency, risking Sterling underperformance if BoE cuts ahead of the Fed.
The GBP/USD pair hovers around familiar levels, yet it has dropped below the 1.3400 mark on Friday after Retail Sales in the UK missed estimates and Federal Reserve (Fed) speakers crossed the wires. At the time of writing, the pair trades at around 1.3370, virtually unchanged.
Sterling eases after disappointing UK consumption data, while cautious BoE and Fed rhetoric keep downside risks alive
Sales in the UK rose by 0.6% YoY in November, unchanged from the previous print but missed estimates of 0.9% expansion. On a monthly basis, figures fell 0.1%, beneath forecasts of a 0.4% expansion, reported the Office for National Statistics (ONS) a day after the Bank of England (BoE) cut rates due to cooling inflation.
On Thursday, the BoE reduced borrowing costs on a 5-4 vote split. BoE Governor Andrew Bailey opted to support the hawks and added that the interest rate path is uncertain, while highlighting that inflation-persistence data shows positive signs, but risks remain balanced.
In the US, New York Fed President John Williams said that some data shows more disinflation, while acknowledging that the “Unemployment rate may have been pushed up by distortions, maybe by a tenth, but not a surprising read.” He added that he does not have the urgency to change monetary policy.
The University of Michigan reported on Friday that Consumer Sentiment in December rose below estimates of 53.4, coming at 52.9. The report showed that consumer spending is slowing as conditions for buying durable goods fell for the fifth consecutive month, whereas people expect the unemployment rate to continue rising over the next year.
Regarding inflation expectations, the survey showed that for a one-year period, Americans expect prices to rise at an annual rate of 4.2%, while for a five-year period, they expect inflation at 3.2%.
BoE vs. Fed: Who moves first?
Given the fundamental backdrop, expectations that the Federal Reserve will reduce rates in the first half of the year remain unchanged, with odds for a June cut at 53%. Meanwhile, the BoE’s chance for the first-rate cut is fully priced in for the same month as the Fed, but odds for a March move are the highest at 40%, according to Capital Edge rate probability data. If the BoE moves faster than the Fed, expect further downside on the GBP/USD
GBP/USD Price Forecast: Technical outlook
GBP/USD has lost bullish momentum, with the pair edging towards the 200-day SMA at 1.3350 after clearing strong support at 1.3400. A breach of the former will expose 1.3302, followed by the 50-day SMA at 1.3253.
The Relative Strength Index (RSI), although bullish, points downward, indicating that sellers are outweighing buyers.
For a bullish resumption, buyers must clear 1.3400 to remain hopeful of testing higher prices.
Pound Sterling Price This Month
The table below shows the percentage change of British Pound (GBP) against listed major currencies this month. British Pound was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.96% | -0.93% | 0.83% | -1.38% | -0.94% | -0.37% | -0.96% | |
| EUR | 0.96% | 0.04% | 1.84% | -0.42% | 0.02% | 0.60% | 0.00% | |
| GBP | 0.93% | -0.04% | 2.06% | -0.46% | -0.02% | 0.56% | -0.03% | |
| JPY | -0.83% | -1.84% | -2.06% | -2.20% | -1.79% | -1.21% | -1.79% | |
| CAD | 1.38% | 0.42% | 0.46% | 2.20% | 0.39% | 1.03% | 0.43% | |
| AUD | 0.94% | -0.02% | 0.02% | 1.79% | -0.39% | 0.58% | -0.01% | |
| NZD | 0.37% | -0.60% | -0.56% | 1.21% | -1.03% | -0.58% | -0.59% | |
| CHF | 0.96% | -0.00% | 0.03% | 1.79% | -0.43% | 0.01% | 0.59% |
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The Bank of Japan’s (BoJ) 25bp rate hike to a 30-year high of 0.75% failed to support the yen, as cautious guidance from Governor Ueda undercut confidence. Despite rising domestic yields and narrowing US–Japan spreads, the JPY weakened sharply, likely exacerbated by positioning, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.
JPY slides despite narrowing yield spreads
"The BoJ tightened its policy rate 25bps to a 30Y high of 0.75%, as expected. But cautious comments on the rate outlook from BoJ Governor Ueda at his press conference have undercut the JPY. Market pricing for a follow-up move late next year has not changed and domestic yields are rising, however. The 10Y bond rate has pushed above 2% for the first time since 1999 and US/Japan spreads have narrowed to 215bps, the smallest gap since 2022."
"Yet the JPY has dropped sharply. Market positioning may account for the JPY underperformance on the day but the decoupling from spreads is becoming more egregious and US officials and Japanese policymakers will take note. Expect more urgent warnings from Japanese monetary officials about the JPY in the coming days."
"A solid rise in the USD on the week and a clear break out from the recent consolidation (bull flag pattern) targets more USD gains and a resumption of the broader bull trend in the USD. A test of 158 appears imminent and additional gains towards 160+ are now very likely from a technical point of view. Support is 156.25/50."
Pound Sterling’s (GBP) post-BoE push through 1.34 has reversed alongside a broader US Dollar (USD) rebound, leaving GBP/USD back near the middle of its recent range. A narrow 5–4 vote to cut rates underscored how finely balanced policy decisions have become, with markets still leaning toward a follow-up cut in April but showing less conviction beyond that, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.
BoE split vote keeps April cut in play
"Cable’s advance through 1.34 following the BoE decision unwound in line with the broader rebound in the USD. Policymakers voted to cut 25bps, as expected yesterday. The vote split was a tight 5-4 in favour of easing."
"The Bank noted that judgement on further easing will become a 'closer call' but you can’t get much closer than 5-4. Markets are sticking with pricing for a likely follow-up cut in April but are less certain about additional easing beyond that."
"Sterling is just about holding the mid-point of the past week’s range, with support around 1.3300/10 and resistance at 1.3450/60. The most the charts say at this point is that the GBP’s rebound from its Nov low has stalled. More range-trading is likely for now."
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