Forex News
- AUD/USD attracts buyers for the fourth day amid hawkish comments from RBA officials.
- China’s upbeat Q3 GDP print published on Monday lends additional support to the AUD.
- Oil-driven inflation fears reinforce Fed hike bets, which support the USD and cap gains.
The AUD/USD pair trades with a positive bias for the fourth straight day, holding steady above the 0.7000 psychological mark during the Asian session on Wednesday and flirting with the monthly high it touched the previous day.
The Australian Dollar (AUD) continues to be underpinned by hawkish signals from Reserve Bank of Australia (RBA) officials, keeping rate-hike expectations alive ahead of the November 3 policy meeting. In fact, RBA Assistant Governor Christopher Kent said on Monday that there are reasonable indications that neutral interest rates are increasing both domestically and globally, while Deputy Governor Andrew Hauser warned earlier today that Q3 trimmed-mean inflation may run hotter than expected.
Adding to this, China's upbeat Q3 GDP print, showing that the economy grew by 4.5% year-over-year during the July-September period, acts as a tailwind for the Aussie. Meanwhile, the US Dollar (USD) builds on the overnight modest bounce from a nearly three-week low as oil-driven inflation fears underpin prospects for further tightening by the Federal Reserve (Fed). In fact, traders are currently pricing in over a 90% chance of a Fed rate hike in December, supporting the buck and capping the AUD/USD pair.
Traders, however, might refrain from placing aggressive bullish bets on the safe-haven Greenback amid renewed hopes for US-Iran peace talks. In fact, media reports said that Qatar and Pakistan had offered a "middle ground" plan to the U.S. and Iran that met the demands of both sides. This, in turn, warrants some caution before confirming that the recent USD corrective decline from the highest level since April 2025 has run its course, as the focus remains on further developments surrounding the Middle East crisis.
AUD/USD daily chart
Technical Analysis
The AUD/USD pair confirms a breakout through a short-term trading range and now eyes a move beyond the 38.2% Fibonacci retracement barrier at 0.7024. Any further move up, however, might confront a hurdle near the 200-day Simple Moving Average (SMA) at 0.7048. This is followed by the mid-range 50.0% retracement at 0.7064, which keeps the near-term bias bearish and suggests that spot prices might struggle to reclaim the pivot area within the broader corrective structure.
On the downside, initial support emerges at the 23.6% retracement at 0.6974, ahead of the structural floor anchored near 0.6893, where buyers would be expected to defend the broader range.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- WTI has jumped over 10% this month due to escalating hostilities in the Middle East and Eastern Europe.
- Mixed signals on U.S.-Iran talks and dismissed reports of an imminent deal created market headwinds.
- Despite 18 vessel attacks in the Strait of Hormuz, Middle East oil flows recovered to 80% of prewar levels.
West Texas Intermediate (WTI) oil price appreciates after two days of losses, trading around $98.60 during Asian hours on Wednesday. Crude oil prices gained ground as traders assessed mixed reports regarding diplomatic progress between the United States and Iran.
Although negotiations remain active, market momentum faced headwinds following high-level diplomatic engagements. Pakistan’s army chief, Field Marshal Asim Munir, met with senior Iranian diplomatic and military officials in Tehran to discuss bilateral ties and the status of talks with Washington. Clarifying the situation, a diplomat involved in the discussions confirmed that efforts to end the conflict are still underway, while dismissing reports that a final deal was imminent.
Despite these diplomatic uncertainties, oil prices have surged more than 10% this month, driven by compounding global supply risks. Intensifying hostilities involving Saudi Arabia, Iran-backed Houthi forces, Russia, and Ukraine have heightened geopolitical tensions, further compounded by at least 18 vessel attacks in the Strait of Hormuz over the past two weeks. Nevertheless, energy infrastructure has shown resilience, with Middle Eastern oil flows largely recovering to approximately 80% of prewar levels.
Brent climbs to fresh multi-month high
Strategists at Societe Generale highlight the renewed strength in crude, noting that Brent has “backed up to $111.2/b, highest since 20th May,” underscoring the latest push to multi-month highs in the oil market.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
The People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead on Wednesday at 6.7192 compared to the previous day's fix of 6.7200 and 6.6779 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.
- EUR/USD declines to around 1.1225 in Wednesday’s early Asian session.
- Traders remained wary of the Euro as France faces widespread protests and fiscal risks.
- The Fed is likely to pause rates this month before resuming tightening later in the year.
The EUR/USD pair loses ground to near 1.1225 during the early Asian trading hours on Wednesday. The Euro (EUR) softens against the US Dollar (USD) as French protests and fiscal strains keep traders cautious. European Central Bank (ECB) policymakers are set to speak later in the day, including President Christine Lagarde, Philip Lane, Joachim Nagel and Piero Cipollone.
CNBC reported that a French official will deploy some military forces to help maintain order during a fresh wave of protests expected this weekend. French Prime Minister Sébastien Lecornu also said there would be fresh curfews “where the situation requires it.”
"The worries in France are not going away anytime soon," said Tommy von Brömsen, FX strategist at Handelsbanken. "The bearish view on France will stay for a while longer, and there's much more euro weakness to be priced in,” Tommy added.
Across the pond, markets calibrate the Federal Reserve’s (Fed) next move after it hiked rates for the first time since 2023 in September. Fed Chairman Kevin Warsh signaled that he wouldn’t “prejudge” meetings, while most Fed policymakers have projected at least one more increase this year.
Traders are now pricing in around a 16.1% probability of another quarter-point increase at the Fed’s October 27-28 meeting, according to the CME FedWatch tool. They price in an over 90% chance of a rate hike in the December policy meeting.
Euro underperforms as Eurozone bond tensions persist despite Germany survey uptick
Strategists at Scotiabank note that the Euro is underperforming on the day, with the EUR “lagging its major currency peers” as ongoing strains in Eurozone government bond markets weigh on sentiment. They highlight that the “10Y OAT/Bund spread remains elevate, near 150bps, reflecting social/fiscal tensions in France,” underscoring the persistent risk premium embedded in French debt.
On the data front, Scotiabank points to the Germany October ZEW Survey, which “reflected a solid improvement in the (still soft) Current Situation reading (-35.9 versus -44.5 expected and -47.1 in September) but some softening in the Expectations component (to 28.1, from 33).” The bank cautions that this “survey of financial professionals tends to be heavily weighted by market, rather than economic, developments” but concludes that it “generally indicates the economy remains in ‘slow recovery’ mode,” limiting the scope for a more decisive Euro rebound.
Warsh cautious on crisis scars but upbeat on investment surge and AI
Fed Chair Warsh delivered a moderately constructive tone, with the FXS Speechtracker score at 5.6/10, slightly softer relative to the historical average of 6.1/10 and signaling only modest incremental information for markets. The admission of being “over-scarred” by the Global Financial Crisis underscores a persistent bias toward vigilance on financial stability, even as Warsh highlights structural growth, an investment surge, and the upside role of AI in data and policy confidence, while refusing to pre-commit on October and December decisions. Overall, the speech balances optimism on the real economy and technology with a clear reluctance to prejudge the policy path, leaving Dollar traders focused on upcoming FOMC meetings as the “crystalizing moment.”
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-hawkish level of 127.51, confirming that the speech did not materially shift the perceived policy stance despite the slightly lower FXS Speechtracker score. With the index firmly above 100, the Fed remains in hawkish territory, and the combination of structural growth, investment surge, and AI-driven confidence in data keeps Dollar sentiment supported even without an incremental hawkish push.
Technical Analysis: EUR/USD keeps a bearish vibe below the 100-day SMA
In the daily chart, EUR/USD retains a bearish near-term bias as spot holds beneath the 100-day simple moving average (SMA) and the 20-day Bollinger middle band. Price is also below the upper Bollinger band, reinforcing a downside-skewed consolidation within the envelope, while the Relative Strength Index (14) at about 40 stays below the neutral 50 line, hinting at subdued bullish momentum.
On the topside, initial resistance emerges at the 20-day Bollinger SMA around 1.1250, followed by the upper band near 1.1392 and the more significant 100-day SMA at 1.1460, which caps the broader recovery attempts. On the downside, the lower Bollinger band at roughly 1.1115 forms the next notable support, and a sustained break below this floor would likely open the way for a deeper slide toward previous cycle lows.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Japanese Finance Minister (FM) Satsuki Katayama said on Wednesday that the government is coordinating closely with the Bank of Japan (BoJ) and there is no major divergence on inflation outlook and policy.
Key quotes
Government coordinating closely with BoJ, no major divergence on inflation outlook, policy.
Tax cut boosts demand and drives up prices.
Will ensure proactive, responsible fiscal policy enhances Japan's supply capacity, doesn't accelerate inflation.
Market reaction
At the time of writing, the USD/JPY pair is up 0.10% on the day at 158.35.
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.
Iran's Foreign Minister Abbas Araghchi said that indirect negotiations with the United States (US) are continuing through intermediary countries, including Pakistan and Qatar, Reuters reported on Tuesday.
Araghchi further stated that the Strait of Hormuz was supposed to be fully opened on the sixth day of this period. Washingtin agreed to Iran's seven-day proposal but sought to add several additional conditions, although he declined to disclose their details. Araghchi also demonstrated that the US cannot be trusted in the negotiation process.
Meanwhile, Yemen’s Houthi rebels declared that the option of a ground attack on Saudi Arabia is on the table, according to Iran's Sepah News. This statement marks a sharp escalation in the ongoing regional conflict.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 0.02% on the day at $98.05.
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.
Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser said on Wednesday that he’s still finalizing forecasts and is uncertain about board decisions. Hauser added that the inflation outlook appears worse than forecast and slightly above expectations.
Key quotes
Still finalising forecasts, uncertain about board decision.
Inflation outlook appears worse than forecast, slightly above expectations.
Companies cite cost pressures as top concern.
Inflation has remained elevated for an extended period.
Inflation expectations must stay anchored to target.
Observed some easing in job data and housing.
Monetary policy effective, but inflation outlook deteriorates.
Must respond to supply shocks to maintain inflation expectations.
Quarterly trimmed mean likely to exceed expectations.
You can't aim for current inflation, but it still matters.
Capacity constraints more intense than anticipated.
September labor report was somewhat weaker than expected.
Unemployment remains low, but labor market is softening.
Market reaction
At the time of writing, AUD/USD is holding higher ground near 0.7009, gaining 0.45% on the day.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
- USD/JPY ends near 158.00 again, inside the range it has held since October 1.
- Swaps put an October 30 BoJ hike under 5% and a December 18 hike near 80%.
- Japan's national CPI is due Thursday, ahead of the BoJ's October 30 decision.
Cheaper Crude Oil and a weaker Dollar elsewhere did little for the Yen on Tuesday, and USD/JPY ended about where it has ended most of October. It fell from about 158.50 to the session low and recovered about half of that drop.
Bank of Japan (BoJ) Governor Ueda told parliament on Monday that underlying inflation is very close to the 2% goal. In swaps, traders translated that into a less than 5% chance of a hike from 1.25% on October 30 and about 80% for December 18. That leaves Yen buyers no BoJ hike to price before December.
Prime Minister Takaichi rejected blame for the weak Yen, and Finance Minister Katayama said on October 15 that Japan is ready to act in the currency market again. Tuesday's high just above 158.50 is USD/JPY's highest since that warning, and it didn't hold.
On the calendar
Japan's September trade figures come at 23:50 GMT on Tuesday, with exports forecast up 20.1% from a year earlier after 19.3%. National CPI excluding fresh food follows at 23:30 GMT on Thursday, forecast at 2.1% after 1.7%, with the BoJ's 2% goal between the two.
University of Michigan one-year inflation expectations at 14:00 GMT on Friday are forecast unchanged at 4.7%, with five-year expectations at 3.5%. They're the last US inflation figures before the Fed's October 28 decision, two days before the BoJ's.
On the charts
Every daily close since October 1 has been within 75 pips of 158.00, with the 50-day Exponential Moving Average (EMA) within a few pips of it. The 200-day EMA is just above 157.50, and the October range runs from just under 157.00 to just under 159.00.
USD/JPY daily chart
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 declines to around $4,120 in Wednesday’s early Asian session.
- Oil prices remained elevated, sustaining inflation concerns that could keep Fed on track to hike again later this year.
- Traders see a 16.1% chance of a hike in October, according to CME's FedWatch Tool.
Gold price (XAU/USD) edges lower to near $4,120 during the early Asian session on Wednesday. The precious metal extends its decline as elevated oil prices raise concerns about persistent US inflation and the prospect that the Federal Reserve (Fed) could keep interest rates higher for longer.
The Iranian military said on Monday that Tehran has not yet completely closed the Strait of Hormuz and can expand the scope of the blockade to the Bab al-Mandeb Strait and the Suez Canal. The Houthis claimed to have attacked King Khalid International Airport in Riyadh, Saudi Aramco facilities in Yanbu on the Red Sea Coast, the Shaybah oilfield, and Saudi naval forces.
Ongoing tensions in the Middle East and possible disruptions to energy shipments through the Persian Gulf could drive oil-driven inflation concerns, weighing on the yellow metal.
Traders are now pricing in nearly a 16.1% odds of another quarter-point increase at the Fed’s October 27-28 meeting, after comments last week from Chairman Kevin Warsh were interpreted as reinforcing expectations for a pause.
However, inflation remains above the Fed’s 2% target, leaving traders focused on whether policymakers pause this month before resuming tightening later in the year. Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.
Risk assets diverge as French unrest weighs on Europe and Dollar firms
Analysts at Commerzbank highlight a growing divergence in risk assets, noting that "European equities declined amid political unrest in France, while US Treasury yields rose as the equity recovery reduced safe-haven demand." In this backdrop, the bank adds that "the USD was slightly firmer," with shifting risk appetite also reflected in commodities as "Brent crude oil prices fell 0.3% to USD109.55" and "Gold fell 0.6% to USD4,141."
Warsh flags investment surge and AI focus but keeps Fed options open into year-end
Fed Chair Warsh’s speech scores 5.6/10 on the FXS Speechtracker, modestly below the 6.1/10 historical average, signaling a slightly less impactful but still constructive tone. The admission of being “over-scarred from the global financial crisis” underscores a cautious bias even as Warsh highlights structural growth and an investment surge driven by “good policies,” while refusing to prejudge the October and December meetings. The emphasis on AI as a demand-side force and on field hearings and task forces suggests the Fed is actively building new intellectual capital, but without offering explicit guidance that would materially shift the policy outlook relative to the established baseline.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated 127.51, confirming that the overall policy tone remains firmly in hawkish territory despite the lack of incremental signal. The combination of a flat index reading and a below-average speech score indicates that Warsh’s remarks largely validated existing expectations for the Dollar-positive Fed stance rather than introducing new hawkish or dovish surprises.
Technical Analysis: Gold remains capped under the key resistance levels
In the daily chart, XAU/USD opens at a pivotal level and holds below the 20-day Bollinger band middle line and the 100-day simple moving average (SMA), keeping the near-term tone bearish as rallies remain capped by these overhead levels. The lower reading of the 14-day Relative Strength Index (RSI) around 41 reinforces a weak momentum backdrop, suggesting downside risks while not yet signaling oversold conditions.
On the topside, initial resistance aligns at the Bollinger band middle line near $4,170, followed by the 100-day SMA around $4,235 and the Bollinger upper band at $4,275, forming a broad supply zone that could limit recoveries. On the downside, the next meaningful support emerges at the Bollinger lower band near $4,065, where buyers may attempt to slow the decline if bearish pressure extends.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
A Reuters poll revealed that a majority of economists expect the Bank of Japan to raise rates at its December meeting, marking the third increase since June.
The US-Iran conflict and the Russia-Ukraine war pushed energy prices higher, with Oil surpassing $100 per barrel during the year. More forecasters expect at least two rate increases in 2027, as Japan, a net energy importer, needs to cope with rising prices and a weaker Yen.
BoJ member Junko Koeda said the central bank should not become overly cautious about raising rates, due to significant upside risks to inflation.
The survey showed that of 78 analysts, 54 expect a rate hike in December, while the BoJ is expected to hold rates unchanged in October.
Sources have told Reuters many BOJ officials prefer to assess more data on how previous increases have affected financial conditions.
For 2027, 39 of 65 analysts or 60% expect the BoJ to raise rates to 1.75% towards the end of June, revealed the survey.
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.
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.
