Forex News
- Dow Jones futures advance following a tech-driven rally that lifted the underlying index to a new record high.
- Traders brace for key corporate earnings reports, including Airbnb and Warner Bros. Discovery.
- Market sentiment grows cautious following an Israeli airstrike in southern Lebanon that killed one person and injured 11.
Dow Jones futures rise 0.19% to trade around 54,600 during European hours on Thursday. Meanwhile, S&P 500 futures gain 0.09% to trade near 7,760, while Nasdaq 100 futures decline 0.35%, trading near 29,510.
US stock futures are posting mixed results following a varied performance across the major indexes in the previous session. Investors and market participants are now turning their attention toward upcoming earnings results from several high-profile companies, including Airbnb and Warner Bros. Discovery.
Market sentiment on Wednesday was heavily driven by sharp swings in the technology sector. SpaceX shares plunged nearly 14% following reports of a steep rise in capital expenditures, which reignited investor concerns over aggressive artificial intelligence-related spending. On the other hand, Nvidia surged 3.4% following Elon Musk’s comments during the earnings call confirming that the company would rely exclusively on Nvidia chips for its AI infrastructure.
These tech gains helped propel the Dow Jones Industrial Average to another record high. However, broader pressure across tech stocks ultimately weighed on sentiment, leaving both the S&P 500 and the Nasdaq Composite struggling to maintain momentum.
Market sentiment turned cautious following an Israeli airstrike in southern Lebanon. The attack, which killed one person and injured 11, marked one of Israel’s deadliest bombings since the June ceasefire began. Israel's military issued a displacement order roughly 30 minutes before the strike, stating it was targeting and destroying Hezbollah infrastructure in response to the group’s violation of the ceasefire terms.
However, market participants weigh reports of a new maritime agreement between Iran and Oman. The two nations are finalizing a joint statement on a shipping route through the Strait of Hormuz, raising expectations for an increase in Middle Eastern energy flows. Although Tehran emphasized that the temporary two-to-four-month route does not mark a full reopening of the strategic waterway, the development has somewhat eased supply disruption fears.
Ai trade regains momentum as semiconductor rebound gathers pace
Analysts at Deutsche Bank highlight that the “rebound in semiconductors continues to gather pace,” pointing to a sharp recovery in AI-linked equities after the July correction. With the Philadelphia Semiconductor Index posting its strongest daily gain since March and its best four-day advance since 2020, Deutsche Bank argues that investors are re-engaging with the AI trade as improving corporate outlooks and capex-related news help rebuild confidence in the broader AI investment cycle.
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
ING’s FX Strategist Francesco Pesole notes improved Gulf-related risk sentiment has weighed slightly on the Dollar, but stable Federal Reserve rate expectations remain supportive. With US payrolls due tomorrow, he argues that caution in markets and limited changes in Fed pricing should keep the Dollar in a broad range, even as data and Fed communication outweigh moves in Oil and geopolitical headlines.
Risk-on tone but range-bound dollar
"News of a deal between Iran and Oman to open a safe shipping route in the Strait of Hormuz has kept the FX market in risk-on mode, favouring a rotation from the dollar to higher-beta currencies. Even so, G10 moves have been contained this week, likely because tomorrow’s US payrolls report remains the key catalyst and a notoriously difficult one to predict."
"Expectations for upcoming Fed meetings are little changed since July’s announcement, with 14-17bp consistently priced for September and 30-35bp for December. This has come during a week in which Brent fell $15/bbl: a clear testament that US rate expectations are currently being driven far more by data and Fed communication than by energy prices."
"Speaking of data, ADP payrolls came in a bit soft at 44k and ISM services rose less than expected to 54.1 yesterday. The services employment subindex plummeted to 47.5, which – according to our macro team – points to some mild downside risks for tomorrow’s payrolls."
"Markets are also waiting for the next headlines on US-Iran negotiations. There appears to be little pessimism left in FX markets, and positive headlines on that topic may not generate sustainable USD weakness. With payrolls looming tomorrow, a wait-and-see stance may keep volatility contained and the dollar broadly range-bound."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
OCBC’s Christopher Wong and Sim Moh Siong highlight a sharp rebound in Gold as easing Middle East tensions weighed on Oil and US Treasury yields, softening the US Dollar. Technical buying and short covering accelerated once resistance broke, while central bank demand from the Bank of Korea added support. Near-term momentum is mildly bullish, with key resistance at 4333 and 4393 and support at 4160 and 4077.
Gold breakout on softer yields
"Gold rose sharply overnight as easing Middle East tensions drove oil prices lower while US Treasury yields and USD eased. Market expectations for Fed to hike in Sep has eased. About 55% probability priced (vs. 66% a week ago). The sharp move in gold accelerated after prices cleared recent resistance, triggering technical buying and short covering."
"Gold’s strength suggests investors are increasingly pricing a de-escalation of the US-Iran conflict, a normalisation of oil flows through the Strait of Hormuz, lower real interest rates and a softer USD."
"News that the Bank of Korea is preparing to purchase domestically produced gold for the first time in 13 years and that they had recently begun buying gold ETF may also have provided a modest sentiment boost, although the scale and timing of its purchases remain unclear."
"Near-term momentum has improved, with Friday’s upcoming US payrolls report now key to whether the decline in yields, USD and gold’s breakout can be sustained."
"Daily momentum is mild bullish while RSI rose to near overbought conditions. Resistance at 4333 (23.6% fibo retracement of 2026 high to low), 4393 (100 DMA). Support at 4160 (50 DMA), 4077 (21 DMA)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold struggles to capitalize on its intraday move up to a fresh high since June 18 amid a modest USD uptick.
- Hopes for a US-Iran peace deal, easing inflation fears and receding Fed-hike bets could cap gains for the US Dollar, supporting the yellow metal.
- Traders might refrain from placing aggressive directional bets ahead of the key US NFP report on Friday.
Gold (XAU/USD) surrenders intraday gains to a fresh high since June 18 – levels just above the $4,300 mark – and trades near the lower end of the daily range heading into the European session on Thursday. A slew of prominent US Federal Reserve (Fed) officials recently warned that persistent inflation risks could necessitate further interest rate hikes. This, in turn, helps revive demand for the US Dollar (USD) and keeps a lid on the non-yielding bullion.
Fed Governor Lisa Cook stated that inflation remains too high and she is prepared to act by raising interest rates if disinflation stalls, warning that the central bank cannot afford to wait indefinitely if price pressures fail to ease. Meanwhile, San Francisco Fed President Mary Daly noted that officials need more data before the September meeting to see if inflation is temporary or lasting. Moreover, according to the CME FedWatch tool, markets are still pricing in around an 80% chance that the US central bank will raise borrowing costs by the end of this year amid inflation risks stemming from supply disruptions.
In fact, Iran-backed Houthis in Yemen said that they launched a missile attack on a Saudi oil tanker off the coast of the Red Sea port city of Yanbu and another in the Gulf of Aden. Investors, however, remain hopeful about a US-Iran peace deal and the reopening of the Strait of Hormuz, which keeps Oil prices depressed near a multi-week low. Iran said on Wednesday that it is in the final stage of drafting an agreement with Oman over the strategic waterway. This fuels optimism about a diplomatic resolution to end a five-month-old war, which, in turn, might keep a lid on any meaningful USD appreciation.
Adding to this, Automatic Data Processing (ADP) reported on Wednesday that private-sector employment in the US grew by 44K in July, marking a notable slowdown from the 98K in the prior month and missing consensus estimates. Separately, data from the Institute for Supply Management (ISM) showed the Services Purchasing Managers Index (PMI) improved a tad to 54.1 in July from 54.0 in the previous month, coming in below expectations for a reading of 54.5. Following the softer data, the probability for a September Fed rate hike eased to roughly 55% from 67%, further warranting some caution for USD bulls.
Moreover, traders might opt to wait for the release of the closely-watched US monthly employment report – popularly known as the Nonfarm Payrolls (NFP) – on Friday for more cues about the Fed's future policy path. In the meantime, Thursday's US economic docket features the usual Weekly Initial Jobless Claims, which, along with comments from influential FOMC members, will drive the USD demand. Apart from this, developments surrounding the Middle East crisis could infuse volatility across the global financial markets and provide some impetus to the Gold price.
XAU/USD daily chart
Technical Analysis: Gold seems poised to attract dip-buyers amid bullish setup
The overnight strong move up beyond the 50-day Simple Moving Average (SMA) for the first time since March 17 was seen as a fresh trigger for XAU/USD bulls. Moreover, a firming Moving Average Convergence Divergence (MACD) histogram in positive territory and a Relative Strength Index (RSI) at 61.28 hint at improving bullish momentum on the daily chart. However, it will still be prudent to wait for some follow-through buying beyond the 23.6% Fibonacci retracement level of the March-June downfall before positioning for any further gains.
The precious metal might then aim to challenge the $4,500 psychological mark – representing the 200-day SMA and the 38.2% Fibonacci level confluence. Higher up, the 50.0%, 61.8% and 78.6% retracements at $4,678, $4,853 and $5,102, respectively, outline subsequent bullish objectives if the current band is cleared. On the downside, immediate support is provided by the 50-day SMA at $4,157, while a deeper setback would likely look toward the Fibonacci cycle low area near $3,939 as a more substantial structural floor.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Nonfarm Payrolls FAQs
Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.
The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.
Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.
Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.
Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann report GBP/USD edged higher to 1.3469 after briefly touching 1.3486, with short-term momentum only slightly firmer. The pair is expected to trade in a higher 1.3445–1.3495 range rather than embark on a strong rally. Over 1–3 weeks, there is still limited scope for a move toward 1.3555 as long as support at 1.3410 holds.
Pound holds gains within tight band
"24-HOUR VIEW: Yesterday, we expected GBP to “consolidate between 1.3425 and 1.3470.” However, GBP edged higher to 1.3486 before closing slightly higher at 1.3469 (+0.12%). While upward momentum has picked up slightly, it is more likely to result in GBP trading within a higher range of 1.3445/1.3495 rather than signaling the start of a sustained advance."
"1-3 WEEKS VIEW: On Monday (03 Aug, spot at 1.3485), we indicated that “while strong momentum suggests further upside, it remains to be seen whether GBP can break and hold above the significant resistance at 1.3555.” Yesterday (05 Aug, spot at 1.3450), we indicated that “upward momentum has since eased, but as long as 1.3385 (no change in ‘strong support’ level) is not breached, there is still a chance, albeit not a high one, for GBP to rise toward 1.3555.” We continue to hold the same view, but we are revising the ‘strong support’ level to 1.3410 from 1.3385."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Here is what you need to know on Thursday, August 6:
Following the risk-positive action seen earlier in the week, markets adopt a cautious stance on Thursday. The US economic calendar will feature Challenger Job Cuts for July, weekly Initial Jobless Claims and second-quarter Unit Labor Costs data ahead of Friday's critical official employment report, which will feature Nonfarm Payrolls (NFP) figures.
The US Dollar (USD) weakened slightly after weak data releases midweek but managed to find its footing as the optimism about the conflict in the Middle East Coming to an end faded. The ADP Employment Change declined to 44K in July from 98K in June and fell short of the market expectation of 70K. Additionallly, the Institue for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) came in at 54.1, below analysts' estimate of 54.5. Early Thursday, the USD Index clings to marginal daily gains but stays below 100.00.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.25% | 0.38% | 0.00% | -0.05% | 0.46% | 0.19% | |
| EUR | -0.03% | 0.23% | 0.36% | -0.02% | 0.03% | 0.44% | 0.17% | |
| GBP | -0.25% | -0.23% | -0.19% | -0.26% | -0.20% | 0.21% | -0.06% | |
| JPY | -0.38% | -0.36% | 0.19% | -0.31% | -0.29% | 0.19% | -0.09% | |
| CAD | -0.01% | 0.02% | 0.26% | 0.31% | 0.04% | 0.51% | 0.20% | |
| AUD | 0.05% | -0.03% | 0.20% | 0.29% | -0.04% | 0.40% | 0.14% | |
| NZD | -0.46% | -0.44% | -0.21% | -0.19% | -0.51% | -0.40% | -0.26% | |
| CHF | -0.19% | -0.17% | 0.06% | 0.09% | -0.20% | -0.14% | 0.26% |
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).
Kashkari tempers rate hike rhetoric, keeps Fed reaction function in focus
Minneapolis Federal Reserve (Fed) Bank President Neel Kashkari's speech received a score of 4.6/10 on the FXS Speechtracker on Thursday, notably softer relative to the historical average of 6.8/10, signaling a less forceful policy tone. By stressing that the goal is to bring down inflation without deliberately slowing the economy and highlighting recent price pressures as largely supply-driven, Kashkari leaned away from aggressive tightening while still acknowledging some demand-side contribution. The explicit remark about not calling for a dramatic increase in rates, coupled with emphasis on explaining the reaction function rather than changing it, pointed to a cautious, communication-focused stance that is modestly less hawkish than the established baseline.
Iran and Oman are reportedly close to finalizing a proposed framework for commercial shipping through the Strait of Hormuz. However, Iranian Deputy Foreign Minister Kazem Gharibabadi told Islamic Republic News Agency (IRNA) that the agreement would not automatically reopen the waterway. According to a senior Gulf official, there is a 50% chance that Iran and Oman will reach a deal by Friday.
Meanwhile, United States (US) Vice President JD Vance told Fox News that talks with Iran were "messy," calling Iranians "extraordinarily difficult people." Following the sharp decline seen earlier in the week, crude Oil prices were virtually unchanged on Wednesday. In the European morning on Thursday, the barrel of West Texas Intermediate trades marginally higher on the day at around $74.50.
Brent steadies as Hormuz corridor eases but does not erase risk premium
Analysts at Commerzbank note that Brent crude is showing signs of stabilization, with prices having "edged up 0.1% to USD79.45, consolidating after a steep three-session decline on the Hormuz deal optimism." They stress that the proposed arrangement in the Strait of Hormuz is not a comprehensive resolution but "would provide a temporary shipping corridor valid for two to four months." In their view, this "more measured tone" from officials indicates that "while the geopolitical risk premium has eased, a full restoration of normal shipping may take some time," leaving the broader oil backdrop still contingent on how the corridor is implemented and whether it is extended.
EUR/USD corrects lower and trades slightly below 1.1550 after posting gains for two consecutive days. Eurostat will publish Retail Sales data for June later in the session.
USD/JPY extends its sideways grind slightly below 158.00 after failing to make a decisive move in either direction on Wednesday.
Gold rose more than 4% on Wednesday and climbed above $4,300 for the first time since mid-June, registering its biggest one-day gain since February. XAU/USD remains in a consolidation phase at around $4,250 on Thursday.
Gold rallies as easing Middle East tensions and softer Fed expectations weigh on USD
Analysts at OCBC note that Gold “rose sharply overnight as easing Middle East tensions drove oil prices lower while US Treasury yields and USD eased,” with market expectations for the Fed to hike in September also softening. They highlight that “about 55% probability priced (vs. 66% a week ago),” and that the “sharp move in Gold accelerated after prices cleared recent resistance, triggering technical buying and short covering.”
OCBC adds that Gold’s strength “suggests investors are increasingly pricing a de-escalation of the US-Iran conflict, a normalisation of oil flows through the Strait of Hormuz, lower real interest rates and a softer USD,” reinforcing the view that geopolitical and rate dynamics are now tilting in favour of the metal.
GBP/USD retreats slightly following a two-day rally and trades near 1.3450 in the early European session on Thursday.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
- USD/CHF regains positive traction and snaps a two-day losing streak amid a modest USD uptick.
- The formation of an ascending channel favors bulls and backs the case for further appreciation.
- Corrective pullbacks could be bought into and remain limited near the trend-channel support.
The USD/CHF pair attracts some buyers near the 0.8060 region on Thursday amid a modest US Dollar (USD) uptick. Spot prices, for now, seem to have snapped a two-day losing streak and trade around the 0.8080-0.8085 region during the first half of the European session, up nearly 0.15% for the day.
From a technical perspective, the move up along an upward-sloping channel points to a well-established bullish trend. Adding to this, the recent breakout above the 0.8000 psychological mark supports prospects for a further near-term appreciation of the USD/CHF pair. Meanwhile, the Relative Strength Index (14) sits near a neutral 48.7, hinting at balanced momentum.
Moreover, the Moving Average Convergence Divergence (MACD) remains slightly negative, which only mildly tempers the constructive tone. Nevertheless, the setup suggests room for further gains before encountering a more significant cap. The USD/CHF pair is placed closer to the middle of the structure, with overhead supply defined by the channel top at 0.8219,
A daily close above this level would signal an acceleration of the uptrend and open the way to fresh highs within the broader bullish channel environment. On the downside, initial demand is located at the channel bottom around 0.7936, where a break would expose deeper support at the prior structural base near 0.7692 and would weaken the current bullish narrative.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
USD/CHF daily chart
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.07% | 0.08% | 0.06% | 0.02% | 0.29% | 0.25% | 0.14% | |
| EUR | -0.07% | 0.00% | 0.00% | -0.05% | 0.19% | 0.19% | 0.07% | |
| GBP | -0.08% | -0.00% | 0.00% | -0.05% | 0.19% | 0.17% | 0.08% | |
| JPY | -0.06% | 0.00% | 0.00% | -0.04% | 0.21% | 0.20% | 0.09% | |
| CAD | -0.02% | 0.05% | 0.05% | 0.04% | 0.26% | 0.25% | 0.12% | |
| AUD | -0.29% | -0.19% | -0.19% | -0.21% | -0.26% | -0.00% | -0.12% | |
| NZD | -0.25% | -0.19% | -0.17% | -0.20% | -0.25% | 0.00% | -0.08% | |
| CHF | -0.14% | -0.07% | -0.08% | -0.09% | -0.12% | 0.12% | 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).
- AUD/USD edges down from three-week lows at 0.7064 but maintains its near-term positive bias intact.
- Australian Trade Balance showed an unexpected surplus in June as commodity exports surged.
- The US Dollar is failing to find support from macroeconomic data this week.
The Australian Dollar (AUD) posts moderate losses against the US Dollar (USD) on Thursday, retreating to the 0.7040 area from three-week highs at 0.7064 on Wednesday. The pair, however, maintains its near-term bullish structure, with investors biding their time ahead of Friday’s key US Nonfarm payrolls report and awaiting clarity on the US-Iran negotiations.
Data from Australia released on Thursday was supportive, as June’s Trade Balance revealed an unexpected surplus, with commodity exports jumping to four-year highs. Australia’s foreign trade posted an AUD 1.929 million surplus, against expectations of an AUD 1.1 million deficit, and following a downwardly revised deficit of AUD 2.367 million in May.
In the US, on the contrary, the ADP Employment Change disappointed on Wednesday, showing 44K net employment creation in July, less than half of June’s 98K and well below the 70K market consensus. Later on Wednesday, the US ISM Services Purchasing Managers’ Index showed healthy growth, but also short of the market expectations, with prices jumping and employment falling.
Dollar bulls remain capped as markets eye US payrolls
ING’s FX strategists highlight that “news of a deal between Iran and Oman to open a safe shipping route in the Strait of Hormuz has kept the FX market in risk-on mode, favouring a rotation from the Dollar to higher-beta currencies.” However, they stress that “G10 moves have been contained this week, likely because tomorrow’s US payrolls report remains the key catalyst and a notoriously difficult one to predict,” keeping traders wary of aggressive positioning.
ING also points out that “markets are also waiting for the next headlines on US-Iran negotiations.” In their view, “there appears to be little pessimism left in FX markets, and positive headlines on that topic may not generate sustainable USD weakness.” With “payrolls looming tomorrow,” the bank expects that “a wait-and-see stance may keep volatility contained and the Dollar broadly range-bound.”
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.
Commerzbank’s Michael Pfister argues that lower Oil prices can initially restrain the Euro (EUR) by reducing European Central Bank (ECB) rate expectations. Over time, however, a lasting end to the Iran conflict could support the currency through stronger Purchasing Managers' Index (PMI) and improved real economic activity.
Oil, rates and Euro reaction
"Over the past few weeks, I have argued on several occasions that the euro might not directly benefit from an end to the war, should interest rate expectations for the ECB ease as oil prices fall. But this does not apply solely to the euro. Since the start of the Iran conflict, the trend in interest rate expectations for the major G10 central banks can, in fact, be divided into two groups:"
"The greater the dependence on energy imports, the stronger the reaction of central bank interest rate expectations to a change in the oil price. In other words, if oil prices rise, so do expectations of interest rate hikes. This applies to the ECB, as well as to the BoE and the Swiss National Bank. But this also means that these expectations will be priced out again should the oil price fall."
"We thus have two arguments: net energy exporters are likely to suffer deteriorating terms of trade when the oil price falls, while their interest rate expectations are less dependent on the oil price. This is likely to be the main reason why the inverse relationship (i.e. appreciation due to lower energy dependence in the event of falling oil prices) is weaker than when oil prices rise."
"One point I have omitted so far is that the real economies of net energy importers would also benefit from a lasting end to the Iran conflict. Leading indicators such as the PMIs are likely to react first. But this reaction is likely to take longer than the reaction seen with interest rate expectations."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Safe-haven US Dollar gains on Middle East tensions despite Iran-Oman Strait of Hormuz shipping deal.
- Mixed US economic data shows weak ADP payrolls but steady ISM Services PMI growth.
- Softer New Zealand jobs data limits aggressive rate hike expectations ahead of September RBNZ meeting.
NZD/USD extends its losses for the second successive day, trading around 0.5870 during the European hours on Thursday. The pair depreciates as the US Dollar (USD) gains support from renewed safe-haven demand following an Israeli airstrike in southern Lebanon. The attack, which killed one person and injured 11, marked one of Israel’s deadliest bombings since the June ceasefire began. Israel's military issued a displacement order roughly 30 minutes prior to the strike, stating it was targeting and destroying Hezbollah infrastructure in response to the group’s violation of the ceasefire terms.
However, the Greenback could encounter headwinds as market participants weigh reports of a new maritime agreement between Iran and Oman. The two nations are finalizing a joint statement on a shipping route through the Strait of Hormuz, raising expectations for an increase in Middle Eastern energy flows. Although Tehran emphasized that the temporary two-to-four-month route does not mark a full reopening of the strategic waterway, the development has somewhat eased supply disruption fears.
US ADP private-sector payrolls rose by just 44,000 in July, a sharp drop from June's revised 95,000 and well below the market forecast of 70,000. Conversely, the ISM Services PMI showed steady momentum, ticking up slightly to 54.1 in July from 54.0 in June, though it narrowly missed the expected 54.5 mark. Investors are now turning their attention toward upcoming economic drivers, specifically Thursday's Initial Jobless Claims and Friday's pivotal Nonfarm Payrolls (NFP) report.
Meanwhile, the New Zealand Dollar (NZD) faces challenges as a softer-than-expected labor market report reinforced expectations that any further interest rate increases would likely be gradual rather than aggressive. Nevertheless, markets continue to price in a quarter-point rate hike in September, following indications from the Reserve Bank of New Zealand's (RBNZ) latest meeting that further policy tightening may be required to reduce monetary stimulus and bring inflation under control.
NZD and local yields slump as solid jobs data highlight lingering slack
Strategists at Brown Brothers Harriman observe that the New Zealand Dollar and local yields have come under pressure even as headline labour data surprise to the upside. They note that “NZD and NZ yields slump” after “New Zealand’s solid Q2 job and wage growth” revealed underlying slack in the labour market. According to BBH, “employment surged 0.5% q/q vs. 0.1% in Q1, well above consensus and RBNZ projection of 0.1%, while private regular wages were up 0.7% q/q (consensus & RBNZ: 0.6%) vs. 0.5% in Q1,” with these stronger readings masking ongoing labour market slack that continues to weigh on the currency and rates.
Technical Outlook: NZD/USD maintains a constructive bullish tone near 0.5900
In the daily chart, NZD/USD trades at 0.5870, maintaining a constructive bullish tone as spot holds above both the nine-day and 50-day Exponential Moving Averages (EMAs) at 0.5858 and 0.5810. The alignment of the shorter EMA above the longer one reinforces a nascent uptrend, while the 14-day Relative Strength Index (RSI) near 61 suggests firm but not yet overbought bullish momentum.
On the topside, initial resistance emerges at 0.5995, ahead of a stronger barrier at 0.6094, where sellers could attempt to cap further gains. On the downside, immediate support is provided by the nine-day EMA, followed by the 50-day EMA; a deeper setback would expose the horizontal floors at 0.5580 and 0.5486, levels that would need to hold to preserve the current bullish bias.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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.
