Forex News
- Silver falls as Fed Chair Kevin Warsh’s unexpectedly hawkish debut and projections signaled potential interest rate hikes.
- The white metal may rebound as easing inflation concerns from progressing US-Iran peace talks revive broader market sentiment.
- US Vice President JD Vance noted that negotiations have made "great progress," despite some underlying friction.
Silver price (XAG/USD) loses over 1% after registering modest gains in the previous day, trading around $64.50 per troy ounce during the Asian hours on Tuesday. The non-yielding Silver struggles amid a hawkish policy outlook at the Federal Reserve (Fed).
Last week, the US central bank opted to hold its benchmark interest rate steady between 3.50% and 3.75%. However, the updated economic projections and commentary from Kevin Warsh, presiding over his first meeting as Fed Chair, surprised the market by leaning more hawkish than anticipated. As a result, futures traders have fully priced in a 25-basis-point rate hike for the September meeting, with some pricing in a minor probability of a tightening move as early as next month.
The downside of the Silver price could be restrained amid progress in ongoing peace talks between the US and Iran, which helped ease concerns about inflation. According to a CNBC report on Tuesday, US Vice President JD Vance noted that negotiations have made "great progress," despite some underlying friction. This followed Vance’s Monday announcement that Iran has agreed to readmit International Atomic Energy Agency (IAEA) inspectors. The optimism was mirrored by Iranian Foreign Minister Abbas Araghchi, who similarly confirmed that the Swiss dialogue has yielded "major progress."
Precious metals, including Silver, have faced persistent downward pressure since the outbreak of the Middle East conflict in late February. Disruptions to energy flows through the Strait of Hormuz initially drove crude oil prices higher, intensifying market fears that central banks would keep interest rates elevated to curb sticky inflation.
The supply outlook shifted after Washington issued Tehran a 60-day license to sell oil on international markets. This regulatory relief has fueled expectations of a faster recovery in global crude supplies, potentially easing the inflationary pressures that have weighed heavily on safe-haven assets.
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.
- GBP/USD remains weak around 1.3245 in Tuesday’s early Asian session.
- UK PM Keir Starmer resigned, signaling a period of political uncertainty.
- Fed holds interest rates steady but leaves the door open to a hike.
The GBP/USD pair loses ground to near 1.3245 during the early Asian trading hours on Tuesday. Political uncertainty in the United Kingdom (UK) continues to weigh on the British Pound (GBP) against the US Dollar (USD). The preliminary readings of the S&P Global Purchasing Managers Index (PMI) from both the US and the UK are due later on Tuesday.
The UK has been plunged into yet another political crisis as Prime Minister Keir Starmer resigned on Monday under intense pressure following Andy Burnham's victory in the Makerfield by-election last week. His Labour Party will now need to select a new leader to lead the country.
“Markets will be focused on Burnham’s views on fiscal policy and whether there will be any relaxation of the current fiscal rules,” said
Commonwealth Bank of Australia strategists, including Kristina Clifton. “A loosening in fiscal rules would likely be poorly received by the UK bond market,” and weigh on the pound, they said.
Markets anticipate the US rate hike later this year after new US Federal Reserve (Fed) Chair Kevin Warsh adopted a hawkish tone on inflation during his first policy meeting. This, in turn, might support the Greenback and act as a headwind for the major pair.
Markets have priced in nearly an 89% chance of a Fed hike in December, up from 61% before last week’s FOMC meeting, according to the CME FedWatch tool.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling 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, its currency will benefit 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.
- WTI enters a bearish consolidation phase on Tuesday and remains close to a multi-month trough.
- The easing of sanctions on Iranian crude exports weighs on oil prices amid progress in peace talks.
- Geopolitical risks remain in play, helping the commodity to defend the 200-day SMA pivotal support.
West Texas Intermediate (WTI) – the benchmark US Crude Oil price – stalls the previous day's decline and consolidates around the $74.00/barrel mark during the Asian session on Tuesday. Meanwhile, the commodity remains within striking distance of the lowest level since March, touched last Thursday, amid signs of progress in US-Iran peace talks.
Mediators – Qatar and Pakistan – said on Monday that the first round of negotiations between the US and Iran – aimed at securing a comprehensive agreement to end the ongoing conflict – concluded with encouraging progress. Both sides have agreed on a roadmap towards reaching a final deal within 60 days, the two mediating countries said in a joint statement following talks in Switzerland.
The latest developments help ease concerns about a breakdown in the diplomatic process, especially after Iran again closed the Strait of Hormuz on Saturday, and US President Donald Trump's threat of fresh military action against Iran. Furthermore, the US Treasury Department announced a temporary easing of sanctions on Iranian crude exports, which acts as a headwind for Crude Oil prices.
Traders, however, remain skeptical about the sustainability of the truce amid major disagreements over the strategic waterway, Tehran's nuclear program, and frozen Iranian funds. This keeps geopolitical risk premium in play, which assists the black liquid to defend a technically significant 200-day Simple Moving Average (SMA), around the $73.00 mark, and warrants caution for bearish traders.
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.
Japan’s Finance Minister Satsuki Katayama said that she held virtual talks with US Treasury Secretary Scott Bessent on Monday, discussing global financial markets and Iran conflict effects.
Key quotes
Discussed global financial markets, Iran conflict effects with Bessent
Japan-US already agreed on decisive actions, no change expected.
Reaffirms market coordination with Bessent.
No comment on currency levels.
Had productive talks with Bessent on global economic issues.
Market reaction
At the time of writing, USD/JPY is up 0.01% on the day at 161.55.
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.
The People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead on Tuesday at 6.8171 compared to the previous day's fix of 6.8150 and 6.7762 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 hovers in a tight range as traders monitor diplomatic progress in the Washington-Tehran talks in Switzerland.
- US Vice President JD Vance noted that negotiations have made "great progress," despite some underlying friction.
- ECB President Lagarde deemed inflation "too large to ignore," yet sees no evidence of dangerous, unanchored inflationary second-round effects.
EUR/USD steadies after registering modest losses in the previous day, trading around 1.1430 during the Asian hours on Tuesday. The currency pair remains locked in a tight range as traders closely monitor diplomatic developments surrounding ongoing talks between Washington and Tehran in Bürgenstock, Switzerland.
According to a CNBC report on Tuesday, US Vice President JD Vance noted that negotiations have made "great progress," despite some underlying friction. This followed Vance’s Monday announcement that Iran has agreed to readmit International Atomic Energy Agency (IAEA) inspectors. The optimism was mirrored by Iranian Foreign Minister Abbas Araghchi, who similarly confirmed that the Swiss dialogue has yielded "major progress."
Meanwhile, the US Dollar (USD) is finding underlying support from a hawkish policy outlook at the Federal Reserve (Fed). Last week, the US central bank opted to hold its benchmark interest rate steady between 3.50% and 3.75%.
However, the updated economic projections and commentary from Kevin Warsh, presiding over his first meeting as Fed Chair, surprised the market by leaning more hawkish than anticipated. As a result, futures traders have fully priced in a 25-basis-point rate hike for the September meeting, with some pricing in a minor probability of a tightening move as early as next month.
In contrast, the Euro (EUR) faces a more dovish backdrop following recent remarks from European Central Bank (ECB) President Christine Lagarde. While Lagarde acknowledged that the current inflation shock is "too large to ignore," she emphasized that there is no evidence of unanchored inflation expectations or dangerous second-round effects that could jeopardize the central bank's targets.
Markets interpreted her tone as modestly dovish, reinforcing expectations that the key ECB rate is unlikely to rise beyond the bank's neutral range of 1.75% to 2.50%.
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.
US Vice President (VP) JD Vance said that talks between the United States (US) and Iran have made “great progress” despite “threatening” and “whining,” CNBC reported on Tuesday.
“Yes, there was a little bit of threatening, there was a little bit of whining, but at the end of the day, the talks continued, and we made great progress,” said Vance.
Earlier on Monday, Vance stated that negotiations in Bürgenstock, Switzerland, were continuing and Tehran had agreed to permit International Atomic Energy Agency (IAEA) inspectors back into Iran.
The US Vice President added that Tehran’s agreement for IAEA inspectors to return to their country was “a major milestone for the American people and the first step in permanently denuclearizing or permanently ending a nuclear weapons program in Iran.”
Meanwhile, Iran’s Foreign Minister Abbas Araghchi also said the talks had yielded “major progress.”
Market reactio
At press time, the WTI Oil price trades 0.05% higher at around $73.95.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- USD/JPY trades flat around 161.55 in Tuesday’s early Asian session.
- US Vice President hails ‘great progress’ in US-Iran talks despite ‘threatening’ and ‘whining.’
- Japan’s Katayama said officials are ready to respond appropriately to FX moves at any time as needed.
The USD/JPY pair holds steady near 161.55 during the early Asian session on Tuesday. Progress in US–Iran peace talks and intervention fears from the Japanese authorities might cap the upside for the pair. Traders will closely monitor the developments surrounding the ongoing talks in Switzerland between Washington and Tehran.
US Vice President JD Vance said on Monday that talks between the US and Iran have made “great progress” despite “threatening” and “whining.” Earlier, Iran’s Foreign Minister, Abbas Araghchi, stated the negotiations had yielded “major progress.”
Traders are on high alert for currency intervention after further weakness in the JPY. Japan’s Finance Minister Satsuki Katayama said on Monday that the officials are ready to respond appropriately to the currency moves at any time as needed.
On the other hand, a hawkish tone from the US central bank might help limit the US Dollar’s (USD) losses. Last week, the Federal Reserve (Fed) decided to leave its benchmark interest rate unchanged between 3.50% and 3.75%. Fed new projections and comments from Kevin Warsh, who was presiding over his first meeting as chair, were more hawkish than markets anticipated.
Futures traders have priced in that the US central bank is likely to hike rates by 25 basis points (bps) at its September meeting, with some chance seen of a move as soon as next month’s meeting.
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.
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