Forex News
- Saudi Arabia works to restore its East-West pipeline, using shuttle vessels to safely bypass immediate risks.
- China urges Iran to restrain Houthi attacks on Saudi energy facilities following direct appeals from Riyadh.
- US leadership weighs action on Iran as diplomatic efforts build ahead of upcoming Gulf summit.
West Texas Intermediate (WTI) oil price remains subdued for the third successive day, trading around $96.40 per barrel during the Asian hours on Friday. Crude oil prices have declined as concerns over Middle East supply disruptions ease, bolstered by growing hopes for renewed diplomatic efforts to resolve the conflict and restore stable energy flows.
Saudi Arabia is actively working to restore its energy infrastructure, targeting the recovery of roughly half the capacity of its East-West pipeline within days, with a full return to operations anticipated within six weeks. To maintain supply in the interim, the kingdom is rerouting a portion of its crude exports through the Strait of Hormuz. By utilizing shuttle vessels to transport crude through the strait before loading tankers waiting outside, Saudi Arabia is effectively limiting its fleet's exposure to potential Iranian attacks.
Diplomatic pressure is also mounting behind the scenes. Reports indicate that China urged Iran to help restrain Houthi militants following an appeal from Riyadh, responding to the rebel group's intensified attacks on Saudi energy facilities. Concurrently, President Donald Trump stated he is evaluating whether to resume military attacks on Iran, speaking ahead of an upcoming meeting with Gulf leaders in New York.
Lower oil and gas prices temper post-Fed bond sell-off
Strategists at Societe Generale note that the bond market “received a helping hand from lower oil and gas priced at the open this morning” after a report by Axios that the US plans to resume Iran-related negotiations with Gulf States next week. They point out that “sellers initially pounced on the hawkish Fed hike last night,” with “10y UST yields dipped to 4.94% as risk assets retreated on the upward revision of the dot plot and the neutral rate, before recovering to 5.02% in Asia.”
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.
On Friday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.7521 compared to the previous day's fix of 6.7580 and 6.7065 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.
- USD/JPY regains positive traction as the JPY weakens after Japan’s CPI report for August.
- Expectations of a more hawkish BoJ might hold back JPY bears from placing fresh bets.
- Softer US bond yields undermine the USD and further contribute to capping spot prices.
The USD/JPY pair attracts fresh buyers during the Asian session on Friday and currently trades above the 156.00 mark, near a two-week high as traders await the outcome of a two-day Bank of Japan (BoJ) meeting.
The Japanese Yen (JPY) weakens a bit after data released from Japan showed that the headline Consumer Price Index (CPI) held steady at 1.9% YoY, while the core inflation unexpectedly eased to 1.7% in August. Moreover, the core CPI, which excludes both fresh food and energy prices, remained below the central bank's 2% target, tempering expectations of a more hawkish BoJ and providing a modest lift to the USD/JPY pair.
Nevertheless, traders are still pricing in a greater chance of a follow-through up move in December after the widely expected BoJ rate hike this Friday. Hence, BoJ Governor Kazuo Ueda's comments during the post-meeting press conference will be scrutinized regarding the precise timing and pace of future tightening. The outlook, in turn, will play a key role in driving the JPY and provide a fresh impetus to the USD/JPY pair.
Meanwhile, Federal Reserve (Fed) Chair Kevin Warsh’s focus on inflation calmed the recent selloff in the fixed-income market, dragging US bond yields away from multi-year highs. This keeps US Dollar bulls on the back foot, which, in turn, might keep a lid on any further upside for the USD/JPY pair heading into the key central bank event. Spot prices, however, seem poised to register gains for the first time in three weeks.
USD/JPY 4-hour chart
Technical Analysis
The USD/JPY pair maintains a capped tone below the 100-period Simple Moving Average (SMA) on the 4-hour chart and the 50.0% Fibonacci retracement. The cluster of overhead levels suggests rallies are vulnerable to selling interest while the recent bounce off lower levels looks more like consolidation within a broader corrective phase than a decisive bullish continuation.
Meanwhile, initial resistance is seen at the 100-period SMA at 156.44, followed closely by the 50.0% retracement at 156.60, while further barriers align at the 61.8% level at 157.48 and then 158.74 and 160.35. On the downside, immediate support is located at the 38.2% Fibo. retracement at 155.71, ahead of the 23.6% level at 154.62, with a deeper bearish extension pointing toward the structural anchor around 152.85.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
National CPI ex Food, Energy (YoY)
Japan’s National Consumer Price Index (CPI), released by the Statistics Bureau of Japan on a monthly basis, measures the price fluctuation of goods and services purchased by households nationwide. The YoY reading compares prices in the reference month to the same month a year earlier. The gauge excluding food and energy is widely used to measure underlying inflation trends as these two components are more volatile. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.
Read more.Last release: Thu Sep 17, 2026 23:30
Frequency: Monthly
Actual: 1.7%
Consensus: -
Previous: 1.8%
Source: Statistics Bureau of Japan
- EUR/USD posts modest gains near 1.1480 in Friday’s early Asian session.
- Easing Treasury yields and a pullback in oil weigh on the US Dollar.
- ECB policymakers see risk of higher inflation.
The EUR/USD pair trades with mild gains around 1.1480 during the early Asian session on Friday. The US Dollar (USD) edges lower against the Euro (EUR) amid lower US Treasury yields and moderating oil prices. Federal Reserve (Fed) Governor Michelle Bowman is set to speak later on Friday.
The 10-year US Treasury yield fell eight basis points (bps) to 4.94% from the previous session. The move was aided by a further drop in oil prices from their highest levels since mid-May. Though the Fed delivered hawkish expectations for now, it might still not raise rates as aggressively as the market expects, making the Greenback vulnerable to any disappointment.
Fed policymakers project one more rate hike later this year and a hold in 2027, while traders are pricing in more than one additional increase in 2026 and roughly three more by the end of 2027.
The European Central Bank (ECB) decided to raise its key deposit rate by 25 bps to 2.50% from 2.25% in a move widely expected by investors. The central bank reiterated it won’t pre-commit to further steps after raising rates for a second time since the Iran war started.
ECB President Christine Lagarde warned that the Middle East conflict and recent developments in Russia’s war on Ukraine will keep headline inflation “well above target” the central bank’s 2% target for an extended period.
Euro inflation steadies as ECB hawkish tone keeps rate hike odds alive
Strategists at Scotiabank note that the latest euro area inflation data did little to shift the policy narrative, with the “final euro area CPI release offered little in terms of surprise, with headline inflation remaining in the low 3% area and core hovering in the mid-2% range.” Against this backdrop, they highlight that “messaging from the ECB remains hawkish,” and that markets are now “pricing just over 50% chance of a hike in October with a cumulative 36bpts of tightening by December,” reinforcing expectations that policymakers may still deliver additional tightening before year-end.
Technical Analysis: EUR/USD keeps a bearish vibe under the 100-day SMA
In the daily chart, EUR/USD retains a bearish near-term bias as spot remains below the 100-day simple moving average (SMA) and the Bollinger middle band. Price hovers just above the lower Bollinger band, hinting at downside pressure, while the Relative Strength Index (14) at 35.35 stays close to the oversold threshold, suggesting that selling momentum is still present but not yet extreme.
On the topside, initial resistance is seen at the 100-day SMA at 1.1550, followed by the Bollinger middle band around 1.1595, with a stronger cap at the upper Bollinger band near 1.1715. On the downside, immediate support is aligned with the lower Bollinger band at 1.1475, and a sustained break beneath this floor would likely open the way to further losses in the pair.
(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.
- The Bank of Japan is set to hike interest rates to 1.25%, the highest level in 31 years.
- Higher inflation, strong GDP data and pressure from the US administration are pushing the BoJ to step up its tightening pace.
- The US Dollar has pared some losses this week, fuelled by the Fed’s hawkish monetary policy stance.
The Bank of Japan’s (BoJ) monetary policy meeting will close a week packed with central bank decisions on Friday, with markets particularly interested in confirming expectations of a hawkish shift that has boosted a strong Japanese Yen (JPY) recovery in September.
Futures markets are practically fully pricing a quarter-point rate hike this time, which would push the BoJ’s benchmark interest rate to its highest level in about 31 years, amid higher inflation, rising wages, and pressure from US Treasury Secretary Scott Bessent.
The Japanese central bank will follow the Federal Reserve (Fed) and the European Central Bank (ECB) in tightening monetary policy as the war in the Middle East fuels global inflation. The Strait of Hormuz remains practically closed, and recent developments threaten the Red Sea alternative route, pushing Brent Oil prices above $100 and spurring serious concerns about supply disruptions.
What to expect from the BoJ interest rate decision?
Barring a highly unlikely surprise, the Bank of Japan will raise its benchmark interest rate from 1% to 1.25% on Friday, drawing monetary policy closer to levels the bank considers neutral for the Japanese economy. The decision is likely to obtain the support of the broad majority of the Policy Board, with recently appointed committee member Toichiro Asada likely to dissent, as he did at June’s meeting.
Rising inflationary pressures, among other reasons, have prompted the BoJ to accelerate its monetary tightening pace. So far, the bank has kept a semi-annual hiking pace, while September’s rate increase, if confirmed, would follow a previous one in June. Markets have speculated on a half-point rate hike, but considering the cautious approach to monetary policy of the Japanese central bank, that option seems out of the question.
Japan’s Consumer Price Index (CPI) data from July revealed that prices grew at their fastest pace in the last seven months, reaching 1.9%, just below the BoJ’s 2% target for price stability. Beyond that, wages have continued rising, which hints at stronger price pressures in the near-term, altogether heightening the risk that the central bank might fall behind the inflation curve if it sticks to the gradual tightening path seen hitherto.
Japan’s broader economic outlook remains supportive too. The Gross Domestic Product (GDP) beat expectations in the second quarter, with a 1.4% annualised growth, providing fairly favourable conditions for some monetary tightening.
Against this backdrop, investors are waiting for the bank to deliver a clear message outlining a firmer monetary policy normalisation cycle ahead. This would come after less-than-subtle pressures from the US administration, following an exceptional coordinated intervention between the US and Japan in Forex markets that halted a long-lasting Yen decline in late July.
Analysts at ING, however, warn that the market might be overestimating BoJ’s hawkishness, arguing that Japan’s “aggressive pro-growth strategy” will act as a brake on any rapid shift to tighter policy by the BoJ. They note that the government “will no doubt express its views against a more aggressive tightening cycle,” adding that it is “hard to see government officials backing a much faster tightening cycle of either a 50bp hike in September or back-to-back hikes in September and October.”
How could the Bank of Japan's monetary policy decision affect USD/JPY?
USD/JPY is showing a 2.5% decline in September so far, as a series of hawkish comments by BoJ officials has prompted traders to ramp up bets on a steeper BoJ tightening cycle. This has triggered a massive short covering in Japanese Yen, with large speculators flipping their net positioning to long JPY for the first time since February.
The US Dollar (USD) has managed to regain some ground this week. The Federal Reserve (Fed) provided a fresh boost to the Greenback on Wednesday by hiking interest rates and pointing to further tightening in coming months, but the broader near-term bias remains bearish.
The USD/JPY pair has returned above the neckline of a bearish Head & Shoulders (H&S) pattern, following a post-Fed rally, but is struggling to get past a previous support-turned-resistance at the 156.75 area, which keeps the broader bearish structure in place. Momentum indicators on the daily chart endorse the bearish view, as the Relative Strength Index (RSI) remains below the 50 level and the Moving Average Convergence Divergence (MACD) is below zero, suggesting rallies are likely to find sellers.
Bulls should confirm above the mentioned H&S neckline at 155.20 and the September 4 high at 156.76 to clear the path towards the area between the previous support zone around 158.00 and the 200-day Simple Moving Average (SMA), at 158.41.
A reversal below 155.20, on the contrary, would confirm the H&S formation, adding pressure towards the 2026 lows near 152.00. The H&S’s measured target lies around the October 2025 lows, at 146.60.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Economic Indicator
BoJ Interest Rate Decision
The Bank of Japan (BoJ) announces its interest rate decision after each of the Bank’s eight scheduled annual meetings. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and raises interest rates it is bullish for the Japanese Yen (JPY). Likewise, if the BoJ has a dovish view on the Japanese economy and keeps interest rates unchanged, or cuts them, it is usually bearish for JPY.
Read more.Next release: Fri Sep 18, 2026 03:00
Frequency: Irregular
Consensus: 1.25%
Previous: 1%
Source: Bank of Japan
Iran's Islamic Revolutionary Guard Corps (IRGC) said on Thursday that a Togo-flagged oil tanker was struck while attempting to make an “illegal passage” through the Strait of Hormuz, Arab news reported.
The IRGC added the tanker came to a halt after catching fire. The Iranian military also stated that it still controls the critical waterway and will not allow the passage of any aggressor.
US President Donald Trump said on Thursday that he was approaching a major decision on whether to resume large-scale attacks on Iran, as Washington weighs how to bring the months-long war to an end, according to Axios.
The United Kingdom Maritime Trade Operations (UKMTO) said on Thursday that a report has been received of a security incident in the Strait of Hormuz 16 nautical miles northeast of Khasab, Oman.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 1.12% on the day at $96.40.
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) Governor Michele Bullock said on Friday that risks to outlook were skewed to the upside at August board meeting.
Meanwhile, RBA Deputy Governor Andrew Hauser stated that the board fully committed to reaching inflation target.
Key quotes
Various indicators indicate labor market conditions stay near, but slightly tighter than, full employment.
At August board meeting, risks to outlook were skewed to the upside.
Developments since then indicate that while growth in the Australian economy is slowing, some upside risks to inflation seem to be materializing.
Liaison program shows many firms are passing on higher input costs.
Recent figures broadly align with expectation of demand growth easing in H1 2026.
Housing market conditions have softened, larger-than-expected easing could weigh on economic activity.
Key question is whether monetary tightening to date will be enough to return inflation to target in reasonable time.
Monetary policy positioned to address developments with focus on price stability and full employment.
Lowering inflation is crucial.
Navigating a world with prolonged elevated oil prices.
Companies now more likely to transfer cost hikes.
Decline in housing prices isn't that significant overall.
Considering if policy is tight enough.
Broad agreement that neutral interest rate has increased.
Inflation risks tilted to the upside.
Difficult to see past ongoing inflation shocks.
Market reaction
At the time of writing, the AUD/USD pair is trading 0.37% higher on the day to trade at 0.7113.
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.
Japan’s National Consumer Price Index (CPI) climbed by 1.9% YoY in August, compared to the previous reading of 1.9%, according to the latest data released by the Japan Statistics Bureau on Friday.
Further details unveil that the National CPI ex Fresh food arrived at 1.7% YoY in August versus 1.8% prior. The figure came in below the market consensus of 1.8%.
CPI ex Fresh Food, Energy rose 1.7% YoY in August compared to the previous reading of 1.8%.
Market reaction to Japan’s National CPI data
At the time of writing, the USD/JPY pair is down 0.15% on the day at 156.03.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- Gold price recovers to around $4,345 in Friday’s early Asian session.
- Oil prices extended their fall into a second straight day, easing inflation concerns.
- The Fed raised rates on Wednesday and flagged more hikes in the coming months.
Gold price (XAU/USD) rises to near $4,345 during the early Asian session on Friday. The precious metal rebounds from a six-week low amid falling oil prices and a weaker US Dollar (USD). Traders continue to assess the latest Federal Reserve (Fed) rate hike and policy cues.
Crude oil prices dropped to a one-week low on signs that supply disruptions in the Middle East could ease, with Saudi Arabia seeking to partially restore flows through a key pipeline.
Additionally, US President Donald Trump is expected to meet Gulf leaders on the sidelines of the UN General Assembly in New York next Tuesday to discuss the next steps in the Iran war. These developments have eased inflation concerns and could provide some support to the yellow metal in the near term.
“We’ve been tied very closely to an inverse relationship with energy prices based on those inflationary pressures ... Energy prices are down fairly dramatically today. So it’s these lower energy prices that are removing some of that pressure on the gold market,” said David Meger, director of metals trading at High Ridge Futures.
On the other hand, the prospect of further US interest rate hikes could exert some selling pressure on the Gold price. Higher interest rates typically weigh on gold because the precious metal does not pay interest, making yield-bearing assets relatively more attractive.
The US Federal Reserve (Fed) on Wednesday raised the interest rate by 25 basis points (bps) to the range of 3.75% and 4.00%, and Fed officials’ projections still point to at least one more increase this year.
Traders are now pricing in nearly a 53.1% chance of another US rate hike when the central bankers meet next in October, compared with nearly 44% a day ago, according to the CME FedWatch tool.
Gold retreats as stronger USD and higher US yields weigh on sentiment
Strategists at OCBC note that gold “reversed lower after the FOMC as the stronger USD and rise in UST yields weighed on sentiment,” with “the 2y yield came close to 4.75% while the 10y returned to around 5%, keeping the opportunity-cost channel firmly in focus.” They add that “near term, elevated yields and a firmer USD may continue to cap gold, but the Fed outcome does not necessarily undermine the broader mediumterm case.” With “a fairly hawkish rate path already in the price,” OCBC argues that “softer US data could pull yields and the dollar lower again,” potentially restoring support for the metal over the medium term.
Technical Analysis: Gold holds above the 100-day SMA, with neutral RSI momentum
In the daily chart, XAU/USD holds a constructive near-term bias, with price above the 100-day moving average (MA) and comfortably above the lower Bollinger Band, suggesting buyers still defend the broader uptrend. However, the latest Bollinger middle band sits overhead as immediate resistance, while the Relative Strength Index (RSI) at 48.58 hovers near neutral, hinting at a consolidative phase rather than a strong directional push.
On the topside, initial resistance is located at the Bollinger simple moving average (SMA) center line near $4,435, followed by the upper Bollinger Band around $4,678, where upside momentum could start to look stretched. On the downside, soft support emerges at the 100-day MA around $4,325, with a deeper bearish extension likely finding demand closer to the lower Bollinger Band near $4,190, a zone that would need to hold to preserve the current bullish structure.
(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.
- AUD/USD rebounds from 50- and 100-day SMA confluence.
- Lower Oil prices ease Dollar support after Fed hike.
- Bullock speech may reshape RBA expectations after Fed tightening.
The Australian Dollar recovered some ground versus the US Dollar on Thursday, following the Federal Reserve’s monetary policy decision on Wednesday, which witnessed a 0.25% rate hike and paved the way for further tightening. The AUD/USD trades at 0.7110 after bouncing off the confluence of the 50- and 100-day SMAs.
AUD/USD rebounds from key SMAs as easing Oil tensions pressure Dollar
During the day, market mood turned optimistic on a potential de-escalation of the Middle East conflict. Consequently, Oil prices drifted lower, weakening the Greenback due to its close correlation as Saudi Arabia reported its crude production would return to half capacity within days.
The US Dollar Index (DXY), which tracks the performance of the US currency against six other currencies, is down 0.10%, at 100.23, a day after the Fed raised rates for the first time in three years.
Fed Chair Warsh stated, “The fact is that inflation remains too high and persistent." The Fed's dot plot, which shows officials' interest rate outlooks, indicates the Fed funds rate is around 4.10%, implying another rate hike may occur soon. This aligns with inflation forecasts, as the Personal Consumption Expenditures (PCE) index is projected to stay at 3.7% this year and gradually approach the Fed’s 2% target by 2028.
Money markets had priced in a 53% chance of another rate hike at the October meeting, according to Prime Terminal.
The US economic report indicated that for the week ending September 12, jobless claims decreased notably from 206K to 196K, beating the forecast of 208K. Eyes shift for Friday’s speech of Fed Governor Bowman and the release of Industrial Production data for August.
In Australia, the economic docket was absent, yet the Reserve Bank of Australia (RBA) Governor Michele Bullock is expected to cross the wires at 00:00 GMT.
AUD/USD Price Forecast: Technical outlook
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.
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