Forex News
- USD/CAD steadies after the recent slide to a two-month low as traders keenly await the US CPI report.
- Rising crude oil prices continue to underpin the Loonie and keep a lid on further gains for the pair.
- The US-Iran standoff and Fed-hike bets support the safe-haven USD, and limit losses for spot prices.
The USD/CAD pair ticks higher during the Asian session on Wednesday, snapping a three-day losing streak to the 1.3915 area or its lowest level since June 10. Spot prices, however, lack bullish conviction and trade around 1.3930, awaiting the release of the latest US inflation figures.
The crucial US Consumer Price Index (CPI), due later today, and the Producer Price Index (PPI) on Thursday will be looked for fresh cues about the US Federal Reserve's (Fed) future policy path. The outlook, in turn, will play a key role in influencing the US Dollar (USD) demand in the near term and providing a fresh impetus to the USD/CAD pair. In the meantime, a combination of diverging forces might hold back traders from placing aggressive bullish bets or positioning for any meaningful appreciation.
Crude oil prices shot to a one-and-a-half-week high on Tuesday after an advisor to Iran’s Supreme Leader Mojtaba Khamenei said that the Strait of Hormuz will not be opened until the US meets Tehran's demands. Adding to this, Iran-backed Houthi rebels in Yemen escalated attacks on vessels in the Red Sea and Bab el-Mandeb Strait, targeting Saudi ships. This keeps war-risk premiums in play and acts as a tailwind for the black liquid, which should underpin the commodity-linked Loonie.
Meanwhile, investors remain worried that elevated energy prices will rekindle inflationary pressures and force the US central bank to adopt a more hawkish stance. According to CME Group's FedWatch Tool, traders are currently pricing in over a 75% chance that the Fed will raise borrowing costs by the end of this year. This, along with persistent geopolitical uncertainties, lends some support to the safe-haven Greenback and helps limit the downside for the USD/CAD pair, warranting caution for bears.
USD/CAD daily chart
Technical Analysis
The USD/CAD pair sits just above the 100-day Simple Moving Average (SMA) at 1.3919 and the 50.0% Fibonacci retracement of the May-June rally, suggesting underlying demand after the recent pullback. On the topside, initial resistance emerges at the 38.2% Fibo. retracement at 1.3980, followed by the denser barrier at the 23.6% retracement near 1.4081, ahead of the cycle high anchor at 1.4244.
That said, a break below the 100-day SMA and the 50.0% retracement at 1.3898 would make the USD/CAD pair vulnerable to test the 61.8% level at 1.3817 and subsequent Fibonacci supports at 1.3701 and 1.3553.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- NZD/USD depreciates as safe-haven demand buoyed the US Dollar amid mounting uncertainty over Middle East peace talks.
- Markets remain divided on a September Fed rate hike ahead of critical inflation data releases.
- Traders expect a September RBNZ rate hike, while PM Luxon survives a leadership challenge ahead of elections.
NZD/USD continues its losing streak for the third consecutive day, trading around 0.5870 during the Asian hours on Wednesday. The pair depreciates as the US Dollar (USD) gains ground on increased safe-haven demand amid rising uncertainty surrounding Middle East peace talks.
Pakistan’s defence minister indicated that Washington and Tehran were approaching an agreement regarding the Strait of Hormuz, alongside reports that parallel negotiations between Iran and Oman had reached an advanced stage. However, US President Donald Trump insisted that Tehran must pay reparations to the victims of attacks associated with the Islamic Republic, injecting renewed caution into the markets.
Traders are likely observing the upcoming inflation report closely due later in the day, as it is expected to play a major role in shaping the Federal Reserve’s (Fed) next interest rate decision.
Dollar outlook hinges on US inflation and Fed rate stance
Analysts at Commerzbank highlight that, in the US, "the focus is on whether inflation is falling quickly enough to prevent the Fed from raising interest rates," a dynamic they see as central to the medium‑term Dollar outlook and the trajectory of US yields.
Market expectations remain divided over the central bank's rate trajectory following its decision to hold rates steady in July. Although rising crude oil prices have fueled arguments for a more aggressive policy stance, odds for a 25-basis-point Fed rate hike in September have softened slightly, dropping to nearly 48% according to the CME FedWatch Tool, down from 52% the previous day.
Markets remain set on a September rate hike from the Reserve Bank of New Zealand as policymakers signal further tightening to withdraw monetary stimulus and keep inflation contained.
On the political front, Prime Minister Christopher Luxon survived a second leadership challenge in four months. Following a three-hour party meeting in Wellington, Luxon confirmed he retains the full backing of his MPs with 87 days remaining until the general election.
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.
- AUD/USD weakens as markets remain divided on a September Fed rate hike ahead of critical inflation data releases.
- Despite rising oil prices, odds for a September Fed rate hike fell from 52% to nearly 48%.
- MUFG and Westpac warn energy risks could trigger RBA hikes, while NAB expects rates held until mid-2027 cuts.
AUD/USD depreciates after registering modest gains in the previous day, trading around 0.7060 during the Asian hours on Wednesday. The currency pair loses ground as the US Dollar (USD) rises ahead of a crucial inflation report. Traders are closely watching this upcoming reading, as it is expected to play a major role in shaping the Federal Reserve’s (Fed) next interest rate decision.
Market expectations remain divided over the central bank's rate trajectory following its decision to hold rates steady in July. Although rising crude oil prices have fueled arguments for a more aggressive policy stance, odds for a 25-basis-point Fed rate hike in September have softened slightly, dropping to nearly 48% according to the CME FedWatch Tool, down from 52% the previous day.
The Greenback receives support from geopolitical uncertainty surrounding a potential diplomatic deal between the US and Iran. Market sentiment briefly improved after Pakistan’s defence minister indicated that Washington and Tehran were approaching an agreement regarding the Strait of Hormuz, alongside reports that parallel negotiations between Iran and Oman had reached an advanced stage. However, US President Donald Trump insisted that Tehran must pay reparations to the victims of attacks associated with the Islamic Republic, injecting renewed caution into the markets.
The Reserve Bank of Australia unanimously held the cash rate at 4.35% in August, but major forecasters split on the outlook. MUFG warns that surging energy prices driven by US-Iran tensions and the closure of the Strait of Hormuz threaten a global inflation shock, potentially forcing an RBA hike as early as September. Westpac calls it a "hawkish hold," arguing softer domestic data weakened the explicit tightening bias, though rising energy risks leave a late-year hike on the table. Conversely, NAB views conditions as sufficiently restrictive, forecasting steady growth and a hold through 2026 before mid-2027 cuts.
RBA tightening weighs as Australia data momentum cools
BNY’s Wee Khoon Chong highlights that the domestic backdrop has turned more challenging, with “financial conditions have tightened, consumer spending is slowing gradually, housing momentum has softened, and labor market conditions have eased a little more than expected.” Against that softer tone in activity, Chong notes the RBA still characterizes policy as somewhat restrictive and expects inflation to return to the midpoint of its target only by late 2027, reinforcing a cautious outlook for the Aussie and AUD/USD.
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.
- USD/JPY looks to build on its recent strong recovery amid a combination of supporting factors.
- The wide rate gap between Japan and other major economies keeps the JPY carry trade active.
- Japan’s fiscal woes further weigh on the JPY and support the pair ahead of the US CPI report.
The USD/JPY pair touches a one-and-a-half-week high during the Asian session on Wednesday, with bulls now looking to build on the momentum further beyond mid-159.00s amid a supportive fundamental backdrop.
The initial surge led by the first US-Japan joint intervention since 1998 has largely faded as the wide rate gap between Japan and other major economies keeps the so-called carry trade active, undermining the Japanese Yen (JPY). Furthermore, Prime Minister Sanae Takaichi's aggressive economic stimulus and tax cuts have raised concerns about Japan's worsening fiscal condition. This, along with economic risks stemming from the continued energy disruptions due to the Iran war, continues to weigh on the JPY and acts as a tailwind for the USD/JPY pair.
Meanwhile, the Reuters Tankan survey showed that Japanese manufacturers' sentiment index climbed from 13 in the previous month to 18 in August, marking the highest level since March 2026. Adding to this, the gauge for non-manufacturers rose to 28 from 25 in July. Furthermore, traders are also increasingly pricing in the possibility of another Bank of Japan (BoJ) rate hike, with Tokyo Tanshi data showing a 66% chance of a move in September. This, however, does little to impress JPY bulls or dent the underlying strong bullish sentiment surrounding the USD/JPY pair.
The US Dollar (USD), on the other hand, is looking to build on this week's gains amid expectations that higher oil prices would rekindle inflationary pressures and force the US Federal Reserve (Fed) to adopt a more hawkish stance. According to the CME Group's FedWatch Tool, traders are assigning over a 75% chance that the US central bank will raise borrowing costs at least once by the end of 2026. This remains supportive of elevated US Treasury bond yields, which, along with geopolitical uncertainties, support the USD and the USD/JPY pair.
Traders, however, seem hesitant ahead of the crucial US Consumer Price Index (CPI) report, due later today. Apart from this, the US Producer Price Index (PPI) on Thursday will influence market expectations about the Fed's future policy path, which, in turn, will drive the USD demand. Apart from this, further developments surrounding the Middle East crisis should provide some meaningful impetus to the buck and the USD/JPY pair. Nevertheless, the aforementioned factors support prospects for an extension of the pair’s recent strong recovery move from the 155.25-155.20 region, or the lowest since May, set earlier this month.
USD/JPY 4-hour chart
Technical Analysis
The USD/JPY pair sits below the 50.0% Fibonacci retracement level of the post-intervention slump and the 61.8% level at 160.63, which suggests that recent gains are losing traction and that upside attempts are increasingly constrained by overhead supply. On the downside, initial support is seen at the 38.2% retracement at 158.58, ahead of the 23.6% level at 157.31, while a deeper slide would expose the structural anchor near 155.26.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen Price This Month
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this month. Japanese Yen was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.08% | -0.26% | -0.05% | -0.59% | -0.40% | 0.19% | 0.83% | |
| EUR | 0.08% | -0.19% | 0.00% | -0.49% | -0.32% | 0.27% | 0.90% | |
| GBP | 0.26% | 0.19% | 0.24% | -0.28% | -0.13% | 0.47% | 1.12% | |
| JPY | 0.05% | 0.00% | -0.24% | -0.50% | -0.49% | 0.05% | 0.82% | |
| CAD | 0.59% | 0.49% | 0.28% | 0.50% | 0.14% | 0.31% | 1.50% | |
| AUD | 0.40% | 0.32% | 0.13% | 0.49% | -0.14% | 0.62% | 1.27% | |
| NZD | -0.19% | -0.27% | -0.47% | -0.05% | -0.31% | -0.62% | 0.65% | |
| CHF | -0.83% | -0.90% | -1.12% | -0.82% | -1.50% | -1.27% | -0.65% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
- Markets remain divided on a September Fed rate hike ahead of critical inflation data releases.
- Rising oil prices and shifting diplomatic signals over the Strait of Hormuz amplify market volatility.
- Scotiabank says recent Pound movements are largely sentiment-driven, closely tracking risk reversals.
GBP/USD inches lower after remaining flat in the previous day, trading around 1.3500 during the Asian hours on Wednesday. The currency pair continues to hold its losses as the US Dollar (USD) gains strength ahead of a crucial inflation report. Investors are watching this upcoming reading closely, as it is expected to play a major role in shaping the Federal Reserve’s (Fed) next interest rate decision.
Market expectations remain divided over the central bank's rate trajectory following its decision to hold rates steady in July. Although rising crude oil prices have fueled arguments for a more aggressive policy stance, odds for a 25-basis-point rate hike in September have softened slightly, dropping to nearly 48% according to the CME FedWatch Tool, down from 52% the previous day.
Meanwhile, the US Dollar is drawing support from geopolitical uncertainty surrounding a potential diplomatic deal between the US and Iran. Market sentiment briefly improved after Pakistan’s defense minister indicated that Washington and Tehran were approaching an agreement regarding the Strait of Hormuz, alongside reports that parallel negotiations between Iran and Oman had reached an advanced stage.
However, these gains in market optimism were quickly checked by escalating rhetoric from the White House. Taking a firmer position, US President Donald Trump insisted that Tehran must pay reparations to the victims of attacks associated with the Islamic Republic, injecting renewed caution into the markets.
Pound sentiment stays in focus as GBP tracks fading downside protection
Strategists at Scotiabank highlight that recent moves in the Pound remain largely sentiment-driven, pointing to the currency’s “tight correlation to risk reversals, which continue to fade their premium for protection against downside movement.” They note that this shift in options pricing underscores a reduced demand for downside hedges, reinforcing the view that market participants are becoming more comfortable with the current GBP backdrop.
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.
- Gold regains positive traction on Wednesday, though the upside potential seems limited.
- Geopolitical risks and Fed-hike bets support the safe-haven USD, which could cap gains.
- Traders might also opt to move to the sidelines ahead of the crucial US inflation figures.
Gold (XAU/USD) attracts some dip-buyers during the Asian session on Wednesday, stalling the previous day's retracement slide from the $4,435 region, or the highest level since June 5. The commodity, however, remains below the $4,400 mark as traders await key US inflation figures for fresh cues about the US Federal Reserve's (Fed) future policy path before placing fresh directional bets on the non-yielding yellow metal.
Friday's weak US Nonfarm Payrolls (NFP) report pointed to signs of a cooling labor market and undermined the case for the Fed to raise interest rates. Investors, however, remain worried about inflation risks stemming from volatile energy prices, which might force the US central bank to adopt a more hawkish stance. In fact, crude oil prices climbed to a one-and-a-half-week high on Tuesday after an advisor to Iran’s Supreme Leader Mojtaba Khamenei said that the Strait of Hormuz will not be opened until the US meets Tehran's demands.
Adding to this, Iran-backed Houthi rebels in Yemen escalated attacks on vessels in the Red Sea and Bab el-Mandeb, particularly targeting Saudi-linked ships. This led to increased war-risk premiums, which act as a tailwind for crude oil prices and should benefit the safe-haven Greenback. Furthermore, hawkish Fed expectations remain supportive of elevated US Treasury bond yields, further underpinning the buck and warranting caution before positioning for an extension of the XAU/USD pair's strong move up witnessed over the past week or so.
Analysts at Deutsche Bank highlighted that the sharp move in energy markets added to pressure on rates, noting that Brent crude “(+4.99% to $87.72/bbl) rallied past $85/bbl for the first time this month, whilst the 10yr Treasury yield (+6.2bps) unwound the entirety of its decline after Friday’s payrolls with September Fed hike pricing returning to above 50% ahead of tomorrow's CPI.” According to the bank, “that backdrop of higher oil prices and rate hike speculation meant it was a tricky session for sovereign bonds around the world,” with a “consistent picture of yields moving closer back to the highs from late-July.”
XAU/USD daily chart
Technical Analysis
The metal is hovering around the 100-day Simple Moving Average (SMA), though it remains capped beneath a dense band of overhead resistance, starting with the 50.0% Fibonacci retracement of the April-June fall and extending towards the 200-day SMA at $4,500.51, suggesting that bulls need a clear break higher to regain control.
On the downside, immediate support is provided by the 100-day SMA at $4,388.33, with further cushions at the 38.2% retracement at $4,298.48 and the 23.6% level at $4,161.40. A break below the latter could expose the structural floor around $3,939.81.
(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.
The Reserve Bank of Australia (RBA) unanimously held rates at 4.35% in August, but major economic forecasters offer varying takes on what comes next:
- MUFG highlights severe external risks. Spiking Brent crude prices, driven by US pressure on Iran and the closure of the Strait of Hormuz, could trigger a global inflation shock. While the RBA has bought time using softer domestic labor and housing data, MUFG warns that persistent energy costs could force a rate hike as soon as September. Markets have already begun pricing in a full hike by next March.
- National Australia Bank (NAB) focuses on the RBA’s subtle tone shift, noting references to a smaller output gap and "somewhat restrictive" financial conditions. NAB interprets this to mean the RBA believes the domestic economy has cooled sufficiently. Consequently, NAB expects steady quarterly GDP growth (0.3%–0.4%) with rates staying on hold through 2026, followed by a first rate cut around mid-2027.
- Westpac characterizes the decision as a "hawkish hold." Softer inflation and labor market data forced the Board to tone down its explicit tightening bias. While Westpac's base case is an extended pause into mid-next year, it cautions that potential energy-driven pass-through leaves the door open for another rate hike later in the year if upside risks materialize.
- Commonwealth Bank (CBA) expects the RBA to hold rates at 4.35% through 2026, targeting 2027 for two cautious cuts. While disinflation continues, the Board’s warning of potential hikes aims to suppress premature market easing. Upcoming July CPI data will be the immediate test, with a November hike remaining a key upside risk.
On Wednesday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.7882 compared to the previous day's fix of 6.7900 and 6.7430 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 extends its consolidative price move as traders opt to wait for the key US inflation figures.
- Germany’s Harmonized Index of Consumer Prices (HICP) for July could also provide some impetus.
- Geopolitical risks, inflation fears and Fed hike bets underpin the safe-haven USD, capping the pair.
The EUR/USD pair struggles to gain any meaningful traction and holds steady around mid-1.1500s during the Asian session on Wednesday, within a familiar range held over the past week or so. Traders keenly await the release of the key US inflation data and further developments surrounding the Middle East crisis before placing fresh directional bets.
The crucial US Consumer Price Index (CPI), due later today, and the Producer Price Index (PPI) on Thursday will be looked for fresh cues about the US Federal Reserve's (Fed) future policy path. The outlook, in turn, will play a key role in influencing the US Dollar (USD) demand in the near term and providing some meaningful impetus to the EUR/USD pair. In the meantime, oil-driven inflation fears keep Fed rate hike bets on the table, underpinning the buck and capping the currency pair.
Crude oil prices shot to a one-and-a-half-week high on Tuesday after an advisor to Iran’s Supreme Leader Mojtaba Khamenei said that the Strait of Hormuz will not be opened until the US met Tehran's demands. Adding to this, Iran-backed Houthi rebels in Yemen escalated attacks on vessels in the Red Sea and Bab el-Mandeb, particularly targeting Saudi-linked ships. This led to increased war-risk premiums, acting as a tailwind for crude oil prices and the safe-haven Greenback.
Investors remain worried that higher energy prices will rekindle inflationary pressures and force major central banks, including the Fed, to adopt a more hawkish stance. According to the CME Group's FedWatch Tool, traders are pricing in a greater chance that the US central bank will raise borrowing costs by the end of this year. The expectations remain supportive of elevated US Treasury bond yields, which favors USD bulls and should keep a lid on any meaningful upside for the EUR/USD pair.
Traders on Wednesday will further take cues from Germany’s Harmonized Index of Consumer Prices (HICP) for July, though the EUR/USD pair remains at the mercy of the USD price dynamics.
EUR/USD daily chart
Technical Analysis
The EUR/USD pair remains capped beneath the 100-day Simple Moving Average (SMA) at 1.1567 and the 50.0% Fibonacci retracement of the May-June fall, at 1.1562. This suggests that upside attempts are vulnerable while these levels cap the advance. On the downside, initial support aligns with the 38.2% Fibo. retracement at 1.1506, ahead of the 23.6% retracement at 1.1437, where buyers could attempt to stabilize spot prices.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- WTI rises amid conflicting reports over US-Iran diplomacy and Strait of Hormuz talks.
- President Trump demanded reparations from Tehran, countering Iran’s recent compensation demands and stalling optimism.
- API data showed US crude stocks surged by 9.1 million barrels, vastly missing expected draws.
West Texas Intermediate (WTI) oil price extends its gains for the third successive day, trading around $82.70 per barrel during the Asian hours on Wednesday. Crude oil prices advance as investors weigh mixed signals regarding a potential deal between the United States (US) and Iran.
Sentiment received an initial boost after Pakistan’s defence minister suggested that Washington and Tehran are “close to some sort of arrangement” to secure the critical Strait of Hormuz. Adding to the diplomatic momentum, reports indicated that parallel talks between Iran and Oman have also reached an advanced stage.
However, market optimism was tempered by escalating rhetoric from the White House. US President Donald Trump adopted a firmer stance, declaring that Tehran should pay reparations for victims of attacks linked to the Islamic Republic. His comments arrived in direct response to a list of demands issued by Iran over the weekend, which included calls for war compensation following US and Israeli military operations in the region.
Oil risk premium builds as US–Iran tensions escalate over Strait of Hormuz
Analysts at Commerzbank highlight that "hopes for a new agreement between Iran and the US in the near future and for the Strait of Hormuz to be reopened are fading." They note that after Iran set out its conditions for reopening the strait at the weekend – including, amongst other things, demands for reparations – US President Trump escalated tensions by responding with "a new demand for compensation payments for the victims of the conflict." This hardening of positions, Commerzbank argues, is helping to entrench the geopolitical risk premium in the energy complex, reinforcing the move in Brent toward USD 90 and gas oil toward nearly USD 1,350 per ton, and tightening the backdrop for European diesel markets despite the region not being directly hit.
Compounding the geopolitical uncertainty, US inventory data delivered a bearish surprise. Figures from the American Petroleum Institute (API) revealed that US weekly crude oil stocks jumped by 9.1 million barrels last week, sharply contrasting with the market's expected decline of 0.5 million barrels and marking the largest inventory surge since February.
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.
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