Forex News
TD Securities notes the Bank of Canada (BoC) kept its policy rate at 2.25% and softened guidance by removing references to both rate-cut risks and consecutive hikes. Markets interpreted the statement as mildly dovish, but prior moves limited volatility. The analysts judge a balanced BoC outlook offers little immediate support to the Canadian Dollar (CAD), though improving data could later help USD/CAD move lower.
Balanced BoC seen limiting CAD gains
"The Bank of Canada held rates at 2.25% and watered down its guidance by removing the reference to both the risk of rate cuts and consecutive hikes going forward."
"Markets took the statement mildly dovishly, but yesterday's move tempered any large swings."
"A balanced BoC outlook does not do much for the CAD."
"Stabilization in Canadian data should allow USD/CAD to eventually retrace below 1.40."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Rabobank’s Bas van Geffen expects the ECB to keep the deposit rate at 2.25% in July, judging a hike as a tail risk that would require a much stronger energy shock. The re-escalation of the Iran war shifts risks toward higher inflation, but policymakers are seen preferring to wait for September, when Rabobank still forecasts one additional hike.
Upside risks but July hike unlikely
"New uncertainty about the situation in the Middle East has revived rate hike expectations for the second half of the year. A lot can still happen in the week until the policy meeting, but we believe that the Governing Council prefers to wait for September. The chance of a hike next week is nonzero, but this would require a substantially stronger energy shock in the coming days."
"The re-escalation of the Iran war gives new impetus to upside inflation risks. This may embolden some of the hawks to push for a follow-up hike, but we believe most policymakers are probably not in a hurry to hike again."
"We acknowledge that there is a significant tail risk of a rate hike next week, but we still prefer to fade these odds. Some of the more hawkish policymakers may contend that the escalation in the Middle East warrants another rate hike."
"So, if anything, we would argue that the re-escalation in the Middle East adds upside risks to our projections for policy rates in 2026Q4."
"We still have a single follow-up rate hike pencilled in for September. That may be insufficient if energy price pressures worsen, but this is a risk scenario and not our baseline."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
BNY’s Geoff Yu says iFlow Carry is beginning to resemble its 2023 upswing. Neutral positioning in carry currencies, including those funded in the dollar, leaves room for exposures to rebuild. G10 FX attracted broad inflows, while EM FX selling was led by HUF, ZAR and KRW.
Carry rebuild and G10 inflows
"iFlow Carry resembles the heyday of 2023. In June, we highlighted that iFlow Carry had moved into statistically significant negative territory, which could signal improved risk appetite ahead. That analysis was based purely on flows, and we continue to take the view that a period of positive significance, where flows align with yield, is possible."
"Neutral holdings create room for carry to rebuild. Because carry currencies offer high yields relative to funders, including the dollar, their holdings stance usually remains in positive statistical significance. The group rarely stays neutral for long unless risk conditions are exceptional."
"Putting this view into practice means that carry can broaden beyond Latin America FX – the only region which has held onto positive holdings through the year. We favor selective EM APAC high-yielders where balance-of-payments relief provides support for real rates, and use EMEA duration as the cleaner expression where FX remains constrained."
"Flows diverged across regions. G10 currencies attracted broad inflows, while EM FX saw moderate selling, led by HUF, ZAR and KRW."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Silver falls nearly 2% as renewed geopolitical tensions weigh on investor sentiment.
- Higher Energy prices reinforce expectations of persistent inflation and tighter monetary conditions.
- Softer US inflation data continues to curb the most hawkish Federal Reserve expectations.
Silver (XAG/USD) falls toward $56.70 at the time of writing on Thursday, down 1.85% on the day. The white metal comes under selling pressure as renewed tensions between the United States (US) and Iran drive energy prices higher, reviving concerns about persistently elevated global inflation.
Higher Oil prices are fueling expectations that inflation could remain above central bank targets for longer. This scenario prompts investors to anticipate tighter monetary conditions for an extended period, an environment that is generally unfavorable for non-yielding assets such as Silver.
Geopolitical concerns intensified after US President Donald Trump threatened to expand attacks on Iranian infrastructure if Tehran refuses to return to the negotiating table. Meanwhile, the suspension of crude loading operations at several Iraqi terminals following a drone-related incident has heightened fears of global Oil supply disruptions, providing additional support to energy prices.
At the same time, recent US inflation data is helping to limit Silver's downside. The latest Consumer Price Index (CPI) and Producer Price Index (PPI) reports for June showed a further moderation in price pressures, prompting markets to scale back expectations of additional monetary tightening by the Federal Reserve (Fed).
According to the CME FedWatch tool, the chance of a Fed interest rate hike at the July meeting has fallen to around 10%, down from above 30% a week ago. The decline in hawkish expectations is limiting downside pressure on precious metals, even as energy-driven inflation concerns continue to weigh on market sentiment.
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.
ING’s Chris Turner highlights a powerful short squeeze in Sterling, triggered by reports that Shabana Mahmood could become Andy Burnham’s chancellor, a choice seen as less fiscally expansive. Speculators had held their shortest Pound positions since 2017, and Turner sees scope for EUR/GBP to test 0.8400 after a sustained break of 0.8470, with GBP/USD eyeing 1.3600–1.3650.
Short squeeze drives Sterling higher
"The sterling short squeeze continues. The catalyst for EUR/GBP to break below 0.8500 yesterday was reports that Shabana Mahmood would be Andy Burnham’s pick for chancellor when he likely comes to power next week. Mahmood is seen to the right of the Labour Party and a less divisive – and potentially less fiscally expansive – candidate for chancellor than Ed Miliband. 10-year UK gilts outperformed German Bunds by around 5bp yesterday."
"The strength of the sterling rally looks more a function of position adjustment rather than a massive re-assessment of the prospects for UK PLC, however. Positioning data from US futures exchanges had recently shown speculators running the shortest sterling positions since 2017."
"It may be difficult to stand in the way of the sterling rally in the short term, where a sustained break of 0.8470 opens up 0.8400 for EUR/GBP, while GBP/USD could make a run at 1.3600/3650. And next week looks a big one for UK inputs, with Burnham taking the reins and both CPI and jobs data released."
"Yet when position-adjustment activity fades and investors return to the UK macro/Bank of England story, EUR/GBP should be able to retest the recent break-out area around 0.8600/8610. That may be a story for much later this month."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold struggles as higher energy prices keep inflation concerns alive despite soft US CPI and PPI data.
- US Retail Sales, Initial Jobless Claims and speeches from Fed officials take centre stage on Thursday.
- Technically, XAU/USD is locked in the $4,000-$4,200 range, with sellers holding the upper hand.
Gold (XAU/USD) edges lower on Thursday as traders look past back-to-back softer-than-expected US inflation reports and remain focused on renewed Middle East tensions, which are fueling concerns that higher energy prices could reignite inflationary pressure.
At the time of writing, XAU/USD trades around $4,028, down 0.80% on the day.
Both the US Consumer Price Index (CPI) and Producer Price Index (PPI) reports for June came in below market expectations. The softer readings reduced the chances of an imminent Federal Reserve (Fed) interest rate hike, but Gold struggled to gain traction as traders continued to debate whether the Fed could still tighten policy later this year.
Fed officials continue to stress the need to bring inflation sustainably back to the 2% target while noting that the labor market appears to have stabilized. This suggests that the central bank could raise interest rates later this year if inflation proves more persistent.
Elevated borrowing costs reduce Gold's appeal as investors seek higher returns from interest-bearing assets.
Against this backdrop, Gold retains a downside bias, though it has traded broadly between $4,000 and $4,200 in recent weeks after falling to $3,941 in June, its lowest level since November 2025.
Next on the US economic docket are Retail Sales and Initial Jobless Claims data, due at 12:30 GMT. Speeches from Fed officials Lorie Logan and Jeffrey Schmid later in the day will also be watched.
On the geopolitical front, the US carried out a fifth consecutive night of strikes against Iranian targets, while Tehran responded by targeting US assets in Kuwait, Bahrain and Jordan.
Iran also said it would not allow Washington to interfere in the Strait of Hormuz, calling it a "red line." Meanwhile, The Wall Street Journal reported on Wednesday that US President Donald Trump was leaning towards expanding military operations.
Technical analysis: Sellers retain control as XAU/USD struggles below $4,200
On the daily chart, XAU/USD keeps a bearish bias as it remains well below the 200-day Simple Moving Average (SMA) at $4,495 and the 100-day SMA at $4,548.
Price is holding within a downward parallel channel, trading beneath its upper boundary around $4,200, while momentum is mixed. The Relative Strength Index (RSI) near 40 leans slightly bearish, while the Moving Average Convergence Divergence (MACD) remains positive, yet with declining histogram bars, hinting that any rebound would still face structural headwinds overhead.
On the topside, immediate resistance is clustered around $4,200, where the horizontal cap and the channel’s upper line converge, before the more significant barriers at the 200-day SMA near $4,496 and the 100-day SMA close to $4,548.
On the downside, initial support appears at the $4,000 horizontal level, with a deeper cushion at the channel floor around $3,800.
(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.
Brown Brothers Harriman’s (BBH) Elias Haddad reports USD/CAD is consolidating losses after benign United States (US) Consumer Price Index (CPI) and Producer Price Index (PPI) data, with the Bank of Canada (BoC) leaving its policy rate unchanged at 2.25% for a sixth meeting. Updated BoC projections show core inflation near 2% and slowing Gross Domestic Product (GDP) growth, suggesting scope for markets to pare roughly 50 bps of priced tightening as Canada’s economy remains in excess supply.
Benign outlook tempers BoC tightening bets
"USD/CAD is consolidating this week’s losses triggered by the benign US June CPI and PPI inflation reports."
"As was widely expected, the Bank of Canada (BoC) left the policy rate on hold at 2.25% for a sixth straight meeting yesterday."
"The updated projections suggest the BoC is in no rush to start raising rates. Core inflation is seen averaging 2% y/y over Q3, and real GDP growth is projected to cool from an annualized pace of 2.5% q/q in Q2 to 1.5% in Q3."
"Bottom line, there is room for BoC rate hikes bets (50bps in the next twelve months) to adjust lower against CAD as the Canadian economy remains in excess supply."
"Notably, the BoC may have taken a page from Fed Chair Kevin Warsh’s playbook and stepped back from forward guidance."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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