Forex News
- Iran, Saudi Arabia, Pakistan, and Turkey agreed to regional security talks in Tehran to support stability.
- Middle East discussions come ahead of US midterm elections, with potential military strikes against Iran looming if negotiations stall.
- Ongoing regional conflicts with Houthis and Hezbollah keep supply risks elevated despite crude flows recovering to prewar levels.
West Texas Intermediate (WTI) oil price extends its losses for the second successive day, trading around $100.10 per barrel during Asian hours on Tuesday. Crude oil prices fell as renewed diplomatic efforts in the Middle East raised hopes of preventing a wider escalation of the US-Iran conflict.
Following high-level talks held in Tehran, Iran, Saudi Arabia, Pakistan, and Turkey agreed on Monday to continue security discussions and enhance regional cooperation, according to Islamic Republic of Iran Broadcasting (IRIB). A joint statement released after the first meeting between Iran and senior officials representing the Mecca Joint Defence Agreement stated that the four countries had agreed to maintain dialogue and consultations, particularly concerning regional peace, security, and stability.
The discussions come roughly a week before the US midterm elections, after which US President Donald Trump has repeatedly suggested that military strikes against Iran could resume following months of stalled negotiations.
Meanwhile, Saudi-led forces continue to engage Iran-backed Houthi rebels, while Hezbollah is reportedly preparing for another regional conflict in Lebanon after receiving financial support from Iran. These ongoing tensions continue to pose risks to Middle Eastern oil supplies, despite crude flows having recovered to around prewar levels.
TD Securities highlights constructive cta positioning in WTI crude
According to TD Securities, trend-following accounts remain positively aligned with WTI crude, with their CTA Position Tracker highlighting "constructive positioning" in the contract. The bank notes that net long exposure is clustered near recent price levels, with "upside triggers" close by, suggesting systematic traders are poised to add to length should the current trend extend. Scenario analysis around WTI crude further indicates CTAs are prepared to "add or trim exposure as volatility and trend signals evolve through the coming months," underscoring a dynamic, rules-based approach to risk management in the energy complex.
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.
Iran, Saudi Arabia, Pakistan, and Turkey agreed on Monday to continue security discussions and enhance regional cooperation following high-level talks held in Tehran, according to Islamic Republic of Iran Broadcasting (IRIB).
A joint statement released after the first meeting between Iran and senior officials representing the Mecca Joint Defence Agreement stated that the four countries had agreed to maintain dialogue and consultations, particularly on regional peace, security and stability.
The meeting was hosted by Mohsen Rezaei, Secretary of Iran’s Supreme National Security Council, and attended by Saudi Defence Minister Prince Khalid bin Salman, Pakistan’s army chief Asim Munir, and Turkey’s intelligence chief Ibrahim Kalin.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 0.15% on the day at $100.43.
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.
Canadian Prime Minister Mark Carney said on Monday that the country has not changed its position in trade talks with the United States (US). Carney added that any progress made is because Washington moved closer to Canada’s position.
Key quotes
Canada has not changed its position in trade talks with the US.
Not willing to sign US trade terms offered in August.
To the extent any progress has been made in US trade talks, it's because the US is coming closer to our position.
Market reaction
At the time of writing, the USD/CAD pair is up 0.06% on the day at 1.4012.
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.
- Gold price recovers some lost ground to near $4,010 in Tuesday’s early Asian session.
- Hopes of easing hostilities between the US and Iran provide some support to Gold.
- Fed is likely to hold interest rates steady in its October meeting on Wednesday.
Gold price (XAU/USD) rebounds to around $4,010, snapping the two-day losing streak during the early Asian session on Tuesday. The precious metal edges higher as easing oil prices temper inflation concerns ahead of this week’s US Federal Reserve (Fed) meeting.
Oil prices tumble amid hopes of easing hostilities between the US and Iran. CNBC reported that Saudi Arabia’s Defense Minister held talks with Iranian leaders in Tehran on Monday in an effort to ease simmering tensions between the two countries. This development offered some relief to inflation concerns, though the reprieve may prove temporary.
“There’s been a bit of a pullback in crude oil, which is helping gold, while some bargain-hunting is also coming in,” said Bob Haberkorn, senior market strategist at StoneX. “I think it’s going to be light trading here and we’re going to hang around the $4,000 level into the Fed announcement to see what they have to say,” Bob added.
All eyes will be on the Fed interest rate decision on Wednesday. The US central bank is widely expected to leave interest rates unchanged in a range of 3.75% to 4.00% at its upcoming October meeting following September’s hike.
Markets are now pricing in around 10% odds that the Fed will raise rates by another quarter point at its meeting on Wednesday, according to the CME FedWatch tool. Nearly 82.3% expect at least one hike by year-end.
Gold bull case tested as CTAs lean short around key $4,000 level
According to TD Securities, “the long-term gold bull thesis faces a test near the $4,000/oz level, with CTAs now short across all signals.” The bank notes that “CTAs have already been heavy sellers in gold, with systematic funds firing short across all momentum indicators,” leaving positioning skewed to the downside as prices probe this key threshold.
Against this backdrop, TD Securities points out that “spot and futures pricing has traded below the key $4,000/oz level, however the market has again shown signs of being extremely resilient with prices recovering in fairly short order.” They add that “despite the near-term easing of ETF flows, the trend remains supportive, while central bank demand has been a key upside driver, particularly when prices are within this territory.”
In terms of positioning dynamics, TD Securities highlight that “CTAs would start to cover shorts north of $4,092/oz,” suggesting that a sustained move above that level could trigger short-covering and potentially reinforce the still broadly supportive backdrop for gold.
Warsh flags investment surge and AI focus but avoids pre-committing on Fed path
Fed Chair Warsh’s speech scores 5.6/10 on the FXS Speechtracker, modestly below the 6.1/10 historical average, pointing to a slightly less impactful tone relative to the established baseline despite broadly steady messaging. The acknowledgment of being “over-scarred from the global financial crisis” underscores a cautious bias even as Warsh highlights structural growth and an investment surge driven by “good policies,” while refusing to prejudge upcoming October and December meetings and stressing spillover dynamics between US policy and the rest of the world. Warsh’s emphasis on AI as a near-term demand-side force and a tool to improve data confidence, alongside a focus on financial stability and tail risks, reinforces a risk-aware stance that is supportive of sustained policy vigilance rather than an immediate shift in the Fed reaction function.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a level of 127.51, signaling that the speech left the perceived policy stance firmly in hawkish territory. The combination of a steady, elevated index reading and a slightly softer FXS Speechtracker score suggests markets see no material recalibration of the Fed’s hawkish bias, with Warsh’s caution and focus on investment and AI framed as consistent with an ongoing preference for maintaining tight conditions.
Technical Analysis: Gold retains a nagative outlook under the 100-day SMA
In the daily chart, the near-term bias of XAU/USD is bullish as spot holds well above the 100-day simple moving average (SMA) and the 20-day Bollinger middle band, keeping the broader uptrend intact despite the latest consolidation. Price also sits over the lower Bollinger band, suggesting downside moves remain buffered, while the Relative Strength Index (RSI) at 35.20 drifts toward oversold territory, hinting that selling pressure may be losing momentum rather than signaling a trend reversal.
On the downside, immediate support is clustered around the lower Bollinger band at $4,020, followed by the Bollinger midline near $4,130 and the 100-day SMA at $4,220, which together define a dense demand zone underpinning the bullish structure. With no nearby resistance levels flagged by the current indicator set, any rebound from this support area could see buyers attempting to reassert control toward recent highs, as long as daily closes remain above the $4,020 technical floor.
(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.
- USD/JPY wins back about half of its two-session drop and ends above 157.50.
- None of the economists in a Bloomberg survey expects a BoJ hike in October.
- Tokyo CPI and the BoJ's decision both follow Wednesday's Fed statement.
Monday's rise won back about half of what USD/JPY lost on October 22 and 23. Yen buying in Tokyo had taken it through 157.00 to its lowest since September 18. On Monday it rose from just above 156.50 to just above 157.50 and ended near its high for the session, two days before the Fed's decision.
The Bank of Japan (BoJ) raised its rate to 1.25% from 1% in September, and BoJ Governor Ueda has said there's no need for back-to-back hikes. With September's hike done, back-to-back would mean Friday, so the Yen isn't expected to get a BoJ hike to trade. None of the economists in a Bloomberg survey expects one in October, and most expect December.
September's vote was 7-2, with both dissents against raising rates. Previews expect any dissent on Friday to come from BoJ board members Takata and Tamura, in favour of a hike. A vote for one could bring forward the December hike the Yen is waiting on.
On the calendar
Tokyo's October Consumer Price Index (CPI) and Japan's September jobless rate are both out on Thursday at 23:30 GMT, the last figures before the BoJ's decision on Friday. BoJ Governor Ueda's press conference follows at 06:30 GMT on Friday, and his guidance on December is what USD/JPY has left to price from Tokyo.
The Fed is expected to hold its 3.75%-4.00% range when its statement comes out at 18:00 GMT Wednesday. US growth for the third quarter and the Personal Consumption Expenditures Price Index (PCE) for September follow at 12:30 GMT Thursday. Both shape the case for a December Fed hike.
On the charts
Monday's high stopped short of both moving averages, the 200-day Exponential Moving Average (EMA) and the 50-day, which are just under 158.00. The October 22 drop was the first daily close below 157.00 since September 18. The six-month range on the chart runs from the September 8 low just under 153.00 to the July high just under 164.00.
USD/JPY daily chart
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- AUD/USD slips 0.26% to 0.7016 as the Greenback strengthens.
- Middle East diplomatic efforts push Oil lower, improving market sentiment.
- Australian inflation and Fed decision could reshape monetary policy expectations.
The Australian Dollar drifted lower on Monday, down over 0.26%, as market mood was positive, as reflected by Wall Street ending in the green, while a potential de-escalation of the US-Iran conflict pushed energy prices lower. Broad US Dollar strength weighed on the Aussie, even though the Australian central bank is expected to raise rates towards the end of the year. The AUD/USD exchange rate is 0.7016.
AUD/USD retreated despite risk-on mood, as USD strength overshadows RBA hike speculation
This week three major central banks will release their monetary policy decisions, but most eyes will be on the Federal Reserve (Fed). On Wednesday, the Fed is expected to hold rates unchanged, and while a rate hike is priced in by money markets, a dovish message from Fed Chair Kevin Warsh at his press conference could push the Greenback lower.
Geopolitical news pushed Oil prices lower, amid reports that the Mecca Pact members Iran, Turkey, Pakistan, and Saudi Arabia agreed to continue talks. Meanwhile, speculation of a coordinated US-Israeli attack on Tehran persists after Iranian officials excluded nuclear talks from the pact reunion.
In the US, the economic docket remained absent, but on Tuesday, Durable Goods Orders, the ADP Employment Change 4-week average and the Conference Board (CB) Consumer Confidence are eyed.
Ïn Australia, the schedule will resume on Wednesday with a speech by the Governor of the Reserve Bank of Australia (RBA), Michele Bullock, along with the release of Australia’s inflation data. Trimmed Mean CPI for September is expected at 0.3% MoM, a tenth higher from August’s 0.2% increase. On an annual basis, a reading above August’s 3.6% can pave the way for another rate hike.
AUD/USD Price Forecast: Technical outlook
In the daily chart, AUD/USD trades at 0.7016, maintaining a bearish near-term tone as spot holds beneath the clustered simple moving averages (SMA) set around 0.7073. The pair also trades below several upward-sloping trend lines, including the one intersecting near 0.7103, which now acts as overhead resistance, while the Relative Strength Index (RSI) at 50.6 points to neutral momentum rather than strong directional conviction.
On the topside, initial resistance is located at the SMA cluster around 0.7073, followed by the near-term trend-line barrier at 0.7103 and the more prominent horizontal cap at 0.7198, with higher structural hurdles emerging at 0.7453, 0.8968 and 0.9941. On the downside, first support is seen at the upward trend line around 0.6919, ahead of a deeper structural floor near 0.6354, where the longer-term descending trend line break price is located.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.25% | 0.21% | 0.43% | 0.10% | 0.29% | 0.30% | 0.29% | |
| EUR | -0.25% | -0.00% | 0.14% | -0.17% | 0.05% | 0.05% | 0.05% | |
| GBP | -0.21% | 0.00% | 0.15% | -0.17% | 0.06% | 0.05% | 0.05% | |
| JPY | -0.43% | -0.14% | -0.15% | -0.32% | -0.13% | -0.13% | -0.12% | |
| CAD | -0.10% | 0.17% | 0.17% | 0.32% | 0.19% | 0.22% | 0.22% | |
| AUD | -0.29% | -0.05% | -0.06% | 0.13% | -0.19% | 0.02% | 0.01% | |
| NZD | -0.30% | -0.05% | -0.05% | 0.13% | -0.22% | -0.02% | 0.00% | |
| CHF | -0.29% | -0.05% | -0.05% | 0.12% | -0.22% | -0.01% | -0.01% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
- NZD/USD stops just above 0.5700 for a fourth session and ends below it.
- TD Securities now expects three RBNZ hikes to 3.50%, and the Kiwi still slips.
- The RBNZ is expected to raise rates to 3.00% Wednesday, ahead of the election.
TD Securities dropped its call for a Reserve Bank of New Zealand (RBNZ) pause and now expects three hikes, and NZD/USD still fell on Monday. It stopped just above 0.5700 for a fourth straight session and ended below that level, as traders bought Dollars before the Fed's Wednesday decision.
Traders put a quarter-point RBNZ hike to 3.00% near 90%, and 22 of 27 economists in a Reuters poll expect it. With the hike already in the price, the Kiwi's case rests on what comes after. Nine of 23 economists in the same poll see another rise to 3.25% in December.
Third-quarter inflation slowed to 3.7%, under the RBNZ's own 3.9% forecast. The hike is expected anyway, because economists see fuel costs and the weaker Kiwi taking inflation back above 4% in the fourth quarter. That makes the Kiwi's own weakness part of the case for the hike.
On the calendar
The RBNZ's decision and Monetary Policy Review are due at 01:00 GMT on Wednesday, with the cash rate forecast to rise to 3.00% from 2.75%. That's ten days before New Zealand's November 7 election. The RBNZ's forecast for its own rate covers the December and February meetings that TD's call rests on.
The Fed is expected to keep its 3.75%-4.00% range on Wednesday, with the statement at 18:00 GMT and Fed Chair Warsh's press conference after it. That range is already above the 3.00% the RBNZ is expected to reach, and September durable goods orders on Tuesday are forecast to rise 0.6%.
On the charts
NZD/USD's climb since its October 14 low just above 0.5550 has stalled under the 50-day Exponential Moving Average (EMA), with the 200-day just under 0.5800. Monday's drop gave back about a fifth of that climb. Daily momentum is overbought for the first time since late July.
NZD/USD daily chart
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.
- EUR/USD ends at its low, under 1.1200 for the first time since October 14.
- Ifo expectations rise to 91.6, and EUR/USD gives up the gain within 11 bars.
- The ECB's decision Thursday, a day after the Fed's, is expected to be a hold.
Germany's Ifo survey beat its forecast on Monday, and EUR/USD was back under its pre-release level by the 11th five-minute bar. Dollar buying ahead of the Federal Open Market Committee (FOMC) meeting, which ends Wednesday, then took it to its lowest since October 15. It ended at that low, below 1.1200 for the first time since October 14.
The US two-year yield rose to about 4.71% before the Fed's meeting. The Fed's 3.75%-4.00% range is already well above the European Central Bank (ECB) deposit rate of 2.50%. Futures put a December Fed hike near 80%, which would widen that gap in the Dollar's favour.
The Ifo business climate rose to 90.2 against an 89.8 forecast, with expectations up to 91.6 from 90.4 and the current assessment down to 88.8 from 89.5. A firmer German outlook adds to the case for the December ECB hike that 64 of 73 economists in a Reuters poll expect. EUR/USD's rise on the release was less than a quarter the size of the fall that followed it.
On the calendar
US durable goods orders at 12:30 GMT on Tuesday are forecast up 0.6% after a 0.1% fall. A hold is expected in the Fed's 18:00 GMT statement on Wednesday. Fed Chair Warsh takes questions at 18:30 GMT, with the December hike the open question.
ECB President Lagarde speaks at 17:00 GMT on Tuesday, after the ECB's bank lending survey at 09:00 GMT. The ECB announces at 13:15 GMT on Thursday, with the deposit rate expected to stay at 2.50%, and its December decision is the Euro's side of the rate gap.
On the charts
Monday's drop gave back about three-fifths of the bounce off the October 14 low just above 1.1100 to the October 16 high just above 1.1250. EUR/USD is below its 50-day Exponential Moving Average (EMA), just above 1.1350, and its 200-day, just under 1.1500, and both have fallen in every session since mid-September.
EUR/USD 5-minute chart
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.
- GBP/USD falls from the October 22 five-week high to just under 1.3350.
- Traders buy back Dollars before the Fed, and the Pound is flat against the Euro.
- Chancellor Healey presents his Budget Wednesday, and US PCE is due Thursday.
The Pound was flat against the Euro on Monday, so GBP/USD's drop came from traders buying back Dollars before Wednesday's Federal Open Market Committee (FOMC) decision. It fell below 1.3350 to its lowest since the October 20 jobs data and ended just under that level, after three sessions above it.
Traders who had bet against the Dollar bought some back before the Fed, which is expected to hold after raising rates in September. EUR/USD fell by almost exactly as much as GBP/USD, which left EUR/GBP flat and puts the whole move on the Dollar side of GBP/USD.
The Times reported that Chancellor Healey plans to raise the minimum wage for over-21s by about 3.9%, to around £13.20. That's two-tenths faster than the 3.7% rise in pay excluding bonuses, the figure at the centre of the case for a Bank of England (BoE) hike on November 5. GBP/USD rose on the next two five-minute bars.
On the calendar
Chancellor Healey presents his first Budget on Wednesday, with the Debt Management Office's plan for gilt sales published alongside it. It comes eight days before the BoE's November 5 decision, where traders put a quarter-point hike in the UK's Bank Rate from 3.75% close to fully priced.
The Fed's decision is due on Wednesday at 18:00 GMT, and futures put a hold from 3.75%-4.00% near 90% and a December hike near 80%. The first estimate of US third-quarter Gross Domestic Product (GDP) and September's Personal Consumption Expenditures Price Index (PCE) follow on Thursday at 12:30 GMT, and both feed the December odds.
On the charts
The October 22 high just above 1.3400 came on a test of the 200-day Exponential Moving Average (EMA) at about the same level. Monday's drop took GBP/USD back under its 50-day EMA, and the fall from that high is about a third of the climb from the October 14 low near 1.3150. Daily momentum is cooling from overbought.
GBP/USD daily chart
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.
- DJIA gives back about two-thirds of an early climb and ends short of 52,400.
- Goldman Sachs adds about 105 points, most of the price-weighted index's gain.
- The Fed's decision is due Wednesday, and Microsoft and Alphabet report after it.
One stock, Goldman Sachs (GS), accounted for about seven of every ten points the Dow Jones Industrial Average added on Monday. The index rose to near 52,600 by the tenth five-minute bar, gave back about two-thirds of that climb by the session low near 52,250, and ended short of 52,400.
The Dow is weighted by share price, and at about $890 Goldman is its most expensive stock, so its 2% rise was worth about 105 points. UnitedHealth (UNH) and Merck (MRK) took about 70 points off between them, which left the Dow behind the S&P 500, where technology shares count for more.
Anthropic's filing to list on the Nasdaq says it will spend up to $120.5 billion on computing built on Nvidia chips, and Nvidia (NVDA) added about 30 points. The same filing commits up to $114.5 billion to Google through 2033, and Alphabet (GOOGL) fell about 1% and took about 20 points off the Dow.
On the calendar
The Federal Open Market Committee (FOMC) decision is due at 18:00 GMT on Wednesday, and futures price about a 10% chance of a hike from 3.75%-4.00%. Fed Chair Warsh's press conference follows at 18:30 GMT. The September Personal Consumption Expenditures Price Index (PCE) and third-quarter Gross Domestic Product (GDP) are due at 12:30 GMT on Thursday, and both bear on a December hike.
Boeing (BA), Coca-Cola (KO) and Sherwin-Williams (SHW) report before Tuesday's opening bell, and Visa (V) after it. Microsoft (MSFT) and Alphabet report after the Fed on Wednesday. Caterpillar (CAT), the Dow's second most expensive stock at about $690, reports with Merck on Thursday, and Chevron (CVX) on Friday.
On the charts
The Dow has given back about a quarter of its climb from the October 1 low near 50,500 to the October 22 high near 52,900. It's still above the 50-day Exponential Moving Average (EMA) near 52,100, and the August 5 high just short of 54,750 is about 4% above. Daily momentum has cooled from overbought since Thursday.
Dow Jones 5-minute chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
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