Forex News
China's Services Purchasing Managers' Index (PMI) climbed to 51.4 in August from 50.4 in July, the latest data published by RatingDog showed on Thursday. This figure came in stronger than the market expectations of 50.6.
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.
Australia's Trade Balance narrowed to A$1,923M MoM in July, followed a surplus of 1,929M in the previous reading, according to the latest foreign trade data published by the Australian Bureau of Statistics on Thursday. The market consensus was for a surplus of A$1,390M.
Further details reveal that Australia's Exports fell by 3.3% MoM in July from a rise of 9.6% seen a month earlier. Meanwhile, Imports dropped by 2.5% MoM in July, compared to a decrease of 0.2% seen in June.
Market reaction to Australia’s Trade Balance
The Australian Dollar (AUD) has little to no impact following the Australia’s Trade Balance report. At press time, the AUD/USD pair is trading at 0.7168, losing 0.01% on the day.
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.
The People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead on Thursday at 6.7807 compared to the previous day's fix of 6.7829 and 6.7167 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.
- GBP/USD bulls seem hesitant as Fed rate bets help limit the weak US ADP-led USD decline.
- Escalating US-Iran tensions further underpin the safe-haven USD and keep a lid on the pair.
- Traders look to US ISM Services PMI for some impetus ahead of the NFP report on Friday.
The GBP/USD pair consolidates below the 1.3500 psychological mark during the Asian session on Thursday and remains close to a three-week low, touched the previous day.
The US Dollar (USD) stabilizes following the previous day's corrective fall amid Federal Reserve (Fed) rate hike expectations and geopolitical uncertainties. Traders ramped up their bets that the US central bank will raise borrowing costs this month following Fed Chair Kevin Warsh's hawkish remarks last Friday. Furthermore, inflation risks stemming from higher energy prices back the case for Fed policy tightening, which, in turn, offers some support to the USD and acts as a headwind for the GBP/USD pair.
Meanwhile, tensions between the US and Iran have flared up following fresh American strikes on Iranian targets and retaliatory drone and missile attacks by Tehran across the Gulf region. Adding to this, continued clashes over the Strait of Hormuz keep the geopolitical risk premium in play, which, in turn, is seen as another factor underpinning the safe-haven Greenback. However, sliding US bond yields hold back USD bulls from placing aggressive bets and help limit further losses for the GBP/USD pair.
Traders now look forward to the release of the US ISM Services PMI for some impetus, though the focus remains on the closely watched US monthly employment details – popularly known as the Nonfarm Payrolls (NFP) report on Friday. Apart from this, further developments surrounding the Middle East crisis might continue to infuse volatility in financial markets, which might continue to influence USD price dynamics and produce short-term trading opportunities around the GBP/USD pair.
GBP/USD 4-hour chart
Technical Analysis
The GBP/USD pair trades around the 200-period Simple Moving Average (SMA) on the 4-hour chart and above the 50.0% Fibonacci retracement of the July-August upside. A convincing break below should pave the way for deeper Fibonacci floors at 1.3425 and 1.3357, where buyers would be expected to defend the underlying bullish structure.
On the upside, initial resistance is located at the 38.2% Fibo. retracement at 1.3521, followed by the 23.6% retracement at 1.3580, with a more distant barrier at the cycle high anchor near 1.3676.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- EUR/USD trades on a flat note around 1.1590 in Thursday’s early Asian session.
- Traders raise their bets on a September rate hike after Fed Warsh’s speech.
- ECB’s Makhlouf said the central bank must be prepared to lift interest rates further.
The EUR/USD pair holds steady near 1.1590 during the early Asian session on Thursday. The potential upside for the major pair might be limited amid hawkish Federal Reserve (Fed) expectations and escalating conflict in the Middle East. The US August ISM Services Purchasing Managers Index (PMI) report is due on Thursday. On Friday, traders will closely monitor the US Nonfarm Payrolls (NFP) data.
Fed Chair Kevin Warsh warned last week that policymakers may need to tighten again if inflation fails to move convincingly towards 2%. His hawkish remarks could lift the USD and act as a headwind for the pair. Expectations of a September Fed rate hike rose to 62.3%, up from below 40% before the speech, according to the CME FedWatch tool.
US President Donald Trump said on Wednesday that strikes on Iran would likely be short-lived, reiterating the US controls the Strait of Hormuz. Meanwhile, Supreme National Security Council Secretary Mohsen Rezaei said Washington will soon witness Tehran’s “new strategy” for war. Rising tensions in the Middle East could boost safe-haven flows, supporting the Greenback.
Across the pond, European Central Bank (ECB) policymaker Gabriel Makhlouf said the central bank must not shy away from more interest rate hikes if inflation “starts moving in the wrong direction.” ECB Governing Council member Joachim Nagel said on Wednesday that markets see over a 95% chance of a September rate hike.
Euro sentiment sours as oil recovery revives terms of trade worries
Strategists at Scotiabank highlight that the latest bout of Euro weakness has aligned with a rebound in energy markets, noting that “the renewed deterioration looks to have coincided with the latest recovery in oil prices, sparking concerns about the euro area’s terms of trade as a major energy importer.” They suggest that the shift in commodity dynamics is undermining support for EUR even as yield spreads remain broadly favourable, reinforcing the market’s increasingly bearish tone toward the single currency.
Technical Analysis: EUR/USD is well-supported above the 100-day SMA, with neutral RSI
In the daily chart, EUR/USD sits on a pivot around the day’s opening level and holds above the 100-day simple moving average (SMA), suggesting a mild underlying bid, yet it remains capped beneath the Bollinger Bands’ middle line. The Relative Strength Index (RSI) at 51.80 is neutral, hinting that near-term momentum is balanced and leaving scope for either a modest continuation higher or further consolidation around current levels.
On the topside, initial resistance is seen at the Bollinger middle band around 1.1605, ahead of a stronger barrier at the upper Bollinger band near 1.1708. On the downside, immediate support is defined by the 100-day SMA at 1.1565, with a deeper cushion at the lower Bollinger band around 1.1500, where buyers would be expected to show more interest if the pair extends its pullback.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
US President Donald Trump said that while the US is prepared to strike Iran again at any time, he doesn’t expect the renewed fighting to last “too long,” Reuters reported on Wednesday.
Iran’s Supreme Leader Mojtaba Khamenei said that Iran’s armed forces have “unforgettable lessons” in store for the US in his first message since fighting resumed after a month of relative calm.
Meanwhile, Supreme National Security Council Secretary Mohsen Rezaei said Washington will soon witness Tehran’s “new strategy” for war.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 0.04% on the day at $91.12.
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.
- AUD/NZD trades just above 1.2250 after a session high short of 1.2300.
- The cross gained 1.07% and the New Zealand Dollar supplied most of it.
- Australian growth beat at 0.4% on the quarter and 2.1% on the year.
AUD/NZD spent Wednesday pushing at a ceiling that has held since 2013, running from near 1.2100 to a high short of 1.2300 and trading just above 1.2250 into the European afternoon. The Australian Gross Domestic Product (GDP) beat and the New Zealand rate decision landed within hours of each other, and the tidy explanation is that the Aussie caught a bid on the data. The arithmetic says something less flattering.
Only one leg actually moved
Set the cross gain of 1.07% against the New Zealand Dollar's own 0.82% decline on the US Dollar in the same window, and the Australian contribution comes out at roughly a quarter of a percent. That is not a currency catching a firm pop off a growth surprise. That is a currency standing still while the other side of the cross falls over, and it accounts for close to four fifths of the move.
The distinction matters to anyone buying a thirteen-year high. A cross that rallies because both legs are working carries its own momentum, while a cross that rallies because the denominator collapsed is only as durable as the damage on that side. The Reserve Bank of New Zealand raised its Official Cash Rate (OCR) to 2.75% and its own projections carried only one more quarter point this year, which is the disappointment that did the work. Nothing about that repricing tells you where the Australian Dollar goes next.
The divergence trade is real but dated
None of the above means the structural story is wrong. Australia's cash rate sits at 4.35% against New Zealand's 2.75%, a gap of 160 basis points, and Wednesday's growth figures pushed the implied probability of a hike at the September 28 meeting to around 57% from roughly 48% beforehand. New Zealand is openly discussing a pause. Those two trajectories point the same way the cross has been travelling for a year.
The composition is where the Australian case gets thinner. Household spending rose 0.4% with discretionary strength concentrated heavily in electric and hybrid vehicle purchases, essential spending fell 0.3%, private investment was flat, and softer imports supplied a meaningful share of the headline. Growth of that shape does not force a central bank's hand. It removes an argument for patience, which is a smaller thing than the reaction suggests, and annual growth still decelerated from 2.5%.
The Reserve Bank of Australia has also been explicit that growth needs to slow for inflation to come down, which makes an upside growth surprise an ambiguous input rather than a clean hawkish one. Australian 10-year yields at their highest since 2011 do more to advertise a global bond problem than a domestic tightening cycle. The cross is being asked to break a level it has failed at twice since May on the strength of a growth print that beat by a tenth and a policy statement written in Wellington.
Both legs answer to the same shock
Thursday's Australian trade balance at 01:30 GMT carries a 1.39 billion consensus against 1.929 billion previously, with exports last at 9.6% and imports at minus 0.2% on the month, and the Chinese services survey follows at 01:45 GMT at 50.6 against 50.4. China is the largest trading partner for both economies, which makes that release one of the few scheduled events this week capable of moving the cross rather than one of its legs. Friday's American payrolls report, by contrast, hits both antipodean currencies through the same risk channel and largely nets out here, which is the standing argument for expressing an antipodean view on the cross rather than against the Dollar.
The larger risk is that both central banks are reading one shock in opposite directions. New Zealand's headline inflation of 4.1% falls to 2.9% excluding vehicle fuels, and Australia's July annual rate of 3.5% sits alongside a trimmed mean stuck at 3.6%, with households cutting fuel consumption because of the conflict. Crude Oil above $90.00 is writing both inflation stories, and a decisive move lower in the barrel takes the hawkish argument away from Sydney and Wellington at the same moment.
Levels and bias
Resistance: The 1.2300 handle is the only level that matters and Wednesday's high stopped short of it, which is the second refusal at this shelf since May. A daily close above 1.2300 puts the cross into territory untraded since 2013, where there is no reference structure and price discovery gets disorderly quickly.
Support: The 1.2200 area is the first line and it decides whether Wednesday holds as a breakout attempt or reads as an exhaustion spike. Beneath it, 1.2100 marks where the session began, and the 50-day Exponential Moving Average (EMA) near 1.2050 is the level that would end the near-term advance.
Bias: Bullish while 1.2200 holds. The trend, the rate gap and both policy trajectories favour the Australian leg, and the 200-day EMA near 1.1900 is a long way beneath the tape. The Stochastic Relative Strength Index (Stoch RSI) near 65 leaves room to run, though a one-legged rally into a thirteen-year ceiling is worth respecting, and a slip back under 1.2200 would confirm that Wednesday was a New Zealand event borrowed rather than an Australian one earned.
AUD/NZD daily chart
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.
- Gold price recovers to near $4,385 in Thursday’s early Asian session.
- Hostilities between the US and Iran escalated, which might cap gold’s upside.
- Traders are pricing in a 62.3% chance of a Fed rate increase this month.
Gold price (XAU/USD) rebounds from a nearly one-month low to around $4,385 during the early Asian session on Thursday. The precious metal edges higher as the US Dollar (USD) and Treasury yields retreat from recent highs. All eyes will be on the US August Nonfarm Payrolls (NFP) data, which is due later on Friday.
US Treasury yields eased after a surge to multi-year highs in the previous session. Federal Reserve (Fed) Bank of New York President John Williams said that rising long-term bond yields are not driven by inflation fears but are instead a reflection of a solid economy.
"One of the reasons that gold has been able to move back above unchanged is we have seen a little tick down in yields for the day and that has allowed gold to bounce off some of the recent lows," said David Meger, director of metals trading at High Ridge Futures.
However, rising tensions in the Middle East could raise energy-driven inflation concerns and boost the prospect of Fed rate hikes in the coming months. This, in turn, might cap the upside for the yellow metal. Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.
Traders are now pricing in a 62.3% probability of an interest rate hike at the Fed's policy meeting this month, according to the CME FedWatch tool.
The US launched new airstrikes on Iranian targets, prompting counter strikes by Tehran targeting US interests in Bahrain, Kuwait, Jordan and Iraq, and fuelling concerns about a wider renewal of hostilities.
US President Donald Trump said that the US had launched a wave of “large and powerful” strikes on Iranian targets near the Strait of Hormuz in retaliation for what he said was a “failed attempt” at laying mines along the vital trade route.
Gold slips as higher oil and Middle East tensions curb Fed easing hopes
Commodities strategists at ING report that gold prices have "eased to a two-week low, slipping below $4,300/oz," as escalating tensions in the Middle East have pushed oil prices higher and forced markets to "reassess the outlook for US interest rates." They caution that rising energy costs "could add to inflationary pressures and reduce the scope for near-term Federal Reserve easing," a backdrop that is seen "weighing on non-yielding assets such as gold."
Williams flags strong economy behind higher yields as inflation trend cools
Fed's Williams delivered a mildly less hawkish tone, with a 6/10 FXS Speechtracker score only marginally above the historical average of 5.9/10, as the emphasis shifted toward a strong economy and contained inflation expectations rather than fresh inflation fears. By stressing that rising yields are driven by robust growth, strong investment demand, and geopolitical factors such as Middle East conflict and tariffs—while underscoring a trend toward lower inflation and stable labor markets—Williams framed current financial conditions as tight but not disorderly, keeping the focus on achieving 2% inflation as the primary mandate.
The FXS Fed Sentiment Index slipped by 1.42 points to 127.44, signaling a modest pullback in perceived hawkishness despite remaining firmly above the neutral 100 line. This configuration suggests that, even with a softer edge to the latest remarks, the broader Fed stance still resides in hawkish territory, consistent with elevated yields and a data-dependent path toward the 2% inflation goal as tracked by the FXS Speechtracker.
Technical Analysis: Gold retains a modest bullish tone above the 100-day SMA
In the daily chart, XAU/USD holds above the 100-day simple moving average (SMA), keeping a constructive bullish bias despite consolidating below the Bollinger middle band. The 14-day Relative Strength Index (RSI) hovers near 50, hinting at neutral short-term momentum that could tilt higher while price remains supported above the 100-day SMA.
On the topside, initial resistance is located at the Bollinger middle band around $4,450, with the upper Bollinger band near $4,685 acting as a subsequent hurdle if buyers regain control. On the downside, immediate support is seen at the 100-day SMA at $4,360, ahead of the lower Bollinger band near $4,215, where a deeper pullback would be expected to attract dip-buying interest as long as the broader bullish structure holds.
(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.
- GBP/JPY drops over 1%, breaking below the 100-day SMA.
- Bearish RSI signals sellers regain control of near-term momentum.
- Break below 214.00 exposes 213.02 and 209.58 supports.
The Pound Sterling collapses versus the Japanese Yen as growing “speculation” of an intervention in the FX markets witnessed the Yen appreciating versus most G8 FX currencies. The GBP/JPY trades with losses of more than 1.10%, at 214.08.
GBP/JPY Price Forecast: Technical Outlook
The cross-pair dipped below the 100-day Simple Moving Average (SMA) at 215.08, opening the door to further downside and putting the 214.00 milestone in play. Momentum shifted strongly bearish, as indicated by the Relative Strength Index (RSI). Hence, the path of least resistance is tilted to the downside, with sellers regaining control.
The GBP/JPY first support is 214.00. A breach of the latter will expose the 200-day SMA as the next support at 213.02. On further weakness, the August 3 cycle low of 209.58 would be the next area of interest, before sellers test yearly lows near 207.24.
On the other hand, if buyers drive the GBP/JPY exchange rate above the 100-day SMA, this could trigger some consolidation between the 215.08-216.04 area, with the latter being the 50-day SMA.
GBP/JPY Price Chart – Daily
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.05% | 0.24% | -0.87% | -0.37% | -0.32% | 0.74% | 0.16% | |
| EUR | -0.05% | 0.18% | -0.92% | -0.43% | -0.37% | 0.66% | 0.11% | |
| GBP | -0.24% | -0.18% | -1.09% | -0.59% | -0.56% | 0.46% | -0.08% | |
| JPY | 0.87% | 0.92% | 1.09% | 0.48% | 0.55% | 1.58% | 1.03% | |
| CAD | 0.37% | 0.43% | 0.59% | -0.48% | 0.06% | 1.09% | 0.55% | |
| AUD | 0.32% | 0.37% | 0.56% | -0.55% | -0.06% | 1.03% | 0.50% | |
| NZD | -0.74% | -0.66% | -0.46% | -1.58% | -1.09% | -1.03% | -0.53% | |
| CHF | -0.16% | -0.11% | 0.08% | -1.03% | -0.55% | -0.50% | 0.53% |
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).
- NZD/USD trades near 0.5850 after a 1.7% peak-to-trough slide.
- The Official Cash Rate went to 2.75%, a unanimous second straight hike.
- Headline inflation is 4.1%, but 2.9% excluding vehicle fuels.
The Reserve Bank of New Zealand (RBNZ) raised its policy rate on Wednesday and the currency fell almost 1.7% from top to bottom on the day it happened. NZD/USD ran from near 0.5900 down into the 0.5800 area before a grudging recovery left it near 0.5850, sitting directly on its 200-day Exponential Moving Average (EMA). A central bank delivering exactly what the market asked for and getting sold for it is worth more than a paragraph.
A hike is not a path
The Official Cash Rate (OCR) went up a quarter point to 2.75%, unanimously, the second consecutive increase and precisely the consensus call. Nothing in the decision itself surprised anyone. The disappointment sat in the projections, where the track carried the prospect of one further quarter point before year end and no more, against a market that had been running a considerably longer ladder into 2027.
The press conference confirmed the read rather than repairing it. The Governor's framing was that the bank can now take time to assess the effect of two back-to-back moves, which is the language of a pause being placed on the table rather than removed from it. Currencies do not trade the level of the policy rate. They trade the slope, and the slope got flatter at two o'clock.
The scale of the gap explains the size of the move. Rate markets had been carrying something in the region of 95 basis points of further tightening out to the middle of 2027, a path several times longer than the one the bank published, and a repricing that large does not happen in twenty pips. It happened in the ninety minutes after the decision, and the Kiwi was the weakest major currency on the board from the Tokyo open onward.
The inflation being tightened into is not domestic
New Zealand's headline rate reached 4.1% in the second quarter, more than two points above the target midpoint, which reads like an emergency. Strip out vehicle fuels and the annual number is 2.9%, comfortably inside the band, and most core measures sit near it. The wedge between those two figures is an imported energy shock, delivered by a conflict that has kept Crude Oil above $90.00 through renewed American strikes on Iranian targets and Iranian retaliation across the Gulf.
That distinction is the whole trade. Tightening into an import-price shock is the least credible form of tightening available, because the central bank cannot influence the shock and the shock reverses on somebody else's timetable. The market has worked out that if fuel rolls over, the case for the remaining quarter point rolls over with it, and the currency is priced for exactly that outcome rather than for the hike that has already been banked.
The cross tape confirms this is a New Zealand problem rather than a Dollar one. AUD/NZD gained 1.07% on the session and pushed to a high short of 1.2300, the top of a range that has capped it since 2013, on a day when the Australian Dollar itself barely moved against the Greenback. A currency being sold against its nearest neighbour and against the reserve currency at the same time is not the victim of a Dollar bid.
What the rest of the week does to the Kiwi
Thursday's Chinese services survey at 01:45 GMT, seen at 50.6 against 50.4, matters more to this pair than its billing suggests, because the export channel through New Zealand's largest trading partner is the one domestic variable capable of moving the growth forecast the RBNZ just published. The American session then brings initial jobless claims at 12:30 GMT and the Institute for Supply Management (ISM) services Purchasing Managers Index (PMI) at 14:00 GMT, seen at 54.3 with prices paid last at 70.3.
Friday is where the pair gets resolved. Nonfarm payrolls at 12:30 GMT carry a 58K consensus against a prior reading of 23K jobs lost, with unemployment seen at 4.1% and average hourly earnings at 0.3% on the month. Wednesday's private payrolls miss at 38K against a 47K consensus failed to weaken the Dollar at all, which tells you how a firm Friday number gets treated with the Federal Reserve priced around two thirds for a hike on September 16.
Levels and bias
Resistance: The 0.5850 shelf is congested, with the 200-day EMA underneath the price and the 50-day sitting roughly twenty pips above it, so the whole area functions as one hurdle rather than two levels. Above that, 0.5900 is the level lost on the decision and the first genuine recovery marker, with 0.5950 guarding the range high near 0.6000.
Support: The 0.5800 area caught the low and is the line that decides whether Wednesday was a repricing or a rout. Beneath it, 0.5750 is the next reference, and the pair has no meaningful structure between there and 0.5700.
Bias: Bearish. Price is resting on a long-run average it spent the session slicing through, the Stochastic Relative Strength Index (Stoch RSI) near 62 has plenty of room to fall before anything looks stretched, and the central bank has just told the market its tightening cycle is nearer its end than the curve assumed. A daily close back above 0.5900 would be needed to argue otherwise.
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.
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