Forex News
- NZD/USD drifts higher to near 0.5855 in Wednesday’s early Asian session.
- China's CPI rose 0.8% YoY in August, matching expectations.
- Traders await key US inflation data later this week for fresh impetus.
The NZD/USD pair gathers strength to around 0.5855 during the early Asian trading hours on Wednesday. The New Zealand Dollar (NZD) edges higher against the US Dollar (USD) following Chinese economic data. Traders will keep an eye on the US inflation data later this week.
Data released by the National Bureau of Statistics of China on Wednesday showed that the country’s Consumer Price Index (CPI) climbed 0.8% YoY in August, versus a rise of 0.5% prior. This figure came in line with the market consensus.
On a monthly basis, Chinese CPI inflation rose to 0.4% in August after declining by 0.1% in July, hotter than the 0.3% increase expected. Meanwhile, China’s Producer Price Index (PPI) climbed 3.8% YoY in August, compared to a 3.5% increase in July. The data beat the estimates of 3.7%.
The upbeat Chinese CPI and PPI reports could provide some support to the China-proxy Kiwi, as China is a major trading partners of New Zealand.
Traders await US inflation data for further clues on US monetary policy outlook. The US PPI data will be released on Thursday and CPI readings on Friday.
“The market continues to absorb the stronger-than-expected U.S. jobs report and await upcoming CPI and PPI data, while higher oil prices are stoking inflation concerns and supporting expectations for a September rate hike,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.
Markets are now pricing in about a 59.4% odds of an interest rate hike at the Federal Reserve’s (Fed) policy meeting, according to the CME FedWatch Tool.
RBNZ nudges OCR higher as Commerzbank highlights gradual stimulus withdrawal
Analysts at Commerzbank note that the RBNZ “raised the Overnight Cash Rate (OCR) by 25bp to 2.75% as expected,” framing the move as part of a “gradual removal of monetary stimulus” that the bank deems appropriate “to return inflation sustainably to the target.”
Technical Analysis: NZD/USD retains a neutral tone in the near term
In the daily chart, NZD/USD is consolidating just above the 100-day simple moving average (SMA), which lends nearby trend support, while the Bollinger Bands’ lower band underpins the downside and helps define a broader range. Price, however, remains below the Bollinger Bands’ 20-period SMA, leaving the spot capped within the upper half of the recent band and pointing to a neutral, range-bound near-term bias. The Relative Strength Index (RSI) at 45.6 sits slightly below the 50 line, hinting that bullish momentum has faded without yet signalling oversold conditions.
On the downside, initial support is seen at the 100-day SMA near 0.5845, ahead of the Bollinger lower band around 0.5825, where failure would expose a deeper corrective phase within the broader recovery from prior lows. On the topside, immediate resistance is located at the Bollinger 20-period SMA in the 0.5905 area, with a daily close above that level needed to open the way toward the upper band near 0.5990 and reassert bullish control.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- AUD/USD trades with a positive bias on Wednesday amid a weak USD and RBA rate hike bets.
- Higher-than-expected Chinese inflation figures do little to provide any impetus to the Aussie.
- Hawkish Fed expectations and geopolitical risks limit USD losses ahead of US inflation figures.
The AUD/USD pair sticks to its positive bias through the Asian session on Wednesday and trades around the 0.7220-0.7225 area, just below its highest level since May 14, touched the previous day. Spot prices, meanwhile, moved little following the release of China's inflation figures.
The National Bureau of Statistics of China reported that the headline Consumer Price Index (CPI) climbed 0.8% in August from a year ago, up from 0.5% previously. On a monthly basis, CPI inflation arrived at 0.4%, compared to a decline of 0.1% recorded in July and hotter than expectations of a 0.3% increase. Adding to this, China’s Producer Price Index (PPI) jumped 3.8% YoY in August, also surpassing estimates of a rise to 3.7% from 3.5% in the previous month. The data, however, fails to provide any impetus to the China-proxy Aussie, though a combination of factors continues to act as a tailwind for the AUD/USD pair.
Markets are pricing in a growing chance that the Reserve Bank of Australia (RBA) will raise interest rates later this month on the back of stronger-than-expected economic growth and persistent domestic inflation. This continues to underpin the Australian Dollar (AUD), while the US Dollar (USD) remains depressed near its lowest level in over two weeks amid the Bank of Japan (BoJ)-inspired rally in the Japanese Yen (JPY). This, in turn, is seen as supporting the AUD/USD pair. Traders, however, refrain from placing aggressive directional bets ahead of the release of the latest US inflation figures later this week.
The US Producer Price Index (PPI) will be published on Thursday, followed by the US Consumer Price Index (CPI) on Friday. The crucial data should provide more cues about the US Federal Reserve's (Fed) policy path, which, in turn, will drive USD demand and the AUD/USD pair. In the meantime, expectations that the US central bank will raise borrowing costs later this month amid inflation risks stemming from higher energy prices, along with escalating US-Iran tensions, could help limit deeper losses for the safe-haven USD. This might keep a lid on any further appreciating move for the currency pair.
AUD/USD daily chart
Technical Analysis
The AUD/USD pair holds well above the 200-day Simple Moving Average (SMA) at 0.6996, keeping the broader near-term bias constructive. Dip buyers might continue to defend the medium-term trend floor just beneath 0.7000. On the top side, bulls could aim to test a multi-year peak, around 0.7270-0.7275, which, if cleared, should pave the way for additional near-term gains.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
Consumer Price Index (YoY)
The Consumer Price Index (CPI), released by the National Bureau of Statistics of China on a monthly basis, measures changes in the price level of consumer goods and services purchased by residents. The CPI is a key indicator to measure inflation and changes in purchasing trends. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Renminbi (CNY), while a low reading is seen as bearish.
Read more.Last release: Wed Sep 09, 2026 01:30
Frequency: Monthly
Actual: 0.8%
Consensus: 0.8%
Previous: 0.5%
Source: National Bureau of Statistics of China
- AUD gains support as stronger Chinese consumer and producer price data fails to lift the currency.
- Japanese Yen strengthens following US Treasury warnings against shorting the currency and growing hawkish rate hike expectations.
- The Takaichi administration adopts a firmer policy stance to combat excessive Yen weakness ahead of the upcoming central bank meeting.
AUD/JPY pares its daily losses following the release of key economic data from China, Australia's primary trading partner. However, the currency cross remains in negative territory and is trading around 111.00 during Asian hours on Wednesday.
China's Consumer Price Index (CPI) climbed 0.8% year-over-year (YoY) in August, matching market consensus and accelerating from the 0.5% rise recorded in July. On a monthly basis, CPI inflation arrived at 0.4% in August, bouncing back from a 0.1% decline previously and coming in hotter than the expected 0.3% increase. Additionally, the Producer Price Index (PPI) jumped 3.8% YoY in August, following a 3.5% increase in July and beating the market consensus of 3.7%.
Furthermore, the AUD/JPY cross depreciated as the Japanese Yen (JPY) gained ground after US Treasury Secretary Scott Bessent warned traders against betting against the currency. The former hedge fund manager stated that he maintains a "pretty good insight" into the Bank of Japan's (BoJ) future actions and currency interventions.
Meanwhile, the BoJ is broadly expected to raise interest rates the following week. At the same time, the Takaichi administration has adopted a more hawkish stance as policymakers increasingly acknowledge the urgent need to limit excessive JPY weakness.
Analysts at UOB Group note that their latest 1–3 week view has shifted decisively more bearish after an “unexpectedly sharp move” in USD/JPY. They recall that as of Friday, with spot around 155.90, they had highlighted that “conditions are deeply oversold” following last Thursday’s sharp drop and that USD “must close below 155.00 before further declines are likely,” with “the next level to watch below 155.00” flagged at 154.20. However, they point out that yesterday the Dollar “broke below 155.00 and plunged to a low of 154.04,” price action that “suggests USD is likely to continue to weaken,” with the “year-to-date low of 152.08” now identified as the next key support. UOB adds that “the downside pressure will remain intact as long as USD holds below 156.00,” with that level now seen as strong resistance after being revised down from 157.50.
Economic Indicator
Consumer Price Index (YoY)
The Consumer Price Index (CPI), released by the National Bureau of Statistics of China on a monthly basis, measures changes in the price level of consumer goods and services purchased by residents. The CPI is a key indicator to measure inflation and changes in purchasing trends. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Renminbi (CNY), while a low reading is seen as bearish.
Read more.Last release: Wed Sep 09, 2026 01:30
Frequency: Monthly
Actual: 0.8%
Consensus: 0.8%
Previous: 0.5%
Source: National Bureau of Statistics of China
China’s Consumer Price Index (CPI) climbed 0.8% in August from a year ago after arriving at a rise of 0.5% in Juuly, the National Bureau of Statistics of China reported on Wednesday. The market consensus was for 0.8% in the reported period.
Chinese CPI inflation arrived at 0.4% MoM in August versus a decline of 0.1% prior, hotter than the expectation of a 0.3% increase.
China’s Producer Price Index (PPI) jumped 3.8% YoY in August, following a 3.5% increase in July. The data came in above the market consensus of 3.7%.
Market reaction to China’s CPI, PPI data
At the press time, the AUD/USD pair is up 0.07% on the day to trade at 0.7220.
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.
US President Donald Trump is banning Canadian products, including alcohol, dairy and motor vehicles, as Canadian retaliatory tariffs on American goods come into force, BBC reported on Tuesday.
The new measure, which will take effect by September 29, were announced after Canadian tariffs on billions of dollars worth of imported American goods took effect earlier on Tuesday.
Canada’s Prime Minister Mark Carney warned the country's pivot away from the USwill come at a cost, but that the alternative would be far worse.
Market reaction
At the time of writing, the USD/CAD pair is down 0.03% on the day at 1.3780.
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.
- WTI climbs after US strikes near Kharg Island and Iranian retaliatory threats disrupt key shipping lanes.
- Houthi militants target southern Saudi Arabian energy infrastructure, including the major Jazan refinery, adding to supply fears.
- Stronger Chinese demand forces global refiners to seek alternative crude supplies from Africa, Canada, and Latin America.
West Texas Intermediate (WTI) oil price extends its gains for the third successive day, trading around $92.30 during the Asian hours on Wednesday. Crude oil prices rise as the US struck several Iranian tankers near Kharg Island, a major crude export hub. The attacks heightened geopolitical tensions and raised concerns about further disruptions to global oil supplies. A
US official said the strikes came in response to an attempted missile attack on a US warship. Tehran retaliated by launching ballistic missiles toward Jordan and warning vessels in the Persian Gulf, urging tanker crews near Kuwaiti and Bahraini ports to “immediately abandon their vessels.”
Iran-backed Houthi militants also attacked energy infrastructure in southern Saudi Arabia, including the 400,000-barrel-a-day Jazan refinery. Meanwhile, stronger Chinese oil demand is pushing up prices for African, Canadian and Latin American crude as disruptions in the Strait of Hormuz force refiners to look farther afield for alternative supplies.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
On Wednesday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.7769 compared to the previous day's fix of 6.7804 and 6.7042 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 edges higher as USD selling remains unabated amid the BoJ-inspired JPY rally.
- Rising Fed rate-hike bets and geopolitical uncertainties limit losses for the safe-haven USD.
- Traders seem hesitant ahead of the release of the monthly UK GDP and US inflation figures.
The GBP/USD pair trades with a positive bias near mid-1.3500s during the Asian session on Wednesday, though it lacks bullish conviction and remains confined within the previous day's broader range. Meanwhile, the downside seems limited as traders await the release of monthly UK GDP and US inflation figures before placing fresh directional bets.
The key focus will be on the US Producer Price Index (PPI) and the Consumer Price Index (CPI), due on Thursday and Friday, respectively. The crucial data will be looked at for more cues about the US Federal Reserve's (Fed) policy path amid rising bets for a September rate hike and will influence the US Dollar (USD) price dynamics. This, in turn, should provide some meaningful impetus to the GBP/USD pair.
Fed path hinges on US inflation data as swaps lean toward another hike
Strategists at Scotiabank stress that the inflation data due this week will be pivotal for the policy outlook, arguing that “signs of progress on inflation need to be clear in this week’s PPI (Thursday) and CPI (Friday) for a Fed to hold.” They note that market pricing still favours further tightening, with swaps “continu[ing] to lean towards the idea of a hike, with OIS pricing in around 60% chance of a 25bps tightening move next week.”
In the meantime, the Bank of Japan (BoJ)-inspired rally in the Japanese Yen (JPY) keeps the USD depressed near its lowest level in over two weeks, touched on Tuesday. The British Pound (GBP), on the other hand, draws support from UK finance minister John Healey's optimistic growth agenda and commitment to fiscal discipline. This acts as a tailwind for the GBP/USD pair, but the uptick lacks bullish conviction.
Against the backdrop of inflation risks stemming from persistently higher energy prices, the upbeat US Nonfarm Payrolls (NFP) report lifted market bets for a September Fed rate hike. Moreover, escalating US-Iran tensions keep the geopolitical risk premium in play and lend some support to the safe-haven Greenback. This, in turn, is holding back traders from placing fresh bullish bets on the GBP/USD pair.
GBP/USD 4-hour chart
Technical Analysis
The GBP/USD pair hovers just under the 38.2% Fibonacci retracement at 1.3553 while holding above the 23.6% retracement at 1.3524. This positioning, together with spot prices trading over the 200-period Simple Moving Average (SMA) on the 4-hour chart, at 1.3502, but still capped by nearby Fibonacci hurdles, suggests a broadly neutral near-term tone.
A move beyond the 38.2% retracement could lift the GBP/USD pair to the 50.0% level at 1.3576 and then the 61.8% retracement at 1.3599. Beyond that, further barriers are seen at 1.3632 and the swing high region near 1.3675. On the downside, first support aligns with the 23.6% Fibo. level at 1.3524, ahead of the 200-period SMA at 1.3502, with a deeper floor around 1.3477 if selling pressure extends.
(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 gains ground to around 1.1630 in Wednesday’s early Asian session.
- ECB is set to raise its benchmark interest rates by 25 bps at its next policy meeting on Thursday.
- The key US inflation reports will be in the spotlight later this week.
The EUR/USD pair gains traction to near 1.1630 during the early Asian trading hours on Wednesday. Expectations of a rate hike from the European Central Bank (ECB) provide some support to the Euro (EUR) against the US Dollar (USD). ECB President Christine Lagarde is set to speak later in the day.
The ECB is widely expected to hike interest rates at its September policy meeting on Thursday, driven by surging energy prices due to the ongoing US-Iran conflict. Traders have fully priced in a 25 basis point (bps) move to 2.5% as the latest data shows Eurozone inflation rose back above 3% in August.
"We expect the ECB to hike rates by 25 basis points. Another insurance rate hike," said ING's global head of macro Carsten Brzeski. "Or for those who don’t like this term: a dovish rate hike,” Brzeski added.
Traders await key US Producer Price Index (PPI) and Consumer Price Index (CPI) inflation data, due later this week. These reports may shed fresh light on the Federal Reserve’s (Fed) next steps at their September 14-15 meeting. Any signs of hotter inflation in the US could lift the Greenback and act as a headwind for the major pair.
Euro upside bias holds as EUR/USD seen confined to tight range
Analysts at UOB Group maintain a constructive but measured stance on EUR/USD over the coming weeks. They recall that in their most recent narrative last Friday, when spot was at 1.1635, they noted that the strong surge from the prior Thursday “suggests the bias has shifted to the upside, but upward momentum is not that strong for now, and any advance could stay within a 1.1585/1.1690 range.” Updating their view on Monday with spot around 1.1625, they reiterated that “the upside bias remains intact, but EUR should stay within a narrower range of 1.1585/1.1670.” UOB says it “continue[s] to hold the same view,” indicating that while the Euro retains an upside tilt, gains are still expected to be contained within these defined parameters.
Technical Analysis: EUR/USD keeps a bullish vibe above the key 100-day SMA
In the daily chart, EUR/USD holds a constructive near-term bullish bias as the pair stabilizes above the Bollinger middle band and the 100-day moving average. The lower Bollinger band reinforces a broad demand zone under the market, while the upper band caps the immediate topside. The Relative Strength Index (14) near 57 suggests positive but not overstretched momentum, hinting that buyers still retain the upper hand as long as price holds above the mid-band support.
On the downside, initial support is located at the Bollinger middle band near 1.1622, followed by the 100-day moving average around 1.1560 and the lower Bollinger band close to 1.1538, where a deeper pullback would likely encounter stronger demand. On the topside, the first notable resistance is the upper Bollinger band around 1.1705, and a daily close above this barrier would open the door for an extension of the current rebound phase toward higher highs in the coming sessions.
(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 official said that US forces have struck multiple Iranian tankers tied to Iran’s Islamic Revolutionary Guard Corps (IRGC) in response to attempted missile attacks on a US warship, Bloomberg reported on Tuesday.
US Central Command (CENTCOM) said in a statement that American forces struck the tankers in the Gulf of Oman and near Iran’s Kharg Island, adding that US forces “directed the crews to abandon ship before the vessels were struck.” CENTCOM stated the targeted tankers were “part of a multibillion-dollar shadow network that funds the IRGC and its regional proxies.
IRGC warned that ships in Kuwaiti and Bahraini ports hosting US forces could be targeted in retaliation for American attacks on Iranian oil tankers.
Meanwhile, Iran’s semi-official Mehr news agency reported that explosions were heard on Kharg Island, Iran’s main oil export facility.
Iran-backed Houthi militants said they again targeted Saudi Arabia’s 400,000 barrel-a-day Jazan refinery and facilities that serve the domestic market.
Early Wednesday, Iranian military said it attacked a base in Jordan hosting US troops. The source said air defences intercepted and destroyed 18 of 20 Iranian missiles, two fell away from population centers, but no casualties reported after Iranian missile strike.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 0.13% on the day at $92.35.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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