Forex News
- EUR/JPY could target the upper boundary of its ascending channel near 187.80.
- The 14-day Relative Strength Index near 52 indicates neutral-to-positive momentum.
- The primary support appears at the nine-day EMA of 185.24.
EUR/JPY gains ground for the fourth successive day, trading around 185.30 during the Asian hours on Thursday. The EUR/JPY cross is holding a constructive bias, with spot remaining above the nine-day and 50-day Exponential Moving Averages (EMAs). The short-term EMA, hovering just above the medium-term line, suggests the broader uptrend remains intact after the recent pullback.
The technical analysis of the daily chart suggests the EUR/JPY cross is moving within the ascending channel pattern, suggesting an ongoing bullish bias. The 14-day Relative Strength Index (RSI) near 52 suggests neutral-to-positive momentum rather than overbought conditions.
The EUR/JPY cross may explore the region around the upper boundary of the ascending channel around 187.80, followed by the all-time high of 187.95, recorded on April 17.
On the downside, the immediate support lies at the nine-day EMA of 185.24, followed by the 50-day EMA at 185.07. A break below these averages would cause the bearish emergence and put downward pressure on the EUR/JPY cross to test the lower ascending channel boundary around 184.50. Further declines would expose the nearly four-month low of 181.87, recorded on March 16, followed by the six-month low of 180.81, reached on February 12.
(The technical analysis of this story was written with the help of an AI tool.)
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.11% | -0.09% | -0.03% | -0.04% | 0.03% | -0.07% | -0.18% | |
| EUR | 0.11% | 0.02% | 0.07% | 0.06% | 0.04% | 0.07% | -0.06% | |
| GBP | 0.09% | -0.02% | 0.06% | 0.03% | 0.04% | 0.05% | -0.09% | |
| JPY | 0.03% | -0.07% | -0.06% | -0.02% | -0.06% | -0.04% | -0.14% | |
| CAD | 0.04% | -0.06% | -0.03% | 0.02% | -0.03% | 0.00% | -0.13% | |
| AUD | -0.03% | -0.04% | -0.04% | 0.06% | 0.03% | 0.03% | -0.12% | |
| NZD | 0.07% | -0.07% | -0.05% | 0.04% | -0.00% | -0.03% | -0.13% | |
| CHF | 0.18% | 0.06% | 0.09% | 0.14% | 0.13% | 0.12% | 0.13% |
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 Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Israeli military says during the Asian trading session on Thursday that the Home Front Command, the branch of the Israel Defense Forces (IDF) responsible for civil defense, issues an early warning after launches from Lebanon toward northern Israel.
Market reaction
No immediate reaction by the US Dollar (USD) after a warning from Israel's Home Front Command. As of writing, the US Dollar Index (DXY) trades 0.13% lower at around 99.95.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- NZD/USD drifts higher to near 0.5800 in Thursday’s Asian session.
- Trump vowed even more attacks if no peace deal is secured.
- Hot inflation keeps traders on edge about the US rate outlook.
The NZD/USD pair gains traction to around 0.5800 during the Asian trading hours on Thursday. Nonetheless, escalating tensions in the Middle East could weigh on the New Zealand Dollar (NZD) as a riskier asset against the US Dollar (USD). The US Producer Price Index (PPI) report.
Iran’s joint military command said that its armed forces will give a "crushing and decisive” response to any “aggression” from the US in the region. Earlier, US President Donald Trump vowed to strike Iran again and scolded the country for delaying talks on an interim peace deal, following overnight attacks that put further strain on a fragile truce.
Bahrain, Jordan and Kuwait reportedly intercepted Iranian missiles and drones aimed at US military facilities on Thursday, per Reuters. Fears of wider conflict in the region could boost the Greenback as a safe-haven currency.
US inflation accelerated in May to the fastest pace in more than three years as the Iran war pushed up energy prices. The US Bureau of Labor Statistics (BLS) revealed on Wednesday that the US Consumer Price Index (CPI) rose 4.2% YoY in May, versus 3.8% prior. This figure came in line with the market expectation. Following the hot inflation report, market expectations have aggressively pivoted away from any remaining hope for rate cuts this year.
Traders have fully priced in a 25-basis-point (bps) hike in December, a sharp turn from expectations of two rate cuts this year before the Iran war erupted at the end of February.
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.
Bahrain, Jordan and Kuwait reportedly intercepted Iranian missiles and drones aimed at US military facilities on Thursday, signaling wider regional involvement in the conflict, Reuters reported.
Iran reportedly launched ballistic missiles toward Jordan's Muwaffaq Salti Air Base, a facility hosting US forces that had previously been targeted in an earlier attack that was successfully intercepted. Meanwhile, Kuwait's Armed Forces General Staff said the country's air defense systems were intercepting hostile aerial targets from Iran, including UAVs and ballistic missiles.
The Iranian military announced in a statement that it had launched a drone operation against the US Navy’s Fifth Fleet based in Bahrain, in response to the violation of the ceasefire and US military attacks on areas in southern Iran, Reuters reported on Thursday.
Earlier, Iran’s joint military command said that its armed forces will give a ‘“crushing and decisive” response to any “aggression” from the US in the region.
On Wednesday, the Iranian military stated that the Strait is "closed to all vessels, including oil tankers and commercial ships," effective immediately, and "any vessel attempting to transit the strait will be targeted." Meanwhile, US Central Command (CENTCOM) said that commercial ships are continuing to transit “in and out of the Strait of Hormuz tonight,” contradicting claims from Iran that the strait has been closed.
Market reaction
Crude oil prices attract some buyers following this headline. At the time of writing, the West Texas Intermediate (WTI) is up 0.41% on the day at $90.70.
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/USD attracts some buyers during the Asian session on Thursday amid a softer USD.
- Rising geopolitical tensions and Fed rate hike bets should help limit deeper USD losses.
- Diminishing odds of further tightening by the RBA also contribute to capping spot prices.
The AUD/USD pair recovers a few pips after touching a fresh two-month low during the Asian session on Thursday and moves back above the 0.7000 psychological mark. The fundamental backdrop, however, seems tilted in favor of bearish traders, making it prudent to wait for strong follow-through buying before confirming that spot prices have formed a near-term bottom.
Despite a rise in the headline US Consumer Price Index (CPI) in May, the milder core indicators eased worries about runaway inflation and kept the US Dollar (USD) bulls on the defensive. This, in turn, is seen as a key factor acting as a tailwind for the AUD/USD pair. Nevertheless, traders are still pricing in a 70% chance that the US Federal Reserve (Fed) will hike interest rates by the end of this year amid concerns about energy prices due to the Middle East conflict.
In fact, the US military launched a new wave of strikes on targets across Iran after President Donald Trump said that more were coming. In response, Iran announced the closure of the Strait of Hormuz and warned that its armed forces would give a crushing and decisive response to any aggression from the US in the region. The latest developments threaten to derail efforts to over three-month-old war, which should support Crude Oil prices and the safe-haven Greenback.
Apart from this, fading expectations of additional interest rate hikes by the Reserve Bank of Australia (RBA) might hold back traders from placing aggressive bullish bets around the Australian Dollar (AUD) and cap the AUD/USD pair. This, in turn, suggests that any subsequent move up might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly. Traders now look to the US Producer Price Index (PPI) for a fresh impetus later today.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.12% | -0.09% | -0.05% | -0.05% | 0.04% | -0.08% | -0.18% | |
| EUR | 0.12% | 0.03% | 0.07% | 0.08% | 0.06% | 0.07% | -0.06% | |
| GBP | 0.09% | -0.03% | 0.06% | 0.04% | 0.04% | 0.04% | -0.09% | |
| JPY | 0.05% | -0.07% | -0.06% | -0.02% | -0.03% | -0.03% | -0.14% | |
| CAD | 0.05% | -0.08% | -0.04% | 0.02% | -0.01% | 0.00% | -0.14% | |
| AUD | -0.04% | -0.06% | -0.04% | 0.03% | 0.01% | 0.01% | -0.14% | |
| NZD | 0.08% | -0.07% | -0.04% | 0.03% | -0.00% | -0.01% | -0.13% | |
| CHF | 0.18% | 0.06% | 0.09% | 0.14% | 0.14% | 0.14% | 0.13% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
- Silver rebounded after hitting an 11-week low of $61.50 on Thursday, driven by industrial demand and safe-haven appeal.
- The white metal could drop as US airstrikes in Iran fuel Middle East conflict and worsen global inflation fears.
- Trump threatened to strike Iran "very hard," accusing Tehran of intentionally stalling interim peace deal negotiations.
Silver price (XAG/USD) gains ground after two days of losses, trading around $64.00 per troy ounce during the Asian hours. The white metal rebounds from an 11-week low of $61.50 reached in earlier hours on Thursday, driven by a unique intersection of its dual nature as both a monetary safe-haven and a critical industrial commodity.
However, Silver faces limited upside as the US military launched a second day of airstrikes against Iran, threatening a prolonged Middle East conflict that has rattled global markets and intensified inflation fears.
US launched "self-defense" strikes following an incident where an American helicopter was shot down, triggering Iranian retaliatory attacks on US military facilities in Bahrain, Jordan, and Kuwait.
In response to what it termed "unwarranted and continued aggression," US Central Command (CENTCOM) confirmed that the US began airstrikes in Iran on Wednesday. Furthermore, President Donald Trump warned of severe military action if an interim peace deal is not finalized, accusing Tehran of stalling. Iranian officials, however, maintain they will not back down.
Compounding market jitters, May US inflation accelerated at its fastest pace in over three years due to surging energy costs, though the data matched expectations. While traders modestly pared back Federal Reserve rate hike projections, a December quarter-point increase remains fully priced in. Market focus now turns to the upcoming release of May's Producer Price Index (PPI) and Initial Jobless Claims.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- GBP/USD edges higher to near 1.3385 in Thursday’s Asian session.
- Traders raise their bets on US rate hikes after upbeat US economic data.
- BoE officials signaled the central bank is in "no rush to raise interest rates.
The GBP/USD pair gathers strength to around 1.3385 during the Asian trading hours on Thursday. However, the potential upside might be limited amid rising expectations for higher-for-longer US interest rates. Markets might turn cautious later in the day ahead of the US Producer Price Index (PPI) report.
A combination of robust labor and hot inflation reports from the US has reinforced a "higher for longer" stance from the Fed, which could lift the US Dollar (USD) and act as a headwind for the major pair.
Markets are now pricing in a 43.7% probability of a quarter-point rate hike in December, up from just about 14% a month ago, according to the CME FedWatch tool.
Traders will closely monitor the next US PPI inflation data for the outlook for Fed rates, especially with Chairman Kevin Warsh taking the helm. Major analysts have delayed rate cut expectations. Goldman Sachs anticipates the US central bank to hold rates steady through 2026, with the next cut not occurring until 2027
On the UK’s front, Bank of England (BoE) policymaker Alan Taylor said earlier this week that interest rates at their current level were restrictive for the economy and he did not see the need for a rate hike to tackle inflationary pressures that have grown as a result of the Iran war.
BoE Governor Andrew Bailey stated last week that the bank is in "no rush to raise interest rates.” Traders await the monthly UK Gross Domestic Product (GDP) data on Friday, which could provide fresh directions on the BoE's rate path.
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.
- USD/CAD edges lower on Thursday, though it lacks follow-through amid mixed cues.
- Rising Oil prices underpin the Loonie and cap gains amid a modest USD downtick.
- Geopolitical risks and the divergent Fed-BoC expectations lend support to the pair.
The USD/CAD pair struggles to capitalize on the overnight bounce from the 1.3900 mark, or the weekly low, and ticks lower during the Asian session on Thursday. Spot prices, however, remain well within striking distance of the year-to-date high, touched on Tuesday, and currently trade just below mid-1.3900s, down less than 0.10% for the day amid mixed cues.
Iran announced the closure of the Strait of Hormuz after the US launched a fresh wave of strikes across the country under orders from US President Donald Trump. The latest developments help Crude Oil prices in recovering further from a nearly two-month low, touched on Tuesday, which is seen underpinning the commodity-linked Loonie. Apart from this, subdued US Dollar (USD) price action turns out to be another factor acting as a headwind for the USD/CAD pair.
Meanwhile, the risk of a further escalation of tensions between the US and Iran might continue to benefit the Greenback's safe-haven status. In fact, Iran’s joint military command said that its armed forces will give a “crushing and decisive” response to any “aggression” from the US in the region. Furthermore, the war-driven rise in energy prices continues to fuel inflationary concerns and bolster expectations for a more hawkish US Federal Reserve (Fed).
According to the CME Group's FedWatch Tool, traders are currently pricing in over a 70% chance that the US central bank will raise borrowing costs by the end of this year. The bets were lifted by Wednesday's report showing that the US Consumer Price Index (CPI) rose 4.2% YoY in May, marking its highest level in three years. In contrast, the Bank of Canada (BoC) maintains a dovish stance as policymakers are prioritizing a sluggish economy over inflation threats.
The divergent Fed-BoC policy expectations, in turn, should help limit the downside for the USD/CAD pair, making it prudent to wait for strong follow-through selling before confirming that spot prices have topped out. Traders now look forward to the release of the US Producer Price Index (PPI), due later during the North American session. This, along with fresh developments surrounding the Middle East crisis and Oil price dynamics, should provide a fresh impetus.
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.
- US Dollar Index fell as Middle East uncertainty grew after US-Iran retaliatory strikes disrupted regional stability following a helicopter downing.
- Trump threatened to strike Iran "very hard," accusing Tehran of intentionally stalling interim peace deal negotiations.
- May’s US CPI hit forecasts at 4.2% YoY, up from April’s 3.8%. Core CPI ticked up to 2.9%.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is holding losses after registering minor gains in the previous day and trading around 100.00 during the Asian hours on Thursday.
The Greenback struggles as traders assess the uncertainty surrounding the Middle East conflict. Following an incident where an American helicopter was shot down, the US launched "self-defense" strikes, triggering Iranian retaliatory attacks on US military facilities in Bahrain, Jordan, and Kuwait.
In response to what it termed "unwarranted and continued aggression," US Central Command (CENTCOM) confirmed that the US began airstrikes in Iran on Wednesday. Furthermore, President Donald Trump warned of severe military action if an interim peace deal is not finalized, accusing Tehran of stalling. Iranian officials, however, maintain they will not back down.
Adding to the crisis, the Islamic Revolutionary Guard Corps (IRGC) announced an immediate, total closure of the Strait of Hormuz to all commercial and oil vessels, warning that any transit attempts would be targeted. This disruption has sent oil prices surging, reviving inflation fears and altering Federal Reserve (Fed) interest rate expectations. Money markets are now pricing in 25 basis points of tightening, pointing toward a potential Fed rate hike by year-end.
On the economic front, May’s US CPI matched forecasts, rising to 4.2% YoY (up from 3.8% in April), while Core CPI ticked up to 2.9% YoY from 2.8%. Market attention now shifts to the upcoming release of the May Producer Price Index (PPI) and Initial Jobless Claims later today.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
The People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead on Thursday at 6.8150 compared to the previous day's fix of 6.8130 and 6.7819 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.
Forex Market News
Our dedicated focus on forex news and insights empowers you to capitalise on investment opportunities in the dynamic FX market. The forex landscape is ever-evolving, characterised by continuous exchange rate fluctuations shaped by vast influential factors. From economic data releases to geopolitical developments, these events can sway market sentiment and drive substantial movements in currency valuations.
At Rakuten Securities Hong Kong, we prioritise delivering timely and accurate forex news updates sourced from reputable platforms like FXStreet. This ensures you stay informed about crucial market developments, enabling informed decision-making and proactive strategy adjustments. Whether you’re monitoring forex forecasts, analysing trading perspectives, or seeking to capitalise on emerging trends, our comprehensive approach equips you with the insights needed to navigate the FX market effectively.
Stay ahead with our comprehensive forex news coverage, designed to keep you informed and prepared to seize profitable opportunities in the dynamic world of forex trading.
