Forex News
- US Dollar Index trades in positive territory for the fifth consecutive day around 98.00 in Friday’s Asian session.
- Better-than-expected US economic data and a more hawkish Fed outlook underpin the DXY.
- The preliminary reading of the US Q4 GDP and the PCE inflation data will be closely monitored later on Friday.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, trades on a stronger note near 98.00 during the Asian trading hours on Friday. Traders brace for the key US economic data later on Friday for more clues on the interest rate path.
The stronger-than-expected US economic data and hawkish Federal Reserve (Fed) minutes could lift the DXY in the near term. According to minutes released on Wednesday from the January Fed meeting, officials split on where the interest rates should go. Several policymakers stated that rate hikes could be on the table and wanted the post-meeting statement to more closely reflect “a two-sided description of the Committee’s future interest rate decisions.”
Data released by the US Department of Labor (DOL) on Thursday showed that the Initial Jobless Claims declined to 206,000 for the week ending February 14. This figure came in below the market consensus of 225,000 and down from the previous week’s revised 229,000.
Minneapolis Fed President Neel Kashkari said the labor market has remained "pretty resilient" and that the central bank is close to both mandates of maximum employment and stable prices. Meanwhile, San Francisco Fed President Mary Daly stated that the monetary policy is in a good place.
The preliminary reading of the US Gross Domestic Product (GDP) for the fourth quarter (Q4) and the Personal Consumption Expenditures (PCE) data will be the highlights later in the day. In case of weaker-than-expected outcomes, this could drag the US Dollar lower against its rivals.
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.
- GBP/USD attracts sellers for the fifth consecutive day and is pressured by a combination of factors.
- Receding Fed rate cut bets support the USD, while rising March BoE rate cut bets weigh on the GBP.
- Traders now look forward to the Advance US Q4 GDP and the US PCE Price Index for a fresh impetus.
The GBP/USD pair prolongs its weekly downtrend for the fifth consecutive day on Friday and slides back closer to a nearly one-month low, touched the previous day. Spot prices trade below mid-1.3400s during the Asian session on Friday and seem vulnerable to slide further as traders now look to important US macro data for a fresh impetus.
The Advance US Q4 GDP report, along with the US Personal Consumption Expenditure (PCE) Price Index, is due for release later today and will be looked upon for more cues about the US Federal Reserve's (Fed) rate-cut path. This, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics. In the meantime, reduced bets for more aggressive policy easing by the US central bank assist the USD to stand firm near its highest level since January 23 and turn out to be a key factor exerting pressure on the GBP/USD pair.
Meanwhile, the Pound Sterling (GBP) continues with its relative underperformance on the back of the growing acceptance that the Bank of England (BoE) will lower borrowing costs at its next policy meeting in March. The expectations were lifted by the disappointing UK jobs report, which showed that the Unemployment Rate rose to 5.2% during the three months to December and pointed to a slowdown in wage growth. Moreover, the UK consumer inflation fell to its lowest level in nearly a year, reaffirming dovish BoE bets.
Apart from this, the GBP/USD pair's downfall could further be attributed to some follow-through technical selling following this week's breakdown below the 1.3530-1.3520 resistance-turned-support. This, in turn, validates the near-term negative outlook, suggesting that a positive reaction to weak US macro data could be seen as a selling opportunity and runs the risk of fizzling out rather quickly. Nevertheless, spot prices remain on track to register heavy weekly losses, and the fundamental backdrop backs the case for a further depreciating move.
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 stays muted as stronger Oil supports the Canadian Dollar, offsetting the stronger US Dollar.
- WTI price may further appreciate as US President Trump warned Iran to strike a deal or face military consequences.
- US Initial Jobless Claims fell to 206K, down from 229K and below the 225K forecast.
USD/CAD steadies for the second successive session, hovering around 1.3700 during the Asian hours on Friday. The pair remains subdued as the commodity-linked Canadian Dollar (CAD) draws support from higher Oil prices, offsetting the stronger US Dollar (USD). Notably, Canada is the largest Oil exporter to the United States (US), supplying around 60% of total US crude imports.
West Texas Intermediate (WTI) Oil price is trading near $66.50 per barrel at the time of writing. The benchmark WTI remains near a six-month high of $66.82, reached earlier in the day, supported by escalating supply concerns linked to tensions between the United States (US) and Iran.
BBC reported that US President Donald Trump warned that Iran must reach an agreement or face “bad things,” keeping the threat of military action over fragile nuclear negotiations. Iran, in turn, informed UN Secretary-General Antonio Guterres that it does not seek conflict but will respond to any military aggression.
The Greenback continues to receive support following hawkish minutes from the Federal Open Market Committee (FOMC) released on Wednesday. The January FOMC Meeting Minutes revived speculation about possible rate hikes if inflation persists. While nearly all policymakers backed holding rates steady, only a few favored a cut, and officials signaled openness to easing if inflation cools as expected.
Additionally, stronger-than-expected US economic figures lent support to the US Dollar. The US Department of Labor (DOL) reported Thursday that Initial Jobless Claims came in at 206K for the week ending February 14, down from the prior week’s revised 229K and below the 225K market forecast.
Traders will likely observe the preliminary reading of the US Gross Domestic Product (GDP) for the fourth quarter (Q4) and the Personal Consumption Expenditures (PCE) data later on Friday.
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.
- AUD/USD struggles to capitalize on the previous day’s bounce amid a broadly firmer USD.
- Receding Fed rate cut bets and a weaker risk tone underpin the safe-haven Greenback.
- Traders now look to the Advance US Q4 GDP and the key US PCE data for a fresh impetus.
The AUD/USD pair meets with a fresh supply during the Asian session on Friday and remains well within striking distance of a nearly two-week low, touched the previous day. Spot prices currently trade around the 0.7035 area as traders look to the key US macro releases before placing fresh directional bets.
The delayed US GDP report is expected to show that growth in the world's largest economy slowed to 3.0% annualized pace during the October-December period, compared to the 4.4% rise recorded in the previous quarter. The key focus, however, will be on the US Personal Consumption Expenditure (PCE) Price Index – the Federal Reserve's (Fed) preferred inflation gauge – amid signs of easing inflationary pressures. The crucial data will play a key role in influencing market expectations about the Fed's rate-cut path, which, in turn, will drive the US Dollar (USD) demand and provide a fresh impetus to the AUD/USD pair.
Apart from this, the flash US PMIs will be looked upon to grab short-term trading opportunities heading into the weekend. In the meantime, the preliminary reading of Australia's S&P Global Manufacturing PMI came in at 51.5 in February, down from 52.3 prior. This, along with a slight deterioration in the global risk sentiment, acts as a headwind for the Australian Dollar (AUD) amid a bullish USD, bolstered by fading Fed rate cut bets. In fact, the January Nonfarm Payrolls (NFP) report, along with less dovish FOMC Minutes and the recent comments from Fed officials, did not support the notion of three rate cuts in 2026.
Furthermore, reviving safe-haven demand assists the safe-haven Greenback to hold steady just below a four-week high, touched on Thursday, and acts as a headwind for the AUD/USD pair. However, the US central bank is still expected to lower borrowing costs this year, which marks a significant divergence in comparison to the Reserve Bank of Australia's (RBA) hawkish outlook and could support spot prices. Hence, it will be prudent to wait for strong follow-through selling before positioning for the pair's recent pullback from the vicinity of mid-0.7100s, or the highest level since February 2023, touched last Thursday.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.09% | 0.11% | 0.08% | 0.04% | 0.38% | 0.42% | 0.06% | |
| EUR | -0.09% | 0.01% | -0.02% | -0.05% | 0.29% | 0.33% | -0.03% | |
| GBP | -0.11% | -0.01% | -0.02% | -0.07% | 0.28% | 0.31% | -0.05% | |
| JPY | -0.08% | 0.02% | 0.02% | -0.04% | 0.29% | 0.32% | -0.03% | |
| CAD | -0.04% | 0.05% | 0.07% | 0.04% | 0.33% | 0.37% | 0.02% | |
| AUD | -0.38% | -0.29% | -0.28% | -0.29% | -0.33% | 0.03% | -0.32% | |
| NZD | -0.42% | -0.33% | -0.31% | -0.32% | -0.37% | -0.03% | -0.36% | |
| CHF | -0.06% | 0.03% | 0.05% | 0.03% | -0.02% | 0.32% | 0.36% |
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).
- NZD/USD softens to near 0.5960 in Friday’s early Asian session.
- RBNZ’s Breman said the path is bumpy, but inflation is seen back in the target range in Q1.
- Traders brace for key US economic data later on Friday for more clues on the interest rate path.
The NZD/USD pair attracts some sellers to around 0.5960 during the Asian trading hours on Friday. The New Zealand Dollar (NZD) weakens against the US Dollar (USD) following a dovish hold by the Reserve Bank of New Zealand (RBNZ). Traders brace for the key US economic data later on Friday for fresh impetus.
The New Zealand central bank decided to hold the Official Cash Rate (OCR) at its February policy meeting. This was the first-rate decision under new Governor Anna Breman. She pushed expectations for the next potential rate hike to late 2026 or early 2027.
Breman said on Thursday that the path to 2% inflation has been bumpy, but the central bank expects inflation to already be back in its target range in the first quarter of this year. A dovish hold by the RBNZ could weigh on the Kiwi against the USD in the near term.
On the USD’s front, hawkish Federal Reserve (Fed) minutes and stronger-than-expected economic data provide some support to the Greenback. Data released by the US Department of Labor (DOL) on Thursday showed that the number of US citizens submitting new applications for unemployment insurance declined to 206K for the week ending February 14. This figure came in lower than the market consensus of 225K and down from the previous week’s revised 229K.
The preliminary reading of the US Gross Domestic Product (GDP) for the fourth quarter (Q4) and the Personal Consumption Expenditures (PCE) data will be in the spotlight later on Friday. If the reports come in worse than expected, this could undermine the USD and cap the downside for the pair.
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.
- Silver preserves its gains registered over the past two days, to a one-week high.
- This week’s breakout through a confluence resistance favors the XAG/USD bulls.
- The mixed technical setup warrants caution before positioning for further gains.
Silver (XAG/USD) struggles to capitalize on its gains registered over the past two days and oscillates in a narrow range during the Asian session on Friday. The white metal currently trades around the $78.25-$78.30 region, nearly unchanged for the day, and remains close to a one-week high, touched on Thursday.
From a technical perspective, this week's breakout through a one-week-old ascending trend-channel resistance, which coincided with the 100-hour Simple Moving Average (SMA), was seen as a key trigger for the XAG/USD bulls. The 100-hour SMA has flattened around $76.32 after a modest rise, and spot prices hold above it to preserve an intraday bullish bias.
Meanwhile, the Moving Average Convergence Divergence (MACD) line sits marginally below the Signal line near the zero mark, with a slightly negative histogram that points to subdued momentum. However, the Relative Strength Index (RSI) stands at 55, neutral with a mild upward tilt. Moreover, acceptance above the 100-period SMA underpins the breakout structure.
A turn of the MACD histogram back to positive would reinforce upside follow-through. A firming RSI above 60 would signal strengthening momentum, while a drop beneath 50 would warn of fading impetus. The former descending channel hurdle at $75.58 could act as initial support on pullbacks, while deeper protection aligns with the channel floor near $70.31.
Absent fresh momentum, the XAG/USD could consolidate, but maintaining levels above the moving average would keep the near-term bias upward.
(The technical analysis of this story was written with the help of an AI tool.)
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.
- WTI retreated after hitting $66.82, a six-month high, amid rising US-Iran supply tensions.
- President Trump warned Iran to strike a deal or face military consequences, pressuring fragile nuclear talks.
- EIA Crude Oil Stocks fell 9.014M barrels, versus forecasts for a 2.1M-barrel build.
West Texas Intermediate (WTI) Oil price eases after two consecutive sessions of gains, trading near $66.40 per barrel during Asian hours on Friday. The benchmark WTI retreated after touching a six-month high of $66.82 earlier in the day, supported by escalating supply concerns linked to tensions between the United States (US) and Iran.
According to the BBC, US President Donald Trump warned that Iran must reach an agreement or face “bad things,” keeping the threat of military action over fragile nuclear negotiations. Iran, in turn, informed UN Secretary-General Antonio Guterres that it does not seek conflict but will respond to any military aggression.
Crude Oil prices could regain traction as reports indicate US officials are considering a potential military operation in the Middle East, while Israel continues to advocate for regime change in Tehran. The head of the UN nuclear watchdog cautioned that Iran’s window for a diplomatic resolution is narrowing amid a US military buildup. Any escalation risks disrupting flows through the Strait of Hormuz, a critical chokepoint that handles roughly 20% of global Oil shipments.
A Reuters report suggests that the geopolitical premium embedded in crude prices due to US-Iran tensions remains fluid, though markets broadly assume the situation will ultimately stabilize. Estimates place the current risk premium at around $7–$10 per barrel, reflecting concerns that negotiations could collapse, while still implying limited expectations of major supply disruptions through the Strait of Hormuz.
Meanwhile, fresh data from the US Energy Information Administration (EIA) showed US Crude Oil Stocks dropped by 9.014M barrels in the last week, sharply contrasting with market forecasts for a 2.1M-barrel build that would have offset the prior week’s 8.53M increase.
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.
- EUR/USD holds steady around 1.1770 in Friday’s early Asian session.
- Uncertainty surrounding ECB leadership could weigh on the Euro.
- Traders will take more cues from the flash US Q4 GDP and PCE inflation reports, which are due later on Friday.
The EUR/USD pair trades on a flat note near 1.1770 during the early Asian session on Friday. The potential upside for the Euro (EUR) seems limited amid European Central Bank (ECB) leadership speculation swirls.
The Financial Times reported that ECB President Christine Lagarde was expected to leave her post before the end of her eight-year term. Analysts suggested an early departure would allow French President Emmanuel Macron and German Chancellor Friedrich Merz to select a successor before the April 2027 French presidential election.
Meanwhile, stronger-than-expected US labor market data and hawkish FOMC Minutes provide some support to the Greenback and create a headwind for the major pair. Several Federal Reserve (Fed) officials suggested that if inflation remains stubbornly above the 2% target, rate hikes could be on the table, according to FOMC Minutes released Wednesday. Policymakers advocated for a "two-sided" description of future policy to reflect this risk.
Traders await the release of key US economic data later on Friday, including the flash Gross Domestic Product (GDP) data for the fourth quarter (Q4) and the Personal Consumption Expenditures (PCE) report. In case of weaker-than-expected outcomes, this could drag the US Dollar (USD) lower against the shared currency. On the Euro front, the preliminary readings of the Purchasing Managers’ Index (PMI) from the Eurozone and Germany will be published.
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.
Reserve Bank of New Zealand (RBNZ) Governor Anna Breman said on Thursday that the path to 2% inflation has been bumpy, but we expect inflation to already be back in our target range in the first quarter of this year.
Key quotes
Path to 2 percent inflation has been bumpy but we expect inflation to already be back in our target range in the first quarter of this year.
We are confident that inflation will return to the 2 percent target midpoint over the next 12 months.
Market reaction
At the press time, the NZD/USD pair is down 0.07% on the day to trade at 0.5968.
RBNZ FAQs
The Reserve Bank of New Zealand (RBNZ) is the country’s central bank. Its economic objectives are achieving and maintaining price stability – achieved when inflation, measured by the Consumer Price Index (CPI), falls within the band of between 1% and 3% – and supporting maximum sustainable employment.
The Reserve Bank of New Zealand’s (RBNZ) Monetary Policy Committee (MPC) decides the appropriate level of the Official Cash Rate (OCR) according to its objectives. When inflation is above target, the bank will attempt to tame it by raising its key OCR, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the New Zealand Dollar (NZD) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken NZD.
Employment is important for the Reserve Bank of New Zealand (RBNZ) because a tight labor market can fuel inflation. The RBNZ’s goal of “maximum sustainable employment” is defined as the highest use of labor resources that can be sustained over time without creating an acceleration in inflation. “When employment is at its maximum sustainable level, there will be low and stable inflation. However, if employment is above the maximum sustainable level for too long, it will eventually cause prices to rise more and more quickly, requiring the MPC to raise interest rates to keep inflation under control,” the bank says.
In extreme situations, the Reserve Bank of New Zealand (RBNZ) can enact a monetary policy tool called Quantitative Easing. QE is the process by which the RBNZ prints local currency and uses it to buy assets – usually government or corporate bonds – from banks and other financial institutions with the aim to increase the domestic money supply and spur economic activity. QE usually results in a weaker New Zealand Dollar (NZD). QE is a last resort when simply lowering interest rates is unlikely to achieve the objectives of the central bank. The RBNZ used it during the Covid-19 pandemic.
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