Forex News
- AUD/USD struggles to gain any meaningful traction amid a combination of diverging forces.
- Renewed Iran hostilities benefit the safe-haven USD and act as a headwind for spot prices.
- The divergent RBA-Fed expectations support the pair as traders await the US NFP report.
The AUD/USD pair finds some support near the 0.7200 mark during the Asian session on Friday, though it struggles to gain any meaningful traction amid persistent geopolitical uncertainties. Nevertheless, spot prices remain within striking distance of the highest level since June 2022, touched on Wednesday, as traders keenly await the release of the closely-watched US monthly employment details.
The optimism over a potential US-Iran peace deal and the de-escalation of conflict fades rather quickly in the wake of renewed hostilities with Iran in the Strait of Hormuz. In fact, the US military said that it had intercepted Iranian attacks on three American warships transiting through the strategic waterway. Earlier, Iran accused the US of violating the ceasefire by striking multiple targets in and around the strait. This keeps geopolitical risks in play, which assists the safe-haven US Dollar (USD) in preserving the previous day's gains and acts as a headwind for the AUD/USD pair.
However, the Australian Dollar (AUD) continues to draw some support from the Reserve Bank of Australia's (RBA) hawkish tilt. In fact, the central bank indicated earlier this week that inflation remains too high and refused to rule out further tightening. In contrast, investors scaled back their expectations for a rate hike by the US Federal Reserve (Fed) in 2026 in the wake of the recent decline in Crude Oil prices. The divergent RBA-Fed policy outlooks, in turn, keep a lid on any meaningful USD appreciation and warrant some caution before placing bearish bets on the AUD/USD pair.
Traders also seem reluctant and now look forward to the US Nonfarm Payrolls (NFP) report for some meaningful impetus later during the North American session. The official report is expected to show that the US economy added 62K new jobs in April, down sharply from 178K in the previous month. The Unemployment Rate, however, is seen holding steady at 4.3%. The focus will also be on Average Hourly Earnings, which might influence Fed expectations. This, in turn, will play a key role in driving the USD demand and producing short-term trading opportunities around the AUD/USD pair.
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.
- USD/CAD declines as the US Dollar weakens amid easing Middle East tensions and improving market sentiment.
- Israel and Iran signaled easing hostilities, while Trump said the US-Iran ceasefire remains in place.
- The commodity-linked CAD may also weaken amid lower oil prices.
USD/CAD depreciates after two days of gains, trading around 1.3660 during the Asian hours on Friday. The pair weakens as the US Dollar (USD) softens amid improving market sentiment driven by the de-escalation of renewed tensions in the Middle East. Separate statements from Israel and Iran suggested that hostilities have, for the time being, subsided. US President Donald Trump also stated that the ceasefire between the US and Iran remains intact.
However, losses in the USD/CAD pair may remain limited as the commodity-sensitive Canadian Dollar (CAD) could also come under pressure due to declining oil prices. It is important to note that Canada is the largest crude oil exporter to the United States (US).
West Texas Intermediate (WTI) crude prices retreat after posting modest gains in the previous session, trading near $92.70 per barrel at the time of writing. Crude oil prices moved lower as easing tensions between the US and Iran reduced concerns over potential supply disruptions.
Oil prices had earlier advanced after renewed tensions flared between the United States (US) and Iran. The US military said it conducted retaliatory strikes on Iranian targets on Thursday, focusing on sites allegedly linked to attacks against US forces.
The Canadian Dollar also remained under pressure amid expectations of a dovish stance from the Bank of Canada (BoC). The latest GDP figures pointed to an economic slowdown following the outbreak of the conflict, reinforcing the BoC’s cautious guidance as policymakers continue prioritizing economic growth while inflation pressures remain contained.
Traders now await Canadian employment data due on Friday. Economists expect Canada to add 15,000 jobs in April, while the unemployment rate is projected to remain steady at 6.7%.
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.
A US trade court ruled against US President Donald Trump's latest 10% global tariffs, finding they were not justified under a 1970s trade law, however the court only blocked the levy on two small businesses and the state of Washington, Reuters reported on Thursday.
The court ruled that Trump's imposition of the tariffs under Section 122 of the Trade Act of 1974 was misguided. One of the judges said it was premature to grant victory to the plaintiffs.
Market reaction
At the time of writing, the US Dollar Index (DXY) is down 0.03% on the day at 98.25.
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.
On Friday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.8502 compared to the previous day's fix of 6.8487 and 6.8138 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.
US President Donald Trump said that a ceasefire with Iran is still in place despite fresh military clashes in and around the Strait of Hormuz, warning that it would be obvious if the ceasefire were over, CNN reported on Thursday.
Earlier Thursday, the US Central Command said it carried out “defensive strikes” on Iranian assets after “unprovoked Iranian attacks” on three US destroyers in the strait. The Iranian military accused the US of violating the ceasefire by targeting two ships in the waterway and attacking civilian areas.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 1.52% on the day at $92.88.
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.
- USD/JPY holds steady near 157.00 in Friday’s early Asian session.
- Suspected Japanese government interventions could support the Japanese Yen.
- US forces intercepted Iranian attacks.
The USD/JPY pair flat lines around 157.00 during the early Asian session. The pair steadies following another intervention by Japanese authorities. Traders might wait on the sidelines ahead of the US April employment report, which will be published later on Friday.
Japanese officials are suspected of spending around 10 trillion Yen in recent days to support the Japanese Yen (JPY). Japan’s top foreign exchange official Atsushi Mimura said on Thursday that authorities are prepared to respond on all fronts to speculative moves in the foreign exchange market. Mimura also declined to comment on FX intervention and specific currency levels.
Bloomberg reported on Thursday that US forces targeted Iranian military facilities responsible for launching attacks against warships transiting the Strait of Hormuz. US President Donald Trump said on Truth Social that US forces destroyed Iranian attackers and warned, “We’ll knock them out a lot harder and a lot more violently” if Iran doesn’t sign a deal soon.
Meanwhile, the Trump administration has been waiting for Iran to respond to its proposal to reopen the Strait of Hormuz and end the war. However, uncertainty in the Middle East remains high. Any signs of escalating tensions in the region could lift the US Dollar (USD) against the JPY.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- WTI declines after Israel and Iran separately signaled a temporary halt in hostilities.
- Oil prices previously surged after renewed tensions escalated between the US and Iran.
- The US military said it launched retaliatory strikes on Iranian sites linked to attacks on US forces.
West Texas Intermediate (WTI) oil price loses ground after registering modest gains in the previous day, trading around $93.70 per barrel during the Asian hours on Friday. Crude oil prices fell after separate reports from Israel and Iran indicated that hostilities have, at least for now, come to a halt.
Oil prices had earlier climbed after renewed tensions erupted between the United States (US) and Iran. The US military stated that it carried out retaliatory strikes on Iran on Thursday, targeting sites allegedly responsible for attacks on US forces.
The US military launched strikes on the Iranian port city of Bandar Abbas and Qeshm Island in the Strait of Hormuz. A senior US official told Fox News that the attacks do not signal a resumption of the war and should not be interpreted as the end of any existing ceasefire agreement.
US Central Command confirmed that Iranian forces launched missiles, drones, and small-boat assaults against USS Truxtun, USS Rafael Peralta, and USS Mason while the three guided-missile destroyers were transiting the Strait of Hormuz. CENTCOM described the Iranian operation as unprovoked and stated that US forces responded under the right to self-defense, according to the official statement.
Iran’s military accused the US of breaching the ceasefire between the two countries, claiming that American forces targeted two ships in the Strait of Hormuz and struck civilian areas, according to Reuters.
Meanwhile, the Trump administration is awaiting Iran’s response to a proposal intended to reopen the Strait of Hormuz and bring an end to the nearly 10-week conflict, while tensions continue to remain high across both the Persian Gulf and Lebanon. Reports indicate that Tehran is expected to communicate its response through Pakistan within the next two days.
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 trades with mild gains near 1.1730 in Friday’s early Asian session.
- Growing optimism surrounding a potential US-Iran peace deal lifts the Euro.
- All eyes will be on the US April NFP report on Friday.
The EUR/USD pair posts modest gains around 1.1730 during the early Asian session on Monday, supported by growing optimism surrounding a potential US-Iran peace deal. Markets might turn cautious later in the day ahead of the highly-anticipated US Nonfarm Payrolls (NFP) report for April.
The US President Donald Trump administration has been waiting for Iran to respond to its proposal to reopen the Strait of Hormuz and end the war. On Wednesday, an Iranian official said that it was reviewing a US peace proposal that sources said would formally end the war while leaving unresolved the critical US demands that Iran suspend its nuclear program and reopen the Strait of Hormuz.
A de-escalation in Middle East tensions could undermine a safe-haven currency such as the Greenback and act as a tailwind for the major pair.
The US April jobs data will take center stage later on Friday. The US economy is expected to add 62,000 jobs in April, while the Unemployment Rate in the US is projected to remain steady at 4.3% during the same period. A strong jobs report could lead the US Federal Reserve (Fed) to maintain higher interest rates for longer, boosting the US Dollar (USD) against the Euro (EUR).
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.
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