Forex News
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) agreed to keep its oil output unchanged for March at a meeting on Sunday. The group announced that the next meeting will take place on March 1.
A statement noted, "The countries will continue to closely monitor and assess market conditions, and in their continuous efforts to support market stability, they reaffirmed the importance of adopting a cautious approach and retaining full flexibility to continue pausing or reverse the additional voluntary production adjustments."
Market reaction
At the time of press, the WTI price is down 2.80% on the day at $63.45.
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.
The Bank of Japan (BoJ) published the Summary of Opinions from the January monetary policy meeting, with the key findings noted below.
Key quotes
One member said no need to worry excessively about impact on corporate profits provided rate hike pace is not too fast.
One member said appropriate to keep raising policy rate if BOJ economic and price projections materialize.
One member said current financial conditions remain significantly accommodative given economic strength and fallout from recent weak yen.
One member said as we have done so far, Bank of Japan should raise rates while examining how economy and markets respond to each policy shift.
One member said risk of BOJ being behind the curve has not necessarily become evident yet, yet it is becoming even more important for BOJ to conduct monetary policy carefully and timely.
One member said if overseas rate environments change this year, there is risk BOJ could unintentionally fall behind the curve.
One member said as foreign exchange market players pay attention to real interest rate differentials, BOJ must adjust current significantly negative real policy rate.
One member said yen fall and rise in long-term rates largely reflect fundamentals so only prescription from monetary policy perspective is to raise policy rate in timely and appropriate manner.
One member said BOJ should not take too much time examining impact of rate hike and proceed with next rate hike without missing appropriate timing.
One member said BOJ should raise policy rate every few months.
One member said developments seen in Japan Government Bond market over past two weeks or so have been a one-sided steepening of yield curve that warrants attention
One member said BOJ should stick with current thinking and continue reducing its bond purchases while responding to exceptional circumstances by, for example, increasing purchases.
One member said JGB market volatility, especially for super-long notes, has increased so BOJ should consider taking flexible action in exceptional cases including purchases of JGBs.
One member stated that when there is an increase in bond market volatility, it is important for a central bank to examine whether market functioning is maintained.
One member said weak yen increases profits and wages of large firms but weighs on those of smaller firms, and thus could lead to wider inequality.
One member said inflation has started to become persistent.
One member said pass-through to prices of higher import prices caused by weak yen has become more noticeable.
One member said it has become more probable that exchange rate factors will push up prices.
One member said it is necessary to pay more attention to upside risks to prices.
One member said since the economy faces labor supply constraints, risks to prices have become skewed toward the upside.
Market reaction
Following the BoJ’s Summary of Opinions, the USD/JPY pair is up 0.28% on the day to trade at 155.18 as of writing.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.04% | -0.05% | 0.17% | 0.10% | 0.12% | 0.03% | 0.00% | |
| EUR | 0.04% | -0.01% | 0.20% | 0.15% | 0.16% | 0.07% | 0.04% | |
| GBP | 0.05% | 0.00% | 0.00% | 0.16% | 0.18% | 0.08% | 0.05% | |
| JPY | -0.17% | -0.20% | 0.00% | -0.05% | -0.04% | -0.12% | -0.15% | |
| CAD | -0.10% | -0.15% | -0.16% | 0.05% | 0.01% | -0.08% | -0.11% | |
| AUD | -0.12% | -0.16% | -0.18% | 0.04% | -0.01% | -0.09% | -0.12% | |
| NZD | -0.03% | -0.07% | -0.08% | 0.12% | 0.08% | 0.09% | -0.04% | |
| CHF | -0.00% | -0.04% | -0.05% | 0.15% | 0.11% | 0.12% | 0.04% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
This section was published on February 1 at 22:27 GMT as a preview of the BoJ Summary of Opinions release.
The BoJ Summary of Opinions Preview
The Bank of Japan (BOJ) will publish its report on Sunday at 23:50 GMT. This report includes the BOJ's projection for inflation and economic growth. It is scheduled 8 times per year, about 10 days after the Monetary Policy Statement is released.
How could the BoJ Summary of Opinions affect USD/JPY?
USD/JPY trades on a positive note on the day in the lead up to the BoJ Summary of Opinions. The pair edges higher as the US Dollar (USD) strengthens after former Federal Reserve (Fed) Governor Kevin Warsh was selected to be the next Fed chair.
The first upside barrier for the USD/JPY pair is seen at the January 23 high of 159.81. The next resistance level emerges at the 160.00 psychological level, en route to the January 14 high of 161.00.
To the downside, the 100-day Exponential Moving Average (EMA) of 154.50 will offer some comfort to buyers. Extended losses could see a drop to the January 30 low of 152.50. The next contention level is located at the January 29 low of 151.95.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- Gold price faces some selling pressure near $4,780 in Monday’s early Asian session.
- Reports that Kevin Warsh would be nominated as the next Fed Chair weigh on the Gold price.
- Geopolitical risks and sustained buying by central banks might cap the downside for XAU/USD.
Gold price (XAU/USD) tumbles to around $4,780 during the early Asian session on Monday. The precious metal extends the decline after reaching historic highs last week amid signs of political stability in the United States (US). Traders will take more cues from the US ISM Manufacturing Purchasing Managers Index (PMI) report later on Monday.
The yellow metal had been soaring to record highs in the previous weeks, bolstered by worries that US President Donald Trump would choose a Federal Reserve (Fed) Chairman who would cave into his demands to cut interest rates. Nonetheless, reports that Trump would nominate Kevin Warsh, who is seen as a relatively safe bet compared with other candidates, weigh on the Gold price as it eases concerns over the Fed’s independence.
On the other hand, ongoing geopolitical tensions, including US-Iran tensions, could provide some support to a traditional safe-haven asset like Gold. Iran's supreme leader Ayatollah Ali Khamenei warned over the weekend that any attack on his country would spark a regional conflict, as the US continues to build up its forces nearby.
Additionally, rising demand from major central banks could underpin the precious metal. "Investors and global central banks have... favoured gold as their reserve currency of choice, which they believe insulates them from US policy dependence," said Emma Wall, chief investment strategist at Hargreaves Lansdown. "Certain nations will have observed the threat of Russia having its US dollar assets seized by global players supportive of Ukraine, and subsequently considered the metal a more attractive neutral reserve," she added.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
China’s President Xi Jinping said in an article published on Saturday in Qiushi that he has renewed calls for the Chinese Yuan to build a “strong currency” that can become widely used in international trade, investment and foreign exchange markets and reach the status of a global reserve.
These remarks underscore Beijing’s long-term ambition to reduce reliance on the US Dollar (USD).
Market reaction
At the time of writing, the AUD/USD pair is trading around 0.6941, down 0.30% on the day.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
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