Forex News
On Monday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.8579 compared to Friday's fix of 6.8674 and 6.8282 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
- GBP/USD remains in the negative territory due to stalled US–Iran peace talks.
- US–Iran peace talks stalled after Trump canceled a Pakistan delegation for potential negotiations.
- USD strengthens on safe-haven demand as Israel-Hezbollah clashes intensify despite a US-brokered ceasefire extension.
GBP/USD remains in the negative territory after trimming daily losses, trading around 1.3520 during the Asian hours on Monday. The pair faced pressure as the risk-sensitive Pound Sterling (GBP) weakened amid stalled US–Iran peace talks.
US President Donald Trump called off that delegation to Pakistan to potentially discuss directly with Iran, Bloomberg reported on Sunday. "If they want to talk, they can come to us, or they can call us. You know, there is a telephone. We have nice, secure lines," said Trump.
Trump on Saturday told Jared Kushner and Steve Witkoff to skip the trip to Pakistan, which is mediating talks, saying that Iran “offered a lot, but not enough. Iranian President Masoud Pezeshkian stated that his nation won’t enter “imposed negotiations under threats or blockade.”
CNN reported that President Trump was swiftly escorted off the stage by Secret Service after possible shots were fired at the White House Correspondents’ Dinner in Washington, DC, on Saturday. Vice President JD Vance and several members of Trump’s Cabinet, who were also in attendance, were also rushed out.
The US Dollar (USD) strengthened against major peers on safe-haven demand as the ceasefire comes under strain, with Israel and Hezbollah escalating attacks despite a US-brokered extension meant to halt fighting for three weeks.
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.
- WTI regains positive traction on Monday amid the lack of progress in US-Iran peace talks.
- Supply disruption worries due to the Hormuz standoff further support Crude Oil prices.
- Reduced Fed rate cut bets underpin the USD, capping the USD-denominated commodity.
West Texas Intermediate (WTI) – the benchmark US Crude Oil price – kicks off the new week on a positive note and reverses a part of Friday's modest decline, though the upside remains capped. The commodity currently trades below mid-$94.00s, up nearly 1.0% for the day, amid global oil supply concerns.
US President Donald Trump has cancelled a planned visit to Islamabad by his envoys Steve Witkoff and Jared Kushner, even as Iran's Foreign Minister Abbas Araqchi arrived in Pakistan. This comes amid a deadlock over issues that include the blockade of the Strait of Hormuz and keep geopolitical risks in play, which continue to act as a tailwind for Crude Oil prices.
Meanwhile, traffic through the strategic waterway remains largely blocked due to Iran's restrictions on movement and the US naval blockade of Iranian ports. This adds to worries about prolonged disruptions and turns out to be another factor offering support to Crude Oil prices. However, a modest US Dollar (USD) uptick caps any further upside for the commodity.
Investors remain worried that the war-driven surge in energy prices will revive inflationary pressures and force major central banks, including the US Federal Reserve (Fed), to adopt a more hawkish stance. In fact, the current market pricing indicates over 80% chance for the Fed rates to remain at the current range in 2026, which continues to underpin the Greenback.
Nevertheless, the aforementioned fundamental backdrop seems tilted in favor of bullish traders and suggests that the path of least resistance for Crude Oil prices is to the upside. Hence, any corrective slide is more likely to get bought into and remain cushioned. However, it will be prudent to wait for a move beyond the $95.00 mark before positioning for further gains.
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.
- Gold price falls to near $4,680 in Monday’s early Asian session.
- Trump cancelled a planned trip by two officials to Pakistan for talks on the Iran war.
- Markets expected the Fed to keep rates unchanged.
Gold price (XAU/USD) tumbles to around $4,680 during the early Asian session on Monday. The precious metal attracts some sellers amid the ongoing conflict in the Middle East. Traders brace for the US Federal Reserve (Fed) interest rate decision later on Wednesday, with no change in rate expected.
Uncertainty in the Middle East remains high as peace talks over the Iran war have stalled. US President Donald Trump told Jared Kushner and Steve Witkoff to skip the trip to Pakistan, which is mediating talks, saying that Iran “offered a lot, but not enough.” Iranian President Masoud Pezeshkian stated that his nation won’t enter “imposed negotiations under threats or blockade.”
Meanwhile, Israeli Prime Minister Benjamin Netanyahu said he has ordered the military to "vigorously attack" what he called Hezbollah targets in Lebanon, per BBC. Rising tensions in the Middle East have boosted crude oil prices, which have fueled inflation fears and raised the bar for cutting rates. Gold is often used amid geopolitical uncertainty but does not yield interest, making it less attractive when interest rates are high.
The Fed is widely expected to keep interest rates unchanged at its upcoming April policy meeting. Traders will closely watch the Fed’s press conference for more clues on how policymakers are interpreting the impact of higher energy costs and whether this alters their longer-term outlook on interest rates.
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.
- EUR/USD remains subdued ahead of the German GfK Consumer Confidence Survey release.
- US–Iran peace talks stalled after Trump canceled a Pakistan delegation for potential negotiations.
- Trump was escorted off stage by the Secret Service after possible shots at White House Correspondents’ Dinner.
EUR/USD edges higher after opening from levels below the previous close, remaining in the negative territory and trading around 1.1710 during the Asian hours on Monday. The pair faced challenges as the Euro (EUR) depreciated amid fragile peace talks in the Middle East. Traders will likely observe the German GfK Consumer Confidence Survey later in the day.
US-Iran peace talks were stalled after US President Donald Trump called off that delegation to Pakistan to potentially discuss directly with Iran, Bloomberg reported on Sunday. "If they want to talk, they can come to us, or they can call us. You know, there is a telephone. We have nice, secure lines," said Trump.
Trump on Saturday told Jared Kushner and Steve Witkoff to skip the trip to Pakistan, which is mediating talks, saying that Iran “offered a lot, but not enough. Iranian President Masoud Pezeshkian stated that his nation won’t enter “imposed negotiations under threats or blockade.”
CNN reported that President Trump was swiftly escorted off the stage by Secret Service after possible shots were fired at the White House Correspondents’ Dinner in Washington, DC, on Saturday. Vice President JD Vance and several members of Trump’s Cabinet, who were also in attendance, were also rushed out.
The US Dollar receives support from safe-haven demand as the ceasefire is under growing pressure, as Israel and Hezbollah have increased attacks on each other despite a US-brokered extension to the peace deal that was supposed to halt fighting for three more weeks.
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.
Iran's Foreign Minister Abbas Araghchi held talks in Oman on Sunday and discussed security in the Strait of Hormuz and broader Gulf waters and diplomatic efforts to end the Iran-US conflict, Reuters reported on Sunday.
Araghchi said that the US military presence in the Middle East was fuelling insecurity and division and called for a regional security framework free of outside interference.
Iran's Foreign Minister further stated that regional countries must form collective security without US intervention.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 1.25% on the day at $94.30.
Brent Crude Oil FAQs
Brent Crude Oil is a type of Crude Oil found in the North Sea that is used as a benchmark for international Oil prices. It is considered ‘light’ and ‘sweet’ because of its high gravity and low sulfur content, making it easier to refine into gasoline and other high-value products. Brent Crude Oil serves as a reference price for approximately two-thirds of the world's internationally traded Oil supplies. Its popularity rests on its availability and stability: the North Sea region has well-established infrastructure for Oil production and transportation, ensuring a reliable and consistent supply.
Like all assets supply and demand are the key drivers of Brent Crude 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 Brent 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 Brent Crude 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 Brent Crude 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.
US President Donald Trump was swiftly escorted off the stage by Secret Service after possible shots were fired at the White House Correspondents’ Dinner in Washington, DC, on Saturday, CNN reported.
Vice President JD Vance and several members of Trump’s Cabinet who were also in attendance were also rushed out. A source said that Trump is safe, while two sources said Vance is safely out of the dinner. An FBI official said that person armed with a shotgun tried to breach security at the White House press dinner.
When asked if shooting was linked to the Iran war, Trump stated that he doesn’t think so. US President further stated that the incident won't deter me from winning in the Iran war.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
US President Donald Trump said an Iran war will end soon and the US will be victorious, FOX News reported on Sunday. His remarks came as Trump called off that delegation to Pakistan to potentially discuss directly with Iran.
Key quotes
Incident wont deter me from winning in Iran war.
Iran war will end soon, and we will be victorious.
If Iran wants to talk, they can call us.
We'll do it by phone.
Some people we're dealing with on Iran are reasonable, others are not.
Hope Iran is smart.
NATO didn't support us on Iran.
We will seize Iran's nuclear material as part of talks.
I'm not too disappointed in China, could do more.
China could have been far worse.
Hold talks with Putin and Zelenskiy on Ukraine.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 1.25% on the day at $94.30.
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 weakens to around 0.7145 in Monday’s early Asian session.
- Trump cancelled a trip to Islamabad by two envoys for talks over the weekend.
- The Australian March CPI inflation data and Fed rate decision will be the highlights on Wednesday.
The AUD/USD pair trades in negative territory near 0.7145 during the early Asian session on Monday. The Australian Dollar (AUD) softens against the US Dollar (USD) amid fragile peace talks in the Middle East, and markets brace for the Federal Reserve (Fed) interest rate decision later on Wednesday.
Efforts to resume peace talks over the Iran war stalled after US President Donald Trump called off that delegation to Pakistan to potentially discuss directly with Iran, per Bloomberg. "If they want to talk, they can come to us, or they can call us. You know, there is a telephone. We have nice, secure lines," said Trump. Iranian President Masoud Pezeshkian stated that his nation won’t enter “imposed negotiations under threats or blockade.”
Furthermore, the ceasefire is under growing pressure as Israel and Hezbollah have increased attacks on each other despite a US-brokered extension to the peace deal that was supposed to halt fighting for three more weeks. Uncertainty and escalating tensions in the Middle East could provide some support to a safe-haven currency such as the Greenback and act as a headwind for the pair in the near term.
Traders will keep an eye on the Australian March Consumer Price Index (CPI) inflation report, which is due on Wednesday. The headline CPI is expected to show an increase of 4.7% YoY in March, compared to 3.7% in February. Any signs of hotter inflation in Australia could solidify bets for a 25-basis-point (bps) rate hike at the Reserve Bank of Australia’s (RBA) May 5 meeting and could lift the Aussie against the USD.
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.
Efforts to resume peace talks over the Iran war stalled after US President Donald Trump called off that delegation to Pakistan to potentially discuss directly with Iran, Bloomberg reported on Sunday. The Islamic Republic said it won’t negotiate so long as it’s being threatened.
Trump on Saturday told Jared Kushner and Steve Witkoff to skip the trip to Pakistan, which is mediating talks, saying that Iran “offered a lot, but not enough.” Meanwhile, Iranian President Masoud Pezeshkian stated that his nation won’t enter “imposed negotiations under threats or blockade.”
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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