Forex News
- Gold slides below $4,050 during the Asian session on Tuesday, filling the weekly bullish gap.
- Geopolitical risks remain in play, underpinning the USD and exerting pressure on the bullion.
- The downside seems cushioned as USD bulls opt to wait for the crucial FOMC policy meeting.
Gold (XAU/USD) maintains its offered tone through the Asian session on Tuesday and currently trades just below $4,050, down 0.85% for the day. This follows the previous day's failure to find acceptance above the $4,100 mark and suggests that the path of least resistance for the bullion remains to the downside. However, subdued US Dollar (USD) price action could help limit the downside as the focus remains on the crucial two-day FOMC policy meeting. Investors will look for cues about the US Federal Reserve's (Fed) future policy path, which will play a key role in driving the USD demand and providing a fresh directional impetus to the non-yielding yellow metal.
Heading into the key central bank event risk, traders pared Fed rate-hike bets amid renewed hopes for US-Iran diplomacy to end a five-month-old conflict, which led to the overnight slump in oil prices and eased inflation fears. In fact, the US paused its bombing campaign against Iran following roughly two weeks of strikes. Moreover, US President Donald Trump said on Monday the US was having good talks with Iran and that there was a chance of a resolution. This raised hopes of pulling the US and Iran back to the negotiating table, and normalizing of Middle East energy flows.
Trump, however, warned that US strikes would resume if the negotiations failed to deliver. Furthermore, Saudi Arabia, Jordan and Iraq reported drone attacks on Monday, keeping a lid on the optimism. Adding to this, concerns about disruptions to global energy supplies support oil prices and the safe-haven USD. The spotlight shifted to the Bab el-Mandeb Strait after Yemen’s Iran-backed Houthis announced a maritime blockade against Saudi Arabia and attacked Saudi oil installations along the coast of the Red Sea. Moreover, traffic through the Strait of Hormuz remains restricted.
The fundamental backdrop seems tilted firmly in favor of USD bulls, which backs the case for further downside for Gold. Traders, however, might refrain from placing aggressive bets and opt to wait for the outcome of the highly-anticipated FOMC meeting on Wednesday. Hence, it will be prudent to wait for strong follow-through selling and acceptance below the $4,000 psychological mark before placing fresh bearish bets on the XAU/USD pair.
XAU/USD daily chart
Gold seems vulnerable to test $4,000 amid bearish technical setup
Against the backdrop of the recent breakdown below the 200-day Simple Moving Average (SMA), the range-bound price action since June 19 might still be categorized as a bearish consolidation phase. Meanwhile, momentum indicators are mixed. In fact, the Relative Strength Index (RSI) hovers just below the 50 line near 45, hinting at lacklustre buying conviction, while the Moving Average Convergence Divergence (MACD) turns higher in positive territory. This suggests that any rebounds are still corrective within a broader downside context as long as Gold holds under the long-term average.
Nevertheless, the precious metal looks vulnerable to further slippage unless buyers quickly defend the recent lows around the psychological $4,000 handle. On the topside, the top boundary of the trading range near the $4,200 mark is the key resistance to beat. A daily close above this barrier would be needed to ease the broader bearish bias and open the door to a more sustainable advance to the 200-day SMA at $4,493.65.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- AUD/USD meets with a fresh supply as geopolitical risks remain supportive of a bullish USD undertone.
- Bulls shrug off RBA Governor Bullock’s comments as the focus remains on the FOMC policy meeting.
- The mixed technical setup warrants some caution before placing aggressive directional bets on the pair.
The AUD/USD pair attracts some follow-through selling following the previous day's failure to find acceptance above the 0.7000 psychological mark and weakens to the 0.6970 area during the Asian session on Tuesday. Spot prices move little in reaction to Reserve Bank of Australia (RBA) Governor Michele Bullock’s comments and remain confined in a familiar range held over the past two weeks or so.
The US Dollar (USD) sticks to its bullish undertone as the optimism over a potential US-Iran diplomacy to end a five-month-old conflict fades after Saudi Arabia, Jordan and Iraq reported drone attacks on Monday. This keeps geopolitical risk premium in play and acts as a tailwind for the safe-haven Greenback, exerting some downward pressure on the AUD/USD pair. Traders, however, might refrain from placing aggressive bets ahead of the crucial two-day FOMC policy meeting, starting later today.
The recent repeated failures to break through the 38.2% Fibonacci retracement level of the May-June downfall suggest that the recovery from the 200-day Simple Moving Average (SMA) has run out of steam. That said, the Moving Average Convergence Divergence (MACD) histogram remains marginally positive while the MACD line stays above the signal line, hinting that bullish momentum persists even as the neutral Relative Strength Index (RSI) suggests only modest directional conviction.
Hence, it will be prudent to wait for some follow-through selling below the 23.6% Fibo. level before placing fresh bearish bets on the AUD/USD pair and positioning for a retest of the 200-day SMA at 0.6904. This is followed by the 0.6868 Fibonacci anchor, which reinforces a deeper structural floor should a corrective pullback unfold. On the topside, initial resistance is aligned with the 38.2% Fibo. retracement at 0.7024 ahead of the 50% retracement at 0.7073 and then 0.7121 at the 61.8% Fibo. level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
AUD/USD daily chart
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.05% | 0.01% | 0.02% | 0.02% | 0.36% | 0.18% | 0.00% | |
| EUR | -0.05% | -0.03% | -0.06% | -0.06% | 0.32% | 0.15% | -0.03% | |
| GBP | -0.01% | 0.03% | 0.00% | 0.02% | 0.37% | 0.19% | 0.03% | |
| JPY | -0.02% | 0.06% | 0.00% | -0.00% | 0.34% | 0.17% | 0.02% | |
| CAD | -0.02% | 0.06% | -0.02% | 0.00% | 0.36% | 0.16% | 0.02% | |
| AUD | -0.36% | -0.32% | -0.37% | -0.34% | -0.36% | -0.16% | -0.34% | |
| NZD | -0.18% | -0.15% | -0.19% | -0.17% | -0.16% | 0.16% | -0.15% | |
| CHF | -0.01% | 0.03% | -0.03% | -0.02% | -0.02% | 0.34% | 0.15% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
- EUR/JPY could find primary resistance around the rising wedge top at 186.90.
- The 14-day Relative Strength Index of 57.46 indicates moderate bullish momentum.
- The primary support lies at the nine-day EMA of 186.01.
EUR/JPY holds ground after two days of losses, trading around 186.20 during the Asian hours on Tuesday. The currency cross is holding a bullish near-term bias as it trades above both the nine-period and 50-period Exponential Moving Averages (EMAs), keeping the broader uptrend supported.
The 14-day Relative Strength Index (RSI) at 57.46 leans to the bullish side without yet signaling overbought conditions, suggesting buyers still retain control while upside momentum remains moderate. However, the daily chart technical analysis shows that the EUR/JPY cross is remaining within a rising wedge, indicating a strong bearish reversal risk.
The EUR/JPY cross could rise toward the upper boundary of the rising wedge around 186.90. Further advances could support the currency cross to target the all-time high of 187.95, which was recorded on April 17.
On the downside, the initial support lies at the nine-day EMA of 186.01, followed by the lower boundary of the rising wedge around 185.50 and the 50-day EMA at 185.33. A break below this confluence support zone could cause a bearish emergence and put downward pressure on the EUR/JPY cross to navigate the region around the five-month low of 181.87, recorded on March 16, and the seven-month low of 180.81.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | -0.01% | 0.00% | -0.00% | 0.33% | 0.16% | -0.00% | |
| EUR | -0.03% | -0.04% | -0.02% | -0.05% | 0.29% | 0.14% | -0.03% | |
| GBP | 0.00% | 0.04% | 0.02% | 0.04% | 0.36% | 0.19% | 0.03% | |
| JPY | 0.00% | 0.02% | -0.02% | -0.01% | 0.32% | 0.16% | 0.01% | |
| CAD | 0.00% | 0.05% | -0.04% | 0.00% | 0.34% | 0.15% | 0.02% | |
| AUD | -0.33% | -0.29% | -0.36% | -0.32% | -0.34% | -0.14% | -0.33% | |
| NZD | -0.16% | -0.14% | -0.19% | -0.16% | -0.15% | 0.14% | -0.14% | |
| CHF | 0.00% | 0.03% | -0.03% | -0.01% | -0.02% | 0.33% | 0.14% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
- NZD/USD struggles to capitalize on a modest Asian session rise amid a bullish USD undertone.
- Geopolitical uncertainties continue to underpin the safe-haven buck and weigh on spot prices.
- Traders, however, seem hesitant and move to the sidelines ahead of the crucial FOMC meeting.
The NZD/USD pair turns lower for the second consecutive day following a modest Asian session uptick to the 0.5785 region on Tuesday. Spot prices currently trade around the 0.5770-0.5765 area, just above last week's swing low, as the US Dollar (USD) retains its bullish undertone amid geopolitical uncertainties.
The US paused its bombing campaign against Iran following roughly two weeks of strikes. Moreover, US President Donald Trump said on Monday the US was having good talks with Iran and that there was a chance of a resolution. This raised hopes of pulling the US and Iran back to the negotiating table, though the optimism fades rather quickly after Saudi Arabia, Jordan and Iraq reported drone attacks. Moreover, Trump warned that US strikes would resume if the negotiations failed to deliver, helping the safe-haven USD preserve its recent strong gains back closer to the monthly high, which continues to weigh on the NZD/USD pair.
Traders, however, seem hesitant to place aggressive bets ahead of the highly anticipated two-day FOMC policy meeting, starting later today. The US Federal Reserve (Fed) will announce its decision on Wednesday and is expected to leave rates unchanged. Hence, the focus will be on the accompanying policy statement and the post-meeting press conference. Investors will look for cues about the Fed's future policy path, which will influence the Greenback and drive the NZD/USD pair. In the meantime, firming expectations that the Reserve Bank of New Zealand (RBNZ) will deliver another rate hike in September could support the New Zealand Dollar (NZD).
Strategists at Brown Brothers Harriman argue that “above target inflation and a more favorable domestic growth outlook argue for additional RBNZ rate hikes which is NZD supportive.” They note that at its 8 July meeting, the RBNZ lifted the Official Cash Rate by 25bp to 2.50% and signalled that “further OCR increases appear likely at upcoming meetings.” Reflecting this hawkish bias, BBH highlight that “the swaps curve price in 60bps hikes by year-end and a total of 100bps of tightening over the next twelve months to 3.50% - near the top of the RBNZ estimated neutral range (2.20%-4.10%).”
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.
- US Dollar Index remained flat amid a rare level of uncertainty heading into a Fed decision.
- Traders expect the Federal Reserve to hold interest rates steady this week, with possible hikes delayed to September.
- Donald Trump warned military strikes against Iran could resume if diplomatic negotiations collapse.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is losing ground after three days of gains and trading around 101.50 during the Asian session on Tuesday.
The Greenback moves little amid market caution ahead of the Federal Reserve's policy decision on Wednesday. According to the CME FedWatch Tool, markets are pricing in nearly a 38% chance of a rate hike in July, an unusually high level of uncertainty so close to a meeting. Citadel Securities expects the Fed to deliver a rate increase to solidify Chairman Kevin Warsh’s inflation-fighting credibility following his repeated promises to restore price stability. Looking further ahead, the probability of at least a 25-basis-point hike in September currently sits at approximately 81.4%.
President Donald Trump stated that the US is engaged in "good talks" with Iran to resolve the Middle East conflict. While Washington suspended its 13-night strike campaign over the weekend, leading to three consecutive days without attacks. Tehran’s foreign ministry countered that no direct negotiations with the US are taking place, noting its only active dialogue is with Oman regarding the future of the Strait. Even so, the diplomatic developments helped push oil prices down, easing broader inflation and monetary policy concerns.
Washington suspended its 13-night strike campaign over the weekend, leading to three consecutive days without attacks. Tehran’s foreign ministry countered that no direct negotiations with the US are taking place, noting its only active dialogue is with Oman regarding the future of the Strait.
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.
Gold prices fell in India on Tuesday, according to data compiled by FXStreet.
The price for Gold stood at 12,450.33 Indian Rupees (INR) per gram, down compared with the INR 12,547.03 it cost on Monday.
The price for Gold decreased to INR 145,212.10 per tola from INR 146,346.10 per tola a day earlier.
Unit measure | Gold Price in INR |
|---|---|
1 Gram | 12,450.33 |
10 Grams | 124,498.00 |
Tola | 145,212.10 |
Troy Ounce | 387,248.80 |
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.
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.
(An automation tool was used in creating this post.)
- Silver price may gain support as US-Iran peace talks lower oil costs and dampen rate-hike fears.
- Donald Trump warned military strikes against Iran could resume if diplomatic negotiations collapse.
- Traders expect the Federal Reserve to hold interest rates steady this week, with possible hikes delayed to September.
Silver price (XAG/USD) declines after registering nearly 0.5% gains in the previous day, trading around $57.50 per troy ounce during the Asian hours on Tuesday. The non-yielding white metal may regain ground as the prospect of de-escalation sends oil prices lower, easing market concerns over rising inflation and further interest rate hikes.
US President Donald Trump indicated that the US is engaged in "good talks" with Iran to resolve the conflict in the Middle East. However, Trump also cautioned that the US is prepared to resume military strikes if negotiations collapse. The statement comes after the US suspended attacks late Friday following nearly two weeks of hostilities, with Tehran simultaneously halting retaliatory strikes against US bases in neighboring countries.
Washington suspended its 13-night strike campaign over the weekend, leading to three consecutive days without attacks. Tehran’s foreign ministry countered that no direct negotiations with the US are taking place, noting its only active dialogue is with Oman regarding the future of the Strait.
Traders are turning their attention to the Federal Reserve’s upcoming policy decision this week, where central bank officials are widely expected to keep interest rates on hold. While lingering inflationary pressures have led a minority of traders to speculate on an immediate rate increase, the prevailing consensus suggests that any potential hike would likely be deferred until September.
- USD/JPY flattens at around 163.75 in the countdown to the Fed’s monetary policy.
- The Fed and the BoJ are expected to hold interest rates steady.
- The BoJ will likely maintain hawkish monetary policy guidance.
The Japanese Yen (JPY) trades flat against the US Dollar (USD) at around 163.75 during the Asian trading session on Tuesday. The USD/JPY pair struggles for direction as investors have sidelined ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.
At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades marginally lower to near 101.46.
According to the CME FedWatch tool, traders see a 62% chance that the Fed will leave interest rates unchanged in the range of 3.50%-3.75%. The tool also shows a strong possibility of an interest rate hike in the September policy meeting.
Investors should not expect any guidance on the interest rate outlook in the monetary policy statement and Chairman Kevin Warsh’s press conference, as he clarified in the last meeting that “so-called forward guidance is not well-suited in the current policy juncture”.
Market participants would like to know for how long the United States (US) inflation will stay above the central bank’s 2% target.
On the Tokyo front, investors also await the Bank of Japan (BoJ) monetary policy announcement on Friday. The BoJ is expected to leave interest rates unchanged at 1% and deliver hawkish remarks on the monetary policy outlook.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
Speaking at the Anika Foundation Fundraising Lunch in Sydney on Tuesday, Reserve Bank of Australia (RBA) Governor Michele Bullock said that the “key question is whether tightening already delivered is enough to slow inflation.”
Additional quotes
Board ready to raise cash rate further if needed.
Policy operates with a lag, so full effects of this year's rate increases yet to be felt.
Best contribution policy can make is to maintain low, stable inflation.
Some further easing in growth of demand likely to be required to bring inflation down.
Some further easing in the labor market will likely be required.
Economy overall has adjusted gradually and broadly as expected.
Policy can’t address the economy’s slow productivity growth.
Underlying inflation has evolved as expected, but still too high.
Hearing from business that non-labour cost pressures continue to pick up.
Housing market has eased by more than we had anticipated.
Demand growth appears to be moderating broadly as expected in May baseline forecasts.
Remains too early to assess the full economic effects of the oil shock.
We are seeing the economy slow, and the housing market slow more than expected.
Inflation is pretty much in line with where we thought it would be.
Don't know what board will decide at next meeting.
Will depend on whether board thinks policy is restrictive.
If board thinks inflation is not coming down, will have some difficult decisions to make.
Inflation is largely in line with expectations.
Board faces tough choices if inflation doesn’t ease.
Uncertain about board decision at next meeting.
Outlook to depend on board's view of policy restrictiveness.
Economy slowing, housing market cooling more than anticipated.
Market reaction
The Australian Dollar (AUD) sees little reaction to RBA Governor Bullock’s comments, with AUD/USD trading listlessly below 0.7000, as of writing.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
In the Asian trading session on Tuesday, Japan Finance Minister (FM) Satsuki Katayama highlighted the need to communicate to financial and Japanese Government Bonds (JGBs) markets regarding the administration’s intentions towards the fiscal policy stance.
On Monday, Japan Prime Minister (PM) Sanae Takaichi addressed the need for an exit from the excessively tight fiscal policy to spur growth. However, Takaichi confirmed that the government won’t pursue reckless spending. She added that the additional government spending will be funded by expanding Gross Domestic Product (GDP)-driven tax revenue.
Remarks from Japan FM Katayama
Can't comment on source for funding food tax cut beyond what PM said yesterday.
Important to communicate with markets on process of compiling budget.
Must communicate with JGB market in run up to budget compilation, we hadn't done that.
Monetary policy is part of economic policy, as stated in BoJ act.
Believe government's relationship with BoJ has been smooth.
Economic blueprint draft dropped out some consideration of history on BoJ-government relationship, as our desire for proactive fiscal policy has come to forefront.
Very good that final version of economic blueprint has won market understanding.
Weak Yen have both merits, demerits.
Won't comment on potential intervention.
No change in our stance that we're ready to respond on forex as needed.
US, Japan both share this stance on Forex.
GPIF portfolio is far short on alternative investments.
My remarks on GPIF portfolio were meant that households should benefit from economy to be boosted by growth strategy.
Aware that GPIF needs to follow rules for portfolio changes.
Important to explain fully to market to avoid speculative trading on JGB market.
Believe JGB will become attractive asset relatively for pension funds, but not meaning to push for specific changes as that would be against rules.
PM Takaichi has carried over BoJ accord signed during Abe administration.
Market reaction
A slight buying interest was seen in the Japanese Yen (JPY) following remarks from Japan FM Katayama. At press time, USD/JPY trades almost flat at around 163.73.
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.
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