Forex News
At its July meeting, the Federal Reserve (Fed) kept its Fed Funds Target Range (FFTR) unchanged at 3.50%–3.75%, right in line with what markets were expecting.
Highlights from the FOMC statement
The Fed leaves the key overnight interest rate unchanged in the 3.50%-3.75% range, says it will deliver price stability.
Inflation remains elevated relative to the 2% goal, in part reflecting supply shocks in certain sectors, including energy.
Economic activity is expanding at a solid pace despite elevated uncertainty.
Productivity growth and capital investment are strong.
The FOMC is continuing its policy of maintaining ample reserves in the banking system.
Job gains have kept pace with the workforce, and the unemployment rate has changed little.
Vote in favor of policy was 9-3, with Cleveland Fed President Hammack, Minneapolis Fed President Kashkari and Dallas Fed President Logan dissenting in favor of a 25-basis-point increase.
This section below was published at 17:00 GMT as a preview of the Federal Reserve's policy announcements.
- The US Federal Reserve is seen leaving the policy rate unchanged for the fifth consecutive meeting in July.
- CME FedWatch Tool shows there is a considerable chance for an unexpected rate hike.
- Fed Chair Kevin Warsh’s comments could drive the US Dollar’s valuation.
The United States (US) Federal Reserve (Fed) announces its interest rate decision on Wednesday, another pivotal meeting for markets to gauge the stance of policymakers as they assess how rising crude Oil prices could impact the inflation outlook.
Markets widely expect the Federal Open Market Committee (FOMC) to keep interest rates unchanged in the range of 3.5%-3.75% for the fifth consecutive meeting in July.
However, this decision is not fully priced in, with the CME FedWatch Tool pointing to a nearly 30% probability of a 25 basis points (bps) interest rate hike, compared to just 15% a week ago.
After falling about 35% from May to the end of June, crude Oil prices turned north again in July. With the United States (US) and Iran exchanging strikes for nearly two consecutive weeks, the naval activity in the Strait of Hormuz came to a halt. As a result, the barrel of West Texas Intermediate (WTI) climbed above $90 from $67 at the beginning of July. Although news of the US and Iran pausing strikes helped WTI correct lower, it’s still up nearly 20% this month.
Fed hike odds rebound as oil-driven inflation worries resurface
Strategists at OCBC note that the perceived risk of near-term Fed tightening has shifted meaningfully recently. They point out that the probability of a July Fed rate hike “fell to just 10% following benign US inflation data but has since rebounded to 35% as higher oil prices reignited inflation concerns.” In their view, “a hold accompanied by hawkish guidance would likely push expected rate hikes further out the curve without materially altering the roughly 55bp of cumulative tightening priced in through mid-2027.”
However, OCBC cautions that “a decision to leave rates unchanged with little explanation could be interpreted as dovish and create confusion about the Fed's reaction function.”
When will the Fed announce its interest rate decision and how could it affect EUR/USD?
The Fed is scheduled to announce its interest rate decision and publish the monetary policy statement at 18:00 GMT. This will be followed by Fed Chair Kevin Warsh’s press conference starting at 18:30 GMT.
If the Fed announces a 25 bps rate hike, that would be seen as a hawkish surprise and boost the USD, causing EUR/USD to turn south. If the US central bank decides to hold rates steady, an important factor will be the potential number of dissents on the hawkish side.
US Dollar outlook hinges on Fed, and a surprise is on the cards
Analysts at MUFG observe that the recent pullback in Oil has eased some of the urgency around further tightening, noting that “in the near-term, the correction lower in energy prices will dampen rate hike expectations for central banks ahead of the Fed’s, BoE’s and BoJ’s latest policy meeting this week.” Against that backdrop, they reiterate that “we have been assuming that the Fed would leave rates on hold this week but one can’t completely rule out the possibility of a rate hike.”
MUFG adds that any policy surprise could have swift currency implications: “If the Fed delivers a hawkish surprise and hikes rates this week it would give the US dollar renewed upward momentum.”
In case the Fed leaves the policy rate unchanged as anticipated and refrains from making a significant change to the policy statement, which would be in line with Fed Chair Warsh’s insistence of avoiding forward guidance, the immediate market reaction is likely to remain muted. In this scenario, investors will scrutinize comments from Warsh in the press conference.
During his congressional testimony earlier this month, Warsh adopted a neutral tone with a score of 5.4/10 on the FXS Speechtracker. By calling recent inflation data an “imperfect gauge” and stressing that whether AI proves inflationary is “up to the Fed,” the remarks framed technology-driven price shifts as manageable one-offs rather than a persistent inflation threat, while acknowledging disruptive transition risks. If Warsh downplays the impact of the recent increase in Oil prices on inflation and reiterates the favorable growth outlook, markets could see that as a dovish sign and cause the USD to lose interest. Conversely, EUR/USD could turn south in case Warsh makes it clear that they will need to take action soon to tame inflation, even if the pair has an initial bullish reaction to a policy hold.
Eren Sengezer, European Session Lead Analyst at FXStreet, provides a short-term technical outlook for EUR/USD:
“EUR/USD has been fluctuating in a relatively tight range since the beginning of the month, but there are no signs of a bullish reversal. The Relative Strength Index (RSI) indicator on the day chart failed to clear the 50 threshold three times since early July and the descending trend line drawn from late-January stays intact.”
“On the downside, 1.1280 (static level) aligns as the next key support ahead of 1.1160 (static level) and 1.1000 (psychological level, static level). Looking north, the first resistance area could be spotted at 1.1460-1.1490 (50-day Simple Moving Average (SMA), upper arm of the Bollinger Band) before 1.1570 (100-day SMA, descending trend line) and 1.1635 (200-day SMA).
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.
- Peso weakens as Gulf War escalation dents risk appetite.
- Oil surge complicates Fed hold case before Warsh press conference.
- Trump’s USMCA comments add uncertainty around Mexico’s trade outlook.
The Mexican Peso loses ground against the US Dollar on Wednesday as risk appetite turns sour amid the escalation of the Gulf War, while traders await the Federal Reserve’s monetary policy decision. The USD/MXN trades at 17.51, up 0.47%.
USD/MXN rises as Middle East tensions boost crude, revive Fed hike risks
Sentiment deteriorated after Iran launched attacks on US assets within the Gulf States. The White House responded as the US President Donald Trump said that talks with Iran will continue but added that “we’ll be hitting Iran hard.” The backdrop pushed Oil prices higher, with West Texas Intermediate, the US crude benchmark, rising nearly 7% at $84.62.
A scarce economic docket keeps traders laser-focused on the Federal Reserve’s monetary policy decision. The Fed is expected to keep rates unchanged due to softer June inflation data and a resilient labour market. However, crude prices are almost 20% above June’s closing price, making it tougher to achieve back-to-back positive inflation readings.
Analysts at Wells Fargo speculate that the Fed Chair Kevin Warsh could influence the board to delay rate hikes, as they assess incoming data. In the press conference, he could lay the ground for a possible interest rate increase for the September meeting.
Money markets had priced in a 59% for a hold. However, the chances of a 25-basis-point (bp) rate hike are increasing to 41%, according to Prime Terminal data.
Following the Fed’s decision, the US calendar will be active, featuring the release of the final second-quarter GDP data and the Fed’s favored inflation indicator, the Core Personal Consumption Expenditures (PCE) Price Index.
Across the south of the border, Mexico’s docket was absent and light, though negotiations regarding the USMCA failed to provide certainty to the administration led by the Mexican President, Claudia Sheinbaum.
Trump commented that he doesn’t care about the agreement, as he added, “I'd rather be independent. Here's the thing: Mexico and Canada need us. We don't need them. The deal is important for them. It's not important for us.”
Meanwhile, Fitch Ratings believes Mexico is still maintaining its investment-grade rating, according to the director of sovereign analysis for Latin America, Shelly Shetty. Fitch has Mexico at the lowest level of the investment grade at “BBB/stable outlook.”
However, he warned that factors that could change the perspective is Mexico’s debt burden, or if an economic crisis or serious recession occurs.
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 17.5105, keeping a constructive near-term tone as spot holds above the clustered supports formed by the simple moving average (SMA) around 17.416 and the recently broken descending trend lines, whose break prices now sit near 17.45 and 15.80. The pair remains underpinned by this reclaimed structure, while the 14-day Relative Strength Index near 53 stays slightly above its midline, hinting at modest bullish momentum rather than exhaustion.
On the downside, initial support is seen at the former downtrend barrier now turned floor around 17.45, followed by the SMA zone near 17.42, with a deeper medium-term cushion emerging at the older trend break around 15.80. As long as USD/MXN defends these supports, dips are likely to be treated as corrective within an improving bias, with buyers retaining control of the daily structure despite the absence of clearly defined nearby resistance levels.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN 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.
- USD/CAD holds a range of barely 30 pips just beneath 1.4100, pinned above a rising 50-day average hours before the Federal Reserve decision.
- July 15 deliberations land today, blaming a widening yield spread for Canadian Dollar weakness and pledging to look through higher Crude Oil prices.
- Both risks Governing Council ranked as major have already fired since that meeting, one of them five days later.
A forecast that broke while it was being written
The Bank of Canada published the deliberations behind its July 15 hold this morning, roughly half an hour before the Federal Reserve announces whether it does the same thing. USD/CAD has answered by doing nothing at all, holding a range of barely 30 pips just beneath 1.4100 and sitting a fraction lower on the day. The document is a careful account of a meeting the currency market moved past two weeks ago.
Governing Council opened its policy meetings on July 7 and decided on July 15. Somewhere in between, by the record's own admission, hostilities in the Middle East re-escalated and pushed global Crude Oil prices back up. Members logged the development, wrote down a path in which inflation eases to roughly 2.5% in the second half of the year on the assumption Crude Oil declines, and held at 2.25% anyway.
The pledge attached to that path is the load-bearing part. Policymakers agreed to look through the direct effects of higher energy prices while promising a response if those effects broadened into other goods and services. That is a commitment in both directions, made conditional on a market that has since put Brent through a 16% three-session slide, the steepest such run since 2020, and a bounce of more than 4% today.
Both of the major risks have already fired
The deliberations name two risks above the rest: upside inflation from the war, and downside growth from US trade policy. The second is described as an ever-present possibility of new American tariffs. Five days after the decision, the White House signed an order putting 50% duties on a range of Canadian goods, from wine and dairy through cement and furniture.
Ottawa has answered by intensifying negotiations rather than retaliating, with Prime Minister Mark Carney telling the premiers last week that nothing is being ruled out depending on how the talks land. The war risk fired as well, with the four-day stand-down in the Gulf breaking overnight as US forces intercepted an Iranian missile attack and struck Iran-aligned militias in Iraq alongside Saudi forces.
What the record does not supply is a rate that can respond to either risk. Governing Council describes an economy that produced no growth between the first quarter of 2025 and the first quarter of 2026, unemployment at 6.5% inside the same band it has held for a year, and a labour market members agreed is still soft. The policy rate already sits on the floor of the neutral range the Bank of Canada assumes for itself.
The yield spread is not an Ottawa variable
The most useful line in the whole document is the one where members trace the Canadian Dollar's depreciation to a widening bond-yield differential, US yields having risen on strong data while Canadian yields barely moved. That is a central bank identifying the driver of its own currency and locating it in another country. The July projection assumes the Canadian Dollar averages around 71 US cents over the horizon, and spot is already there rather than above it.
Canadian data since the meeting has run cooler than the deliberations assumed. June inflation eased to 2.8% and the preferred core measures fell to their softest in more than five years, which has thinned market pricing for any further Canadian tightening this year. The rate story that moves this exchange rate is now one-sided, and the side still carrying a live hike tail is the American one.
The only decision that prices this exchange rate today
The Federal Reserve announces at 18:00 GMT with a press conference at 18:30 GMT and no Summary of Economic Projections attached. A hold is the heavy consensus, so the trade sits in the dissent count and in whether the chair leaves September armed. Futures pricing carried a July hike tail near 36% on the July 27 capture, wide enough that a hawkish hold is not fully paid for.
Statistics Canada publishes May Gross Domestic Product (GDP) growth on Friday, with an advance estimate for June attached and a flash reading that pointed to a 0.1% gain. That is the next genuine domestic input for the Canadian Dollar, and it lands two days after the only meeting on this continent that can widen the spread today.
Technical levels
Resistance: The 1.4150 shelf is the reclaim line, the June breakout level that has capped every attempt since the mid-month flush. Through it, the year high near 1.4250 is the only structure left on the frame.
Support: The 50-day exponential moving average (EMA) just beneath 1.4050 is rising into price and has held on every test this month. Under that sits the 1.4000 handle, with the 200-day EMA just below 1.3900 the trend marker that has not been tested since May.
Bias: Bullish above the 50-day EMA. The daily Stochastic Relative Strength Index near 21 is turning up out of the oversold band with price coiled in a 30-pip range, and the differential argument points one way while the Federal Reserve holds a live hike tail and Canadian pricing empties out. A daily close beneath 1.4000 invalidates.
USD/CAD daily chart
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- AUD/JPY falls to 113.60 after Australian inflation misses expectations.
- Markets scale back expectations for further RBA policy tightening.
- Intervention fears continue to support the Japanese Yen.
AUD/JPY trades around 113.60 on Wednesday at the time of writing, down 0.61% on the day, after weaker-than-expected Australian inflation data triggered broad selling pressure on the Australian Dollar (AUD).
Data released by the Australian Bureau of Statistics showed that the Consumer Price Index (CPI) rose 3.8% YoY in June, down from 4% in May and below the market consensus of 4%. On a monthly basis, the CPI declined by 0.1%, marking a second consecutive monthly decrease. Meanwhile, the Trimmed Mean CPI, the Reserve Bank of Australia's (RBA) preferred measure of underlying inflation, increased by 3.6% YoY, confirming a moderation in underlying price pressures.
The figures reinforced expectations that the RBA could keep interest rates unchanged at its upcoming meetings, with investors scaling back expectations for any additional rate hikes this year. This reassessment of the monetary policy outlook is weighing heavily on the Australian Dollar.
At the same time, the Japanese Yen (JPY) is attracting renewed demand amid growing speculation that Japanese authorities could intervene in the foreign exchange market to support the domestic currency. These expectations are adding further downward pressure on AUD/JPY.
However, the still-wide interest rate differential between Japan and Australia continues to limit the Japanese Yen's upside potential. Investors also remain cautious ahead of the Bank of Japan (BoJ) monetary policy decision scheduled for Friday, which could provide fresh clues about the timing of further policy normalization.
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 | -0.04% | -0.06% | -0.02% | -0.10% | 0.57% | 0.25% | 0.08% | |
| EUR | 0.04% | -0.02% | 0.02% | -0.07% | 0.64% | 0.27% | 0.12% | |
| GBP | 0.06% | 0.02% | 0.07% | -0.03% | 0.66% | 0.31% | 0.14% | |
| JPY | 0.02% | -0.02% | -0.07% | -0.08% | 0.61% | 0.23% | 0.09% | |
| CAD | 0.10% | 0.07% | 0.03% | 0.08% | 0.68% | 0.33% | 0.18% | |
| AUD | -0.57% | -0.64% | -0.66% | -0.61% | -0.68% | -0.35% | -0.50% | |
| NZD | -0.25% | -0.27% | -0.31% | -0.23% | -0.33% | 0.35% | -0.15% | |
| CHF | -0.08% | -0.12% | -0.14% | -0.09% | -0.18% | 0.50% | 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).
- USD/CHF extends its winning streak and trades near its highest level in more than a year.
- The US Dollar stays firm ahead of the Fed’s interest-rate decision.
- Switzerland’s subdued inflation outlook supports expectations that the SNB will keep interest rates unchanged through 2027.
USD/CHF edges higher on Wednesday, hovering near its highest level in more than a year as hawkish Federal Reserve (Fed) expectations contrast with a steady Swiss National Bank (SNB) outlook, weighing on the Swiss Franc (CHF). At the time of writing, the pair trades around 0.8204, extending its gains for an eighth consecutive day.
The US Dollar (USD) stays well supported ahead of the Fed’s interest-rate decision at 18:00 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.45, rebounding from an intraday low of 101.24.
The Fed is widely expected to leave borrowing costs unchanged within the 3.50%-3.75% range, although traders are also bracing for the possibility of a surprise hike amid heightened energy-driven inflation risks. According to the CME FedWatch Tool, markets price in around a 30% chance of a 25-basis-point increase.
Oil prices rebounded sharply on Wednesday after Iran launched missiles at a US military base in Jordan, ending a brief pause in the fighting. US President Donald Trump later threatened retaliatory strikes against Tehran, dimming hopes that shipping through the Strait of Hormuz would return to normal anytime soon.
The war in the Middle East also supports demand for the US Dollar. Although the Swiss Franc is traditionally viewed as a safe-haven currency, Switzerland's zero interest-rate policy is overshadowing its appeal, prompting investors to favour higher-yielding currencies.
Analysts at Commerzbank note that, although inflation has picked up again in Switzerland in recent months, “the rise has been smaller than expected.” They argue that “the exchange rate effect is smaller than is often assumed,” helping to explain why price pressures remain contained.
Against this backdrop, Commerzbank says it “stand[s] by our forecast that inflation is likely to increase only slightly, if at all,” and stresses that this “relatively subdued inflationary pressure is one of the main reasons for our long-standing forecast that the SNB will leave interest rates unchanged until the end of 2027.”
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.
Scotiabank strategists Shaun Osborne and Eric Theoret note the US Dollar (USD) is narrowly mixed to softer ahead of the Federal Open Market Committee (FOMC), with swaps pricing a modest chance of a hike but the bank seeing that risk as much lower.
They argue policy is unlikely to change until Federal Reserve (Fed) operating reviews are complete. The analysts add that a hold without guidance would likely see the Dollar ease, with US Dollar Index (DXY) weakness below 101.10 signaling further short‑term losses.
Fed hold seen capping Dollar upside
"Swaps continue to price in the non-negligible risk (33%) of a tightening today but that is well below the level (80%+) that has conventionally signaled (pre-Warsh, admittedly) that the Fed was likely to adjust policy."
"Still, the chance of a rate increase today is low—much lower even than swaps are pricing—in our opinion."
"A rate move (either way) seems unlikely until these reviews are complete."
"If the Fed holds and there is no guidance, the USD is likely to ease."
"DXY losses below 101.10 intraday would signal scope for further USD losses in the short run."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- DJIA trades roughly 900 points lower and back beneath the 52,000 handle for the first time since Friday, hours before the rate decision.
- A surprise commercial inventory draw of more than 7 million barrels lands at 14:30 GMT, with the barrel already up almost 7% on renewed strikes.
- Futures price a two-thirds chance of a fifth straight hold, which leaves the risk in a 130-word statement and half an hour of questions.
The Dow Jones Industrial Average trades just above 51,800 on Wednesday afternoon, down roughly 900 points and 1.7% from Tuesday's close.
The session high just above 52,800 printed before 09:00 GMT, and the tape has sold in one near-continuous line ever since. The 52,000 handle reclaimed on Monday's peace bid is gone.
The war stops being somebody else's trade
Iran's Islamic Revolutionary Guard Corps launched multiple ballistic missiles at US forces in the Middle East late Tuesday, and Central Command says every one was intercepted. Reporting puts the target at an American base in Jordan. Trump told a television interviewer on Wednesday morning that Washington will hit Iran hard in reply, retiring the four-day pause that risk assets spent the start of the week banking.
West Texas Intermediate advanced almost 7% on the session to trade near $90.00, back where it sat before the stand-down. For four months a chokepoint war has produced dispersion inside the equity market rather than direction, because supply news lands unevenly across constituents and cancels out at the index line. A barrel near $90.00 three hours before a rate decision does not land unevenly at all.
A barrel count that arrives three hours early
The Energy Information Administration (EIA) reported commercial Crude Oil stocks down 7.167 million barrels on the week at 14:30 GMT, against a consensus draw of 2.5 million and a 2.011 million build the week before. A miss of that size is not a refinery-maintenance story. It is the physical market confirming that a shut chokepoint eventually turns up in a tank farm, three and a half hours before the statement.
The timing matters more than the number, because a committee that lifted its 2026 inflation projection to 3.6% from 2.7% in June, on the argument that the energy shock is still feeding through fertiliser, petrochemicals, and food prices, now writes its statement with a fresh draw and a 7% Crude Oil rally on the screen. Nothing in that framework makes the doves' afternoon easier.
Two-thirds for a hold, and no way to read the other third
Futures price a 66.3% chance the target range stays at 3.50% to 3.75% and a 33.7% chance of a hike, a tail barely moved from the 35.8% carried through last week. Further out the curve is unambiguous: at least one hike is 80.6% priced by 16 September, 87.1% by 28 October and 92.2% by 9 December, with two hikes 60.3% priced by year end. The argument is not whether this Fed moves, only when.
What makes the afternoon awkward is that there is very little to read the answer off. July carries no Summary of Economic Projections, so there is no dot plot and no chair's dot. June's statement was cut to roughly 130 words from 310 and stripped of forward guidance, which was the stated point of the redesign. A 130-word statement is a very small surface on which to hang a $90.00 barrel.
That leaves the 18:30 GMT press conference carrying the whole information load, and it is only the second of this chair's tenure. Nine of 18 June dots showed a 2026 hike, yet the hold passed unanimously and the hawk bloc has never once appeared in a dissent. Half an hour of questions has to settle whether a hawkish hold is a warning or a formality.
The index with the least chip exposure falls the hardest
The benchmark chip exchange-traded fund is down more than 4% on the day and 10% on the week after four straight losing sessions, on doubts about artificial intelligence capital returns and Chinese competition. Micron (MU) fell 5%, Advanced Micro Devices (AMD) more than 5% and KLA (KLAC) more than 8%. On earlier marks the S&P 500 was down 0.9% and the Nasdaq Composite 1.2%.
Nvidia (NVDA) is the index's only semiconductor component and not one of its higher-priced shares, so a price-weighted structure gives the chip rout little purchase here. What sold instead was the rate-sensitive industrial and consumer complex that dislikes a $90.00 barrel and a hawkish committee in equal measure. Procter & Gamble (PG) fell more than 3% on a revenue miss, while Ford (F) added 5% on a beat and a raised forecast.
The calendar does not stop at 18:30 GMT
Thursday at 12:30 GMT brings the June Personal Consumption Expenditures deflator, the advance second-quarter Gross Domestic Product estimate and weekly claims in a single block. Consensus has headline PCE at -0.1% MoM and 3.7% YoY from 4.1%, core at 0.2% MoM and 3.3% YoY from 3.4%, growth at 2.1% and initial claims at 200K from 187K.
The catch is the vintage, because that deflator measures June, the peace-dividend month when headline consumer prices fell 0.4% MoM and gasoline dropped almost 10%. It arrives 18 hours after a decision taken with the barrel near $90.00, describing a world that has been repriced twice since. Friday's Employment Cost Index at 0.8% consensus and the Michigan one-year inflation expectations series at 4.2% have the better claim on September.
Levels
Resistance: The 52,000 handle flipped from floor to ceiling on Wednesday and is the first line back. Above it sit Tuesday's close near 52,750 and the session high just above 52,800. The record just above 53,300 has stood since early July.
Support: Just above 51,800 is where the session low printed and where price is trading now, with the 50-day Exponential Moving Average near 51,500 the last structural defence beneath it. Losing that line leaves the 51,000 handle as the next round defence, with the 200-day average near 49,000 far below.
Bias: Bearish beneath 52,000. The daily Stochastic Relative Strength Index near 18 has been pinned in oversold for a week without producing a bounce, which reads as trend rather than opportunity, and the five-minute reading near 89 says the late lift into the decision is already stretched. Invalidation is a daily close back above 52,000.
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
BNY’s Geoff Yu notes that USD exposure is elevated across global portfolios, with strong buying in both equities and bonds generating sizeable rebalancing signals. The bank recommends increasing FX hedges instead of selling U.S. assets, as hedge ratios remain low and Dollar allocations high. July’s equity declines may ease pressure but do not remove the need for hedging.
High U.S. allocations drive hedge demand
"The USD was by far the best-bought currency, with a marginal flow score more than twice that of JPY, the next strongest. This supports our view that cross-border dollar exposure is at a record high: equity and fixed-income ownership remain elevated, while hedge ratios are low. U.S. equities also posted a modestly positive marginal return score, so strong dollar buying and equity gains have produced a large, combined rebalancing signal."
"Dollar-selling signals from equity rebalancing are a welcome correction to stretched asset allocations. Equities accounted for 59.5% of total portfolio holdings at the end of last week, close to the early-July peak before the recent sell-off in memory-chip stocks. Relative to fixed income, equity exposure is now at a record high."
"The USD fixed-income rebalancing signal is therefore weaker than the equity signal, but elevated U.S. bond holdings still create a clear need for more hedging."
"Falling U.S. equities into month end will reduce total dollar exposure and ease some immediate rebalancing pressure. Even so, existing positions remain lightly hedged, while concerns over equity outflows should encourage further dollar hedging."
"The message is unchanged: global exposure to U.S. assets remains historically high and portfolios still need to reduce risk. Increasing FX hedges is the most efficient route without cutting U.S. allocations outright."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Silver loses 0.43% on the day, trading around $56.90 at the time of writing.
- Investors remain cautious ahead of the Federal Reserve's policy decision.
- Escalating tensions in the Middle East continue to cloud the outlook for precious metals.
Silver (XAG/USD) trades around $56.90 on Wednesday at the time of writing, down 0.43% on the day. Price action remains cautious as investors avoid taking large directional positions ahead of the Federal Reserve (Fed) monetary policy announcement.
The Fed is widely expected to leave its benchmark interest rate unchanged within the 3.5%-3.75% range for a fifth consecutive meeting. Nevertheless, futures markets continue to price in roughly a one-in-three chance of a 25 basis-point rate hike, highlighting persistent uncertainty over the US inflation outlook.
The main focus will be on Fed Chair Kevin Warsh's press conference for clues about the future path of monetary policy. Any indication that policymakers remain concerned about inflation or are prepared to tighten policy further would likely support the US Dollar (USD), limiting the appeal of non-yielding assets such as Silver.
Meanwhile, geopolitical tensions remain elevated after United States (US) President Donald Trump said Washington would carry out further strikes against Iran following attacks targeting US positions in Jordan, according to Reuters. The escalation has supported Oil prices and reinforced concerns that higher energy costs could keep inflation elevated, strengthening the case for the Fed to maintain restrictive monetary policy for longer.
Although geopolitical uncertainty would normally boost demand for safe-haven assets, markets are currently focusing on its inflationary implications. Higher inflation expectations could encourage future monetary tightening, limiting Silver's upside.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
Scotiabank strategists Shaun Osborne and Eric Theoret highlight that GBP/USD is flat around 1.33, supported by stronger United Kingdom (UK) lending data and stabilizing Bank of England (BoE) expectations. They stress that UK fiscal narratives remain important for sentiment toward government debt. The Monetary Policy Committee (MPC) is expected to deliver a hawkish hold at 3.75%, while technically the British Pound (GBP) trades in a June range between 1.3150 and 1.3550, with near‑term moves seen between 1.3250 and 1.3350.
Hawkish BoE hold risk within tight range
"The pound is also quiet and also entering Wednesday’s NA session flat vs. the USD as it also consolidates within a remarkably tight range—around 1.33. The fundamental release calendar has included the latest lending and money supply data, offering a notable beat on both mortgage approvals and a sizeable jump in lending."
"Domestic political developments have been limited however UK media continue to focus PM Burnham’s fiscally-motivated plans for welfare reform."
"The narrative is important, as the UK remains vulnerable to sentiment toward its government debt market. As with EUR (and ECB), BoE rate expectations are showing signs of stabilization and offering some modest support to the GBP via yield spreads."
"Policy risk is elevated over the next 24 hours as we look to the 2pm ET FOMC and Thursday’s BoE—where the MPC is expected to deliver a hawkish hold at 3.75%."
"Bearish/neutral—the RSI is showing signs of stabilization in the lower 40s, implying modest bearish momentum below the neutral threshold at 50. The local range from June is bound between support near 1.3150 and resistance closer to 1.3550. We remain neutral absent a break of the range, and see near-term movement bound between 1.3250 and 1.3350. "
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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