Forex News
- USD/CAD falls as the US Dollar (USD) loses ground over expectations of two more Federal Reserve rate cuts in 2026.
- Markets brace for President Trump to nominate a new Fed chair in May, potentially favoring lower interest rates.
- The CAD receives support as Oil prices rise on supply concerns amid geopolitical concerns.
USD/CAD pares recent gains from the previous session, trading around 1.3710 during the Asian hours on Friday. The pair depreciates as the US Dollar (USD) loses ground over expectations of two more Federal Reserve rate cuts in 2026.
Markets are bracing for US President Donald Trump to nominate a new Fed chair to replace Jerome Powell when his term ends in May, a move that could tilt monetary policy toward lower interest rates. Federal Open Market Committee (FOMC) December Meeting Minutes indicated that most participants judged that it would likely be appropriate to stand on further rate cuts if inflation declined over time. Meanwhile, some Fed officials said it might be best to leave rates unchanged for a while after the committee made three rate reductions in 2025 to support the weakening labor market.
The Canadian Dollar (CAD) receives support as the recent Bank of Canada (BoC) communications indicated noncommittal on further tightening, with a growing bias toward holding rates. Statistics Canada reported a 0.3% contraction in real GDP in October, confirming that growth momentum cooled into Q4. S&P Global Canada Manufacturing Purchasing Managers’ Index (PMI) for December will be eyed later in the day.
The commodity-linked Canadian Dollar receives support against the US Dollar amid higher Oil prices, given Canada’s status as the largest crude exporter to the United States (US). Oil prices could edge higher on potential supply concerns amid escalating geopolitical tensions.
Ukrainian drones reportedly struck Russian Oil facilities, while Russia and Ukraine exchanged accusations of civilian attacks on New Year’s Day, despite intensive talks overseen by US President Donald Trump aimed at ending the nearly four-year conflict.
Reuters reported that the US Treasury Department announced sanctions on Wednesday against Oil traders accused of helping Venezuela’s Maduro government evade restrictions, including four tankers allegedly part of a so-called “shadow fleet.”
West Texas Intermediate (WTI) Oil price holds ground after registering modest losses in the previous trading session, hovering near $57.60 at the time of writing. Traders are awaiting Sunday’s virtual meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+), with expectations that the group will uphold its November decision to pause further production increases.
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.
- WTI trades flat as markets await Sunday’s OPEC+ meeting, expecting production increases to remain paused.
- Oil prices may rise on supply concerns after Ukrainian drone strikes on Russian Oil facilities and escalating tensions.
- The US Treasury sanctioned Oil traders, including four tankers, for aiding Venezuela’s Maduro government in evading restrictions.
West Texas Intermediate (WTI) Oil price holds ground after registering modest losses in the previous trading session, hovering near $57.50 during the Asian hours on Friday. Traders are awaiting Sunday’s virtual meeting of the Organization of the Petroleum Exporting Countries and its allies (OPEC+), with expectations that the group will uphold its November decision to pause further production increases.
Oil prices could edge higher on potential supply concerns amid escalating geopolitical tensions. Ukrainian drones reportedly struck Russian Oil facilities, while Russia and Ukraine exchanged accusations of civilian attacks on New Year’s Day, despite intensive talks overseen by US President Donald Trump aimed at ending the nearly four-year conflict.
Reuters reported that the US Treasury Department announced sanctions on Wednesday against Oil traders accused of helping Venezuela’s Maduro government evade restrictions, including four tankers allegedly part of a so-called “shadow fleet.”
The Panama-flagged Nord Star, the Guinea-flagged Lunar Tide, and the Hong Kong-flagged Della, all sanctioned on Wednesday, have transported Venezuelan crude or fuel this year to destinations in Asia and the Caribbean.
The measures are preventing sanctioned vessels from entering or leaving Venezuela, forcing the state Oil company PDVSA to adopt extreme measures to avoid refinery shutdowns as residual fuel inventories accumulate.
US Energy Information Administration (EIA) data showed US crude inventories fell by 1.934 million barrels last week, the largest draw since mid-November and well above expectations for a 0.9 million-barrel decline.
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.
- Silver price jumps to near $72.90 in Friday’s Asian session.
- Expectations of more US interest rate cuts and safe-haven flows support the XAG/USD.
- The CME group raised precious metals margins, which might cap Silver’s upside.
Silver price (XAG/USD) attracts some buyers to around $72.90 during the Asian trading hours on Friday. The white metal rose more than 140% in 2025, marking its sharpest jump since 1979. The rally in Silver is underpinned by the prospect of further US Federal Reserve interest rate cuts in 2026 and safe-haven demand amid geopolitical uncertainty.
Expectations of more US interest rate cuts weigh on the US Dollar (USD) and provide some support to the USD-denominated commodity price. Financial markets are currently pricing in two quarter-point Fed rate cuts this year. Lower interest rates could reduce the opportunity cost of holding Silver, supporting the non-yielding precious metal.
Additionally, the price of silver is also supported by purchases by central banks and investors buying so-called "safe haven" assets due to concerns about global tensions and economic uncertainty.
"Gold and silver prices are experiencing a notable rise due to the interplay of several economic, investment, and geopolitical factors," said Rania Gule from trading platform XS.com.
However, the potential upside for the white metal might be limited in the near term due to some profit-taking and portfolio rebalancing. The Chicago Mercantile Exchange (CME) Group, one of the world’s largest trading floors for commodities, stated that margins for gold, silver, platinum and palladium would increase again. The notice means investors will need to put up more cash on their bets to insure against the prospect of a default when they take delivery of the contract.
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.
- AUD/USD gains as the Australian Dollar finds support on rising odds of RBA interest rate hikes.
- Australia’s Manufacturing PMI held at 51.6 in December, below the 52.2 flash estimate and unchanged from November.
- The US Dollar weakens as markets price in two additional Federal Reserve rate cuts in 2026.
AUD/USD recovers its recent losses registered in the previous trading session, rising toward 0.6690 during the Asian hours on Friday. The pair gains as the Australian Dollar (AUD) finds support amid growing expectations of interest rate hikes from the Reserve Bank of Australia (RBA). Australia’s Q4 CPI report is awaited due January 28. Analysts note that a stronger-than-expected Q4 core inflation reading could trigger a rate hike at the RBA’s February 3 meeting.
RBA Governor Michele Bullock said earlier that although the board did not explicitly consider a rate hike, it discussed the conditions under which interest rates might need to increase in 2026. The RBA December Meeting Minutes indicated that policymakers stand ready to tighten policy if inflation fails to ease as expected
The headline seasonally adjusted S&P Global Australia Manufacturing Purchasing Managers’ Index (PMI) came in at 51.6 in December 2025, slightly below the flash estimate of 52.2 and unchanged from November. The index held at a three-month high, with output and new orders continuing to expand, albeit at a slower pace.
The AUD/USD pair also receives support as the US Dollar struggles on odds of two additional Federal Reserve rate cuts in 2026, reflecting that monetary policy paths diverge between the US Federal Reserve (Fed) and the Reserve Bank of Australia. Markets are bracing for US President Donald Trump to nominate a new Fed chair to replace Jerome Powell when his term ends in May, a move that could tilt monetary policy toward lower interest rates.
Federal Open Market Committee (FOMC) December Meeting Minutes indicated that most participants judged that it would likely be appropriate to stand on further rate cuts if inflation declined over time. Meanwhile, some Fed officials said it might be best to leave rates unchanged for a while after the committee made three rate reductions in 2025 to support the weakening labor market.
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.
- GBP/USD edges higher to near 1.3480 in Friday’s early Asian session.
- Traders believe more USD weakness is coming if the next Fed Chair opts for deeper interest-rate cuts as anticipated.
- The BoE expects rates to continue on a gradual downward path, but each subsequent cut will be a "closer call."
The GBP/USD pair gathers strength to around 1.3480 during the early Asian session on Friday. Expectations of the US Federal Reserve (Fed) rate cuts this year weigh on the US Dollar (USD) against the Pound Sterling (GBP). Philadelphia Fed President Anna Paulson is set to speak later on the weekend.
The Greenback ended 2025 with the sharpest annual decline in eight years. With at least two rate reductions priced in for this year, the Fed's policy path diverges from the United Kingdom (UK), dimming the USD's appeal. Financial markets are pricing in nearly a 15.0% chance the Fed will cut interest rates at its next meeting in January, according to the CME FedWatch tool.
Furthermore, anticipations that US President Donald Trump will name a dovish successor to Fed Chair Jerome Powell, whose term ends this year, might contribute to the USD’s downside. Trump stated that he expects the next Fed Chairman to keep interest rates low and never “disagree” with him. The comments are likely to heighten concerns among investors and policymakers about Fed independence.
On the other hand, the Bank of England (BoE) expects rates to continue on a gradual downward path, which provides some support to the Cable. The UK central bank reduced interest rates from 4.0% to 3.75% at its December policy meeting, the lowest level in nearly three years. Governor Andrew Bailey said during the press conference that rates are likely to continue on a gradual downward path, but "how much further we go becomes a closer call" with each cut.
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.
- EUR/USD gains as the ECB is likely to keep interest rates on hold for an extended period.
- The US Dollar weakens as markets price in two additional Federal Reserve rate cuts in 2026.
- Markets brace for President Trump to nominate a new Fed chair in May, potentially favoring lower interest rates.
EUR/USD has recovered its recent losses registered in the previous session, trading around 1.1760 during the Asian hours on Friday. Traders will likely observe Germany’s Manufacturing Purchasing Managers’ Index (PMI) data later in the day.
The Euro (EUR) is finding support against the US Dollar (USD) as monetary policy paths diverge between the European Central Bank (ECB) and the US Federal Reserve (Fed). The ECB left interest rates unchanged in December and indicated they are likely to stay on hold for an extended period. ECB President Christine Lagarde highlighted that elevated uncertainty makes it challenging to provide clear forward guidance on future policy moves.
The EUR/USD pair gains ground as the US Dollar struggles amid expectations of two additional Federal Reserve rate cuts in 2026, which would narrow interest-rate differentials with other major central banks. Markets are bracing for US President Donald Trump to nominate a new Fed chair to replace Jerome Powell when his term ends in May, a move that could tilt monetary policy toward lower interest rates.
The CME FedWatch tool shows an 85.1% probability of rates being held at the Fed’s January meeting, up from 84.5% a week earlier. Meanwhile, the likelihood of a 25-basis-point rate cut has fallen to 14.9% from 15.5% a week ago.
The Fed lowered interest rates by 25 basis points (bps) at the December meeting, bringing the target range to 3.50%–3.75%. The Fed delivered a cumulative 75 bps of rate cuts in 2025 amid a cooling labor market and still-elevated inflation.
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.
- Gold price climbs to around $4,345 in Friday’s early Asian session.
- Expectations of Fed rate cuts this year and geopolitical risks could boost the Gold price.
- Increased margin requirements on gold and silver futures by the CME Group might cap the upside for precious metals.
Gold price (XAU/USD) rises to near $4,345 during the early Asian session on Friday. Gold finished 2025 with a significant rally, achieving an annual gain of around 65%, its biggest annual gain since 1979. The rally of the precious metal is bolstered by the prospect of further US interest rate cuts in 2026 and safe-haven flows.
The US Federal Reserve (Fed) decided to cut the interest rate by 25 basis points (bps) at its December policy meeting, bringing the federal funds rate to a target range of 3.50%–3.75%. Those in favor cited increased downside risks to employment and easing inflation pressures. Fed Governor Stephen Miran voted against the action in favor of a jumbo rate cut, while Chicago Fed President Austan Goolsbee and Kansas City’s Jeff Schmid dissented in favor of leaving rates unchanged.
The minutes from the Federal Open Market Committee (FOMC) meeting on December 9-10 indicated that most Fed officials viewed further interest-rate reductions as appropriate, provided inflation declines over time, although they remained divided over when and by how much to cut. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.
Additionally, the persistent Israel-Iran conflict and the ongoing US-Venezuela tensions could boost the Gold price. It’s worth noting that traders seek assets that can preserve value during periods of uncertainty, which supports a traditional safe-haven asset such as Gold.
On the other hand, traders could book their profits or rebalance their portfolio, which might cap the upside for the yellow metal. The Chicago Mercantile Exchange (CME) Group, one of the world’s largest trading floors for commodities, raised margin requirements for gold, silver, and other metals. These notices require traders to put up more cash on their bets in order to insure against the possibility that the trader will default when they take delivery of the contract.
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.
- USD/JPY strengthens to around 156.75 in Friday’s early Asian session.
- The cautious pace of BoJ’s monetary tightening weighs on the Japanese Yen and creates a tailwind for the pair.
- The prospect of a US rate cut and concerns about the Fed’s independence might cap the upside for USD/JPY.
The USD/JPY pair gains ground to near 156.75 during the early Asian session on Monday. The Japanese Yen (JPY) softens against the US Dollar (USD) as traders have been disappointed with the slow and cautious pace of the Bank of Japan’s (BoJ) monetary tightening.
The BoJ raised its policy rate to 0.75% from 0.50%, the highest level in 30 years, at its December policy meeting. However, the Japanese central bank did not provide specific guidance on the pace of future hikes, which disappointed the market and weighed on the JPY.
On the other hand, the US Federal Reserve (Fed) is expected to cut the interest rates further in 2026, and US President Donald Trump openly pushes for a more dovish central bank chief. This, in turn, might undermine the Greenback against the JPY.
Trump said that he expects the next Fed Chairman to keep interest rates low and never “disagree” with him. The comments are likely to heighten concerns among investors and policymakers about Federal Reserve independence.
“The biggest factor for the dollar in the first quarter will be the Fed,” said Yusuke Miyairi, a foreign-exchange strategist at Nomura. “And it’s not just the meetings in January and March, but who will be the Fed Chair after Jerome Powell ends his term,” Miyairi added.
The Fed cut rates three times in 2025, and traders anticipate two rate cuts this year. Financial markets are pricing in nearly an 18.3% chance the Fed will cut interest rates at its next meeting in January, according to the CME FedWatch tool.
(This story was corrected on January at 01:05 GMT to say, in the last paragraph, that the Fed cut rates three times in 2025, and traders anticipate two rate cuts this year, not next year)
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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