Forex News
- Jakarta protests and El Niño weather risks weigh on investor sentiment ahead of key economic data.
- Bank Indonesia nominee Destry Damayanti promises policy continuity, emphasizing stability while supporting growth.
- The US Dollar remains strong as July's PCE inflation accelerated to 0.2%, beating market expectations.
USD/IDR gains ground for the third successive day, trading around 17,800 during the Asian hours on Thursday. The currency pair is under downward pressure as the Indonesian Rupiah (IDR) struggles against fragile domestic sentiment.
Ongoing major protests in Jakarta have left investors wary of potential unrest reminiscent of last year's turmoil. Adding to this caution, markets are bracing for next week's August inflation report, where El Niño-related weather risks threaten to drive up food prices. These concerns are further compounded by lingering external pressures and ongoing uncertainty in global energy markets ahead of the upcoming July trade data release.
Despite these immediate headwinds, reassuring comments from central bank leadership helped cap broader losses. Destry Damayanti, the sole nominee for Bank Indonesia Governor, told parliament that closer policy coordination would not undermine the central bank’s independence. She emphasized that Bank Indonesia will maintain a stance centered on economic stability while actively supporting growth, helping to reinforce market confidence in policy continuity.
The USD/IDR pair remains stronger as the US Dollar (USD) holds its ground, bolstered by robust economic data. July’s PCE price index accelerated to 0.2% month-on-month, edging past the 0.1% consensus, while the annual rate climbed to 3.7%. This surprise uptick has reinforced market bets that the Federal Reserve could deliver one final rate hike before year-end, leaving investors eagerly awaiting policy cues from Fed leadership at the upcoming Jackson Hole symposium.
Traders assess the shifting geopolitical and fiscal dynamics. Crude oil prices continued to slide following diplomatic headway in the Middle East, where Iran and Oman agreed on territorial waters and revenue-sharing along the Strait of Hormuz, easing immediate inflation anxieties.
Meanwhile, fiscal scrutiny intensified over the US Treasury’s plan to double bond buybacks, a move sharply criticized by billionaire investor Stanley Druckenmiller as detrimental to market credibility and a missed opportunity for meaningful debt reform.
Dollar bears eye renewed pressure on DXY
Strategists at Scotiabank highlight that the technical backdrop for the US Dollar Index remains fragile, cautioning that “bear pressure will build on the DXY again below 98.75,” a level they flag as an important threshold for renewed downside momentum.
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.
Bank of Japan (BoJ) Deputy Governor Ryozo Himino said on Thursday that the central bank will reach decision on rates balancing need to gain information on economy, financial conditions, and acting in timely fashion to avoid being behind the curve on inflation.
Key quotes
Don't see any specific distortion in jgb market.
As such, BoJ can proceed with current bond taper plan.
It is not as if BoJ won't shift policy unless it has complete information on economic, price and financial developments.
Will take into account fact underlying inflation is nearing 2% in making policy decision.
BoJ will reach decision on rates balancing need to gain information on economy, financial conditions, and acting in timely fashion to avoid being behind the curve on inflation.
Market reaction
At the time of writing, the USD/JPY pair is up 0.02% on the day at 159.35.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- The US Dollar Index trades firmly near 99 amid a sticky US PCE Inflation report for July.
- Both the US headline and core PCE Price Index remained steady at 3.7% and 3.3% YoY, respectively.
- Investors keenly await fresh headlines from the Jackson Hole Symposium.
The US Dollar (USD) clings to previous day’s gains on Thursday, driven by a sticky United States (US) Personal Consumption Expenditure (PCE) Price Index report for July.
In the early European session, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades firmly near 99.00.
On Wednesday, the US core PCE inflation, which is the Federal Reserve’s (Fed) preferred inflation gauge, arrived in line with estimates and the prior release of 3.3% Year-on-Year (YoY). In the same period, the headline PCE Price Index also grew at a steady pace of 3.7% YoY, while it was expected to cool down to 3.6%.
Fed’s interest rate expectations for the September meeting or later have barely moved after the inflation data release.
According to the CME FedWatch tool, the odds of the Fed leaving interest rates unchanged in the September policy meeting are almost steady at 64%.
Meanwhile, financial market participants shift their focus to the Jackson Hole Symposium, where Fed Chairman Kevin Warsh is scheduled to speak on Friday.
Fed independence and communication under scrutiny as Warsh weighs guidance stance
Economists at DBS Group Research highlight that Kevin Warsh would confront a complex policy communication challenge if he were to steer the Fed. They argue that “overall, Warsh faces a difficult balancing act: defending the Fed’s independence and price-stability mandate while providing greater clarity on the Fed’s reaction function without abandoning his preference for less forward guidance.” This tension between preserving institutional autonomy and limiting explicit forward guidance, while still offering markets enough transparency on the policy path, is seen as a key issue for Dollar watchers as upcoming US data and Fed events loom.
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 regains positive traction as the US Treasury’s buyback strategy keeps US bond yields depressed.
- The US inflation data fuels Fed rate hike bets, which support the USD and might cap the commodity.
- Traders also opt to wait for Fed Chair Kevin Warsh’s speech on Friday for cues about the policy path.
Gold (XAU/USD) struggles to capitalize on modest Asian session gains on Thursday and remains below its highest level since May 14, touched earlier this week. Traders now seem hesitant to place aggressive directional bets and wait for US Federal Reserve (Fed) Chair Kevin Warsh's speech at the Jackson Hole Symposium on Friday for cues on the future policy path. The outlook, in turn, will play a key role in influencing the US Dollar (USD) price dynamics and provide some meaningful impetus to the non-yielding bullion.
In the meantime, the slightly hot US inflation data released on Wednesday backed the case for at least one Fed rate hike by the end of this year. In fact, data published by the Commerce Department showed that the US Personal Consumption Expenditures (PCE) Price Index remained unchanged at 3.7% in the 12 months through July, coming in higher than expectations. Adding to this, the core gauge, which excludes volatile food and energy prices, held steady at 3.3%, as anticipated. This points to still-sticky inflation and is likely to intensify the debate over whether interest rates should be lifted or held steady.
Despite hawkish Fed expectations, US bond yields remain depressed on the back of the US Treasury's buyback strategy. Adding to this, the latest optimism over a potential US-Iran peace deal and the reopening of the Strait of Hormuz cap the upside for the USD and offer some support to gold. In fact, media reports suggest that the US and Iran have reached a new ceasefire deal that would be announced in the coming days. Furthermore, Iran’s Deputy Foreign Minister Kazem Gharibabadi said on Tuesday that Tehran and Oman have agreed on a temporary maritime route for ships travelling through the waterway.
Gharibabadi, however, warned that the Strait will not fully reopen until the US fulfills its commitments under an interim peace deal signed in June, keeping the geopolitical risk premium in play. This, in turn, acts as a tailwind for crude oil prices and the safe-haven Greenback, which might keep a lid on the gold price. Hence, it will be prudent to wait for strong follow-through buying and a sustained move beyond the $4,700 mark before positioning for the resumption of the XAU/USD pair's upward trajectory witnessed since the beginning of this month.
XAU/USD daily chart
Technical Analysis
The precious metal holds a bullish near-term bias above the $4,525-$4,515 confluence – comprising the 200-day Simple Moving Average (SMA) and the 38.2% Fibonacci retracement of the March-June decline. Meanwhile, the Relative Strength Index (RSI) at 68.21 hovers near overbought territory, while the Moving Average Convergence Divergence (MACD) stays in positive territory. These indicators together suggest that upside momentum is still constructive but increasingly stretched.
Hence, it will be prudent to wait for a move beyond the 50% retracement level and the $4,700 mark before positioning for further gains. The subsequent move up could lift the Gold price to the 61.8% level at $4,861.14. Further north, the 78.6% retracement at $5,107.11 and the cycle high region near $5,420.42 form a broader bullish objective if buyers extend the advance. On the flip side, the $4,525-$4,515 confluence might continue to protect the immediate downside. A deeper pullback would expose the 23.6% level at $4,301.87 before the structural floor around the cycle low at $3,956.35.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
- EUR/USD edges higher to around 1.1655 in Thursday’s early European session.
- Hawkish ECB expectations and resilient economic data support the Euro.
- Fed’s preferred inflation gauge showed core PCE rose 3.3% YoY in July.
The EUR/USD pair gains ground to near 1.1655 during the early European trading hours on Thursday. The Euro (EUR) strengthens against the Greenback on the hawkish stance of the European Central Bank (ECB). The US Initial Jobless Claims data is due on Thursday. Markets will shift their attention to the Jackson Hole symposium later on Friday.
The ECB is expected to raise the key interest rates in September after tightening in June to contain price pressures amid ongoing geopolitical tensions. Markets are now pricing in a nearly 96% probability that the ECB will increase the deposit rate to 2.50% at its September policy meeting, according to the ECB Watch tool.
Hawkish rhetoric from ECB policymakers underpins the shared currency. ECB Executive Board member Isabel Schnabel said on Wednesday that borrowing costs will need to rise further as the lengthy conflict in the Middle East and the surprisingly strong Eurozone economy pose upside risks to inflation.
The Eurozone economy has also proved resilient, with data on Friday showing business activity growing at its fastest pace this year.
Data released by the US Commerce Department on Wednesday showed the Fed’s preferred inflation gauge came in line with expectations, with the core PCE inflation holding steady at 3.3% YoY in July.
Meanwhile, the headline PCE rose 3.7% in the 12 months through July, unchanged from June and hotter than the 3.6% estimate. On a monthly basis, the PCE increased 0.2% after falling 0.1% in June, above the consensus of a 0.1% growth. Traders will closely monitor the speech from Fed Chairman Kevin Warsh in Jackson Hole, Wyoming, which could offer some hints about the outlook for US interest rates.
Euro tone stays firm as ECB rhetoric underscores inflation risks
Strategists at Scotiabank note that the policy backdrop remains underpinned by firm ECB rhetoric, with the latest remarks from Executive Board member Isabel Schnabel “maintain[ing] a hawkish bias.” They highlight that Schnabel has pointed to “upside risks to inflation related to both geopolitical developments and resilient euro area growth,” reinforcing market expectations for further tightening and supporting the constructive tone around the Euro despite its recent consolidation.
Technical Analysis: EUR/USD keeps a bullish vibe above the 100-day SMA
In the daily chart, EUR/USD holds above both the 100-day simple moving average (SMA) and the Bollinger middle band, suggesting a constructive bullish bias as buyers defend the recent breakout. Price trades below the upper boundary of the Bollinger band, leaving room for further upside, while the Relative Strength Index (14) at 65.6 stays in bullish territory but shy of overbought, hinting that upside momentum is firm yet not overstretched.
On the topside, immediate resistance is located at the upper boundary of the Bollinger band near 1.1710, where a sustained break would open the way to further gains in the coming sessions. On the downside, initial support is seen at the middle Bollinger Band around 1.1587, followed by the 100-day SMA at 1.1575; a deeper pullback would look toward the lower limit of the Bollinger band near 1.1460 as a more distant structural floor.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- The Indian Rupee has a flat opening against the US Dollar on Thursday.
- A stronger US Dollar due to a sticky US PCE Inflation report has offset lower oil prices.
- Investors keenly await Fed Chair Warsh’s remarks at the Jackson Hole Symposium.
The Indian Rupee (INR) opens on a flat note against the US Dollar (USD) on Thursday after a holiday the previous day. Still, USD/INR is close to its 10-day low of 95.40. The pair was expected to open positive due to lower oil prices; however, the recovery move in the US Dollar on Wednesday on the back of sticky United States (US) Personal Consumption Expenditure (PCE) Price Index report for July has offset the same.
At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, holds onto Wednesday’s gains near 99.15.
US PCE inflation accelerates at faster-than-expected pace in July
On Wednesday, the US Bureau of Economic Analysis (BEA) reported that the core PCE inflation, which is closely tracked by Federal Reserve (Fed) officials, arrived in line with estimates and the prior release of 3.3% Year-on-Year (YoY). The headline PCE Price Index also grew at a steady pace of 3.7% YoY, while it was expected to cool down to 3.6%.
Signs of price pressures remaining sticky are expected to keep fears of Federal Reserve (Fed) interest rate hikes this year intact.
However, there has been no change observed in the Fed’s interest rate expectations for the September meeting after the inflation data release as of now.
According to the CME FedWatch tool, the odds of the Fed leaving interest rates unchanged in the September policy meeting are almost steady at 64%.
Jackson Hole Symposium awaited
The next major trigger for global financial markets could be remarks from Fed Chairman Kevin Warsh at the Jackson Hole Symposium.
Strategists at DBS flag Fed Chairman Kevin Warsh’s Jackson Hole keynote on Friday, August 28, as “the most important event this week,” but stress that the symposium is being “viewed more as a credibility event rather than a rate-signalling one.”
In their view, “Warsh faces a difficult balancing act: defending the Fed’s independence and price-stability mandate while providing greater clarity on the Fed’s reaction function without abandoning his preference for less forward guidance.”
Iran and Oman reach Hormuz deal
The confirmation from the Islamic Revolutionary Guard Corps (IRGC) that it has reached a revenue-sharing agreement with Oman on the Strait of Hormuz, a critical chokepoint for almost one-fifth of global energy supply, has weighed on oil prices.
However, the IRGC clarified that the reopening of the Strait of Hormuz will take more than just a deal with Oman.
In the opening session, the MCX Crude Oil contract expiring on September 21 is 0.75% lower at around Rs. 7,834.
Lower oil prices bode well for currencies from economies such as India, which rely heavily on oil imports to meet their energy needs.
USD/INR Technical Analysis
In the daily chart, USD/INR trades at 95.42, keeping a mildly bearish near-term tone as it slips just beneath the 20-period exponential moving average (EMA) at 95.5543. Broadly, the triangle formation reflects a sharp volatility contraction, which indicates a sideways trend.
The Relative Strength Index (14) inside the 40.00-60.00 zone also signifies indecisiveness among investors.
On the topside, initial resistance is seen at the 20-period EMA at 95.55, followed higher by the downward trendline break level near 96.5178. On the downside, immediate support aligns with the rising trendline break price at 95.40, with a deeper floor emerging at the trendline start point around 94.16, where buyers would be expected to defend the broader uptrend.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
- USD/JPY attracts dip-buyers for the fourth straight day amid a supportive fundamental backdrop.
- Fed rate hike bets remain in play, underpinning the USD and acting as a tailwind for spot prices.
- The US-Japan rate gap and Japan’s fiscal woes weigh on the JPY amid a bullish setup for the pair.
The USD/JPY pair turns positive for the fourth consecutive day following an intraday dip to the 159.00 neighborhood during the Asian session on Thursday. Spot prices currently trade near the weekly high, though the uptick lacks bullish conviction ahead of Tokyo consumer inflation figures and US Federal Reserve (Fed) Kevin Warsh's speech on Friday.
The slightly hot US inflation data released on Wednesday reaffirmed market bets for at least one Fed rate hike in 2026, which is seen as acting as a tailwind for the US Dollar (USD). The Japanese Yen (JPY), on the other hand, struggles to lure buyers amid the wide US-Japan rate gap and concerns about Japan's worsening fiscal condition, which lends additional support to the USD/JPY pair.
The range-bound price action witnessed over the past two weeks or so could be categorized as a bullish consolidation against the backdrop of a solid recovery from the 155.25-155.20 region, or the lowest since early May, set earlier this month. Furthermore, the USD/JPY pair holds above the 100-period Simple Moving Average (SMA) on the 4-hour chart, reaffirming the constructive outlook.
Meanwhile, the Relative Strength Index (RSI) is around 57, and the Moving Average Convergence Divergence (MACD) is posting slightly positive readings. This setup suggests upside pressure remains in place. A move beyond 159.63, representing the 50% Fibonacci retracement level of the intervention-led slump from a four-decade peak, is needed to unlock a more decisive advance.
This is followed by the 61.8% Fibo. level at 160.66 and the 78.6% retracement at 162.13, before the recent swing high near 163.99 comes into view. On the downside, initial support is seen at the 100-period SMA at 158.90, with the 38.2% Fibo. retracement at 158.60 reinforces the underlying uptrend. A deeper pullback would expose the 23.6% level at 157.33 and the structural low around 155.27.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
USD/JPY 4-hour chart
Japanese Yen Price This week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.18% | 0.33% | 0.32% | 0.52% | -0.30% | 0.34% | 0.48% | |
| EUR | -0.18% | 0.15% | 0.06% | 0.33% | -0.48% | 0.15% | 0.30% | |
| GBP | -0.33% | -0.15% | -0.17% | 0.22% | -0.60% | 0.00% | 0.16% | |
| JPY | -0.32% | -0.06% | 0.17% | 0.26% | -0.53% | 0.11% | 0.25% | |
| CAD | -0.52% | -0.33% | -0.22% | -0.26% | -0.77% | -0.14% | -0.03% | |
| AUD | 0.30% | 0.48% | 0.60% | 0.53% | 0.77% | 0.64% | 0.78% | |
| NZD | -0.34% | -0.15% | -0.00% | -0.11% | 0.14% | -0.64% | 0.14% | |
| CHF | -0.48% | -0.30% | -0.16% | -0.25% | 0.03% | -0.78% | -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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
- USD/CHF remains steady after strong inflation data fuels expectations of another Fed rate hike.
- Diplomatic progress between Iran and Oman eases Middle East tension and near-term inflation pressures.
- Switzerland's August ZEW expectations index jumped to 12.1, marking two consecutive months of economic recovery.
USD/CHF remains steady after registering 0.5% gains in the previous day, trading around 0.8050 during the Asian hours on Thursday. The currency pair remains bound to a tight range as a resilient US Dollar (USD) holds its ground, bolstered by robust economic data.
July’s PCE price index accelerated to 0.2% month-on-month, edging past the 0.1% consensus, while the annual rate climbed to 3.7%. This surprise uptick has reinforced market bets that the Federal Reserve could deliver one final rate hike before year-end, leaving investors eagerly awaiting policy cues from Fed leadership at the upcoming Jackson Hole symposium.
Broader market sentiment is also digesting shifting geopolitical and fiscal dynamics. Crude oil prices continued to slide following diplomatic headway in the Middle East, where Iran and Oman agreed on territorial waters and revenue-sharing along the Strait of Hormuz, easing immediate inflation anxieties.
Simultaneously, fiscal scrutiny intensified over the US Treasury’s plan to double bond buybacks—a move sharply criticized by billionaire investor Stanley Druckenmiller as detrimental to market credibility and a missed opportunity for meaningful debt reform.
The Swiss economic outlook showed notable resilience according to the latest ZEW Survey. The Expectations index rose to 12.1 in August 2026, building on July’s 10.0 reading to mark the second straight month in positive territory and the second-highest level since early 2025. Coupled with a rise in the current conditions gauge to 8.8, the data points to a steadily improving domestic environment, even as economic sentiment polarizes and fewer analysts expect conditions to remain stagnant over the next six months.
Franc outlook questioned as SNB hike expectations clash with subdued inflation
Analysts at Commerzbank highlight a growing disconnect between market pricing and recent commentary around the SNB policy path. They note that “a few weeks ago, reports emerged suggesting that the SNB might keep interest rates unchanged until the end of 2027.” Nevertheless, “the market is still pricing in the first rate hike by mid-2027,” a scenario Commerzbank argues “seems unlikely, given the current inflationary trend.”
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
Gold prices rose in India on Thursday, according to data compiled by FXStreet.
The price for Gold stood at 14,192.09 Indian Rupees (INR) per gram, up compared with the INR 14,090.06 it cost on Wednesday.
The price for Gold increased to INR 165,534.30 per tola from INR 164,343.70 per tola a day earlier.
Unit measure | Gold Price in INR |
|---|---|
1 Gram | 14,192.09 |
10 Grams | 141,920.60 |
Tola | 165,534.30 |
Troy Ounce | 441,422.70 |
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.)
- GBP/USD struggles to attract any meaningful buyers, though the downside seems limited.
- The hot US inflation data fuels Fed hike bets, underpinning the USD and capping the pair.
- Soft US bond yields and the Hormuz optimism act as a headwind for the safe-haven buck.
The GBP/USD pair is seen consolidating near the lower end of its weekly range, below the 1.3600 mark, during the Asian session on Thursday. The downside, however, remains cushioned as traders look for more cues about the US Federal Reserve's (Fed) interest rate path before placing fresh directional bets.
Data released on Wednesday showed that the US Personal Consumption Expenditures (PCE) Price Index rose 3.7% over the 12 months through July, unchanged from the previous month and slightly above consensus estimates. This pointed to still-sticky US inflation and backs the case for at least one Fed rate hike by the end of this year. The outlook, in turn, helps the US Dollar (USD) preserve the overnight gains and acts as a headwind for the GBP/USD pair.
However, the US Treasury's buyback strategy keeps US bond yields depressed, which, along with the optimism over a potential US-Iran deal and the reopening of the Strait of Hormuz, caps the safe-haven buck. In fact, media reports suggest that the US and Iran have reached a new ceasefire deal that would be announced in the coming days. Furthermore, Iran and Oman have agreed on a temporary maritime route for commercial ships travelling through the waterway.
Gharibabadi, however, warned that the strait will not fully reopen until the US fulfills its commitments under an interim peace deal signed in June. This keeps the geopolitical risk premium in play, acting as a tailwind for crude oil prices and the Greenback. Traders also seem hesitant and opt to wait for Fed Chair Kevin Warsh's scheduled speech at the Jackson Hole Symposium on Friday, which should provide a fresh impetus to the USD and the GBP/USD pair.
GBP/USD daily chart
Technical Analysis
The GBP/USD pair keeps the near-term capped tone below the 1.3660-1.3665 supply zone. A convincing break through the said barrier, however, would be seen as a fresh trigger for bullish traders and open the way for an extension of the advance.
On the downside, prior consolidation pockets around the mid-1.3400s and low-1.3300s act as intermediate reference areas where dips could attract buying interest, keeping the broader recovery structure intact.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.19% | 0.32% | 0.32% | 0.53% | -0.31% | 0.29% | 0.47% | |
| EUR | -0.19% | 0.14% | 0.04% | 0.33% | -0.47% | 0.11% | 0.28% | |
| GBP | -0.32% | -0.14% | -0.17% | 0.21% | -0.58% | -0.03% | 0.16% | |
| JPY | -0.32% | -0.04% | 0.17% | 0.26% | -0.55% | 0.06% | 0.23% | |
| CAD | -0.53% | -0.33% | -0.21% | -0.26% | -0.78% | -0.19% | -0.05% | |
| AUD | 0.31% | 0.47% | 0.58% | 0.55% | 0.78% | 0.60% | 0.78% | |
| NZD | -0.29% | -0.11% | 0.03% | -0.06% | 0.19% | -0.60% | 0.18% | |
| CHF | -0.47% | -0.28% | -0.16% | -0.23% | 0.05% | -0.78% | -0.18% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
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