Forex News
On Wednesday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.7180 compared to the previous day's fix of 6.7150 and 6.6811 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
- WTI gains support after falling nearly 7% this week due to easing Middle East supply fears.
- Trump signaled no immediate plans to strike Iran, though Israel hinted an attack could come this week.
- Mediators offered new peace proposals, but Iran’s security chief declared Washington's current response unsatisfactory.
West Texas Intermediate (WTI) oil extends gains for the second successive day, trading around $96.10 per barrel during Asian hours on Wednesday. Crude oil prices gain as investors grappled with uncertainty surrounding ongoing peace negotiations between the US and Iran.
Meanwhile, Qatar’s Foreign Ministry spokesperson stated that both countries are currently evaluating new proposals put forward by mediators to bridge their differences. However, Iran’s national security chief indicated in a social media post that Washington’s response remains unsatisfactory.
US Donald Trump stated that the US has no immediate plan to strike Iran and seems to be getting what it wants, according to the Financial Times. He added that while the US is ready to act if needed, there may be no reason to do so, despite Israeli Prime Minister Benjamin Netanyahu hinting at an attack later this week.
The US conducted defensive strikes against Iran earlier this week, targeting surface-to-air missile systems used against American assets. Nevertheless, the limited scope of these strikes suggests there is no immediate return to large-scale military operations.
Overall, the WTI, US oil benchmark, remains down around 6% so far this week. The decline continues to be driven by optimism over a potential diplomatic breakthrough alongside signs of a recovery in Middle Eastern crude exports.
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.
US President Donald Trump said on Tuesday that "we appear to be achieving all our objectives," adding that the US has no immediate plan to attack Iran, the Financial Times reported. Trump also described the position regarding Tehran as "a brilliant situation.
Meanwhile, the US Embassy in Saudi Arabia on Tuesday has updated its security alert and warned American citizens of possible further attacks by Iranian-backed Houthi forces on airports and critical infrastructure, Reuters reported. It has also restricted travel by its staff to areas that include the kingdom’s main oil-producing and export regions.
The Saudi-led coalition reported on Tuesday that it intercepted and destroyed a drone that it said the Houthis launched toward southern Saudi Arabia.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 0.01% on the day at $95.77.
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.
Canadian Prime Minister Mark Carney said on Tuesday that trade discussions with the United States (US) will become more intensive. Carney added that progress made but US trade talks are not yet complete as key issues remain.
Key quotes
Talks with US to become more intensive.
Progress made but US trade talks not yet complete.
Some red lines remain to be addressed.
Key issues remain, but progress achieved.
Some of our limits in US trade talks have been eliminated.
US requests fewer concessions and proposes more, but deal not reached yet.
Trade negotiators don’t always need talks with USTR, communication lines remain open.
Looks forward to meeting Trump at APEC summit in China.
Market reaction
At the time of writing, the USD/CAD pair is up 0.06% on the day at 1.4012.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
- Gold price drifts lower to around $3,930 in Wednesday’s early Asian session.
- A stronger US Dollar and higher yields weigh on gold prices.
- Central banks bought gold at the fastest pace since the end of 2024 in Q3, the World Gold Council showed.
Gold price (XAU/USD) declines to near $3,930 during the early Asian session on Wednesday, pressured by a firmer US dollar (USD) and higher Treasury yields. Traders await the outcome of US midterm elections for fiscal policy clues.
The US Dollar edges slightly higher as markets gauged uncertainty over a possible US-Iran deal and the outcome of the midterm elections, while Treasury yields also edged higher. This, in turn, undermines the USD-denominated commodity price. The outcomes of US elections will be closely monitored, with polls and nonpartisan analysts favoring Democrats to wrest control of the House from Republicans, while control of the Senate remains uncertain.
“A Democratic clean sweep could potentially put pressure on the US dollar by making it harder for the administration to pass law, including measures related to the debt ceiling. If the dollar falls, that’s one way gold could potentially find some support,” said Fawad Razaqzada, market analyst at forex.com.
The World Gold Council report released on Tuesday showed that central banks bought gold at the fastest pace since the end of 2024 in the third quarter (Q3), even as the metal faced pressure from higher oil prices and interest rates. The institutions accumulated a net 321 tons in the three months through September. However, the World Gold Council cut its forecast for growth in gold investment this year to 200 metric tons from 400 tons previously estimated.
Gold slide seen as excessive despite higher US rate expectations
Analysts at Commerzbank highlight that the gold price "fell by 3.7% on Friday to USD 3,870 per troy ounce, its lowest level in more than a year," leaving "a substantial monthly loss of almost 7% in October, which was even slightly larger than that recorded in September." They attribute much of the recent pressure to shifting monetary expectations, noting that "given the robust US economy and inflation running well above target, a further rate hike in December is highly likely." Commerzbank argues that "expectations of rate hikes have led to rising bond yields and (real) interest rates, which in turn increase the opportunity cost of holding gold and, conversely, reduce the attractiveness of holding gold."
However, the bank stresses that rate dynamics "can only explain the current fall in the price of gold to a limited extent," pointing out that "following last week’s Fed meeting – at which, as expected, the Fed left interest rates unchanged – interest rate expectations have eased and both nominal and real bond yields have subsequently fallen." Against this backdrop, Commerzbank concludes that "we consider the price decline in gold to be excessive and unwarranted. The arguments in favour of a rising gold price remain valid."
Technical Analysis: Gold retains a negative outlook below the 100-day SMA
In the daily chart, XAU/USD extends its retreat below key trend and volatility markers, which keeps the near-term bias bearish. Spot holds under the 100-day simple moving average (SMA) and the Bollinger Bands’ middle line, suggesting rallies remain capped within a broader corrective phase. The Relative Strength Index (RSI) at 36.09 hovers just above oversold territory, hinting at lingering downside pressure but also the risk of intermittent corrective bounces rather than a clear exhaustion low.
On the topside, initial resistance emerges at the Bollinger middle band near $4,080, followed by the 100-day SMA at $4,205, while a more distant cap is seen at the upper Bollinger band around $4,255. On the downside, immediate support aligns with the lower Bollinger band at $3,900; a decisive break beneath this floor would expose fresh bearish space, whereas holding above it could see gold consolidating within the current band structure before any attempt to challenge the overhead resistance cluster.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
New Zealand’s Unemployment Rate ticked up to 5.7% in the third quarter (Q3) of 2026 from 5.6% in the second quarter, according to the official data released by Statistics New Zealand on Wednesday. The figure came in above the market consensus of 5.5%.
Furthermore, New Zealand’s Employment Change arrived at -0.1% in Q3, down from 0.5% in Q2, compared with the consensus forecast of 0.4%. The participation rate in New Zealand decreased to 70.4% in Q3, compared to 70.7% in the previous reading.
Market reaction to New Zealand’s employment data
The New Zealand Dollar (NZD) attracts some sellers following the employment data. At the time of writing, the NZD/USD pair is trading 0.61% lower on the day to trade at 0.5583.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
- AUD/USD falls amid rising geopolitical uncertainty.
- RBA raises rates to 4.85%, but Bullock refrains from forward guidance.
- Iran rejects imminent peace deal claims as US midterm voting unfolds.
The Aussie Dollar drifts lower against the US Dollar late on Tuesday as the US midterm elections are underway, while progress toward a potential diplomatic exit from the US-Iran war stalls after Iran denied claims it was close to a deal. The AUD/USD trades at 0.6965, down 0.44%.
AUD/USD extends losses as US election uncertainty and stalled Iran peace talks overshadow the RBA’s latest rate increase
As we get closer to the first exit polls of the US midterm elections, the focus is on whether Democrats will gain the US House of Representatives and the US Senate. Additionally, what will US President Donald Trump's response be to the election outcome? Meanwhile, Polymarket sees a 75% chance that the Democrats could win the Senate and a 95% chance that they will be the majority in the House.
In the meantime, in the US-Iran conflict, Washington approved the draft memorandum of understanding presented to Iran by the Qatari delegation. Despite this, a Senior Iranian official said that the US and Iran are far from reaching a deal to end the war.
The US JOLTS job openings rose to 7.5 million, up 4.5% from the previous month's 7.19 million. The report showed that the hire rate rose to 3.4% from 3.3%, while total separations remained unchanged at 3.3%. Other data revealed that Factory Orders exceeded August’s reading of 0.3%, coming in at 1.8% MoM.
On Wednesday, the US economic schedule will feature the release of ADP Employment Change and the ISM Services PMI for October.
In Australia, the Reserve Bank of Australia (RBA) raised rates to 4.85% a day ago in a 6-3 vote, with Governor Michelle Bullock adopting a more neutral stance, adding that the three dissenters wanted to wait for more data. She acknowledged that she’s not clear on how high rates must be but refrained from providing forward guidance on the future path of interest rates.
Recently, the S&P Global Services PMI in October improved from 47.8 to 48.5.
AUD/USD Price Forecast: Technical outlook
In the daily chart, AUD/USD trades at 0.6964, keeping a bearish near-term bias as it holds beneath the cluster of simple moving averages (SMA) in the Moving Average Triple around 0.7059. Price remains supported above a series of rising trend lines, with nearby structural demand aligning around the 0.6922 area, while the Relative Strength Index (RSI) at 41.6 hints at stabilizing but still subdued momentum rather than a decisive recovery.
On the topside, initial resistance is seen at the grouped daily SMAs near 0.7059, followed by the horizontal barrier at 0.7198, which caps the broader upside. On the downside, immediate support emerges around the upward-sloping trend-line region near 0.6922, ahead of deeper cushions at 0.6897 and 0.6865, with additional medium-term floors at 0.6833, 0.6673 and the prior break area near 0.6348.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
- New Zealand jobs fell 0.1% in the third quarter against a 0.4% forecast.
- NZD/USD is trading at its session low, its lowest since mid-October.
New Zealand employment fell 0.1% in the third quarter against a forecast 0.4% rise, after 0.5% growth in the second, and the unemployment rate rose to 5.7% against a 5.5% forecast. NZD/USD is trading at its session low just below 0.5600, and it has given back almost all of its climb from the October 14 low just above 0.5550.
The Labour Cost Index rose 0.4% on the quarter against a 0.5% forecast, slowing from 0.7%, and the participation rate fell to 70.4% from 70.7%, so unemployment rose with fewer people looking for work. The Reserve Bank of New Zealand (RBNZ) held its rate on October 28 when a hike had been expected, and weaker jobs and slower wage growth cut into the case for one.
NZD/USD 5-minute chart
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- GBP/USD holds above its 200-day average, on track for a fifth gain in a row.
- The BoE is forecast to vote 7-2 for a hike to 4.00% on Thursday.
- Money markets price four BoE hikes by September 2027, Thursday's included.
The Bank of England (BoE) is forecast to raise the UK's Bank Rate to 4.00% from 3.75% on Thursday, and money markets have three more hikes priced after that one. GBP/USD holds just above 1.3400 and its 200-day Exponential Moving Average (EMA), on track for a fifth straight gain. What's left for the Pound to get from Thursday is in the guidance, not the decision.
The 7-2 forecast needs four of September's six holders to change their vote
Three of the BoE's nine policymakers voted for a hike on September 17: Chief Economist Pill and external members Greene and Mann. BoE Governor Bailey and Deputy Governors Breeden, Lombardelli and Ramsden voted to hold, but said persistent energy costs could strengthen the case for one. Those four are the votes the forecast needs, and a hike would be the BoE's first since August 2023.
BBH expects external members Dhingra and Taylor to keep voting to hold, which gives 7-2. Nomura expects a 6-3 vote again, with the six on the other side. A narrower hike could read as less appetite for the three more priced after it, and those three are what GBP/USD has been buying.
Money markets price four hikes and most banks see two
Money markets fully price four quarter-point hikes by September 2027, according to LSEG data, which would take the Bank Rate to 4.75%. Of 30 research houses, 27 expect a hike on Thursday, and most of them expect one more in February and a stop at 4.25%. BMO's Mark McCormick expects a one-off, and ING has called the market's pricing extreme.
Governor Bailey has said unconditional promises on future rates aren't appropriate, and the market has priced a year of hikes without one. BBH has warned that the guidance could test the full point of hikes priced for the next 12 months and cap the Pound's gains. A Monetary Policy Report that leans toward February and a stop could take some of that pricing out, and GBP/USD would likely fall if it did.
Both Fed dissenters wanted the quarter-point hike the BoE is forecast to make
The Fed held its rate at 3.75%-4.00% on October 28, with Fed Governor Cook and Cleveland Fed President Hammack voting for a quarter-point hike. US job openings rose to 7.523 million in September against a 7.13 million forecast, and factory orders rose 1.8% against 1.2%. GBP/USD's session high, short of 1.3450, came minutes before those releases, and it has traded below that high since.
Brent fell to near $104 a barrel on talk of progress in US-Iran negotiations, after Iran's negotiating team said there had been no new development. Petrol and diesel drove much of September's inflation overshoot, when UK inflation rose to 3.5%. A cheaper Brent is the one way the BoE's case can weaken before Thursday without anyone voting.
The BoE decides between Wednesday's ADP count and Friday's payrolls
The BoE's decision, minutes and Monetary Policy Report are due at 12:00 GMT on Thursday, and Governor Bailey speaks at 12:30 GMT. Cleveland Fed President Hammack, one of the two October dissenters, speaks at 13:50 GMT, 110 minutes after the BoE has voted on the hike she wanted for the US. Chief Economist Pill briefs businesses on Friday.
Wednesday's US numbers come first, with the Automatic Data Processing (ADP) private jobs count at 13:15 GMT forecast to slow to 69K from 90K. The Institute for Supply Management (ISM) survey of services firms follows at 15:00 GMT, where 54.8 is expected after 54.9. Friday's Nonfarm Payrolls (NFP) at 13:30 GMT are forecast at 65K after 29K, with the unemployment rate forecast at 4.2%. Each feeds the Fed's December decision, the Dollar side of GBP/USD's rate gap.
Midterm results arrive from Wednesday, with prediction markets near 75% that Democrats take the Senate, and Reuters reported traders holding back from big Pound bets ahead of them. New York Fed President Williams speaks at 09:30 GMT on Friday and Fed Vice Chair for Supervision Bowman at 17:15 GMT, either side of payrolls.
Pound levels into the BoE vote
Resistance: Monday's high just under 1.3450 is the highest GBP/USD has traded since September 16, and Tuesday's whole range is inside Monday's. Above it, 1.3500 is where the pair turned lower on September 16, the day of the Fed's hike.
Support: The 200-day EMA just under 1.3400 held Tuesday's dip by a few pips. Below it, 1.3300 is the October 29 low, and the October 28 low just above 1.3250 is where the five-session run began.
Bias: Lean short below 1.3450 into Thursday, because the pricing has run further than most research houses expect the BoE to go. A daily close back under the 200-day EMA opens 1.3300, then 1.3250. The daily Stochastic Relative Strength Index (Stoch RSI) is overbought near 85 and starting to roll over. A daily close above 1.3450 puts the pair through Monday's high and ends the short case.
GBP/USD daily chart
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.
UOB’s Ho Woei Chen and Peter Chia note that the People’s Bank of China (PBoC) has announced an increase in the foreign-currency reserve requirement ratio to 6%, effective 15 November, to slow Chinese Yuan (CNY) appreciation. The analysts maintain a cautious medium-term outlook on CNY amid widening interest rate differentials and expect a modest recovery in USD/CNY. UOB will update its forecasts on 6 November.
PBoC move reinforces cautious CNY outlook
"In a statement on Tue (3 Nov), the People’s Bank of China (PBOC) said the reserve requirement ratio for foreign currency deposits (FC RRR) will be increased by 2 ppt to 6% from the current 4%, effective from 15 Nov."
"The PBOC uses adjustments to the FC RRR as a primary tool to manage domestic foreign-currency liquidity and stabilise the value of the CNY."
"We have recently shifted to a cautious medium-term outlook on CNY due to the widening interest rate differential with the USD."
"The FC RRR hike further reinforced our view of a modest recovery in USD/CNY from here."
"We will update our USD/CNY forecasts at the upcoming FX & Interest Rate Monthly Report scheduled to be released on 6 Nov."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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