Forex News
US Treasury Undersecretary for International Affairs, Erin Browne, said on Friday that Japan is no longer faces deflationary environment, and the Japanese Yen (JPY) level and monetary policy must change along with that.
Key quotes
This is a moment of strong US economic momentum, we also take confidence from how far Japan has come.
Japan no longer faces deflationary environment and Yen level and monetary policy must change along with that.
US Japan communicate closely and work together at all levels to support stable, well-functioning markets.
IMF must be more assertive in identifying global imbalances.
IMF needs more balanced approach to assessing global outlook, should consider opportunities for positive, US-led economic shocks.
Sharp, disorderly currency moves can create much wider consequences, cause volatility across markets.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- Gold struggles to capitalize on the previous day’s move up amid a modest USD uptick.
- Fed hike bets, stable US bond yields and geopolitical risks underpin the safe-haven buck.
- Traders eye Fed Chair Warsh’s speech for cues about the policy path and a fresh impetus.
Gold (XAU/USD) reverses a modest Asian session dip on Friday, though any meaningful appreciation seems elusive amid a modest US Dollar (USD) uptick. The energy-driven acceleration in US inflation lifted market bets for an imminent rate hike by the Federal Reserve (Fed). Moreover, US bond yields seem to have stabilized following Thursday's steep decline, which, along with escalating tensions in the Middle East, seems to underpin the safe-haven USD. This, in turn, might cap the upside for the precious metal as traders keenly await Fed Chair Kevin Warsh’s speech.
The US Bureau of Labor Statistics (BLS) on Wednesday reported a broad increase in consumer prices in September as the US-Israeli war with Iran kept oil prices elevated. Adding to this, the US Producer Price Index (PPI), published on Thursday, advanced 1.3% last month, marking the largest gain since March 2022, and the yearly rate soared to 6.3%. Excluding the volatile food and energy components, the core PPI climbed 0.7% and 5% on a monthly and yearly basis, respectively, suggesting that inflation is broadening out beyond energy products. Investors, however, seem convinced that the Fed will keep rates unchanged later this month.
Meanwhile, CME Group's FedWatch Tool indicates over a 90% chance that the US central bank will raise borrowing costs again at its December policy meeting. Hence, Warsh's remarks at the Annual Meetings of the International Monetary Fund (IMF) and World Bank Group, in Bangkok, will be scrutinized for more cues about the Fed's future policy path. The outlook, in turn, will play a key role in influencing the near-term US Dollar (USD) price dynamics and provide some meaningful impetus to the precious metal. In the meantime, persistent geopolitical uncertainties turn out to be another factor acting as a tailwind for the Greenback.
In fact, the Iran-backed Houthi group carried out a deadly missile attack targeting the presidential palace, the seat of Yemen's Saudi-backed and internationally recognised government in the southern city of Aden. Adding to this, French Foreign Minister Pascal Confavreux confirmed that France has started deploying its military assets in Saudi Arabia. Adding to this, the US military developed strike plans that include 'mother of all bombs' against Iranian energy infrastructure and nuclear sites. This raises the risk of a further escalation of tensions in the Middle East, which might continue to support the USD and cap the upside for gold.
XAU/USD 4-hour chart
Technical Analysis
The XAU/USD pair, so far, has been struggling to find acceptance above the 100-period Simple Moving Average (SMA) and remains below the 61.8% Fibonacci retracement level of the July-August upswing. That said, the Moving Average Convergence Divergence (MACD) indicator is positive and rising, hinting at strengthening upside momentum. Adding to this, the Relative Strength Index (RSI) around 56 suggests mildly bullish conditions without reaching overbought territory.
However, it will still be prudent to wait for a sustained move beyond the $4,200 mark and the 61.8% Fibo. retracement at $4,238 before positioning for further gains toward the next upside barriers near the 50.0% retracement at $4,325 and the 38.2% level at $4,412. On the downside, immediate support is offered by the 78.6% Fibo. retracement at $4,115, which is followed by the $4,075-$4,065 horizontal support. A convincing break below the latter would make the Gold vulnerable to challenging the Fibonacci structural floor at $3,957.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- GBP/USD recovers further to near 1.3285 amid weakness in the US Dollar.
- The US Dollar is expected to face high volatility following remarks from Fed Chair Warsh in a fireside chat.
- BoE’s Bailey rules out fears that energy shocks being started passing into wages and broader consumer prices.
The British Pound (GBP) is marginally higher to near 1.3285 against the US Dollar (USD) in the Asian trade on Friday, extending its Thursday’s strong recovery move. The GBP/USD pair has bounced back sharply from its fresh 10-month low of 1.3137 posted on Wednesday at the expense of the US Dollar.
As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, holds onto previous day’s losses at around 101.90.
During the day, the next move in the US Dollar is expected to be guided by comments from Federal Reserve (Fed) Chair Kevin Warsh on the US economy and inflation at the Fireside Chat with International Monetary Fund (IMF) Managing Director Kristalina Georgieva, which is schedule at 03:30 GMT.
On the British Pound front, Bank of England (BoE) Governor Andrew Bailey, like other members, has ruled out fears of second-round inflation effects emerging in the current scenario. However, Bailey warned that prices pressures are above-target and are “enormously frustrating”.
Bailey frustration on UK inflation keeps GBP under cautious support
FXS Speechtracker scores the speech at 6.2/10, slightly below Governor Bailey’s historic 6.4/10 baseline, pointing to a mildly softer impact than usual despite clear concern over above-target UK inflation. The emphasis that second-round effects are still “too early” to judge but currently “subdued,” with businesses focused on cost cutting, leans modestly dovish at the margin, tempering expectations for aggressive near-term tightening and limiting upside for GBP.
Bailey’s remark that the UK economy is “more resilient than we expected, not as strong as we need” reinforces a cautious stance, suggesting the Bank of England will balance inflation frustration against growth risks. The comment that Middle East news is the biggest factor moving UK gilt yields highlights external risk premia rather than a strong policy-driven repricing, leaving GBP supported by lingering inflation concerns but vulnerable to swings in global risk sentiment.
GBP/USD Technical Analysis
In the daily chart, GBP/USD trades at 1.3282, holding marginally above the 20-day exponential moving average (EMA) at 1.3277, which now acts as immediate trend support and hints at a cautiously constructive near-term tone as the pair attempts to stabilize after its recent slide. The Relative Strength Index (RSI) at 47.99 remains below the neutral 50 line, suggesting that bullish momentum is still tentative and that further gains would likely require a clearer improvement in demand.
On the upside, the 20-day EMA at 1.3277 is acting as a dynamic barrier for the pair. Above the 20-day EMA, the September 30 high at 1.3311 seems to be the key barrier. Looking down, the 10-month low of 1.3137 is the major support level. The pair would be exposed to 1.3100 if it fails to hold 1.3137.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
Fed's Chair Warsh speech
Kevin Warsh took office as chairman of the Board of Governors of the Federal Reserve in May 2026, for a four-year term ending in 2030. His term as a member of the Board of Governors will expire in May 2040. Warsh, born in Albany (New York) on April 13, 1970, is an American financier and attorney who already served as a member of the Fed Board of Governors from 2006 to 2011 and was significantly involved in the central bank's response to the financial crisis.
Read more.Next release: Fri Oct 16, 2026 03:30
Frequency: Irregular
Consensus: -
Previous: -
Source: Federal Reserve
- Stock selloff and falling bond yields boosted non-yielding Silver as investors sought safer assets.
- Escalating Middle East conflict and shipping disruptions in the Strait of Hormuz drove Silver's safe-haven appeal.
- CME FedWatch Tool indicates that markets price in a 92% chance of a December Fed rate hike.
Silver price (XAG/USD) extends its gains for the second consecutive day, trading around $57.80 per troy ounce during Asian hours on Friday. Silver prices advanced as a sharp selloff in equity markets triggered renewed safe-haven demand for precious metals. This capital flight into safer assets drove bond yields significantly lower, reducing the opportunity cost of holding non-yielding assets like Silver and offering broad support to the metal.
Adding to the bullish momentum, investors digested intensifying geopolitical risks in the Middle East. Tensions flared following escalating hostilities between Saudi Arabia and Iran-backed Houthi forces in Yemen, alongside an incident earlier in the week where an Iranian projectile struck and sank a Singapore-flagged container ship in the Strait of Hormuz.
Meanwhile, market participants continued to assess the Federal Reserve’s (Fed) monetary policy path, as recent robust US economic data bolstered expectations of tighter borrowing conditions. According to the CME FedWatch Tool, markets are currently pricing in a roughly 72% chance that the Fed will hold interest rates steady this month, while expectations for a rate increase in December have risen to 92%.
CTA short covering in rates spills over into precious metals
According to TD Securities, “CTAs are extremely active cross-asset today,” with “notable short-covering across the board in the rates complex.” This shift in positioning is “helping CTAs to reverse course on yesterday's large-scale gold selling,” while “silver, platinum and palladium are also all seeing CTA short covering,” easing some of the systematic pressure that has weighed on the precious metals space.
Technical Analysis:
In the daily chart, XAG/USD trades at $57.80, extending its decline below both the short-term and medium-term trend metrics, which keeps the near-term bias bearish. The price is currently under the nine- and 50-day Exponential Moving Averages (EMAs), suggesting that rebounds remain capped while the broader downswing persists. The 14-day Relative Strength Index (RSI) at 38.85 stays in low-neutral territory, hinting at lingering downside pressure but not yet extreme oversold conditions, while the latest FXS Fed Sentiment Index reading at 127.51 reinforces the idea that macro policy expectations still lean against precious metals.
On the topside, immediate resistance aligns with the nine-day EMA at $58.81, where any recovery would likely stall initially, followed by a more solid barrier at the 50-day EMA near $62.46 that defines the upper boundary of the current corrective phase. With no clear nearby support levels derived from the available indicators, traders may look to recent lows and psychological round figures as provisional floors, while the bearish bias is expected to hold as long as XAG/USD trades below the clustered moving average resistance.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
The International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Friday that Northern countries must rebuild depleted fuel and strategic energy reserves as winter approaches.
Key quotes
Northern countries need to rebuild their fuel reserves as winter is coming.
No growth can reverse rising debt fast enough without fiscal effort.
Productivity gains are coming from AI and more are expected, but how much and how fast remains to be seen.
Central banks should be laser-focused on price stability.
Preserving stability requires fiscal consolidation in most high-tech countries.
Given speed of AI changes, countries must take steps to ensure AI preparedness.
Countries must take steps to protect themselves from 'substantial risks' of AI, especially cyber attacks.
We see number of cyber attacks growing exponentially.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- BoE Governor Bailey noted resilient UK growth and subdued second-round inflation effects despite above-target inflation frustration.
- GBP gained support as UK GDP unexpectedly grew 0.1% in August, beating forecasts of a contraction.
- Hawkish comments from BoJ board member Junko Koeda signaled potential rate hikes.
GBP/JPY extends its gains for the second successive day, trading around 209.80 during Asian hours on Friday. The currency cross remains stronger as the British Pound (GBP) maintained its position after Bank of England (BoE) Governor Andrew Bailey expressed ongoing frustration with above-target UK inflation during a moderated discussion at the Institute of International Finance Annual Membership Meeting in Bangkok, Thailand.
Addressing the economic landscape, Bailey noted that while the UK economy has proven more resilient than initially expected, its growth remains insufficient for the nation's needs. He added that it is still too early to form definitive views on the strength of second-round inflation effects; however, early signs appear subdued as businesses increasingly prioritize cost-cutting over raising prices.
The British Pound received a boost following stronger-than-expected UK economic data released on Thursday. According to official reports, the UK economy unexpectedly expanded in August, with Gross Domestic Product (GDP) growing by 0.1% month-over-month following a 0.4% increase in July. This expansion outperformed market forecasts, which had anticipated a 0.1% contraction.
UK data strength bolsters November BoE hike expectations
Societe Generale’s Kenneth Broux highlights that “above forecast UK GDP adds to case for November BoE hike,” with the stronger growth print reinforcing the constructive backdrop for the Pound. He notes that dip buyers have been quick to support GBP/USD on softer US yields, keeping spot anchored around the 1.32 pivot as markets lean further into the prospect of BoE tightening later this year.
However, further gains in the GBP/JPY cross may be limited as the Japanese Yen benefits from hawkish signals from the Bank of Japan (BoJ). BoJ board member Junko Koeda stated on Thursday that the central bank should avoid excessive caution regarding interest rate increases, hinting at a potential near-term hike in borrowing costs. She emphasized that the BoJ should adjust its policy rate in a timely manner while taking into account the estimated neutral interest rate range.
Koeda’s speech score of 8.2/10 matches the speaker’s historic average on FXS Speechtracker, signaling a consistent tone but with a clear hawkish tilt versus the recent BoJ baseline. Emphasis on an accommodative monetary environment, upside price risks, and a neutral rate “significantly above 1%” points to scope for further normalization, even without a preset pace of rate hikes.
The commitment to adjust policy so underlying inflation does not exceed 2% and the note that the September rate hike reflected resilient economic data reinforce a cautious but tightening bias. For FX, the combination of a higher perceived neutral rate and a comprehensive assessment of financial conditions is supportive for the Yen, as markets can price in additional gradual rate increases if inflation stays near 2% and growth remains resilient.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
Bank of England (BoE) Governor Andrew Bailey is participating in a moderated discussion at the Institute of International Finance Annual Membership Meeting in Bangkok, Thailand, on Friday.
Key quotes
Above-target UK inflation remains enormously frustrating.
Too early to form strong views on the strength of 2nd round effects.
So far signs of 2nd round effects are subdued, businesses emphasising cost cutting.
UK economy more resilient than we expected, not as strong as we need.
I'm more hopeful than a month ago that we will get more international alignment on AI testing.
Market reaction
At press time, GBP/USD is trading modestly near 1.3280, with the British Pound (GBP) little impressed by these comments.
Bailey flags frustrating UK inflation but second-round risks still contained
FXS Speechtracker scores the speech at 6.2/10, slightly below Governor Bailey’s historic 6.4/10 baseline, pointing to a mildly softer impact than usual. Bailey’s emphasis that above-target UK inflation remains “enormously frustrating” and that the economy is “more resilient than we expected, not as strong as we need” leans modestly hawkish, keeping the door open for sustained policy vigilance on the Pound.
However, Bailey’s comment that it is “too early to form strong views on the strength of 2nd round effects” and that signs so far are “subdued” with businesses focused on cost-cutting, tempers the hawkish tone, suggesting limited immediate pressure for aggressive tightening. The remark that news from the Middle East is the biggest factor moving UK gilt yields highlights that external geopolitical risks, rather than domestic demand, are driving market moves, which slightly dilutes the speech’s overall hawkishness for the Pound.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
- AUD/USD bulls seem hesitant as a combination of factors acts as a headwind.
- Fed hike bets, stable US bond yields and geopolitical risk revive USD demand.
- Receding RBA rate hike bets contribute to capping AUD ahead of Fed’s Warsh.
The AUD/USD pair struggles to capitalize on the previous day's modest bounce from sub-0.6900 levels, or the lowest since early July, oscillating in a range during the Asian session on Friday. Spot prices currently hover around the 0.6920-0.6925 region as investors now look to US Federal Reserve (Fed) Chair Kevin Warsh's speech.
Warsh's remarks at the Annual Meetings of the International Monetary Fund (IMF) and World Bank Group, in Bangkok, will be looked upon for more cues about the Fed's future policy path amid the energy-driven acceleration in US inflation. The outlook, in turn, will play a key role in influencing the US Dollar (USD) price dynamics and provide a fresh impetus to the AUD/USD pair. Heading into the key event, traders have been pricing in over a 90% chance that the US central bank will raise borrowing costs at its December policy meeting.
Furthermore, US bond yields seem to have stabilized following the previous day's steep decline, which, along with escalating tensions in the Middle East, helps revive demand for the safe-haven USD and acts as a headwind for the AUD/USD pair. In the latest developments around the Middle East crisis, the Iran-backed Houthi group carried out a deadly missile attack on the presidential palace in the Yemeni government's interim capital of Aden. This keeps the geopolitical risk premium firmly in play and backs the case for further USD appreciation.
The Australian Dollar (AUD), on the other hand, might struggle to gain any meaningful traction as traders continue to scale back expectations for further interest rate hikes by the Reserve Bank of Australia (RBA) amid signs that the domestic jobs market has cooled significantly. In fact, the Australian Bureau of Statistics (ABS) reported on Thursday that the number of employed people declined by 39.3K in September, missing estimates of a 20K increase by a big margin, while the Unemployment Rate unexpectedly edged higher to 4.7% from 4.6% in August.
The aforementioned fundamental backdrop suggests that the path of least resistance for the AUD/USD pair remains to the downside. Hence, any subsequent move up could be sold into and is more likely to remain limited. Nevertheless, spot prices seem poised to register modest weekly losses, which would mark the fourth week of a negative close in the previous five.
AUD/USD 4-hour chart
Technical Analysis
The AUD/USD pair keeps a bearish near-term bias below the 100-period Exponential Moving Average (EMA) on the 4-hour chart. The pair’s inability to reclaim this overhead dynamic barrier suggests rallies remain capped for now, with price action leaning toward a corrective phase after failing to sustain the recent push above 0.7000.
The said handle defines the first hurdle for any recovery attempt. On the downside, bears might now wait for acceptance below 0.6900 mark before positioning for any further depreciating move. Nevertheless, the broader structure favors selling into strength as long as the AUD/USD pair trades beneath the 0.6991 resistance zone.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- WTI easing follows Trump’s Iran remarks, but Middle East supply fears keep WTI on track for 5.5% gain.
- Tanker rates hit record highs after Iranian projectile sinks vessel in the Strait of Hormuz.
- US crude stockpiles fell 8.6 million barrels last week, marking the largest drawdown since February.
West Texas Intermediate (WTI) oil price halts its six-day winning streak, trading around $96.10 per barrel during Asian hours on Friday. Crude oil prices eased following comments from US President Donald Trump, who stated that he would not use nuclear weapons in Iran and does not foresee deploying American ground troops to the Islamic Republic, according to a report by Reuters. Trump also noted that he had engaged in discussions regarding nuclear disarmament with Russia and China.
In geopolitical developments elsewhere, Yemen's Houthis launched a deadly missile and drone attack targeting the presidential palace in Aden, the Yemeni government's interim capital, as reported by the BBC on Thursday. The attack resulted in five deaths—including two members of Prime Minister Shaya Al-Zindani’s security detail—and left 16 others injured.
However, West Texas Intermediate (WTI) crude remains on track for a weekly gain of over 5.5%, driven by intensifying supply disruption concerns across the Middle East. The US Central Command confirmed that a Singapore-flagged container ship, which sank in the Strait of Hormuz earlier in the week, was struck by an Iranian projectile. This incident has raised further doubts about the restoration of physical oil flows and propelled tanker rates to record highs.
Concurrently, the International Energy Agency (IEA) announced that its member nations agreed to finalize the release of 100 million barrels of oil—the remainder of a 400-million-barrel intervention pledged in March to mitigate rising fuel prices—Bloomberg reported on Thursday. Following a governing board meeting, the IEA confirmed plans to accelerate distribution, which includes releasing 20 million barrels of diesel as soon as possible. Member countries have already drawn 330 million barrels to date.
Adding to the bullish momentum, Energy Information Administration (EIA) data showed that US crude inventories plunged by 8.6 million barrels last week, marking the largest single-week draw since February. WTI was also positioned to outperform Brent for the week, bolstered by lower shipping costs for US crude that helped stimulate broader demand for American oil.
Oil spikes as Middle East tensions and Gulf of Mexico risks roil markets
Analysts at Rabobank note that, externally, “oil prices surged by approximately 4% following an escalation of tensions in the Middle East and concerns over potential supply disruptions caused by an approaching hurricane in the Gulf of Mexico,” underscoring the renewed vulnerability of energy markets to geopolitical and weather-related shocks.
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.
- USD/JPY gains traction to near 158.10 in Friday’s early Asian session.
- US PPI rose by the most in four and a half years in September.
- BoJ’s Koeda warned against being overly cautious on rate hikes.
The USD/JPY pair gathers strength to around 158.10 during the early Asian trading hours on Friday. The US Dollar (USD) edges higher against the Japanese Yen (JPY) following hotter-than-expected US Producer Price Index (PPI) data. Federal Reserve (Fed) Chair Kevin Warsh’s speech will be the highlight later on Friday.
The US PPI rose by 6.3% year-on-year (YoY) in September, the largest increase since 2022, the Bureau of Labor Statistics revealed on Thursday. This reading followed a rise of 5.6% in August (revised from 5.4%) and was higher than the expectation of an increase of 5.3%.
The recent US Consumer Price Index (CPI) data also exceeded expectations, supporting the case for a Fed rate hike and lifting the Greenback. According to the CME FedWatch tool, federal funds rate futures are pricing in at least one quarter-percentage-point rate hike by the end of the year, and the chance of this scenario has risen sharply over the past month.
On the other hand, hawkish comments from Bank of Japan (BoJ) policymakers could boost the JPY and act as a headwind for the pair. BoJ board member Junko Koeda said on Thursday that the central bank should not become overly cautious about raising interest rates, signalling the chance of a near-term hike in borrowing costs.
Koeda added that the Japanese central bank should adjust its policy rate in a timely manner while keeping in mind the estimated range of the neutral interest rate.
Yen finds support as BoJ hawkish tone reinforces downside move in USD/JPY
Analysts at MUFG note that the Yen has benefitted from “more risk-off trading conditions overnight,” with USD/JPY “dropping back below the 158.00-level,” even though its performance has been “more mixed against non-USD currencies.” The stronger Yen has also been “encouraged by hawkish comments from BoJ board member Junko Koeda.” In a speech to local leaders in Kumamoto overnight, she stated that “given that there are considerable upside risks to prices in addition to continued accommodative financial conditions, the Bank should not become overly cautious about raising the policy interest rate.” MUFG highlight that Koeda further “believes the level of the neutral interest rate is considerably above 1%,” a view that “indicates that she still sees room for further rate hikes with the current policy rate at 1.25%.” Against this backdrop, MUFG conclude: “We still expect the BoJ to leave rates on hold this month but hike again before the end of this year in December providing more support for the yen.”
BoJ’s Koeda flags higher neutral rate, keeping Yen supported
Koeda’s speech score at 8.2/10 matches the historic average on FXS Speechtracker, signaling a consistent tone but with a clear hawkish tilt versus the long-standing accommodative backdrop. Emphasis on upside price risks, a neutral rate “significantly above 1%,” and the need to adjust policy so underlying inflation does not exceed 2% reinforces expectations that the Bank of Japan is preparing markets for further normalization, supporting the Yen on rate-differential grounds.
The remark that the September rate hike reflected resilient economic data, alongside the view that the monetary environment has been accommodative, suggests scope for additional tightening even without a preset pace of hikes. By stressing a range for the neutral rate and comprehensive assessment of financial conditions and funding demand, Koeda underpins a data-dependent but clearly hawkish bias that should limit Yen downside and keep upside risks for Japanese yields in focus.
Technical Analysis: USD/JPY remains capped below the 100-day SMA
In the daily chart, USD/JPY maintains a capped bias as it holds below the 100-day simple moving average (SMA) and the upper Bollinger band. Price is consolidating just above the Bollinger middle band, while the Relative Strength Index (RSI) at 53.23 sits in neutral territory, hinting that directional momentum is modest and failing to decisively challenge overhead supply for now.
On the topside, immediate resistance appears at the upper Bollinger band around 158.85, followed by the 100-day SMA at 159.45, where a sustained break would be needed to re-open a more constructive bullish phase. On the downside, initial support is located at the Bollinger middle band near 157.95, ahead of the lower Bollinger band at 157.05, where a drop through this zone would reinforce the view of renewed selling pressure toward lower levels.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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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