Forex News
- Silver consolidates between $55 and $63, showing signs of stabilization.
- XAG/USD struggles to reclaim the 21-day SMA, keeping the bearish structure intact.
- Momentum indicators remain mixed, while the ADX points to a strong underlying trend.
Silver (XAG/USD) edges higher on Friday as a pullback in Oil prices pushes US Treasury yields lower, while the US Dollar (USD) fluctuates near recent highs. At the time of writing, XAG/USD trades around $58.60, up 2.40% on the day.
Despite the pullback, Oil prices and US Treasury yields remain elevated, keeping Silver's upside in check as persistent inflation concerns reinforce hawkish Federal Reserve (Fed) expectations.
Higher borrowing costs typically weigh on non-yielding assets such as Silver. According to the CME FedWatch Tool, traders see an 80% chance of a rate hike in September, although the Fed is widely expected to leave interest rates unchanged at next week’s meeting.
From a technical perspective, Silver has traded between $55 and $63 since late June, pointing to signs of stabilization following a series of lower highs and lower lows from May’s peak near $90.00.
However, XAG/USD is struggling around the 21-day Simple Moving Average (SMA) at $58.82, while the 50-day and 100-day SMAs at $65.44 and $71.21, respectively, keep the broader bearish structure intact.
Momentum indicators paint a mixed picture. The Relative Strength Index (RSI) near 45 points to subdued momentum, while the Moving Average Convergence Divergence (MACD) indicator sits slightly above the zero line, indicating moderate selling pressure. Meanwhile, the Average Directional Index (ADX) near 36 indicates that the broader trend retains meaningful strength.
On the downside, initial support is seen at the horizontal floor near $55, where buyers previously stepped in. On the topside, bulls need to reclaim the 21-day SMA at $58.82 to ease immediate downside pressure. Further resistance is located at $63 and the 50-day SMA at $65.44.
Only a sustained break above these barriers would begin to challenge the broader bearish structure, with the 100-day SMA at $71.21 acting as the next major hurdle.
(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.
- DJIA trades near 52,000, around 325 points higher on the session, clawing back part of Thursday's slide on a wire report that Pakistan is exploring a route back to stalled US-Iran talks.
- A replacement tariff schedule took effect at 12:01 a.m. Friday, 10% to 12.5% on 60 trading partners covering 99% of American imports, on a legal basis built to survive the courts.
- The Federal Open Market Committee decides Wednesday with no projections attached, a 64.2% hold priced against a 35.8% hike tail, the widest of the cycle.
The index that spent this week absorbing a war premium trades near 52,000 on Friday, around 325 points to the good side, on the strength of a wire report that its own three sources undercut in the same breath. Pakistan is exploring a route back to stalled US-Iran talks at China's urging, and those sources cautioned that the obstacles to any American engagement remain high. Crude Oil sold off roughly 4% on the story, with Brent easing toward $96.00 after this week's move above $100.00 and West Texas Intermediate near $88.50.
Every de-escalation headline of this war has been retraced, in April, in May and again in early July, and the market has bought each one on first print. What separates this version is that the equity bid arrived on the same morning the trade regime changed underneath it, and almost nobody marked the second event.
A rally on three sources and a caveat
Apple (AAPL) supplied a large share of the index gain with a 3% move, which is what a price-weighted average does when a high-priced component catches a bid. Beneath the headline the tape was thinner than it looks, with every S&P 500 sector higher and real estate and communication services leading, while the semiconductor complex took real punishment.
The reversal in Intel (INTC) carries more information than the index gain does, because a second-quarter beat that gets sold 4% on spending concerns is the same trade that took Alphabet (GOOGL) down 6% on Thursday. Micron Technology (MU) fell 5%, Broadcom (AVGO) around 2% and Advanced Micro Devices (AMD) around 1%, and the benchmark chip fund gave up 2%. The Dow's insulation from that argument is structural rather than clever, since its chip weighting is a fraction of the Nasdaq's and most of its members still sell physical goods to physical customers.
The tariff schedule that landed while nobody looked
The temporary 10% worldwide levy expired at 12:01 a.m. Friday and was replaced by duties of 10% to 12.5% on 60 trading partners accounting for 99% of American imports, imposed under Section 301 of the Trade Act of 1974 on the charge that those partners have inadequately enforced bans on goods made with forced labour. Canada, the European Union, India and the United Kingdom draw the lower rate. China, Japan and South Korea draw the higher one.
The mechanism matters more than the headline rate does. February's Supreme Court defeat struck down the emergency-powers tariffs and forced the stopgap that lapsed overnight, and the replacement rests on a statute with a long record of surviving challenge. A duty schedule that endures is an input cost that endures, and June import prices were already running 7.1% YoY, the largest annual increase since August 2022, in an index that excludes tariffs outright. The exporters are not absorbing this, which means the domestic buyer is, which means the passthrough arrives with a lag on the desk of a committee that meets in five days.
What the bond market handed back
The Treasury market's answer to the same rumour amounts to a rounding error against the week it just had. The 10-year yield eased to around 4.67% from Thursday's print above 4.70%, its highest since January 2025, while the two-year sits near 4.33% and the long bond just above 5.15%. Three basis points of relief against a month that added roughly thirty is not a change of mind. It reads as a position trim into a weekend with a central bank meeting on the other side of it.
Rate pricing tells the story with more precision than the tape does. The July contract carries a 64.2% hold against a 35.8% hike tail, the widest July tail of this cycle and up from roughly 14% a week ago. Cumulative odds of at least one increase run 82.7% by 16 September and 92.7% by 9 December, with a 61.0% probability of two by that date and a 39.0% modal cell at 4.00% to 4.25%. Equities are trading a peace rumour, and the curve is trading a hiking cycle.
Wednesday is a communication event, not a policy event
The Federal Open Market Committee announces at 18:00 GMT on Wednesday with no Summary of Economic Projections attached, which strips the meeting of the machinery markets normally use to reprice it. The statement now runs to roughly 130 words, forward guidance was struck in June, and the chair has already declined once to publish a projection of his own. What remains tradeable is the press conference at 18:30 GMT, and the language it uses about energy passthrough.
That thin surface is the risk rather than the comfort for an index sitting roughly 2.5% below its record. A hold delivered with harder inflation language does not land on Wednesday's outcome at all. It lands on the September and October contracts, and equity holders have to mark the entire curve in one afternoon. The committee walks in with a Crude Oil shock, a new duty schedule, initial claims at 187K and a chair who has told anyone listening that the 2% target is the whole of his mandate.
The week's data docket
Friday's preliminary Purchasing Managers Index readings set the table, with the composite at 53.6, services at 53.6 against 51 expected, and manufacturing at 53.8 against 54.5 expected and 53.9 prior. New home sales rose 1.6% MoM in June. Durable goods orders follow Monday at 12:30 GMT with the headline seen at 1.6% after a 4.5% decline, and consumer confidence lands Tuesday at 14:00 GMT.
The heaviest data arrives after the decision rather than before it, which leaves Wednesday's language to price a June inflation report the committee has seen and the market has not. Thursday at 12:30 GMT brings June core Personal Consumption Expenditures, seen at 0.1% MoM against 0.3% prior with headline running 4.1% YoY, alongside advance second-quarter Gross Domestic Product at 2.3% and initial claims at 206K. Friday adds the Employment Cost Index at 0.8% and the Michigan survey, where one-year inflation expectations sit at 4.2% and the five-year at 3.3%.
Resistance, support and bias
Resistance: The session high just above 52,100 is the first line, and the 52,200 area that capped every rally this week is the one that decides the next leg. Through there, 52,500 reopens the record just above 53,300.
Support: The 51,700 area holds Friday's low, with the week's floor near 51,800 sitting just beneath it. The 50-day Exponential Moving Average near 51,500 is the last defence of the summer trend, and the 200-day sits far below, just above 49,000.
Bias: Bearish below the 52,200 area. The daily Stochastic Relative Strength Index near 22 is falling toward oversold rather than turning up out of it, and Friday's bid rests on a report its own sources discount. Sell strength into 52,200 for a retest of 51,800 and then the 50-day. A daily close above 52,500 invalidates and puts the record back in play.
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
MUFG’s Lloyd Chan expects MAS to keep policy unchanged at the July meeting while maintaining a tightening bias, distinguishing between energy-driven and domestically generated inflation. Strong Singapore growth and a positive output gap justify tight settings. MUFG sees MAS policy as broadly supportive for the Singapore Dollar and expects any tightening surprise to push USD/SGD lower.
MAS stance seen SGD supportive overall
"We expect MAS to leave policy settings unchanged at its July policy meeting while retaining a clear tightening bias."
"Growth conditions alone would justify maintaining a tight policy stance."
"Nevertheless, we believe MAS is likely to distinguish between an energy-driven inflation shock and persistent domestically generated inflation."
"That said, the policy debate is becoming increasingly balanced."
"Implications for USD/SGD: Regardless of whether MAS delivers a hawkish hold or a modest tightening, the policy signal remains broadly SGD-supportive."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Commerzbank’s Marco Stoeckle argues that the AI trade is at a crossroads, with ‘Mag 7’ euphoria fading and hyperscalers facing cash flow and leverage concerns. In contrast, semiconductor and memory stocks, tracked by SOX and KOSPI, saw hyperbolic gains before sharp drawdowns. Alphabet’s results support the hardware winners narrative but underscore vulnerabilities from eroding free cash flow and rising debt.
Hyperscalers strain, chips stay volatile
"The evolution of the AI-trade remains the other big question, mainly for risk assets but also for broader market sentiment."
"The 'Mag 7'-euphoria long has stalled, and for hyperscalers, the narrative has increasingly shifted towards cash flow erosion and debt-load explosion."
"On an index level, this is embodied by the Philadelphia Stock Exchange Semiconductor (SOX) and the Korean Stock Exchange (KOSPI) indices."
"Although this supports the 'hardware winners'-narrative, it again highlights a key vulnerability of the entire AI-nexus: hyperscalers' cash flow erosion and exploding debt loads, especially among Alphabet's weaker peers."
"As a result, all but one of the Top 5 hyperscalers 5y CDS now trade above CDX.IG - (much) better ratings notwithstanding."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Scotiabank strategists Shaun Osborne and Eric Theoret say broad US Dollar (USD) gains are moderating as United States (US) yields retreat and risk appetite improves after a tech-led selloff. High-beta currencies outperform while Euro (EUR) and British Pound (GBP) edge higher but fail to fully exploit positive data. Geopolitical tensions around Iran and upcoming Federal Open Market Committee (FOMC) risks keep the Dollar and US yields relatively supported into next week.
USD eases but FOMC risk supports
"Yesterday’s broad dollar gains are moderating into the end of the week as crude oil prices ease and US yields edge back from yesterday’s peaks."
"High beta FX is leading moderate gains amongst the major currencies against the USD; the EUR and GBP are modestly firmer but have not been able to leverage positive domestic data surprises into any sort of meaningful outperformance."
"Investors may show a stronger preference for avoiding riskier assets into the weekend and the USD and US yield are likely to remain better supported as the market’s focus shifts inevitably to next week’s FOMC."
"Swaps pricing has nudged back a little from yesterday’s peak but OIS still indicate a not insignificant risk of a Fed hike next week (7bps of tightening priced in)."
"Despite renewed gains in energy prices, we think tightening is unlikely while Warsh’s review of Fed operations is ongoing."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Rabobank's Senior FX Strategist Jane Foley describes EUR/USD as wary after the July European Central Bank (ECB) meeting. Foley notes that the Euro (EUR) failed to gain support despite a hawkish ECB tone, while the Dollar benefits from safe haven demand and Federal Reserve (Fed) expectations. Foley still expects EUR/USD to trade in a choppy range around 1.14 over a 1-to-3-month horizon.
Euro struggles as Dollar stays supported
"Despite the hawkish takeaway from the July ECB policy meeting, the EUR failed to find support."
"CFTC speculators’ position data highlight that since the start of the Iran war, confidence in the EUR has been at a low ebb."
"At the same time, the USD has benefitted from a combination of safe haven flows and hawkish expectations regarding the Fed."
"Continued intensification of the Iran war has the potential to boost safe haven flows and hawkish Fed calls further."
"For now, however, we maintain our view that EUR/USD is likely to trade in a choppy range around the 1.14 level on a 1-to-3-month view."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Oil retreat pressures Dollar as US-Iran talks regain attention.
- US and UK PMIs show resilience, supporting cautious risk appetite.
- Fed and BoE decisions could reset GBP/USD’s downside path.
The Pound Sterling advances by some 0.20% on Friday as Oil prices tumble, weighing on the US Dollar, while the US-Iran conflict signals a further escalation, which market participants ignored. Despite registering daily gains, the GBP/USD is poised to finish the week with losses of nearly 0.70%.
GBP/USD rebounds as oil weakness offsets Fed hike repricing
Risk appetite has improved as Pakistan’s efforts to help resume talks between the US and Iran provided a tailwind for risk assets. Meanwhile, the US President Trump revealed that China and Russia are not “giving or selling weapons” to Iran, he posted on his Truth Social network. In the meantime, an article in the Wall Street Journal states that “Trump is losing patience over an Iran war with no clear end in sight,” which opens the door to further escalation, as revealed by some US officials.
Data from the US, released by S&P Global, showed that manufacturing activity is easing, as the Manufacturing PMI index fell from 53.9 to 53.8, below estimates for a 54.5 expansion. The Services PMI improved from 51.2 to 53.6, crushing forecasts of 51, boosted by the World Cup hosted in the country.
The scenario hasn’t changed, as expectations are that the Federal Reserve may increase rates in 2026. For the July meeting, the odds of keeping rates unchanged at 3.50%-3.75% stand at 59%, while the odds of a hike stand at 41%, up nearly 8% from a day ago.
In the UK, S&P Global reported that the Composite, Services, and Manufacturing PMIs all expanded, compared to June’s readings, exceeding forecasts. Meanwhile, investors remain uncertain about the fiscal policy of new Prime Minister Andy Burnham, which has capped the GBP/USD pair's advance.
Next week, the Federal Reserve is expected to hold rates unchanged. However, as this week progressed, the chance of a rate increase could reach 50%. This opens the door for a live meeting and an interesting discussion amongst the FOMC board. On Thursday, the Bank of England is most likely to hold rates unchanged, with odds standing at 88%.
Given the backdrop, if the Fed raises rates and the BoE holds, this opens the door to further GBP/USD downside, as the US widens its interest rate differential versus the UK.
GBP/USD Price Forecast: Technical outlook
Pound Sterling Price This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.39% | 0.84% | 0.85% | 0.47% | -0.41% | 0.58% | 1.02% | |
| EUR | -0.39% | 0.45% | 0.39% | 0.07% | -0.79% | 0.18% | 0.62% | |
| GBP | -0.84% | -0.45% | -0.07% | -0.39% | -1.24% | -0.27% | 0.21% | |
| JPY | -0.85% | -0.39% | 0.07% | -0.29% | -1.20% | -0.32% | 0.27% | |
| CAD | -0.47% | -0.07% | 0.39% | 0.29% | -0.83% | -0.02% | 0.60% | |
| AUD | 0.41% | 0.79% | 1.24% | 1.20% | 0.83% | 0.98% | 1.46% | |
| NZD | -0.58% | -0.18% | 0.27% | 0.32% | 0.02% | -0.98% | 0.48% | |
| CHF | -1.02% | -0.62% | -0.21% | -0.27% | -0.60% | -1.46% | -0.48% |
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
BNY’s Geoff Yu notes that Brent has retreated slightly below $100 but remains supported by renewed Middle East tensions, Red Sea and Strait of Hormuz disruptions, and Kazakhstan’s export halt. Institutional flows show high-conviction re-accumulation of energy exposure from a still-depleted base. The report stresses that the oil surge is feeding directly into inflation and interest rate anxiety, with yields rising.
Energy flows rebuild as risks rise
"Institutional energy flows have shifted decisively from liquidation to re-accumulation, and July is the clear inflection point. The sector has moved through three phases since March: heavy selling into the first oil shock, a recovery phase during May and June, and a sharper July rebuild as energy risk returned. U.S. energy flows now show high-conviction buying, with the latest weekly reading at the 83rd percentile and monthly flow at the 90th percentile."
"The key point is that flows are accelerating from a depleted base. Energy holdings remain only at the 17th percentile of the March-July window, well below the early-March peak. That creates an important divergence: investors are buying aggressively, but positioning has not yet been rebuilt to crowded levels."
"Brent’s move back toward $100, renewed disruption in the Red Sea and Strait of Hormuz, U.S.-Iranian escalation and Kazakhstan’s export halt have revived the supply risk premium. Brent’s large gains since March confirm the strength of the move, but the flows show the more important point: institutions are rebuilding energy exposure, and the trade is not yet overcrowded."
"Oil prices are hovering near $100 a barrel after briefly topping that level for the first time since May. This came after President Trump said he was weighing a massive attack on Iran and Houthi strikes on Saudi tankers in the Red Sea raised fears of a wider energy shock."
"The oil surge is feeding directly into inflation and interest rate anxiety, with U.S. and German yields climbing as investors price in greater central bank pressure. The broader risk is that military escalation will now turn into a macro shock through energy, bonds and equities."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/CHF trades flat as easing Oil prices weigh modestly on the US Dollar and Treasury yields.
- Strong US business activity and rising Fed rate-hike bets limit the Greenback’s downside.
- Traders await next week’s FOMC meeting, with interest rates expected to remain unchanged.
USD/CHF trades flat on Friday as a pullback in Oil prices weighs modestly on the US Dollar (USD) and US Treasury yields. However, the Middle East war and hawkish Federal Reserve (Fed) expectations keep an underlying floor under the Greenback.
At the time of writing, the pair trades around 0.8166, easing from 0.8185, its highest level since June 2025. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.35, down 0.10% on the day.
US President Donald Trump said on Truth Social that Chinese President Xi Jinping and Russian President Vladimir Putin had assured him that their countries would not supply weapons to Iran.
Meanwhile, Iranian Foreign Minister Abbas Araghchi said Tehran had discussed several initiatives and proposals with Pakistan as a mediator. He added that the main obstacle was not the lack of a mediator but Washington’s “problematic approach,” according to Tasnim.
Oil prices edge lower on Friday but remain around 25% higher this month as the Middle East war threatens shipping through the Strait of Hormuz and Bab el-Mandeb. West Texas Intermediate (WTI) trades around $87.50 after briefly climbing above $92.00 on Thursday, its highest level since June 11.
According to the CME FedWatch Tool, traders see an 80% chance of a rate hike in September, although the Fed is widely expected to keep borrowing costs unchanged at its July 28-29 meeting.
TD Securities analyst note, “higher oil prices driven by Middle East tensions have increased inflation risks and strengthened the case for a rate hike,” but argues that “more evidence is needed to win majority support.” TD adds that “hawkish momentum is building,” yet cautions that Warsh is “unlikely to provide guidance,” and they look for “two dissents from Hammack and Logan” as the committee debates how to respond to the latest inflation impulse.
On the data front, the preliminary S&P Global Composite Purchasing Managers’ Index (PMI) rose to an eight-month high of 53.6 in July from 51.9 in June, while the Services PMI climbed to 53.6 from 51.2. The Manufacturing PMI edged down to 53.8 from 53.9.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
Scotiabank strategists Shaun Osborne and Eric Theoret report the British Pound (GBP) is slightly higher versus the US Dollar (USD) but lagging most G10 peers. Markets are discounting strong United Kingdom (UK) retail sales and Purchasing Managers' Index (PMI) surprises ahead of next week’s expected Bank of England (BoE) hawkish hold. Rate markets price modest tightening by September and November, while options show renewed demand for downside protection in GBP.
BoE expectations and politics temper Pound
"Market participants are clearly not responding to fundamentals and ignoring the release of (far) stronger than expected retail sales data for June alongside a solid surprise to the preliminary PMI’s for July – the latter offering decent levels of expansion in manufacturing (52.8) while also delivering an unexpected recovery out of (sub-50) contraction in services with a print of 51.8."
"The data are important heading into next Thursday’s BoE, where a hawkish hold is expected to be delivered alongside a fresh set of forecasts. The rate path is currently priced for 16bpts of tightening in September and 32bpts for November, offering the potential for near-term upside if policymakers seek to firm up expectations for a hike at the next meeting."
"The options market appears to be signaling a renewed demand for protection against GBP weakness, with a clear turn from last Wednesday’s local peak. The catalyst is likely a combination of geopolitics and domestic political concerns, both generating a meaningful increase in UK government bond yields and threatening the UK’s overall fiscal situation."
"Neutral—the RSI remains close to neutral as the GBP softens back toward the midpoint of its range from mid-June. Local support is found at 1.3150 with resistance at 1.3550. We had anticipated some nearer support closer to 1.3350 but now look to 1.3300 as a limit to short-term weakness."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Forex Market News
Our dedicated focus on forex news and insights empowers you to capitalise on investment opportunities in the dynamic FX market. The forex landscape is ever-evolving, characterised by continuous exchange rate fluctuations shaped by vast influential factors. From economic data releases to geopolitical developments, these events can sway market sentiment and drive substantial movements in currency valuations.
At Rakuten Securities Hong Kong, we prioritise delivering timely and accurate forex news updates sourced from reputable platforms like FXStreet. This ensures you stay informed about crucial market developments, enabling informed decision-making and proactive strategy adjustments. Whether you’re monitoring forex forecasts, analysing trading perspectives, or seeking to capitalise on emerging trends, our comprehensive approach equips you with the insights needed to navigate the FX market effectively.
Stay ahead with our comprehensive forex news coverage, designed to keep you informed and prepared to seize profitable opportunities in the dynamic world of forex trading.
