Forex News
- WTI price dipped after Iran and Oman agreed to a temporary shipping route through the Strait of Hormuz.
- Analysts remain cautious about the agreement's durability due to its temporary nature and historical precedent.
- Houthi militants claimed an attack on a Saudi oil tanker, highlighting ongoing threats to regional maritime security.
West Texas Intermediate (WTI) oil price remains subdued for the fourth successive day, trading around $74.20 per barrel during the Asian hours on Thursday. Crude oil prices declined following news that Iran and Oman reached an agreement on a shipping route through the Strait of Hormuz, fueling expectations of increased energy flows from the Middle East.
An Iran-Oman joint statement is currently in the final drafting stage. The proposed route is expected to remain operational for two to four months, though Tehran stressed that the agreement does not amount to a full reopening of the strategic waterway.
Meanwhile, United States (US) officials continued to express confidence that a broader deal with Iran is nearing, though investors remain cautious about the durability of any lasting peace in the region. Reuters cited Phil Flynn, a senior analyst with Price Futures Group, noting that the market remains optimistic but guarded, adding, "This agreement seems as tenuous as past agreements, and as we know, none of those have held up for very long."
Adding to the regional fragility, Iran-backed Houthi militants in Yemen claimed to have targeted a Saudi oil tanker in the Gulf of Aden while threatening other vessels in the Red Sea, underscoring the ongoing risks to international shipping.
Oil bulls wary as TD flags risk of repeat supply shock
According to TD Securities, the latest bout of weakness in crude is being shaped as much by market psychology as by fundamentals. Strategists there caution that memories of the last downturn remain fresh, noting that “when crude oil prices last tanked during the June MoU, actual supply hit the market.” In their view, that episode is anchoring current fears that any progress toward a US–Iran understanding could again unleash additional barrels, even as timespreads and physical flows still point to an underlying tight market.
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.
Yemen’s Iran-backed Houthis said that they had launched a missile attack on a Saudi oil tanker off the coast of the kingdom's Red Sea port city of Yanbu and another missile attack on a Saudi oil tanker in the Gulf of Aden, Reuters reported on Wednesday.
Earlier, the United Kingdom Maritime Trade Operations (UKMTO) reported an incident southeast of Aden but it is unclear whether it was the same attack.
A Houthi military spokesman said that the latest attacks were the eighth and ninth Saudi oil tankers targeted since the start of the blockade last month.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 0.20% on the day at $74.22.
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.
Iran’s Foreign Ministry spokesperson , Esmaeil Baghaei, said that Iran and Oman are close to finalizing a proposed framework for commercial shipping through the Strait of Hormuz, the Guardian reported on Wednesday.
A senior Gulf official said there is a 50% chance that Iran and Oman will reach an agreement on the Strait of Hormuz by Friday. However, an Iranian official cautioned that such an agreement would not automatically open the waterway.
Baghei further stated that any reopening of the critical waterway would depend on Washington fulfilling what Tehran sees as its commitment to end its own naval blockade of Iran’s ports.
“The geographical coordinates of the route envisaged by the two sides have been agreed upon and, if certain third parties do not obstruct the process, the joint statement of the two countries, containing the main considerations and points of agreement, is also in the final review and drafting stage,” said Baghei.
Meanwhile, Israel carried out attacks in southern Lebanon after accusing Hezbollah of violating the ceasefire, despite ongoing US-mediated peace talks between Israel and Lebanon in Rome.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 0.20% on the day at $74.22.
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.
- Gold price gains momentum to around $4,255 in Thursday’s early Asian session.
- Iran's Foreign Ministry said Iran and Oman agreed on the coordinates of the route through Hormuz.
- The US July employment report will take center stage later on Friday.
Gold price (XAU/USD) rises to near $4,255 during the early Asian session on Thursday. The precious metal extends the rally, marking its biggest daily jump since February, as optimism over a potential deal to reopen the Strait of Hormuz eases energy-driven inflation fears and reduces the odds of the Federal Reserve (Fed) raising interest rates.
Iran’s Foreign Ministry spokesperson Esmaeil Baghaei said on Wednesday that a deal with Oman on a route through the Strait of Hormuz is being “finalised”, but the US and Israel still pose a danger to ships in the vital waterway.
Meanwhile, US President Donald Trump claimed a deal could be reached on Wednesday, with continued diplomatic efforts potentially paving the way for US-Iran talks to resume. US Secretary of State Marco Rubio and Treasury Secretary Scott Bessent, both of whom said progress had been made in those talks.
Reports of a potential interim agreement to clear and reopen the critical water could ease inflation fears and reduce expectations for aggressive Fed interest rate hikes. This, in turn, could boost the yellow metal in the near term.
Traders will closely monitor the release of the US July employment report, which is due later on Friday. This report could offer some hints about the health of the labour market and US interest rate path. Economists expect Nonfarm Payrolls (NFP) to rise by 80,000 in July, while the Unemployment Rate is projected to remain steady at 4.2% during the same period. In case of stronger-than-expected outcomes, this could lift the Greenback and weigh on the USD-denominated commodity price.
Gold underpinned as easing oil prices pull US yields lower
Analysts at Commerzbank highlight that the latest leg of support for Gold came as “US Treasury yields fell across the curve as lower oil prices eased inflation concerns,” helping to reinforce the metal’s recovery alongside the broader risk-on tone.
Technical Analysis: Gold remains capped below the key 100-day SMA in daily chart
In the daily chart, XAU/USD has pushed back above the 20-day simple moving average (SMA) component of the Bollinger Bands, shifting the near-term tone to neutral with a slight bullish tilt, yet broader gains remain capped while price holds beneath the 100-day SMA resistance. The Bollinger upper band now aligns as immediate support after being reclaimed, while the Relative Strength Index (14) at 60.95 shows firm but not overextended upside momentum, hinting that buyers still have some room before facing overbought conditions.
On the topside, a sustained break above the 100-day SMA around $4,400 would be needed to expose higher bullish targets and signal a clearer continuation of the up-leg. On the downside, initial support is now seen around the recently reclaimed Bollinger upper band near $4,185, followed by the Bollinger middle band / 20-day SMA region around $4,070; a loss of this area would likely invite a deeper retreat toward the lower Bollinger band support near $3,950.
(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.
- USD/JPY trades just above 157.50, unchanged and pinned to its 200-day EMA.
- Tokyo spent a reported 8.45 trillion Yen in one day, the largest ever.
- The Fed facility Japan wants enlarged is capped at 60 billion Dollars.
The pair changes hands just above 157.50, flat on the session and sitting directly on a 200-day Exponential Moving Average (EMA) that has risen to meet it. The range covers less than 60 pips. After the sharpest four-session decline in almost two years, the most violent currency in the majors has gone completely still.
Where it has stopped is the whole story. A week ago the pair printed just under 164.00, a four-decade extreme. It now trades at a level last seen in mid-May, which means the largest coordinated intervention on record has bought back roughly eleven weeks of Yen depreciation and no more.
What fourteen trillion Yen actually purchased
Japan's Ministry of Finance is reported to have spent 8.45 trillion Yen in a single day, the largest one-session operation ever recorded, followed by roughly 5.3 trillion the next. The American Treasury joined it, buying Yen for the first time since 2011 and funding the purchase by selling euros rather than Dollars, which tells you the operation was designed with the Treasury market in mind as much as the currency.
The result is a currency that stopped falling the moment the spending stopped. Price has held a narrow band around the 200-day EMA for three sessions without either side pressing, which is what a market looks like when it has found the level authorities are defending and is waiting to see whether they will pay again. Intervention establishes a price. It does not establish a reason.
The differential that caused this is untouched
The Federal Reserve holds at 3.50% to 3.75% with three policymakers dissenting for an increase and no cut priced at any 2026 meeting. The Bank of Japan sits at 1.00% after a seven to one vote in June took the policy rate to a 31-year high. That gap is the machine driving the Yen down, and a currency operation does not touch it.
The June minutes published Wednesday show a board moving toward the only real fix. Several members expected consumer inflation to receive a significant boost in the second half of the fiscal year as firms raise prices across a broad range of goods, two argued for moving faster toward a neutral setting, and one warned that inflationary pressure would persist even if the Middle East conflict resolves, because sourcing alternative supply carries elevated shipping and storage costs. The July meeting pointed future discussion at upside price risks, which the market reads as September being live.
The backstop nobody has voted on
The Foreign and International Monetary Authorities (FIMA) repo facility lets approved foreign authorities raise Dollars against their Treasury holdings instead of selling them, capped at 60 billion Dollars per institution. Japan holds roughly 1.1 trillion Dollars of American government debt, the largest foreign stack in existence, and Tokyo has said it intends to use the facility. Selling those bonds to fund Yen purchases would push American yields up, which nobody in Washington wants.
The American Treasury Secretary has publicly asked for the cap to be raised and pledged to repeat the joint operation. The Federal Reserve has declined to comment, and any expansion requires a majority of the same committee that split three ways nine days ago. Traders are treating an enlarged backstop as though it exists. It is currently a request made on social media, and the institution that would have to approve it has spent two months insisting it does not take its cue from market prices.
What lands before Friday
American weekly jobless claims arrive Thursday at 12:30 GMT with a 202K consensus against 197K, followed by Friday's payrolls report at the same hour, consensus 80K after 57K with the unemployment rate seen at 4.2%. Private payrolls already missed badly on Wednesday at 44K against 70K, and the services employment index fell to 47.4.
Both branches run through this pair. A second soft American labour print narrows the rate gap without Tokyo spending another Yen, which is the outcome Japanese authorities need and cannot manufacture. A firm number rebuilds the differential and puts the Ministry of Finance straight back on the bid, this time defending a level the market has already watched it choose.
Levels and bias
Resistance: 158.00 caps the immediate reaction, with 158.50 above it and the declining 50-day EMA near 161.00 marking where the pre-intervention structure begins again.
Support: The 200-day EMA just above 157.00 is the pivot, with 156.00 beneath it and the intervention spike low near 155.00 as the line authorities have already proved they will defend.
Bias: Bearish. A daily Stochastic Relative Strength Index (Stoch RSI) near 63 and flattening confirms that neither side owns this level yet. Rallies into 158.50 are for selling while the 50-day EMA declines overhead, and a daily close beneath 157.00 opens 156.00 then the 155.00 area. Invalidation is a daily close above 160.00, which would signal the market has decided the backstop is bluff rather than budget.
USD/JPY daily chart
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.
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann reports USD/CNH slipped to 6.7459 after failing to extend a modest bounce, with limited downside momentum. Intraday, they see potential to test last week’s 6.7420 low but doubt a sustained break below. On a 1–3 week horizon, they expect the pair to continue edging lower toward 6.7300 as long as 6.7640 strong resistance holds, while a move above 6.7550 would ease current pressure.
Soft downside bias with nearby supports
"24-HOUR VIEW: We indicated yesterday that USD “is likely to trade between 6.7500 and 6.7620.” However, after edging to a high of 6.7597, USD dropped to a low of 6.7459. While downward momentum has not increased much, USD could test last week’s low, near 6.7420. A continued decline below this level is unlikely. On the upside, a break above 6.7550 would indicate that the current downward pressure has eased."
"1-3 WEEKS VIEW: Two days ago (03 Aug, spot at 6.7490), we highlighted that while USD edged lower last week, “there has been no clear increase in downward momentum.” However, we were of the view that USD “could continue to edge lower toward 6.7300 as long as 6.7640 (‘strong resistance’ level) is not breached.” Our view remains unchanged."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- AUD/USD trades just above 0.7050, its highest level since mid-June.
- All four major Australian banks now forecast a hold at 4.35% on 11 August.
- China's July services PMI fell to 50.4 against 53.7 expected, from 54.1.
The Aussie is trading just above 0.7050 after a gain of not quite two tenths of a percent, its best level in seven weeks and the first time since mid-June that price has held clear of the 50-day Exponential Moving Average (EMA) near 0.7000. The 200-day EMA near 0.6900 continues to rise underneath, and the structure now reads as a base rather than a downtrend.
The way the move has been built is the problem. Today's range covers 25 pips, the daily Stochastic Relative Strength Index (Stoch RSI) has rolled over from the high eighties to the mid seventies, and the entire advance has come in a week when Australia's own interest rate case was dismantled. This is a rally in the Australian Dollar that has nothing to do with Australia.
The hike that got priced out
Three increases in February, March and May took the cash rate from 3.60% to 4.35%, and the June hold explicitly kept a fourth on the table. Ahead of the June-quarter inflation release, a majority of surveyed economists expected at least one further increase in 2026, with August the most nominated meeting. That was the Aussie's entire yield story.
The release at the end of July removed it. Headline inflation printed 3.8% with the trimmed mean at 3.6%, both softer than expected, and all four major domestic banks have since converged on a hold when the board announces at 04:30 GMT on 11 August. The quarterly Statement on Monetary Policy and a press conference follow, so the forecast profile and the tone of the guidance carry the meeting rather than the rate.
The domestic data is the strongest since January and it buys nothing
Australian activity is not the weak leg here. The July composite Purchasing Managers Index (PMI) was revised up to 53.2, the best reading since January, with services at a six-month high and manufacturing back in expansion. Household spending beat as well, and the local equity market has printed a record high on the same Middle East optimism lifting risk assets everywhere.
None of it has a transmission channel any more. Once the market decides the tightening cycle is over, strong activity data stops being a rates input and becomes a growth story that the currency prices only through risk appetite. That is precisely how the Aussie is trading: as a high-beta expression of a falling Greenback, not as a claim on Australian yields.
The oddity is that the carry is finally there. A 4.35% cash rate against an American upper bound of 3.75% leaves the Australian Dollar with a positive policy spread over the Greenback for the first time in years, and the currency still sits more than two cents beneath its May peak. Yield gaps only pay when the market believes they will widen, and this one is now expected to close from the other side.
The China leg is deteriorating in plain sight
China's July services gauge landed at 50.4 against a 53.7 consensus, down from 54.1 and barely above the line separating expansion from contraction. The manufacturing equivalent had already eased to 50.9 from 51.7 earlier in the week. Australia's largest customer is losing momentum in both halves of its economy at once.
Australia's own trade position tells a matching story. The June balance due Thursday at 01:30 GMT is forecast at a deficit near 1.1 billion Australian Dollars after roughly 3 billion prior, with June exports last recorded 6.9% lower on the month. A resource exporter running consecutive monthly deficits while its currency makes seven-week highs is not a currency being bought for its fundamentals.
What lands before the Reserve Bank
Chinese trade data arrives Friday at 03:00 GMT, with exports seen at 22.7% YoY from 27% and imports at 28.6% from 36%, both decelerating sharply. The Dollar side runs first: American private payrolls came in at 44K against 70K today, the services employment index dropped to 47.4, and Friday's 12:30 GMT payrolls report carries an 80K consensus after 57K.
The sequencing matters for anyone holding this into next week. A soft American labour print on Friday extends the Greenback's decline and drags the Aussie higher into a meeting where no policy change is expected, which sets up the classic trap: a currency at the top of its range on foreign flows, walking into domestic guidance that has every reason to sound relaxed about inflation.
Levels and bias
Resistance: 0.7100 is the first genuine test, with 0.7150 above it and the mid-June shelf just under that. Beyond, the May peak short of 0.7300 marks the year's ceiling and is not in play this week.
Support: The 50-day EMA near 0.7000 is the line that decides whether this reclaim is real, with 0.6950 beneath it and the rising 200-day EMA near 0.6900 as the base of the summer range.
Bias: Bullish while the 0.7000 handle holds, targeting 0.7100 and capped near 0.7150 by a Stoch RSI already turning down from overbought. A daily close back beneath 0.7000 puts price under the 50-day again and reopens 0.6950. The 11 August guidance is the binary, and the risk sits with a board that no longer needs to sound hawkish.
AUD/USD daily chart
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.
DBS Group Research economist Radhika Rao notes Indonesia’s onshore markets are focused on the appointment of a new Bank Indonesia Governor after Perry Warjiyo’s departure, with Acting Governor Destry Damayanti prioritising non-rate measures and IDR liquidity. The report highlights a mixed growth-inflation backdrop, a weaker external balance and a rangebound USDIDR, arguing this combination supports an unchanged policy rate stance near term.
New BI leadership and macro backdrop
"Onshore markets are awaiting the appointment of the new Bank Indonesia Governor, after chief Warjiyo stepped down last week."
"Pullback in oil prices and absence of fresh negative triggers has kept USDIDR rangebound within 17900-18000 this week, whilst the benchmark long-end yield holds steady around 7.3%, taking cues from hardening in US rates."
"The evolving growth-inflation mix has been mixed."
"2Q GDP growth report, due on Wednesday, is likely to show that output expanded by a relatively firm 5.3% yoy notwithstanding the energy shock vs 5.6% in 1Q."
"This growth-inflation mix coupled with stability in the rupiah makes the case for the BI to maintain its rates this month."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- GBP/USD trades near 1.3450, inside Monday's range for a second session.
- Bank of England held at 3.75% on 30 July with a third hawkish dissent.
- No Bank of England decision until 17 September and no Budget until 28 October.
Monday's session did the entire week's work in a single candle, reclaiming the moving-average band that had capped every rally since mid-July and stalling just short of 1.3500. The two sessions since have traded wholly inside it. Price changes hands near 1.3450, up a tenth of a percent, and forty-eight hours of trading have added nothing to Monday's result.
The 50-day and 200-day Exponential Moving Averages (EMA) sit converged a shade beneath 1.3400, and price holds the better part of a cent above both. That reclaim is the only thing this tape has achieved. Today's range runs barely 40 pips, the daily Stochastic Relative Strength Index (Stoch RSI) sits near 25, and nothing British is responsible for any of it.
The Dollar is doing all the work
The American releases between 12:15 and 14:00 GMT handed the Greenback two reasons to fall and one reason not to. Private payrolls printed 44K against a 70K consensus, less than half of June's 98K, and the Institute for Supply Management (ISM) services employment index dropped to 47.4 from 51.2, into outright contraction.
The same survey then put prices paid at 70.3 from 67.7, new orders at 57.2 from 55.1 and the headline index at 54.1. Demand is fine, hiring is not, and input costs are accelerating. That combination is stagflationary rather than dovish, which is why a labour miss of this size bought Sterling fourteen pips.
Rate pricing tells the same story from the other end. Odds on a September increase have been trimmed toward the high fifties from the high sixties over the past two sessions, and the softening owes as much to the collapse in Crude Oil as to the labour data. A cut remains priced nowhere in 2026, so a weak American jobs number no longer buys the easing it once did.
Two hawkish holds, twenty-four hours apart
The Federal Reserve held at 3.50% to 3.75% on 29 July with three policymakers dissenting for a quarter-point increase. The Bank of England held at 3.75% the following day with three members voting for 4.00%, up from two in June. Two central banks, two holds, three dissenters apiece, filed inside a single day.
The arithmetic underneath is not symmetric. Three of twelve votes on the American committee is a quarter of it. Three of nine on the British committee is a third, which makes the Monetary Policy Committee the more hawkish of the pair on paper. Sterling has done nothing with that for a week, because rate differentials are not what is moving this exchange rate.
The British case for tightening rests on where energy goes next rather than where inflation has been. June headline Consumer Price Index (CPI) came in at 2.6% against a 2.7% consensus, with core at 2.6% and services down to 3.6%, and the accompanying communication leaned on higher bills feeding through to business pricing later in the year. A market that entered 2026 pricing two British cuts now argues about increases, and the Hormuz negotiation makes that entire argument conditional on a waterway.
Six weeks of nothing scheduled
Westminster has risen for the summer recess and does not sit again until September, which switches off the fiscal newsflow that has driven the Pound since the leadership change in July. The next Bank of England decision is 17 September. The autumn Budget, where the new government's retained fiscal rules meet its spending promises, is pencilled for 28 October.
That leaves Sterling as a pure Dollar expression for six weeks, priced off American payrolls and a Middle East negotiation rather than anything domestic. It also defers the only real downside catalyst on the board. Long-dated gilt yields backed up on the first mention of flexibility inside those rules, and the Budget is where that argument gets resolved.
What lands before Friday
Weekly jobless claims are due Thursday at 12:30 GMT, consensus 202K against 197K prior, alongside preliminary second-quarter productivity at 0.6% and unit labour costs at 2%. Crude Oil is down roughly a tenth on the week on reports that Washington, Tehran and Muscat are close to an interim arrangement reopening the Strait of Hormuz, which is the other half of the Dollar's problem.
Friday's 12:30 GMT payrolls report is the one that counts. Consensus sits at 80K after 57K, the unemployment rate is seen unchanged at 4.2% and average hourly earnings at 3.5% YoY. A second soft labour reading in three days, on top of a services employment index already contracting, is what forces the September question into the open. The route through 1.3500 runs through that number.
Levels and bias
Resistance: 1.3500 caps the week, unbroken through Monday's surge and the two sessions held inside it, and is the gateway to the mid-July peak near 1.3550. Above that, the early-May high near 1.3650 is the only mark left on the frame.
Support: The reclaimed EMA band just beneath 1.3400 is the floor that matters now, with 1.3350 under it and the late-June base near 1.3150 as the summer low.
Bias: Bullish while the EMA band holds, with a daily close above Monday's high through 1.3500 the trigger for a run at 1.3550. A daily close back beneath 1.3400 buries price under both averages again and reopens 1.3300. Momentum is not confirming any of this, so treat strength above 1.3500 as a Dollar event rather than a Sterling one.
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.
Commerzbank economists highlight ongoing Korean Won (KRW) appreciation against the Dollar. USD/KRW slipped 0.1% to 1,430, extending declines from earlier in the week. They attribute KRW strength to reported coordinated FX intervention by the Ministry of Economy and Finance with Japan and sustained exporter Dollar selling, including sizeable forward sales in June.
Intervention and exporters back stronger Won
"July CPI surprised to the downside, easing to 2.8% yoy (Bloomberg consensus: 3.0%) vs 3.2% in June, marking the slowest pace in three months. The moderation was largely driven by softer energy prices. However, core CPI, which excludes volatile food and energy prices, edged up to 2.6% (Bloomberg consensus: 2.5%) vs 2.5% in June, suggesting that underlying price pressures are continuing to broaden beyond supply-side factors."
"Looking ahead, inflation is likely to pick up sharply in August due to low base effects from last year's one-off telecommunications discount programme. Thereafter, inflation should ease albeit gradually as the government relief measures fade. However, persistent core inflation, resilient domestic demand, and continued spillover effects from the semiconductor boom into wages and services are likely to keep inflation above the Bank of Korea's (BoK) 2% target."
"On monetary policy, we expect the BoK to deliver one additional 25bp rate hike this year, taking the Base Rate to 3.0%, in line with its latest median policy rate projection. The July MPC minutes reinforced BoK's tightening bias. Members highlighted that the semiconductor-led recovery is becoming increasingly broad-based and warned that stronger household income, corporate investment, and domestic demand could generate more persistent inflation."
"In FX, USD/KRW fell 0.1% to 1,430 yesterday, extending losses after a 0.5% decline on Monday and a 1.3% drop last week. KRW strength was supported by reports that the Ministry of Economy and Finance intervened in the FX market last Thursday in coordination with Japan. Exporter USD selling also aided KRW, with domestic corporate net selling USD9.3bn of forwards in June."
"Policymakers also expressed concern over rising household debt, higher Seoul apartment prices and financial market imbalances, suggesting that financial stability considerations will remain an important factor in future policy decisions."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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