Forex News
- AUD/USD holds losses as US Dollar safe-haven demand rises amid heightened US-Iran tensions and Strait of Hormuz risks.
- A surprising decline of 23,000 Nonfarm Payrolls in July curbed hopes for an immediate interest rate increase by the Fed.
- RBA is widely expected to keep its cash rate unchanged at 4.35% on Tuesday.
AUD/USD inches lower after registering modest gains in the previous day, trading around 0.7060 during the Asian hours on Monday. The pair holds losses as the US Dollar (USD) receives support from broad risk aversion.
Geopolitical tensions remain high as the ongoing United States (US)-Iran conflict enters a critical diplomatic phase, with intense military engagements and strategic pressure surrounding the Strait of Hormuz driving market caution. Although Iranian officials noted on Sunday that Oman-mediated negotiations regarding the management of the strait are making progress, safe-haven demand for the Greenback remains firmly intact.
Weaker-than-expected US employment data has dampened expectations for a near-term Federal Reserve (Fed) rate hike. Nonfarm Payrolls (NFP) unexpectedly dropped by 23,000 in July, while sharp downward revisions to the previous two months highlighted weakening labor market conditions. Investors are now focused on upcoming inflation reports for further clues on monetary policy.
Traders look ahead to the Reserve Bank of Australia’s (RBA) monetary policy decision on Tuesday. The central bank is widely expected to keep its cash rate unchanged at 4.35% for a second straight meeting. Traders will closely watch the RBA’s updated forecasts and Governor Michele Bullock’s comments for clues on the future policy path.
Rabo sees November RBA risk keeping modest upside bias in AUD/USD
Strategists at Rabobank note that, in their view, there is still “risk of one more rate hike this year in November,” with markets likely to look to the RBA’s 11 August policy meeting for “more clarity on rate hike risks.” Against this backdrop, the bank says it continues to “forecast a modest upside bias in AUD/USD out to 12 months,” a view it anchors “mostly on the back of a moderately softer tone in the USD and the view that Fed rate hike expectations are overdone.”
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.
- USD/CAD kicks off the new week on a slightly positive note, though it lacks follow-through.
- Geopolitical uncertainties and bets for at least one Fed rate hike this year support the USD.
- Friday’s upbeat Canadian jobs data and oil prices underpin the Loonie, capping spot prices.
The USD/CAD pair attracts some dip-buyers at the start of a new week and recovers a part of Friday's heavy losses to the 1.3925 area, or a nearly two-month low. Spot prices climb back above mid-1.3900s during the Asian session, though the upside potential seems limited amid a combination of diverging forces.
As investors look past Friday's disappointing US Nonfarm Payrolls (NFP) report, the US-Iran standoff keeps the geopolitical risk premium in play and acts as a tailwind for the safe-haven US Dollar (USD). Furthermore, bets that the US Federal Reserve (Fed) will raise borrowing costs by the end of this year amid inflation risks stemming from recovering crude oil prices lend support to the Greenback and the USD/CAD pair.
Meanwhile, uncertainties surrounding the reopening of the Strait of Hormuz remain supportive of a bid tone surrounding crude oil prices, which is seen underpinning the commodity-linked Loonie. The Canadian Dollar (USD) could further benefit from the upbeat domestic jobs report, released on Friday. This, in turn, might hold back traders from placing aggressive bullish bets on the USD/CAD pair and cap any meaningful gains.
Hence, it will be prudent to wait for strong follow-through buying before confirming that the recent pullback from the vicinity of mid-1.4200s, or the year-to-date high touched in June, has run its course and positioning for further upside. Traders might also opt to wait for this week's release of US inflation figures. Moreover, further developments surrounding the Middle East crisis will be looked upon for some impetus.
USD/CAD daily chart
Technical Analysis:
The USD/CAD pair’s ability to stay above the 100-day Simple Moving Average (SMA) at 1.3917 suggests underlying demand is still cushioning pullbacks, even as upside momentum appears measured. A break would expose a deeper correction. On the flip side, traders may look to psychological round figures and recent swing highs to define the next topside hurdles as long as spot prices hold above the 100-day SMA.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- Gold kicks off the new week on a softer note as Mideast tensions benefit the safe-haven USD.
- Oil prices fuel inflation fears and keep Fed hike bets on the table, also undermining the bullion.
- Traders look forward to this week’s US inflation figures for more Fed cues and a fresh impetus.
Gold (XAU/USD) drifts lower at the start of a new week and moves away from its highest level since June 17, touched on Friday following the disappointing release of the US Nonfarm Payrolls (NFP) report. In fact, the crucial US monthly employment data showed that the economy unexpectedly lost 23K jobs in July, while the previous month's reading was also revised down to 20K from 57K. This pointed to signs of a cooling US labor market and undermined the case for the US Federal Reserve (Fed) to raise interest rates, which, in turn, weighed heavily on the US Dollar (USD) and provided a goodish lift to the non-yielding bullion.
The immediate market reaction, however, turned out to be short-lived as uncertainties surrounding the Middle East crisis and the reopening of the Strait of Hormuz offered some support to the safe-haven Greenback. In fact, Iran reiterated conditions for a full reopening of the critical waterway, including an end to the US naval blockade, the removal of sanctions and compensation for war damage. Moreover, Tehran has ruled out direct talks with the US, citing alleged violations of the interim peace agreement reached in June. This keeps the geopolitical risk premium in play and underpins the USD, exerting some pressure on gold.
Meanwhile, the US-Iran standoff acts as a tailwind for crude oil prices. Investors remain worried that rising energy prices will rekindle inflationary pressures and force major central banks to adopt a more hawkish stance. Furthermore, the CME Group's FedWatch Tool indicates that traders are still pricing in a greater chance that the US central bank will raise borrowing costs by the year-end. The outlook remains supportive of elevated US Treasury bond yields, which favors USD bulls and backs the case for a further depreciating move for gold. Traders, however, might opt to wait for the latest US inflation figures this week.
XAU/USD daily chart
Technical Analysis:
Friday's breakout through the 38.2% Fibonacci retracement level of the April-June downfall favors XAU/USD bulls. The said support is pegged just above the $4,300 mark, which, if broken, could prompt some technical selling and pave the way for a further depreciating move. Moreover, Gold remains below the 50% Fibo. level and the very important 200-day Simple Moving Average (SMA), warranting some caution before positioning for an extension of the recent move up witnessed over the past week or so.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.02% | 0.30% | 0.09% | 0.04% | 0.22% | 0.12% | |
| EUR | -0.03% | -0.00% | 0.26% | 0.03% | 0.00% | 0.17% | 0.08% | |
| GBP | -0.02% | 0.00% | 0.26% | 0.04% | 0.04% | 0.17% | 0.09% | |
| JPY | -0.30% | -0.26% | -0.26% | -0.25% | -0.29% | -0.18% | -0.20% | |
| CAD | -0.09% | -0.03% | -0.04% | 0.25% | -0.10% | 0.13% | 0.03% | |
| AUD | -0.04% | -0.01% | -0.04% | 0.29% | 0.10% | 0.14% | 0.07% | |
| NZD | -0.22% | -0.17% | -0.17% | 0.18% | -0.13% | -0.14% | -0.08% | |
| CHF | -0.12% | -0.08% | -0.09% | 0.20% | -0.03% | -0.07% | 0.08% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
- USD/JPY rises as split BoJ board views on future rate hikes keep the Yen on the defensive.
- Japan logged an unexpected June current account deficit of JPY 92.3 billion, its first in 17 months, on large foreign dividend payouts.
- Escalating US-Iran tensions boost the Dollar, driving the USD/JPY pair higher.
USD/JPY gains ground after registering modest losses in the previous day, trading around 158.20 during the Asian hours on Monday. The pair remains stronger as the Japanese Yen (JPY) holds losses following the release of the Bank of Japan’s (BoJ) Summary of Opinions from its July 30–31 monetary policy meeting.
The summary suggested a clear division among board members; while some advocated for holding interest rates steady to evaluate the lagged impact of previous rate hikes, others pushed to maintain or even accelerate the tightening cycle, citing rising upside risks to prices. Despite members noting that Middle East tensions are weighing on economic activity, they highlighted that robust AI-related demand and a moderately recovering domestic economy continue to provide an offset.
Japan recorded its first current account deficit in 17 months in June, driven by high dividend payouts to overseas investors who have been pouring capital into domestic markets. According to Finance Ministry data released Monday, the deficit hit JPY 92.3 billion ($584.51 million), wildly missing economists' median forecast of a JPY 1.51 trillion surplus in a Reuters poll, and down sharply from a JPY 1.28 trillion surplus a year earlier.
The USD/JPY pair rises as the US Dollar (USD) continues to draw support from broad risk aversion. Geopolitical tensions remain high as the ongoing US-Iran conflict enters a critical diplomatic phase, with intense military engagements and strategic pressure surrounding the Strait of Hormuz driving market caution. Although Iranian officials noted on Sunday that Oman-mediated negotiations regarding the management of the strait are making progress, safe-haven demand for the Greenback remains firmly intact.
Fed expectations seen driving scope for lower yields
According to TD Securities, the risk of another Fed hike “lingers,” but the bank argues that upcoming inflation data could be pivotal for rate expectations. The team notes that their projections for this week’s CPI — “core and headline CPI this week (0.20% m/m and 0.15% m/m, respectively)” — would “likely lead to further pricing out of hikes.” With “the majority of the recent move higher in rates driven by Fed expectations,” TD Securities adds that “rates could move lower as hikes are priced out.”
Musalem flags persistent inflation risks as Fed bias stays hawkish
Fed’s Musalem delivered a modestly more hawkish tone, with the FXS Speechtracker score at 7.4 versus a 7.0 historical baseline, underscoring concern that inflation expectations could risk losing their anchor even as they are currently described as stable and aligned with the 2% target. Emphasis on core inflation amid energy volatility, a preference for incremental rate hikes, and an assessment that core inflation likely sits between 2.5% and 3%—alongside a stated willingness to surprise markets when needed—reinforce a bias toward tighter policy and a higher-for-longer stance. The assertion that the Dollar’s reserve status is not under threat and that the United States remains the fastest-growing, most innovative economy with strong rule of law further supports a constructive backdrop for the Dollar, especially as financial conditions are still seen as highly accommodative and many asset prices remain elevated.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to hold at a hawkish 138.69, signaling that despite the slightly above-baseline speech score, the broader policy tone remains consistently restrictive rather than newly escalated. With the index firmly above the neutral 100 mark and aligned with the elevated FXS Speechtracker reading, markets are likely to interpret Musalem’s remarks as reinforcing existing expectations for a cautious, data-dependent path that leans toward additional tightening if inflation fails to move sustainably closer to the 2% target.
(The story was corrected on August 10 at 02:40 GMT to say in the title, second bullet point, and third paragraph that Japan recorded a current account deficit, and not a narrowing surplus.)
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.
- GBP/USD kicks off the new week on a softer note as geopolitical uncertainties support the USD.
- The disappointing US NFP further tempers Fed hike bets, which might cap the upside for the buck.
- Market focus now shifts to this week’s release of US inflation figures and the prelim UK Q2 report.
The GBP/USD pair edges lower at the start of a new week and moves further away from an over three-week high, or levels just above the 1.3500 psychological mark touched on Friday.
The US Dollar (USD) is looking to build on its recovery from the post-NFP swing low amid persistent uncertainties surrounding the Middle East crisis and efforts to reopen the Strait of Hormuz. This, in turn, acts as a headwind for the GBP/USD pair, though the downside seems limited as receding US Federal Reserve (Fed) rate hike bets could limit any meaningful USD appreciation.
The closely-watched US monthly jobs data showed that the economy lost 23Kjobs in July, while the previous month's reading was revised lower to 20K from 57K, pointing to signs of a cooling labor market. Traders were quick to react and are now pricing in a less than 45% chance that the US central bank will raise borrowing costs in September, down from 67% a week ago.
However, investors are still assigning a greater probability of at least one 25-basis-point (bps) rate increase before the end of this year amid concerns that recovering oil prices will rekindle inflationary pressures. Hence, the focus shifts to the latest US inflation figures, due this week. Apart from this, the incoming geopolitical headlines will drive the USD and influence the GBP/USD pair.
Investors will further confront the release of the prelim UK Q2 GDP report on Thursday, which will play a key role in providing a fresh impetus to the British Pound (GBP). Nevertheless, the aforementioned fundamental backdrop warrants some caution before placing fresh bullish bets on the GBP/USD pair and positioning for an extension of a nearly two-week-old uptrend.
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.
- EUR/USD consolidates below its highest level since June 17 amid a modest USD uptick.
- The USD looks to build on its recovery from the post-NFP swing low amid Iran tensions.
- Market attention now shifts to this week’s release of the latest US inflation figures.
The EUR/USD pair kicks off the new week on a subdued note and trades just above 1.1550 during the Asian session, well within striking distance of a fresh high since June 17, touched in reaction to the disappointing US jobs data on Friday.
The closely watched US Nonfarm Payrolls (NFP) showed that the economy lost 23K jobs in July, missing consensus estimates of 80K by a wide margin. Adding to this, the previous month's reading was revised lower to show an addition of 20K jobs, compared to the 57K reported originally. Further details revealed that annual wage inflation, as measured by the change in the Average Hourly Earnings, eased to 3.2% from 3.4%. This offsets a dip in the Unemployment Rate to 4.1%, from 4.2% in June, and undermines the case for the US Federal Reserve (Fed) to raise interest rates.
The immediate market reaction, however, turns out to be short-lived as persistent uncertainties over efforts to reopen the critical Strait of Hormuz lend some support to the safe-haven US Dollar (USD). The USD Index (DXY), which tracks the Greenback against a basket of currencies, is now looking to build on Friday's late rebound from its lowest level since June 17 and is turning out to be a key factor acting as a headwind for the EUR/USD pair. Traders, however, seem reluctant to place directional bets and opt to wait for further developments surrounding the Middle East crisis.
Over the weekend, Iran stated that talks with Oman to establish a safe shipping route through the strategic waterway are nearing an agreement. Tehran, however, cautioned that any deal would not result in an immediate reopening. Furthermore, Iran-backed Houthi militants in Yemen claimed a recent attack on Saudi Arabia’s Jazan refinery, while a tanker operated by the Abu Dhabi National Oil Co. came under attack in the Strait. This keeps the geopolitical risk premium in play and supports oil prices, fueling inflation fears and bets for at least one interest rate hike by the Fed in 2026.
The mixed fundamental backdrop, in turn, warrants some caution before positioning for an extension of the EUR/USD pair's recent strong move up from the vicinity of mid-1.1300s, touched on July 28. Market attention now shifts to the latest US consumer inflation figures, due on Wednesday, which will be looked for more cues about the Fed's policy path. Apart from this, the incoming geopolitical headlines will play a key role in influencing the USD price dynamics and producing some short-term trading opportunities around the EUR/USD pair.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The ongoing US-Iran conflict has entered a crucial diplomatic phase, with intense fighting and strategic pressure around the vital Strait of Hormuz continuing to drive the dynamic of the war. Iranian officials stated on Sunday that Oman-mediated negotiations on the strait's management are making progress. However, Tehran maintains that commercial shipping will not fully resume until the US agrees to broader concessions, including an immediate end to military action, comprehensive sanctions relief, and financial compensation.
Amid these delicate diplomatic efforts, unverified social media reports circulating Sunday evening claim that Iran launched multiple anti-ship cruise missiles from Sirik in southern Iran, striking an oil tanker off Oman's coast. The vessel—reportedly transiting the US-backed southern shipping corridor—is said to be on fire following the attack. Secondary reports suggest up to four missiles targeted the tanker, with additional claims pointing to another targeted vessel and a downed US MQ-9 drone over southern Iran. None of these claims have been officially confirmed by international maritime monitors, U.S. Central Command, or major news outlets, leaving the vessel's identity, status, and casualties unknown, as reported by Gulf News.
Meanwhile, broader regional tensions remain closely connected as Israeli Prime Minister Benjamin Netanyahu rejected President Trump’s 15-point Gaza peace plan, despite Israel scaling back its military operations in the area. Hamas has expressed continued commitment to the proposal, while US officials view Netanyahu's refusal as a political maneuver tailored for his domestic audience. Given Iran's sustained backing of Hamas, the situation in Gaza remains deeply linked to the overarching US-Iran standoff.
Tehran-backed Houthi forces hit a Saudi oil refinery Sunday, just days after Riyadh formed a new defense alliance with Turkey and Pakistan amid the escalating US-Israel conflict with Iran. Reopening the Strait of Hormuz remains stalled after Iran imposed tough new conditions and reportedly targeted a UAE merchant vessel with a missile.
Market reaction
As of writing, West Texas Intermediate (WTI) oil price rises after registering nearly 1.5% losses in the previous trading day, hovering around $79.40 per barrel.
On Monday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.7884 compared to Friday's fix of 6.7904 and 6.7379 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
The Bank of Japan (BoJ) published the Summary of Opinions from the July 30-31 monetary policy meeting, which showed a split between members wanting to hold rates to assess the impact of the last rate hike and others pushing to continue or accelerate tightening. Key findings noted below.
Key Quotes:
One opinion said it is appropriate to keep the policy rate unchanged given the roughly one-to one-and-a-half-year lag before a hike's effects on inflation and activity become visible.
Meanwhile, another board member argued that conditions remain accommodative enough for the central bank to continue raising rates.
Another opinion went further, suggesting the pace of hikes could end up faster than markets currently expect amid rising upside risks to prices.
Members described Japan's economy as recovering moderately but facing crosscurrents, with Middle East tensions weighing on activity and AI-related demand offsetting the drag, while yen weakness cuts both ways.
One member noted Japan has previously suffered sharp demand and inflation deceleration during major external shocks, but has so far shown resilience against both US tariff policy and the Middle East conflict.
Members said underlying CPI inflation is expected to reach a level broadly consistent with the price stability target between the second half of fiscal 2026 and fiscal 2027, with the Middle East situation, AI demand and Yen weakness adding upward pressure.
Market Reaction:
The USD/JPY pair sticks to modest intraday gains and trades close to the 158.00 mark following the release of BoJ’s Summary of Opinions.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- WTI gains as Tehran warned shipping route talks won't bring an immediate reopening of the critical waterway.
- Attacks on a Saudi refinery and an Abu Dhabi tanker highlight escalating regional supply threats.
- Iran rejected direct US talks while demands for ending naval blockades and sanctions remain unmet.
West Texas Intermediate (WTI) oil price gains ground after registering nearly 1.5% losses in the previous trading day, hovering around $79.40 per barrel during the Asian hours on Monday. Crude oil prices advance as persistent uncertainty surrounds efforts to reopen the critical Strait of Hormuz.
Over the weekend, Iran stated that talks with Oman to establish a safe shipping route through the strategic waterway are nearing an agreement, though Tehran cautioned that any deal would not result in an immediate reopening. Meanwhile, regional security remains fragile; Iran-backed Houthi militants in Yemen claimed a recent attack on Saudi Arabia’s Jazan refinery, and a tanker operated by the Abu Dhabi National Oil Co. came under attack in the Strait.
Diplomatic progress remains stalled as Tehran rejected direct negotiations with the United States (US) for now, citing alleged breaches of the interim peace deal reached in June. Iran continues to insist on key demands, including an end to the US naval blockade, the lifting of sanctions, and compensation for war damages. Despite mounting pressure on the US administration to resolve with Tehran, President Donald Trump signaled patience regarding the negotiations.
Adding to the regional instability, Israeli Prime Minister Benjamin Netanyahu rejected President Trump’s 15-point Gaza plan, even as Israel scaled back its attacks. Hamas reported that it remains committed to the proposal, while US officials characterized Netanyahu’s rejection as a maneuver driven by domestic politics. Ultimately, Iran’s backing of Hamas ensures that the conflict in Gaza remains deeply intertwined with the broader US-Iran standoff.
Energy markets look to potential deal-making despite tight fundamentals
According to TD Securities, "energy markets hold out hope for a deal," even as their high-frequency data indicate that global crude balances have swung back into a meaningful deficit and product markets remain tight. The bank’s strategists argued that this combination of constructive fundamentals and lingering optimism around potential deal-making is helping to anchor sentiment in WTI and Brent, despite the recent pullback in prices.
(The story was corrected at 01:42 GMT on Monday to say in the title and the first paragraph that WTI gains instead of losing ground.)
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.
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