Forex News

• The Pound Sterling gains sharply against its major peers after the release of the UK employment data.
• The UK ILO Unemployment Rate came in steady at 4.7%, as expected.
• Investors expect the Fed to cut interest rates on Wednesday.

The Pound Sterling (GBP) attracts bids against its major peers on Tuesday, reaching its highest level in more than two months against the US Dollar, after the release of the United Kingdom (UK) labor market data for the three months ending July. The Office for National Statistics (ONS) reported that the Unemployment Rate remained steady at a four-year high of 4.7%, as economists had expected.

The UK economy created fresh 232K jobs in the quarter ending July, very close to estimates of 220K and the prior reading of 239K. Meanwhile, Average Earnings excluding bonuses, a key measure of wage growth, rose at an annual pace of 4.8%, as expected, slower than the previous 5%. Average Earnings including bonuses, a closely tracked indicator by the Bank of England, also rose in line with expectations at 4.7%, higher than the previous reading of 4.6%.

Steady employment conditions are expected to offer relief to Bank of England (BoE) officials, who had warned of growing labor market concerns. BoE Governor Andrew Bailey said earlier this month that he is “more concerned about downside job risks” than other Monetary Policy Committee (MPC) members who voted to keep rates on hold in the August monetary policy meeting.

Investors brace for more volatility in the British currency this week as the Consumer Price Index (CPI) data for August and the BoE’s monetary policy announcement are scheduled for Wednesday and Thursday, respectively.

The UK CPI report is expected to show that the headline inflation rose to 3.9% on an annual basis from 3.8%. Signs of inflationary pressures accelerating would boost hopes that the BoE will keep interest rates on hold at 4% on Thursday.

Daily digest market movers: Pound Sterling strengthens against US Dollar

• The Pound Sterling jumps to near 1.3630 against the US Dollar (USD) during Tuesday’s European session after the release of the UK employment data. The strength in the GBP/USD pair is also driven by weakness in the US Dollar.
• During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, revisits a seven-week low near 97.00.
• The US Dollar faces selling pressure as traders are increasingly confident that the Federal Reserve (Fed) will cut interest rates on Wednesday. According to the CME FedWatch tool, there is a 96% chance that the Fed will reduce interest rates by 25 basis points (bps) to 4.00%-4.25%, while the rest support a bigger reduction of 50 bps.
• The reasoning behind firm Fed dovish speculation is growing downside United States (US) labor market risks . Lately, a majority of Federal Open Market Committee (FOMC) members, including Chair Jerome Powell, argued in favor of monetary policy expansion amidst slowing job demand.
• On Wednesday, investors will pay close attention to the monetary policy statement, the dot plot and Powell’s press conference to get cues about the monetary policy and the labor market outlook. Investors would also focus on cues regarding the impact of tariffs on inflation.
• In Tuesday’s session, investors will focus on the US Retail Sales data for August, which will be published at 12:30 GMT. Sales are expected to grow by 0.3% on a monthly basis, slower than the prior 0.5% increase.

Technical Analysis: Pound Sterling breaks out from Ascending Triangle

The Pound Sterling climbs to near 1.3630 against the US Dollar on Tuesday. With the latest jump, the GBP/USD pair breaks out from an Ascending Triangle formation.

The horizontal resistance of the above-mentioned chart pattern is plotted from the July 23 high around 1.3585, while the upward-sloping border is drawn from the August 1 low near 1.3140.

A decisive breakout of the Ascending Triangle chart pattern could result in a fresh upside move.

The near-term trend of the Cable remains bullish as it trades close to the 20-day Exponential Moving Average (EMA), which is around 1.3520.

The 14-day Relative Strength Index (RSI) breaks above 60, indicating a strong upside momentum.

Looking down, the August 1 low of 1.3140 will act as a key support zone. On the upside, the July 1 high near 1.3800 will act as a key barrier.

• The Indian Rupee trades higher around 88.20 against the US Dollar ahead of trade discussions between the US and India.
• Washington receives 50% tariffs on imports from India into the US.
• The Fed is expected to reduce borrowing rates on Wednesday.

The Indian Rupee (INR) rises to near 88.20 against the US Dollar (USD) on Tuesday. The USD/INR pair declines as the US Dollar underperforms its peers, with investors remaining certain that the Federal Reserve (Fed) will start the monetary-easing cycle in its policy announcement on Wednesday.

During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slumps to near 97.00, the lowest level seen in seven weeks.

According to the CME FedWatch tool, there is a 96% chance that the Fed will reduce interest rates by 25 basis points (bps) to 4.00%-4.25%, while the rest support a bigger reduction of 50 bps.

As the Fed is widely anticipated to reduce interest rates, the major trigger for the US Dollar will be the monetary policy statement and Chair Jerome Powell’s speech to get cues about the outlook of interest rates for the remainder of the year and the labor market.

Fed dovish speculation has been intensified by escalating US labor market risks. Last week, Initial Jobless Claims data for the week ending September 5 showed that individuals claiming jobless benefits came in the highest in four years at 263K.

US-India trade discussions will be key trigger for Indian Rupee

• Though the Indian Rupee trades higher against the US Dollar, it is broadly underperforming as top negotiators from India and the United States (US) are scheduled to discuss trade in New Delhi on Tuesday.
• Trade relations between India and the US have not been good in the past few months as President Donald Trump has criticized New Delhi for buying Oil from Russia, which he called that Moscow is utilizing the money for funding the war in Ukraine. Additionally, Trump also raised tariffs on India to 50%, making Indian products less competitive in global markets.
• Ahead of US-India trade discussions, Washington’s trade adviser Peter Navarro said in an interview with CNBC on Monday that India was "coming to the negotiating table". He also acknowledged the exchange of tweets between President Trump and India’s Prime Minister Narendra Modi happened last week, which signaled that both nations continue to negotiate on trade and expressed confidence that they will reach a deal soon.
• "India is coming to the table. PM Modi sent out a very conciliatory, nice, constructive tweet, and President Trump responded to that. We'll see how this works,” Navarro.
• The confirmation of a trade truce between the US and India would be favorable for the Indian Rupee in times when the Asian giant is going through structural reforms to steadfast its domestic consumption. Earlier this month, the Indian government unveiled a new Goods and Services Tax (GST) bill in which tax slabs were brought down to two from four.
• In the US, investors will focus on the US Retail Sales data for August, which will be published at 12:30 GMT. The US Retail Sales data is expected to come in lower at 0.3% on a monthly basis, against the prior release of 0.5%.
• Meanwhile, the US Senate narrowly confirmed President Donald Trump’s chosen economic adviser Stephen Miran as a member of the Fed’s Board of Governors ahead of the policy decision. Miran was placed on the Fed’s board after member Adriana Kugler unexpectedly resigned in early August.

Technical Analysis: USD/INR holds above 20-day EMA

The USD/INR pair falls to near 88.20 on Tuesday. However, the near-term trend of the pair remains bullish as it holds above the 20-day Exponential Moving Average (EMA), which trades near 88.03.

The 14-day Relative Strength Index (RSI) falls to near 60.00. A fresh bullish momentum would emerge if the RSI rebounds from that level.

Looking down, the 20-day will act as key support for the major. On the upside, the round figure of 89.00 would be the key hurdle for the pair.

• Gold attracts some follow-through buyers amid a combination of supportive factors.
• Rising Fed rate cut bets continue to weigh on the USD and benefit the yellow metal.
• Overbought conditions warrant caution  for bulls ahead of the  key central bank events.

Gold (XAU/USD) hits a fresh record high heading into the European session on Tuesday and moves closer to the $3,700 round-figure mark amid a supportive fundamental backdrop. The US Dollar (USD) selling bias remains unabated in the wake of the growing acceptance that the US Federal Reserve (Fed) will resume its rate-cutting cycle this week. Moreover, rising geopolitical risks further contributed to the safe-haven precious metal's recent breakout momentum witnessed over the past two weeks or so.

It, however, remains to be seen if the XAU/USD bulls retain their dominant position or opt to take some profits off the table ahead of this week's key central bank events, including the highly anticipated Fed policy decision on Wednesday. The US central bank is widely expected to lower borrowing costs by 25 basis points (bps). Moreover, updated economic projections and Fed Chair Jerome Powell's comments during the post-meeting presser will be scrutinized for cues about the future rate-cut path.

Daily Digest Market Movers: Gold buying remains unabated as Fed rate cut bets weigh on USD

• The XAU/USD bulls pause for a breather during the Asian session on Tuesday following the recent blowout rally to a fresh all-time high and ahead of the key central bank event risks. The downside for the XAU/USD pair, however, remains cushioned amid a supportive fundamental backdrop.
• Traders ramped up their bets for a more aggressive policy easing by the Federal Reserve following the release of a weaker US Nonfarm Payrolls (NFP) report for August. According to the CME Group's FedWatch Tool, the US central bank is expected to lower borrowing costs three times this year.
• The US Senate voted to confirm US President Donald Trump's aide, Stephen Miran, to join the Fed's Board of Governors. The decision came as a US federal appeals court ruling that Trump cannot fire Fed Governor Lisa Cook, and ahead of a two-day FOMC meeting due to begin this Tuesday.
• Meanwhile, the dovish outlook leads to an extension of the recent US Dollar (USD) downfall to its lowest level since July 24 and should continue to act as a tailwind for the non-yielding Gold. Apart from this, the intensifying Russia-Ukraine conflict could limit losses for the safe-haven commodity.
• Russian forces launched a massive attack on Ukraine’s southeastern city of Zaporizhzhia, following a series of strikes by the latter against its oil infrastructure in recent weeks. Moreover, Trump has repeatedly threatened tougher measures against Russia, keeping geopolitical risks in play.
• An emergency summit of Arab and Islamic country leaders has condemned Israel’s attack on Hamas leaders in Doha, Qatar's capital, on September 9. A joint statement from the summit urged member states to coordinate efforts aimed at suspending Israel's membership in the United Nations.
• Tuesday's release of the US monthly Retail Sales figures and Industrial Production data might do little to provide any impetus. Traders this week will also scrutinize monetary policy updates from the Bank of Canada on Wednesday, the Bank of England on Thursday, and the Bank of Japan on Friday.

Gold needs to pause for a breather amid extremely overbought daily RSI

The overnight strong move up marked a fresh breakout through a bullish flag pattern. That said, the daily Relative Strength Index (RSI) is holding well above the 70.0 mark, pointing to extremely overbought conditions and warranting some caution before positioning for any further gains. This suggests that the XAU/USD pair might struggle to build on the momentum beyond the $3,700 round figure, which should now act as a key pivotal point.

Meanwhile, any meaningful corrective slide is likely to attract fresh buyers and find decent support near the flag pattern breakout point, around the $3,645 region. However, some follow-through selling, leading to a subsequent fall below the $3,633 horizontal zone, could drag the Gold price to the $3,610-3,600 area. A convincing break below the latter could pave the way for deeper losses and expose the $3,500 psychological mark, with some intermediate support near the $3,562-3,560 region.

• The Euro is drawing support from a weaker US Dollar to test multi-week highs.
• Hopes of a dovish turn by the Fed are weighing heavily on the US Dollar.
• EUR/USD bulls are pushing against 1.1790, with the 1.1830 long-term high in focus.

EUR/USD appreciates for the fourth consecutive day on Tuesday. The pair trades at 1.1775 at the time of writing, favoured by a risk-on mood as investors brace for, at least, a 25-basis-point (bps) interest rate cut by the Federal Reserve (Fed) on Wednesday and at least one more before the end of the year.

US President Donald Trump did not want to miss the opportunity of taking part in the event and called for a "bigger" rate cut on social media. This highlights the unprecedented political pressure, which is putting the central bank's ability to act independently into question.

The market, however, has been celebrating lower interest rates in anticipation. The US Dollar Index, which measures the value of the Greenback against six major currencies, has dropped to nearly two-month lows, and Wall Street indexes rose to fresh record highs. In this context, risk appetite has offset concerns about French debt, and the Euro (EUR) has risen higher.

Later on the day, the Eurozone Industrial Production and the ZEW Economic Sentiment Index might test the Euro's strength. In the US, August's Retail Sales data might provide some fundamental guidance for the USD, but they are unlikely to alter the expectations of a Fed rate cut this Wednesday.

Daily digest market movers: Hopes of lower interest rates are weighing on the US Dollar

• The US Dollar remains on its back foot as the market prices a quarter-point interest rate cut on Wednesday, coupled with a more dovish forward guidance. Investors are starting to think that the Fed is behind the curve and that it will be forced to accelerate its monetary easing cycle with a series of cuts over the next months.
• The US Senate has confirmed Trump's former economic advisor, Stephen Miran, as Fed Governor, which grants the US president a dove loyalist on the board from this meeting on.
• Fed Governor Lisa Cook will also be on the board at the upcoming two-day meeting, as the Federal Appeals Court has blocked President Trump's bid to fire her on an alleged mortgage fraud.

Technical Analysis: EUR/USD rallies to the 1.1790 resistance area

EUR/USD continues to head north, as US Dollar weakness weighs more than the Eurozone's domestic issues, at least for now. Technical indicators show a solid bullish momentum, with the Relative Strength Index (RSI) at 66 on the 4-hour chart.

Bulls are attempting to break the July 24 high at 1.1790 at the time of writing, the last hurdle before the July 1 high at 1.1830. Further up, a trend-based Fibonacci tool shows the 161.8% extension at 1.1875.

To the downside, a previous resistance is now acting as support at the 1.1750 area ahead of the September 12 low near 1.1700, and the ascending channel's bottom, now around 1.1690. Below here, the September 11 low near 1.1660 would come into view.

• The Japanese Yen attracts some buyers amid expectations for an imminent BoJ rate hike.
• Fed rate cut bets undermine the USD and weigh on USD/JPY ahead of central bank events.
• Political and BoJ, along with a positive risk tone, might cap gains for the safe-haven JPY.

The Japanese Yen (JPY) spikes to a one-week high and remains on track to appreciate further against a broadly weaker US Dollar (USD) amid the divergent Bank of Japan (BoJ)-Federal Reserve (Fed) policy expectations. Investors seem convinced that the BoJ will stick to its policy normalization path, while the US central bank will resume its rate-cutting cycle this week. This, in turn, is seen as a key factor driving flows towards the lower-yielding JPY and exerting downward pressure on the USD/JPY pair.

Meanwhile, the recent political developments in Japan could give the BoJ reasons to delay rate hikes. This, along with a positive risk tone, might keep a lid on any further appreciating move for the safe-haven JPY. Traders might also refrain from placing aggressive bets and opt to wait for this week's key central bank events. The Fed is scheduled to announce its policy decision on Wednesday ahead of the two-day BoJ meeting starting Thursday, which will provide a fresh impetus to the USD/JPY pair.

Japanese Yen is underpinned by BoJ rate hike bets, bearish USD

• The Japanese Yen has been struggling for a firm near-term direction over the past week or so and oscillating in a range against its American counterpart amid ambiguity over the Bank of Japan rate hike decision. Japanese Prime Minister Shigeru Ishiba's resignation added a layer of uncertainty in the markets and could give the BoJ more reasons to go slow on interest rate hikes.
• Japan's farm minister and the chief government spokesperson, Shinjiro Koizumi, on Tuesday announced his candidacy to lead the ruling Liberal Democratic Party (LDP) and replace the outgoing Prime Minister Shigeru Ishiba.
• Meanwhile, the US-Japan trade deal has removed some risks to domestic growth. The BoJ sees the development paving the way for steady progress toward the inflation target. Moreover, a tight labor market and optimistic economic outlook keep the door open for an imminent BoJ interest rate hike by the end of this year and offer some support to the JPY.
• Moreover, the current market pricing points to a nearly two full 25-basis-point rate hikes by July next year, which, in turn, warrants some caution before placing aggressive JPY bearish bets. Traders might also opt to wait on the sidelines ahead of the latest BoJ monetary policy update on Friday. This, along with a bearish US Dollar, should cap the USD/JPY pair.
• The USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near its lowest level since July 24 amid rising bets for a more aggressive policy easing by the US Federal Reserve. Traders ramped up their bets for three interest rate cuts by the Fed this year after the recent US macroeconomic data pointed to signs of a softening labor market.
• The US Senate voted to confirm Stephen Miran – one of US President Donald Trump’s top economic advisers – to join the Fed's powerful Board of Governors. Miran will now be voting on this week's interest rate decision. A federal appeals court ruled that Trump cannot fire Fed Governor Lisa Cook, who can participate in the pivotal two-day meeting starting Tuesday.
• On the geopolitical front, Trump said on Monday that a face-to-face meeting between Ukrainian President Volodymyr Zelenskyy and his Russian counterpart, Vladimir Putin, is difficult. This comes amid the intensifying Russia-Ukraine war and brewing Middle East tensions, which could further benefit the safe-haven JPY ahead of the key central bank events.
• Tuesday's US economic docket features the release of US monthly Retail Sales figures and Industrial Production data later during the North American session. The immediate market reaction is more likely to be muted as traders might refrain from placing aggressive directional bets and opt to wait for more cues about the central banks' policy outlook.

USD/JPY bears could aim trading range support near 146.30-146.20

The range-bound price action might be seen as a consolidation phase before the next leg of a directional move. Meanwhile, the recent repeated failures near a technically significant 200-day Simple Moving Average (SMA) suggest that the path of least resistance for the USD/JPY pair is to the downside. That said, it will still be prudent to wait for some follow-through selling and acceptance below the 147.00 mark before positioning for further losses amid neutral oscillators on the daily chart. Spot prices might then accelerate the fall towards the 146.30-146.20 horizontal support. This is closely followed by the 146.00 round figure, below which the downward trajectory could extend further towards the 145.35 intermediate support en route to the 145.00 psychological mark.

On the flip side, any positive move up is likely to confront an immediate hurdle near the 148.00 round figure, above which a bout of short-covering could lift the USD/JPY pair to the 200-day Simple Moving Average (SMA) barrier, currently pegged near the 148.75 zone. Some follow-through buying, leading to a subsequent strength beyond the 149.00 mark and the monthly swing high, around the 149.15 region, would negate the negative outlook and shift the near-term bias in favor of bullish traders.

In an interview with TV24 on Tuesday, European Central Bank (ECB) policymaker Martins Kazaks said that the “reduction in ECB rates is already very significant.”

He further noted that “there is no reason to cut rates at the moment.”

Market reaction

At the press time, EUR/USD is up 0.20% on the day at 1.1782.

European Central Bank (ECB) policymaker Francois Villeroy de Galhau made some comments on the French fiscal and economic outlook on Tuesday.

Key quotes

French growth is not strong enough but remains positive.

We "seriously" have to tackle the debt problem.

We can do it.

There is no reason for France to become Europe’s laggard.

We must both rein in spending and raise taxes.

• The UK Unemployment Rate held steady at 4.7% in three months to July.
• The Claimant Count Change for Britain came in at 17.4K in August.
• GBP/USD sits at two-month highs above 1.3600 after UK employment data.

The United Kingdom’s (UK) ILO Unemployment remained at 4.7% in the three months to July, data published by the Office for National Statistics (ONS) showed on Tuesday.

The data aligned with the market expectations.

Additional details of the report showed that the number of people claiming jobless benefits rose 17.4K in August, compared with a revised drop of 33.3K in July, bettering the expected 20.3K print.

The Employment Change data arrived at 232K in July versus 239K in June.

Meanwhile, Average Earnings, excluding Bonus, in the UK edged higher by 4.8% three months year-over-year (3M YoY) in July versus a 5% growth booked previously. The market consensus was for a 4.8% reading.

Another measure of wage inflation, Average Earnings, including Bonus, increased by 4.7% in the same period after accelerating by 4.6% in the quarter through June. The data matched the estimate of 4.7%.

GBP/USD reaction to the UK employment report

GBP/USD holds its upside following the release of the UK employment data. The pair is trading 0.14% higher on the day near two-month highs of 1.3628, as of writing.

The section below was published at 04:04 GMT as a preview of the UK labor market report.

UK Jobs Report Overview

The United Kingdom (UK) docket has the labor market report to be released by the Office for National Statistics (ONS) on Tuesday, later this session at 06:00 GMT.

UK Claimant Count Change for August is expected to rise by 20.3K, reflecting the number of people claiming jobless benefits. The reading was -6.2K in July. Meanwhile, the Claimant Count Rate was at 4.4% in the previous month.

UK Average Earnings, including bonuses, in the three months to July, are expected to accelerate by 4.7%, following 4.6% prior, while ex-bonuses, the wages are expected to rise by 4.8% against the previous 5.0%.

UK ILO Unemployment Rate (3M) may remain consistent at 4.7% in the three months to July.

How could the UK Jobs Report affect GBP/USD?

The UK jobs report may take a backseat as traders shift focus to Wednesday’s Consumer Price Index (CPI) and Retail Price Index releases. The Pound Sterling (GBP) draws support against its peers from cautious sentiment surrounding the Bank of England (BoE) to hold interest rates steady at 4% in the monetary policy meeting on Thursday.

The GBP/USD pair remains stronger above 1.3600 as the US Dollar (USD) weakens due to the firm likelihood of the US Federal Reserve (Fed) lowering rates by 25 basis points at its September meeting due on Wednesday. Traders will likely be watching the US Retail Sales for August on Tuesday.

Technically, the GBP/USD pair may appreciate toward its initial barrier at 1.3788, the highest since October 2021. On the downside, the primary support lies at the nine-day Exponential Moving Average (EMA) of 1.3555, followed by the 50-day EMA at 1.3485.

West Texas Intermediate (WTI) Oil price advances on Tuesday, early in the European session. WTI trades at $63.19 per barrel, up from Monday’s close at $63.04.
Brent Oil Exchange Rate (Brent crude) is also up, advancing from the $67.19 price posted on Monday, and trading at $67.28.