Forex News

Scotiabank strategists Shaun Osborne and Eric Theoret note the Canadian Dollar (CAD) is effectively flat versus the US Dollar (USD) but modestly outperforming other majors, trading close to their fair value estimate around 1.40. With CAD-specific news limited, USD/CAD remains driven by external factors and stabilized US/Canada spreads. Technicals stay USD-bearish, with downside focus on a break below 1.3970/80 and fading rallies toward 1.41.

CAD trades near fair value versus Dollar

"The CAD is effectively flat against the USD and outperforming most of the major currencies modestly on the day as a result."

"CAD-specific news remains scant and the trend in funds remains largely contingent on external developments. US/Canada spreads have stabilized and broader risk appetite remains positive—while the tech/AI cycle holds."

"The trend in relative US/Canada data surprises has turned a little more positive for the CAD in recent weeks. Trade concerns remain a background niggle ahead of the August 19 deadline for President Trump’s latest tariff salvo."

"Our fair value estimate for spot sits just above 1.40 this morning (1.4006), suggesting that the CAD is more or less right where it should be. "

"Bearish—There is little change in the CAD’s technical position. Broader chart pointers continue to lean USD-bearish after the negative technical close on the week through last Friday."

"The CAD still needs to secure a break under 1.3970/80 (former high/retracement support) to drive the next phase of gains, however. Technicals suggest fading moderate USD gains to the 1.41 zone."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

ING analysts Warren Patterson and Ewa Manthey report Copper prices trading above $14,000/t on the LME and near record levels on Comex, driven by metal diversion into the US ahead of potential tariff decisions. Tight physical markets, low inventories outside the US and ongoing supply-side challenges are seen as supporting prices and possibly increasing volatility in coming sessions.

Record-level prices on supply constraints

"In base metals, copper prices also extended gains, with LME copper trading above $14,000/t and Comex futures remaining close to record levels. The market continues to be driven by the diversion of metal into the US ahead of potential tariff decisions. This is leaving availability tighter elsewhere and supporting prices across global exchanges."

"Improving sentiment around the Middle East provided a boost to industrial metals. Hopes for progress in negotiations over the reopening of the Strait of Hormuz have weighed on the US dollar. Lower energy prices have reduced inflation concerns and improved the outlook for global growth-sensitive assets."

"Copper fundamentals remain supportive. Tight physical markets, low inventories outside the US and ongoing supply-side challenges should keep prices well supported. Developments in US tariff policy could also trigger increased volatility in the near term."

"Aluminium and zinc also moved higher alongside copper."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• The New Zealand Dollar extends its decline for a second consecutive day as the US Dollar strengthens.
• Rising geopolitical tensions in the Middle East support demand for safe-haven assets despite mixed US economic data.
• Softer New Zealand employment figures reinforce expectations that the central bank will tighten policy only gradually.

NZD/USD trades around 0.5880 on Thursday at the time of writing, down 0.10% on the day. The pair remains under pressure as renewed demand for the US Dollar (USD) emerges, with investors seeking safe-haven assets amid fresh geopolitical tensions in the Middle East. An Israeli airstrike in southern Lebanon has reignited risk aversion, although reports that Iran and Oman are finalizing an agreement on a temporary shipping route through the Strait of Hormuz have helped ease concerns over prolonged disruptions to energy supplies.

The US Dollar is benefiting from this defensive positioning despite another round of mixed US economic data. Initial Jobless Claims edged up to 199K last week from a revised 198K previously, but came in below market expectations of 202K. The release follows Wednesday's weaker ADP employment report. Investors are now turning their attention to Friday's Nonfarm Payrolls (NFP) report for a clearer assessment of US labor market conditions.

Markets continue to scale back expectations for another interest rate hike from the Federal Reserve (Fed). According to the CME FedWatch tool, the chance of a 25-basis-point rate increase in September has fallen to 56.9% from 63.4% a week ago, as traders increasingly believe that the gradual cooling in the labor market could encourage the central bank to adopt a more cautious approach.

Meanwhile, the New Zealand Dollar (NZD) remains weighed down by weaker-than-expected employment data. The report reinforces expectations that the Reserve Bank of New Zealand (RBNZ) will continue to tighten monetary policy at a gradual pace, although markets still fully price in a 25-basis-point rate hike at the September meeting. Policymakers recently indicated that further tightening may still be required to bring inflation fully under control.

NZD softens as labor slack persists but RBNZ tightening bias holds

Strategists at BBH note that “NZD and NZ yields slump” in the wake of New Zealand’s latest labour market data, arguing that “solid Q2 job and wage growth mask ongoing labor market slack.” They highlight that employment “surged 0.5% q/q vs. 0.1% in Q1, well above consensus and RBNZ projection of 0.1%,” while “private regular wages were up 0.7% q/q (consensus & RBNZ: 0.6%) vs. 0.5% in Q1.” However, BBH stress that “strong hiring was more than offset by rising labor supply,” with the participation rate “rose 0.2ppt to 70.7%,” which “lifting unemployment and pointing to excess labor supply.” In their view, the labour market slack is underscored by the fact that “the unemployment rate rose 0.2ppt to 5.6% (consensus & RBNZ: 5.4%), the highest since Q3 2015 and the underutilization rate increased 0.9ppt to 13.8%, the highest since December 2013.”

Despite the softer currency and higher jobless rate, BBH argue that “NZD has room to keep edging higher against most major currencies,” citing “above target inflation, more favorable domestic growth outlook, and a policy rate near the lower-end of the RBNZ’s neutral range (2.20%-4.10%)” as factors that “argue for additional RBNZ rate hikes.” They note that “the swaps curve price in nearly 100bps of cumulative tightening over the next twelve months to 3.50%.” TD Securities concur that policy tightening remains on the table, stating that “despite the mixed report today, we believe the RBNZ has the room to hike again by 25bps in September given that economic activity continues to recover in Q3.”

• Gold pauses after reaching a seven-week high as traders monitor developments surrounding the Strait of Hormuz.
• Markets lower expectations of a September Fed rate hike ahead of Friday’s Nonfarm Payrolls report.
• Momentum indicators turn bullish as XAU/USD reclaims the 50-day SMA.

Gold (XAU/USD) consolidates gains on Thursday after briefly climbing above $4,300 as the US Dollar (USD) steadies while traders await confirmation of a possible Iran-Oman agreement on the Strait of Hormuz. At the time of writing, XAU/USD trades around $4,269, up 0.52% on the day.

The precious metal rallied a little over 4% on Wednesday, hitting its highest level in seven weeks after Iran said it had reached an understanding with Oman on a proposed shipping route through the Strait. Tehran added that a joint statement containing the main points of the agreement was in the final stages of drafting.

Oil prices stay under pressure, creating a supportive backdrop for Bullion. A sustained decline in energy prices would ease inflation concerns and reduce pressure on major central banks, particularly the Federal Reserve (Fed), to raise interest rates. Higher borrowing costs generally weigh on Gold by increasing the opportunity cost of holding the non-yielding metal.

Despite the recent decline, Oil prices still carry a significant geopolitical risk premium as tensions in the Middle East persist. Iran says the proposed agreement with Oman would establish only a temporary shipping route and would not amount to a full reopening of the Strait. Yemen’s Houthis also claim to have attacked two Saudi oil tankers, while Tehran denies holding talks with the United States, saying its discussions with Oman are strictly bilateral.

Still, lower energy prices and softer US labour-market data, including weaker ADP employment and JOLTS figures, have prompted traders to reduce bets on a September Fed rate hike. Initial Jobless Claims, however, rose only slightly to 199K from 198K and came in below the 202K forecast.

According to the CME FedWatch Tool, markets now see a 56.9% chance of a 25-basis-point (bps) increase in September, down from 63.4% a week earlier.

Attention now turns to Friday’s US Nonfarm Payrolls (NFP) report. According to TD Securities, July ADP employment data "surprised to the downside, moderating to 44k (TD: 50k, cons: 65k)." Analysts highlight that "both the monthly and weekly ADP data have moderated this summer after a strong start to the year," and they anticipate that "a similar trend is likely to occur with NFP job gains."

Technical analysis: Buyers regain control above 50-day SMA, $4,300 in focus

XAU/USD is recovering above the 50-day Simple Moving Average (SMA) at $4,157, but remains capped beneath the 100- and 200-day SMAs, keeping the broader tone neutral with a slight topside constraint.

The Relative Strength Index (RSI) at 61 on the daily chart leans toward bullish momentum, while the Moving Average Convergence Divergence (MACD) indicator holds in positive territory with the line above the signal and an expanding positive histogram, which together suggest improving upside pressure despite the overhead moving-average barrier.

On the topside, initial resistance is seen at the horizontal level around $4,300, ahead of the 100-day SMA at $4,393, with the 200-day SMA at $4,493 acting as a more distant cap.

On the downside, immediate support is provided by the reclaimed 50-day SMA near $4,157, with a deeper structural floor at the prior horizontal support around $4,000, where buyers would be expected to re-emerge if a pullback develops.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

BNY’s Geoff Yu notes Oil prices have stabilized near $80 as markets digest Iran’s proposed shipping route with Oman through the Strait of Hormuz. The temporary arrangement has reduced perceived disruption risk for Brent and WTI, helped by larger U.S. inventories. Yet traders remain cautious given ongoing shipping incidents and unresolved United States (US) backing for any deal.

Hormuz corridor tempers risk premium

"Oil prices have steadied at close to $80/barrel as traders digested Iran’s claim that it had reached an agreement with Oman on a proposed shipping route through the Strait of Hormuz."

"The possible route, which officials said could operate for two to four months, supported hopes that some energy flows may resume, even though it would not amount to a full reopening and U.S. backing remains unclear."

"Brent fell as markets priced in a lower probability of a prolonged disruption, but traders remain cautious given continued shipping risks, including reported explosions near Oman and Houthi threats against tankers."

"Larger U.S. crude inventories and improved stocks at Cushing also eased pressure, while fresh disruption at a Black Sea export terminal kept supply risks in view."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• AUD/USD edges lower as the US Dollar steadies following two consecutive days of losses.
• Markets trim Fed rate-hike bets as lower energy prices ease inflation concerns.
• China’s trade figures could influence the Australian Dollar ahead of next week’s RBA meeting.

AUD/USD edges lower on Thursday as the US Dollar (USD) steadies following two consecutive days of losses. At the time of writing, the pair trades around 0.7036, down roughly 0.32% on the day.

US labour-market data released on Thursday offered some support to the Greenback. Initial Jobless Claims rose only slightly to 199K from 198K and came in below expectations of 202K.

Meanwhile, attention stays on developments surrounding the Strait of Hormuz. Iran and Oman are close to finalizing an agreement that would establish a temporary shipping route through the waterway. The prospect of an agreement has improved near-term market sentiment, but the broader backdrop remains fragile, keeping some defensive demand for the US Dollar alive.

Tehran denies holding direct talks with the United States, even as Washington says negotiations are taking place. Traders are also waiting for formal confirmation of the Iran-Oman agreement and more details on whether it would lead to a full reopening of the Strait.

Oil prices trade modestly higher on Thursday, although their recent decline has eased energy-driven inflation concerns and reduced pressure on major central banks to raise interest rates. According to the CME FedWatch Tool, markets now see around a 56% chance of a September Federal Reserve (Fed) rate hike, down from 63% a week earlier.

Friday’s US Nonfarm Payrolls (NFP) report will be closely watched as it could influence Fed rate expectations.

On the Australian side, China’s Trade Balance data is also in focus. The Australian Dollar is sensitive to developments in the Chinese economy because of the close trading relationship between the two countries.

Attention will then shift to the Reserve Bank of Australia’s (RBA) interest-rate decision next week. Analysts at Standard Chartered expect the Reserve Bank of Australia to "keep the cash rate unchanged at 4.35% at its 11 August meeting," noting that "Q2 trimmed mean inflation held steady at 0.8% q/q – as we had expected – and below the RBA’s prior forecast (0.9%)." They add that this outcome, "together with the recent retracement in oil prices, should take the pressure off the RBA to tighten policy further in the near term."

Halpenny highlights MUFG’s G10 regression models showing the US Dollar undervalued against most peers, implying risk premia tied to Middle East conflict, inflation concerns and political interference at the Federal Reserve. US-backed Yen intervention and subtle support for broader Dollar devaluation versus Asia could encourage investors to sell the Dollar when sentiment deteriorates.

Risk premia and policy signals weigh on Dollar

"Looking at our short-term regression models across all of G10 reveals an interesting consistency – the US dollar is undervalued versus eight of the nine currencies in the G10 space suggesting some additional risk premium is currently priced into FX that has prompted this underperformance of the dollar. Some factors may explain this. We could be once again on the cusp of a ceasefire deal in the Middle East that may mean the US dollar has priced this scenario more quickly than other markets that is showing up as US dollar undervaluation in our regression models."

"Another factor that could be starting to weigh on US dollar performance is the intervention that took place last week. This was much more meaningful of course due to US involvement and even though the US Treasury chose not to sell the US dollar, its strong support for Japan in attempting to strengthen the yen and weaken the US dollar is telling."

"Scott Bessent also cited the negative implications of an undervalued yen in dragging valuations lower for Asia FX more generally versus the US dollar. Bessent mentioned specifically that the renminbi also could be undervalued. The US Treasury looks to be subtly endorsing a US dollar devaluation versus Asia more generally."

"Finally, the Wall Street Journal is reporting today that President Trump has spoken to Fed Chair Warsh “repeatedly” since he took over at the Fed with “bursts” of calls “several times in a stretch of days” and this will only reinforce the impression of greater political influence undermining Fed independence. The underperformance of the dollar relative to our models likely captures some of those Fed-related risks and the uncertainty over the Fed’s reaction function going forward. That uncertainty is likely keeping yields higher without offering the dollar the usual support."

"Concerns that emanate from Washington over financial market developments will hardly instil confidence in global investors in holding US assets and could herald another spell of increased US dollar hedging like January this year, which would be bad news for the dollar."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Standard Chartered’s Christopher Graham analyzes recent United Kingdom (UK) polling, noting Labour has regained a lead over Reform UK and Conservatives after Andy Burnham became prime minister. Labour’s support has risen but remains below its July 2024 election result, and current MRP seat projections fall short of a majority. Fiscal decisions and the 28 October budget could critically test Labour’s polling bounce.

Labour lead and October budget risks

"The Labour party has led in eight out of the last 10 national polls, having led in just two polls in H1."

"Since Andy Burnham became prime minister on 20 July, the Labour party has seen a 4ppt bounce in its national polling."

"Based on opinion polls between 7 and 27 July, and using Multi-level Regression and Post-stratification (MRP) techniques, Electoral Calculus estimates that Labour could win 244 seats if an election were held tomorrow."

"Burnham has pledged to increase defence spending, reform social care and devolve economic policy away from Westminster."

"Most recent polls show the Labour Party overtaking Reform UK and regaining its lead position. So far it is well short of the sort of bounce that could convince Burnham to call an early election. Burnham’s biggest challenges lie ahead; fiscal decisions in October could challenge the polling bounce."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)