Forex News
- USD/JPY attracts some dip-buyers as Iran tensions and hawkish Fed bets revive the USD demand.
- Reviving inflationary concerns act as a tailwind for the US bond yields, also underpinning the USD.
- Intervention fears and expectations for a BoJ rate hike in June should help limit deeper JPY losses.
The USD/JPY pair reverses a modest Asian session dip to the 156.50-156.45 area on Monday as the safe-haven US Dollar (USD) draws support from persistent geopolitical uncertainties. Spot prices reclaim the 157.00 mark, though any meaningful upside still seems elusive in the wake of speculations that Japanese authorities might step in to prop up the domestic currency.
US President Donald Trump and Iran both rejected each other’s peace proposals for ending the war and the gradual reopening of the Strait of Hormuz amid major disagreements over Iran's nuclear program. In fact, the Wall Street Journal reported that Iran has rejected US demands to dismantle its nuclear facilities and suspend uranium enrichment for 20 years. US President Donald Trump quickly lashed out at the Iranian response, calling it "totally unacceptable." This comes on top of renewed hostilities in the Strait of Hormuz and keeps geopolitical risks in play, underpinning the USD's reserve currency status and offering some support to the USD/JPY pair.
Meanwhile, the US-Iran standoff triggers a fresh leg up in Crude Oil prices and revives inflationary concerns. Apart from this, the upbeat US Nonfarm Payrolls (NFP) report released on Friday reaffirms hawkish US Federal Reserve (Fed) expectations and acts as a tailwind for the US Treasury bond yields. This turns out to be another factor benefiting the USD and contributing to the bid tone surrounding the USD/JPY pair. Meanwhile, reports last week that officials intervened in the FX market during holidays in early May might hold back traders from placing aggressive bearish bets around the Japanese Yen (JPY) and cap further gains for the currency pair.
Moreover, Japan's top currency diplomat, Atsushi Mimura, had said on Thursday that Japan faces no constraints on how often it can intervene on currency markets and is in daily contact with US authorities. This reinforces that Japan remains committed to stemming speculative JPY moves. Adding to this, the Bank of Japan's (BoJ) upward revision of inflation forecasts and the 6-3 hawkish vote split lifted bets for a potential rate increase as soon as June. This favors the JPY bulls, warranting caution before positioning for further USD/JPY gains.
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.
China’s Consumer Price Index (CPI) climbed 1.2% in April from a year ago after arriving at a rise of 1.0% in March, the National Bureau of Statistics of China reported on Monday. The market consensus was for 0.8% in the reported period.
Chinese CPI inflation arrived at 0.3% MoM in April versus a fall of 0.7% prior, hotter than the expectation of a 0.1% decline.
China’s Producer Price Index (PPI) rose 2.8% YoY in April, following a 0.5% increase in March. The data came in above the market consensus of a 1.5% rise.
Market reaction to China’s CPI, PPI data
The China’s CPI and PPI data have little to no impact to the China-proxy Australian Dollar (AUD). At the press time, the AUD/USD pair is down 0.14% on the day to trade at 0.7235.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.15% | 0.25% | 0.17% | 0.06% | 0.15% | 0.23% | 0.21% | |
| EUR | -0.15% | 0.10% | 0.00% | -0.12% | 0.00% | 0.08% | 0.06% | |
| GBP | -0.25% | -0.10% | -0.09% | -0.22% | -0.10% | -0.02% | -0.05% | |
| JPY | -0.17% | 0.00% | 0.09% | -0.12% | 0.00% | 0.07% | 0.04% | |
| CAD | -0.06% | 0.12% | 0.22% | 0.12% | 0.13% | 0.14% | 0.15% | |
| AUD | -0.15% | -0.01% | 0.10% | -0.01% | -0.13% | 0.06% | 0.05% | |
| NZD | -0.23% | -0.08% | 0.02% | -0.07% | -0.14% | -0.06% | 0.00% | |
| CHF | -0.21% | -0.06% | 0.05% | -0.04% | -0.15% | -0.05% | -0.00% |
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 Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
This section was published on May 10 at 23:13 GMT as a preview of China’s CPI, PPI data.
China’s CPI, PPI Overview
The National Bureau of Statistics of China (NBS) will publish its data for April at 01.30 GMT. The Consumer Price Index (CPI) is expected to show an increase of 0.8% YoY in April, compared to 1.0% in March. The Producer Price Index (PPI) is projected to show a rise of 1.5% in March versus an increase of 0.5% prior.
The CPI is a key indicator to measure inflation and changes in purchasing trends. The YoY reading compares prices in the reference month to the same month a year earlier. Meanwhile, the PPI is a measurement of the rate of inflation experienced by producers.
How could the China’s CPI, PPI affect AUD/USD?
AUD/USD trades on a negative note on the day in the lead up to China’s CPI, PPI data. The pair edges lower as the US Dollar (USD) strengthens amid cautious sentiment after US President Donald Trump and Iran rejected each other’s latest peace proposals to end the 10-week conflict
If data comes in better than expected, it could lift the Australian Dollar (AUD), with the first upside barrier seen at the May 6 high of 0.7277. The next resistance level emerges at the 0.7300 psychological level. The additional upside filter to watch is the March 4 high of 0.7380.
To the downside, the May 8 low and a round figure of 0.7200 will offer some comfort to buyers. Extended losses could see a drop to the May 4 low of 0.7153, followed by the April 30 low of 0.7110.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
On Monday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.8467 compared to Friday's fix of 6.8502 and 6.7988 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.
- GBP/USD attracts some dip-buying following a bearish gap opening at the start of a new week.
- Persistent geopolitical uncertainties and hawkish Fed bets underpin the safe-haven Greenback.
- Easing UK political risks and the BoE’s rate hike signal help limit the downside for spot prices.
The GBP/USD pair rebounds nearly 50 pips following a bearish gap opening at the start of a new week and climbs back to the 1.3600 mark during the Asian session. However, a modest US Dollar (USD) strength might cap any further gains for spot prices.
US President Donald Trump and Iran both rejected each other’s peace proposals for ending the war and the gradual reopening of the Strait of Hormuz amid major disagreements over Iran's nuclear program. This comes on top of renewed hostilities and keeps geopolitical risks in play, which, in turn, assists the safe-haven Greenback to attracts some buyers and should keep a lid on the GBP/USD pair.
Meanwhile, the latest developments trigger a fresh leg up in Crude Oil prices and revive inflationary concerns. Adding to this, Friday's upbeat US Nonfarm Payrolls (NFP) report backs the case for the US Federal Reserve (Fed) to stick to its hawkish stance and remains supportive of elevated US Treasury bond yields. This lends additional support to the USD, and warrants caution for the GBP/USD bulls.
The British Pound (GBP), on the other hand, is underpinned by easing concerns over Prime Minister Keir Starmer’s position, especially after his Labour Party's heavy losses in English local elections and parliamentary votes in Scotland and Wales. Apart from this, the Bank of England's (BoE) hawkish signal that rate hikes could be appropriate if inflation remains persistent supports the GBP/USD pair.
Moving ahead, there isn't any relevant market moving economic data due on Monday, leaving spot prices at the mercy of the USD and incoming geopolitical headlines. Nevertheless, the mixed fundamental backdrop, along with the recent range-bound price action witnessed over the past week or so, makes it prudent to wait for strong follow-through buying before positioning for any further gains.
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.
- Gold price slumps to near $4,690 in Monday’s early Asian session.
- Trump rejected Iran’s latest proposal to end the conflict as “totally unacceptable.”
- US Nonfarm Payrolls rise by 115K in April, stronger than expected.
Gold price (XAU/USD) falls to around $4,690 during the early Asian session on Monday. The precious metal attracts some sellers after US President Donald Trump rejected Iran’s latest peace offer to end the 10-week conflict choking the Strait of Hormuz, fanning inflation fears.
Trump and Iran rejected each other’s peace proposals to end the war as the two sides struggle to maintain a fragile ceasefire, per Bloomberg. US President labeled Iran’s response to his proposal to end the conflict as “totally unacceptable.” Meanwhile, Iranian officials insisted the US needs to pay compensation for war damages, adding that Tehran will reject the US plan that would have forced the country to submit to Trump’s excessive demands.
The ongoing conflict between the US and Iran may keep inflation risk elevated, as well as the expectation for higher interest rates, which weigh on non-yielding bullion. It’s worth noting that Gold is often used amid geopolitical uncertainty but does not yield interest, making it less attractive when interest rates are high.
US Nonfarm Payrolls (NFP) beat expectations, though the plodding US labor market sent up several flags for a potential slowdown this year. The US economy added 115K jobs in April, versus the 185K increase (revised from 178K) in March, according to the Bureau of Labor Statistics on Friday. This figure surpassed the estimations of 62K by a wide margin. Meanwhile, the Unemployment Rate held at 4.3% in April, in line with the market consensus.
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.
- EUR/USD weakens to near 1.1765 in Monday’s early Asian session.
- Trump rejected Iran's response to a US proposal for peace talks to end the war.
- Expectations for an early rate hike by the ECB might help limit the Euro’s losses.
The EUR/USD pair loses momentum to around 1.1765 during the early Asian session on Monday. The Euro (EUR) softens against the US Dollar (USD) amid a cautious mood after US President Donald Trump and Iran rejected each other’s latest peace proposals to end the war in the Middle East.
Bloomberg reported on Sunday that Trump rejected a new Iran peace offer, calling it “totally unacceptable.” An Iranian official said the response focused on ending the war on all fronts, especially Lebanon, and on the safety of shipping through the strait, Iranian state TV said, without indicating how or when the vital waterway might reopen.
A prolonged conflict in the Middle East and a fragile ceasefire between the US and Iran could boost a safe-haven currency such as the Greenback and create a headwind for the major pair in the near term.
Data released by the Bureau of Labor Statistics on Friday showed that the Nonfarm Payrolls (NFP) rose by 115K in April, compared to 185K recorded in March, but better than the 62K forecast. Meanwhile, the Unemployment Rate held at 4.3% in April, in line with the market consensus.
Across the pond, the hawkish tone of the European Central Bank (ECB) could provide some support to the shared currency. Financial markets are now pricing in a 92% probability of a 25 basis point (bps) hike at the June meeting, with a total of three hikes anticipated by the end of 2026, according to Reuters.
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.
US President Donald Trump and Iran rejected each other’s latest peace proposals to bring an end to the war in the Middle East as the two sides struggle to maintain a fragile ceasefire, Bloomberg reported on Sunday.
“I have just read the response from Iran’s so-called ‘Representatives,’” he said in a social media post, calling it “TOTALLY UNACCEPTABLE,” said Trump.
According to the source, which cited people familiar with the response, Iran's latest proposal would dilute some of its highly enriched uranium and have the rest sent to a third country, but it also called for guarantees the transferred uranium would be returned if talks fail and ruled out dismantling its facilities.
Iran’s semi-official news agency Tasnim said the reporting on proposals for handling nuclear material was “not true.” The statement focused on Iran’s desire for an immediate end to the war, the release of its frozen assets, a lifting of US sanctions on oil sales, an end to the US blockade of the Gulf of Oman, and ultimately Iranian management of the strait.
According to Iranian state media, Iran's proposal stresses US compensation for war damages. Iran rejected the US plan that would have forced Tehran to submit to Trump’s excessive demands. Iranian officials further stated that the negotiation team must draft plans solely for the rights of the Iranian nation.
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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