Forex News
MUFG’s Lee Hardman notes that the US Dollar has stalled after the Dollar Index met resistance near 100.00 as Middle East tensions between Iran and Israel eased and Oil prices retreated toward USD90. However, he highlights that a hawkish repricing of Fed rate expectations, ahead of key US CPI data and the June FOMC meeting, continues to underpin the Dollar.
Fed outlook and geopolitics steer USD
"The US dollar lost upward momentum yesterday after the dollar index ran into resistance at the 100.00-level."
"Nevertheless, the US dollar is still continuing to derive more support from the recent hawkish repricing of Fed rate hike expectations."
"The next key test for the Fed rate hike expectations will be the release tomorrow of the latest US CPI report for May."
"The next FOMC meeting on 17th June is likely to be an important pivot point for Fed policy expectations and the US dollar as it will be the first time that new Fed Chair Kevin Warsh will outline his thoughts on how the Fed should respond to the energy price shock."
"Last week’s stronger nonfarm employment report has made it more likely that the Fed will at least drop their easing bias at the June FOMC meeting."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
National Bank Canada's (NBC) Stéfane Marion and Kyle Dahms highlights that the Canadian Dollar (CAD) has been the weakest reserve currency recently, with USD/CAD back near 1.39. They link this to Canada’s deteriorating real growth, negative Canada–U.S. 2‑year spreads and falling Gold prices. They expect CAD to stay under pressure near term and now project USD/CAD at 1.35 by year-end, with a stronger trade accord needed for a sustained rally.
CAD pressured by growth and bullion
"The Canadian dollar has been the worst-performing reserve currency in recent weeks, with USD/CAD moving back to 1.39 — the level last seen at the end of March, during the worst of the equity market pullback that followed the closure of the Strait of Hormuz."
"Oil still matters for Canada, but in the current market configuration, gold appears to be the more relevant marginal driver. Under these circumstances, bullion’s downtrend — now more than 17% below its recent record high — is a key factor behind the loonie’s recent weakness."
"Full-time employment at a record high makes it hard to call Canada a recession story. But with U.S. growth still outperforming by a wide margin, the Canada-U.S. 2-year spread remains a clear headwind for the currency."
"For now, we expect the CAD to remain under pressure. Appreciation should resume, but a sustained rally will likely require Ottawa to secure a trade accord with the U.S. this summer. We have raised our year-end USD/CAD target to 1.35, reflecting persistent uncertainty around geopolitical risks and Canadian firms’ access to the U.S. market."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Gold languishes near two-and-a-half-month lows below $4,360.
- A tense truce in the Middle East has improved investors' sentiment, weighing on the safe-haven USD.
- The technical picture remains bearish with price action well below the 200-day SMA.
Gold (XAU/USD) trades flat on Tuesday, near two-and-a-half-month lows at $4,268, with upside attempts capped below $4,360 so far. A moderate risk sentiment improvement, amid halting hostilities in the Middle East, has failed to support Gold, which remains vulnerable, weighed down by higher US Treasury yields.
Israel and Iran maintain a tense truce, despite an Israeli attack on the Lebanese city of Tyre that killed eight people earlier on the day. US President Donald Trump showed confidence about sealing a deal with Tehran within days, which has boosted a mild appetite for risk, sending the safe-haven US Dollar moderately lower against its main rivals.
Precious metals, however, remain on the back foot, weighed down by high US Treasury yields. US macroeconomic data released last week, namely the bright Nonfarm Payrolls report, prompted investors to ramp up bets on Federal Reserve rate hikes in the mid-term, triggering sharp rallies in US yields and the USD. Markets are now in a wait-and-see mode ahead of the release of the US Consumer Price Index (CPI) figures due on Wednesday, to confirm Fed-tightening bets
Technical Analysis: Stuck at the bottom of a falling channel
XAU/USD trades at $4,337, keeping a bearish near-term tone after breaking below the key 200-day simple moving average (SMA) last Friday. The pair trades near the bottom of a descending channel, with a previous support area ahead of $4,370 holding upside attempts for now, and with the $4,268 low still at hand.
Momentum conditions in daily charts are weak, with the Relative Strength Index (RSI) hovering in the mid-30s and the Moving Average Convergence Divergence (MACD) line deep in negative territory, which together hint that downside pressure remains dominant.
On the downside, initial support lies at the mentioned Monday's low of $4,268, ahead of the lower boundary of the descending channel near $4,220. Further down, the year-to-date low lies in the $4,100 area.
Bulls, on the other hand, should extend gains beyond the $4,350-$4,365 area (March 28, May 29 lows) and the 200-day SMA, now around $4,445. This would ease downside pressure and expose the top of the bearish channel, which would meet the price around $4,540.
(The technical analysis of this story was written with the help of an AI tool.)
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.
- The US Dollar Index trades lower against its major currency peers amid the risk-on mood.
- US President Trump expresses confidence that a deal with Iran could be announced within the next two or three days.
- Investors await the US CPI data for May.
The US Dollar (USD) underperforms its major currency peers during the European trading session on Tuesday, as renewed hopes of a permanent peace deal between the United States (US) and Iran have diminished its safe-haven demand.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.31% | -0.45% | 0.00% | -0.19% | -0.19% | -0.55% | -0.27% | |
| EUR | 0.31% | -0.11% | 0.33% | 0.12% | 0.16% | -0.21% | 0.07% | |
| GBP | 0.45% | 0.11% | 0.45% | 0.26% | 0.25% | -0.09% | 0.19% | |
| JPY | 0.00% | -0.33% | -0.45% | -0.18% | -0.18% | -0.54% | -0.25% | |
| CAD | 0.19% | -0.12% | -0.26% | 0.18% | 0.00% | -0.35% | -0.07% | |
| AUD | 0.19% | -0.16% | -0.25% | 0.18% | 0.00% | -0.35% | -0.04% | |
| NZD | 0.55% | 0.21% | 0.09% | 0.54% | 0.35% | 0.35% | 0.27% | |
| CHF | 0.27% | -0.07% | -0.19% | 0.25% | 0.07% | 0.04% | -0.27% |
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).
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.27% lower to near 99.73.
The Iran deal hopes have intensified, following remarks from US President Donald Trump that negotiations with Tehran are in “final throes” and the Strait of Hormuz could open up in “two or three days” if an agreement with Tehran is secured, The Guardian reported.
The US Dollar had outperformed in the last few months as elevated oil prices due to Hormuz closure boosted inflationary pressures globally and prompted hawkish Federal Reserve (Fed) bets.
According to the CME FedWatch tool, there is an almost 69% chance that the Fed will deliver at least one interest rate hike this year. This is a sharp turnaround from two interest rate cuts anticipated before the onset of the Middle East war.
Meanwhile, investors await the US Consumer Price Index (CPI) data for May, which will be released on Wednesday. Investors will pay close attention to the US inflation data to get fresh cues regarding the Federal Reserve’s (Fed) monetary policy outlook.
The US headline CPI is expected to arrive higher at 4.2% Year-on-Year (YoY) from 3.8% in April. In the same period, the core CPI – which excludes volatile food and energy items – grew at a faster pace of 2.9% against the previous reading of 2.8%.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
BNY’s Bob Savage reports that Bank of Japan (BoJ) officials are considering pausing further reductions in JGB purchases after March 2027, keeping buying near ¥2.1tn as the balance sheet shrinks via maturities. The June meeting is expected to deliver a rate hike to 1.0%. This evolving stance, alongside firmer Japanese money supply, frames the backdrop for USD/JPY and JGB yields.
Policy normalization and JGB purchases
"Bank of Japan (BoJ) officials are increasingly leaning toward pausing further reductions in bond purchases after March 2027, reflecting growing concern about market stability as the central bank unwinds years of quantitative easing."
"Sources indicate policymakers may maintain monthly bond purchases at around ¥2.1tn rather than continue tapering, arguing that the BoJ’s balance sheet will shrink substantially through the natural runoff of maturing bonds."
"The debate comes ahead of the June 15–16 meeting, where the BoJ is also widely expected to raise its policy rate to 1.0% from 0.75%. "
"The discussion highlights the tension between reducing the BoJ’s dominant presence in the government bond market and avoiding excessive volatility in yields as Japan continues its monetary policy normalization."
"Japan’s money supply growth firmed in May. M2 rose 2.5% y/y in May, up from 2.3% y/y in April, while M3 increased 1.7% y/y, unchanged from April."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- The Australian Dollar faces pressure against its risky currency peers as market experts see the RBA’s next policy move on the downside.
- Analysts at NAB said that the Australian economy has lost momentum.
- US-Iran early deal hopes have lifted market sentiment.
The Australian Dollar (AUD) trades lower against its major currency peers during the European trading session on Tuesday. The Aussie Dollar is up 0.15% against the US Dollar (USD) as the market sentiment turns risk-on. However, it is underperforming its risky currency peers amid hopes that the next move by the Reserve Bank of Australia (RBA) on interest rates will be a “cut” rather than a hike.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.28% | -0.43% | 0.00% | -0.14% | -0.18% | -0.52% | -0.23% | |
| EUR | 0.28% | -0.12% | 0.32% | 0.14% | 0.16% | -0.21% | 0.08% | |
| GBP | 0.43% | 0.12% | 0.43% | 0.28% | 0.24% | -0.08% | 0.20% | |
| JPY | 0.00% | -0.32% | -0.43% | -0.13% | -0.16% | -0.50% | -0.21% | |
| CAD | 0.14% | -0.14% | -0.28% | 0.13% | -0.03% | -0.36% | -0.08% | |
| AUD | 0.18% | -0.16% | -0.24% | 0.16% | 0.03% | -0.33% | -0.05% | |
| NZD | 0.52% | 0.21% | 0.08% | 0.50% | 0.36% | 0.33% | 0.28% | |
| CHF | 0.23% | -0.08% | -0.20% | 0.21% | 0.08% | 0.05% | -0.28% |
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).
Analysts at National Australia Bank (NAB) have scrapped their previous forecast of a hike by the RBA in the August policy meeting, and now expect it to lower its interest rate, citing that the economy has lost momentum. However, the NAB has not provided any timeframe for the cut.
Australian economic concerns have stemmed from weak employment and soft Consumer Price Index (CPI) data for April. The Australian Bureau of Statistics reported last month that inflationary pressures cooled down to 4.2% Year-on-Year (YoY) in April from 4.6% in March. On the labor market front, employers laid off 18.6K payrolls in April, while they were anticipated to add 17.5K fresh workers.
Analysts at Commonwealth Bank of Australia (CBA) have predicted that the RBA will hold its Official Cash Rate (OCR) steady at 4.35 by the year-end and deliver cuts in May and August next year.
For more cues on the Australian interest rate outlook, investors will focus on the policy meeting next week, in which the RBA is expected to leave interest rates steady at 4.35%.
Meanwhile, the market sentiment has turned favorable for riskier assets on hopes that the United States (US) and Iran will reach a deal soon. These hopes have intensified following comments from US President Donald Trump that negotiations with Iran are in “final throes” and the Strait of Hormuz could open up in “two or three days” if an agreement with Tehran is secured, The Guardian reported.
As of writing, S&P 500 futures are up almost 0.5% to near 7,450, reflecting risk-on market sentiment. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.23% lower to near 99.75.
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