Forex News
Saudi Arabia and 13 other countries announced the creation of an international coalition to safeguard freedom of navigation through the Bab al-Mandeb Strait, the Red Sea and the Gulf of Aden, Reuters reported on Thursday.
Saudi Arabia’s Ministry of Defence said that the Multinational Maritime Defense Alliance was established as a framework to strengthen collective maritime defence cooperation.
The move came as the US-Iran conflict has become focused on the Strait of Hormuz. The virtual closure of the route, which formerly carried about 20% of global oil and gas exports, is weighing heavily on the global economy.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 1.20% on the day at $82.60.
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.
- USD/JPY trades just above 159.50 after a 2.31% collapse, the sharpest single-session Dollar decline against the Yen since 2022.
- Tokyo has confirmed nothing, which is the design: no jawboning, no rate checks, just size arriving without warning at 13:30 GMT.
- Tokyo inflation accelerated to 1.9% on the measure the Bank watches most closely, hours after the operation and hours before the decision that has to justify it.
USD/JPY trades just above 159.50, down 2.31% and more than five Yen below a high set just short of 164.00. The move arrived in minutes rather than hours, went through the 50-day Exponential Moving Average (EMA) near 161.50 without pausing, and stopped within 20 pips of the 200-day EMA just below 158.00. Nothing on the calendar accounts for a move of that size.
Ten minutes, five Yen
The collapse began at 13:30 GMT and was substantially over before most desks had read the tape. One trading desk recorded roughly 8.1 billion Dollars of selling in the pair across core venues in the ten minutes that followed, with volumes across the complex running far above normal. The Ministry of Finance division that directs intervention was unreachable for comment, and the government has said nothing since.
American data at 12:30 GMT had already softened the Dollar, with advance second-quarter Gross Domestic Product (GDP) growth of 1.5% against a 2.1% consensus and core Personal Consumption Expenditures (PCE) inflation at 0.1% MoM. Soft data moves this pair in tens of pips, not hundreds. The Yen took more than 2% out of the Euro and the Pound and close to 2% out of the Australian Dollar in the same window, which is the signature of one buyer rather than a repricing.
The playbook changed before the operation did
Earlier Japanese operations were preceded by weeks of escalating verbal warnings, rate checks and calibrated hints, all of which gave speculative positions time to trim. This one carried none of that. The approach now is to say nothing and then arrive at size, with the stated aim of wiping out speculative Yen shorts rather than politely discouraging them, and Thursday is the first full demonstration of what that looks like.
The timing was not accidental either. The operation landed the day after a divided Federal Reserve, into a weak American growth print, with month-end flows already running and the Yen at four-decade lows. Tokyo bought the cheapest Dollars it was going to get, at the moment the largest number of leveraged positions sat on the wrong side of the trade.
Now the central bank has to agree
The Bank of Japan announces Friday and is expected to hold at 1.00% after June's increase. The Outlook Report is the substance, with the fiscal 2026 growth forecast expected to be revised up toward 0.8% from 0.5%, and a large majority of surveyed economists still looking for 1.25% by year end, with October the favoured timing for it.
The inflation data has now done part of that job for the committee. Tokyo prices for July, released hours after the operation, came in above expectations on every measure the Bank tracks, which makes it considerably harder to describe the currency's weakness as a passing energy effect. The argument for bringing the next increase forward is stronger on Friday morning than it was on Thursday afternoon.
Tokyo committed roughly 70 billion Dollars to supporting the currency across April and May, and the Yen still reached four-decade lows two months later, which is a fair measure of what an operation buys without a rate move behind it. Intervention without a policy follow-through gets absorbed, and the arithmetic explains why. The gap between the American target range and the Japanese policy rate is roughly 260 basis points, which is the yield the carry trade rebuilds on within days of any operation. A press conference that treats the currency as central to the inflation outlook keeps Thursday's work intact. One that frames the energy shock as temporary and declines to bring the next increase forward hands the positions Tokyo just liquidated back at better levels.
What lands next
The July Tokyo inflation report landed at 23:30 GMT and ran hot across the board. The reading excluding fresh food rose to 1.9% YoY against a 1.7% consensus and 1.6% previously, headline reached 2.0% from 1.7%, and the measure excluding food and energy also printed 2.0%. The June unemployment rate held at 2.5%. The decision follows overnight with the press conference at 06:30 GMT, and Chinese official surveys at 01:30 GMT carry a consensus of exactly 50.0 on both readings.
Next week brings labour cash earnings on Tuesday against a 3.2% previous, the wage measure policymakers have repeatedly named as their test, and the June meeting minutes the same day. The American calendar delivers its manufacturing survey Monday, private payrolls Wednesday, and Nonfarm Payrolls Friday against a 57K previous, with a September Federal Reserve hike priced at 63%. Every one of those is an opportunity to widen the gap Tokyo has just spent reserves narrowing.
Levels and bias
Resistance: First at 160.00, the handle the operation was defending. Above it, the 50-day EMA near 161.50 decides whether Thursday was a correction or a turn, with 163.50 the reference beyond that.
Support: 158.00 covers both the session low and the 200-day EMA, which halted the first wave almost exactly. A daily close below there opens 156.50 and puts the operation firmly in profit.
Bias: Bearish while 161.50 caps. Fading an active operation into a central bank meeting is a poor trade whatever the carry arithmetic says, Tokyo has historically worked in multi-day bursts rather than single strikes, and Thursday night's inflation figures make a validating press conference more likely than it looked when the operation began. A Friday that declines to validate the currency anyway is the trigger that hands the pair back to the funding trade.
USD/JPY daily chart
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.
The headline Tokyo Consumer Price Index (CPI) for July rose 2.0% YoY as compared to 1.7% in the previous month, the Statistics Bureau of Japan showed on Friday.
Additionally, Tokyo CPI ex Fresh Food climbed climbed 1.9% YoY in July against 1.7% expected and 1.6% in the prior month. The Tokyo CPI ex Fresh Food, Energy jumped 2.0% YoY in July, compared to the previous reading of 1.9%.
USD/JPY reaction to the Tokyo Consumer Price Index data
The Japanese Yen (JPY) recovers some lost ground in an immediate reaction to the Tokyo CPI inflation report. As of writing, the USD/JPY pair is down 2.10% on the day at 159.95.
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.
- Gold price drifts higher to near $4,110 in Friday’s early Asian session.
- Traders scale back expectations of an immediate Fed rate hike.
- IRGC said it hit Kuwait and Jordan after US strikes.
Gold price (XAU/USD) gains momentum to around $4,110 during the early Asian session on Friday. The precious metal edges higher as traders reduce their bets on interest rate hikes a day after Federal Reserve (Fed) Chair Kevin Warsh offered little clarity on policy.
On Wednesday, the US central bank decided to leave the interest rates unchanged in its current target range between 3.50% and 3.75%. During the press conference, Warsh pledged an unwavering commitment to bring inflation down, a message that left markets confused about just what he was prepared to do.
It’s worth noting that Gold is often used as a hedge against inflation but does not yield interest, making it less attractive when interest rates are high.
Markets are now pricing in nearly a 63.4% probability of a US rate hike in September, down from about 77% before the July Fed meeting, according to the CME FedWatch tool.
Nonetheless, ongoing tensions in the Middle East might cap the upside for the yellow metal as it could push crude oil prices up and prompt central banks to hold rates at elevated levels for longer.
Bloomberg reported the Islamic Revolutionary Guard Corps (IRGC) said that it targeted US bases in Kuwait, Jordan and Bahrain after US forces bombed a building on Iran’s Qeshm Island. Iranian military added that the Strait of Hormuz would remain closed and that the “aggressor will be punished.”
Fed shifts focus to data as forward guidance is pared back
Commerzbank’s FX Research team notes that the Fed chair has reinforced the central bank’s data-dependent stance, “continu[ing] his efforts to reduce the Fed's reliance on forward guidance, arguing that markets should respond to incoming economic data rather than Fed signalling.” This recalibration of communication strategy is seen by Commerzbank as a key backdrop for recent market moves, with investors increasingly attuned to the evolving macro data rather than pre-set policy cues.
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.
- AUD/USD trades above 0.7000 after a 1.06% advance, taking out the 50-day EMA and posting its strongest session in weeks.
- The domestic week was dovish, with a soft second-quarter inflation report pricing an August hike out of the Reserve Bank's curve.
- The Yen gained close to 2% on the Aussie in the same hour, which is the exposure that matters if Tokyo returns for a second round.
AUD/USD trades above 0.7000, up 1.06% and roughly 85 pips clear of a session low set just below 0.6950 in the early European hours. The advance cut through the 50-day Exponential Moving Average (EMA) sitting at 0.7000, a level the pair has been rejected at repeatedly since June. None of it originated in Australia.
A dovish week at home
Australia's second-quarter inflation report on Wednesday undercut what was left of the tightening case. The trimmed mean measure the Reserve Bank of Australia targets printed 3.6% YoY, below the 3.8% the Bank itself forecast in May, and the monthly headline rate eased to 3.8% from 4.0% against a consensus that expected no improvement at all. Markets took the August hike out of the curve within the hour. The Governor had warned only days earlier that a further increase may still be required to return inflation to target, and the curve priced her out anyway.
The activity data pointed the other way and nobody cared. Building permits jumped 7.2% MoM in June against a consensus looking for a 1.5% decline, and the July flash surveys held in expansion with the composite at 52.6. The Aussie sat within 20 pips of 0.6950 through the entire Asian session and then made its low of the day roughly five hours after the permits release.
The move came from Tokyo
The session turned at 13:30 GMT, when USD/JPY collapsed more than five Yen in minutes on suspected Japanese intervention that Tokyo has not confirmed. One trading desk recorded roughly 8.1 billion Dollars of selling in the pair across core venues inside the ten minutes that followed. The Dollar Index fell to a seven-week low near 100, and every Dollar pair on the board went with it.
American data had softened the ground an hour earlier without doing the work. Advance second-quarter Gross Domestic Product (GDP) growth of 1.5% missed a 2.1% consensus and core Personal Consumption Expenditures (PCE) inflation printed 0.1% MoM against 0.2%, which was worth a few tenths of a percent to the Dollar. The five-Yen move was worth the rest, and the Aussie's 1.06% is overwhelmingly the second thing.
The carry problem
The trade the Aussie actually carries is not the one against the Dollar. Australia's cash rate sits at 4.35% against 1.00% in Japan, which makes the Aussie one of the natural longs funded in Yen, and the Yen took close to 2% out of it on Thursday. A currency that gains 1.06% on the Dollar while losing 2% to its own funding currency has not had a good day. It has had a profitable one.
Intervention of this size rarely arrives on its own, and Tokyo has historically worked in multi-day bursts rather than single strikes. A second round would land on the same leveraged positions from the same direction, and the Aussie sits in the middle of them. That exposure is larger than anything the Australian calendar can produce over the next fortnight.
What lands next
Friday opens with Australian producer prices at 01:30 GMT against a 3% previous, alongside the Chinese official manufacturing and non-manufacturing surveys at the same time. Both carry a consensus of exactly 50.0, the line between expansion and contraction, which leaves no room for a comfortable reading in either direction. The Bank of Japan decision and quarterly Outlook Report follow, with a hold at 1.00% expected and the press conference at 06:30 GMT.
Next week thins out at home. The private Chinese manufacturing survey lands Monday and the services equivalent Wednesday, Australian trade figures arrive Thursday against a previous deficit near 3 billion Australian Dollars, and the United States delivers its manufacturing survey Monday, private payrolls Wednesday, and Nonfarm Payrolls Friday against a 57K previous. The Reserve Bank meets on 11 August.
With a September Federal Reserve hike priced at 63% and the Australian central bank now expected to sit still through August, the rate differential is narrowing from both ends. That is the case for reading Thursday's gain as borrowed rather than earned, and for treating 0.7000 as a level the Aussie has been handed rather than one it has taken.
Levels and bias
Resistance: First at 0.7050, immediately above the session high. A daily close above there opens 0.7100, with the May peak short of 0.7300 the ceiling for the year so far.
Support: 0.7000 is the pivot, reinforced by the 50-day EMA at the same level. Below it sits 0.6950, then the 200-day EMA just above 0.6900, which has flattened out and has held every test since early July.
Bias: Bullish while 0.7000 holds, targeting 0.7100. The daily Stochastic Relative Strength Index (Stoch RSI) at 85 says the move is stretched rather than broken, and the genuine risk to it is a second Japanese operation rather than anything scheduled in Canberra. Losing 0.7000 returns the pair to the range it has occupied since June.
AUD/USD daily chart
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.
Forex Market News
Our dedicated focus on forex news and insights empowers you to capitalise on investment opportunities in the dynamic FX market. The forex landscape is ever-evolving, characterised by continuous exchange rate fluctuations shaped by vast influential factors. From economic data releases to geopolitical developments, these events can sway market sentiment and drive substantial movements in currency valuations.
At Rakuten Securities Hong Kong, we prioritise delivering timely and accurate forex news updates sourced from reputable platforms like FXStreet. This ensures you stay informed about crucial market developments, enabling informed decision-making and proactive strategy adjustments. Whether you’re monitoring forex forecasts, analysing trading perspectives, or seeking to capitalise on emerging trends, our comprehensive approach equips you with the insights needed to navigate the FX market effectively.
Stay ahead with our comprehensive forex news coverage, designed to keep you informed and prepared to seize profitable opportunities in the dynamic world of forex trading.
