Forex News
- Silver gains as oil falls following Trump's comments downplaying near-term military action against Iran.
- Non-yielding XAG faces headwinds as CME FedWatch shows a 78%+ chance of a December rate hike.
- Robust October Nonfarm Payrolls (165K) and falling unemployment (4.1%) could boost the Greenback, capping Silver's rally.
Silver price (XAG/USD) appreciates after two days of losses, trading around $53.00 per troy ounce during the Asian hours on Monday. Silver price advances as declining oil prices eased inflationary pressures.
Crude prices dropped after US President Donald Trump stated that further military strikes on Iran are "highly unlikely," provided progress continues on Iran's nuclear program and the Strait of Hormuz remains open. Trump also noted that the unpopular Middle East conflict, which pushed up energy costs, contributed to the Republicans' recent midterm election losses.
Reuters reported that in a phone interview with CNN, Trump reaffirmed that additional military action would likely be unnecessary if Iran signs a firm agreement. Despite earlier hints at resuming major attacks after the midterms, no large-scale US military operations have been launched. Meanwhile, Iran has warned that it will retaliate against any future strikes by targeting US and Israeli assets.
However, non-yielding Silver may face challenges amid expectations of a Federal Reserve (Fed) rate hike in December. According to the CME FedWatch tool, the probability of another 25-basis-point rate hike at the December Federal Open Market Committee (FOMC) meeting has climbed above 78%.
Robust US employment figures are providing significant support for the Greenback. Specifically, Nonfarm Payrolls (NFP) increased by 165,000 in October, easily topping the market consensus of 65,000 and building on September's revised total of 60,000, while the Unemployment Rate edged down to 4.1%, beating expectations of 4.2%. Traders are now closely watching Tuesday's US Consumer Price Index (CPI) report and Friday's Producer Price Index (PPI) for further signals regarding the Fed's upcoming policy decisions.
US data and Fed speakers in focus as Dollar repricing gathers pace
Strategists at ABN Amro underline that the immediate test for the recent shift in Fed expectations and associated Dollar weakness will come from the US calendar, noting that “three US events will test the repricing of Fed expectations and the USD’s downside risks today.” They point to the combination of scheduled data releases and Fed communication as critical for validating whether markets have gone too far in scaling back tightening prospects and in pricing further downside for the USD.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
China’s Finance Ministry said in a statement on Monday that it will extend the suspension of an additional 24% tariff on imports from the United States (US) for two months, effective November 10.
The Ministry stated that it will maintain 10% tariffs, but the details of how long the suspension will last are not yet known.
This comes ahead of US President Donald Trump and Chinese President Xi Jinping’s expected meeting at APEC in China next week.
Market reaction
The headlines are lifting broader market sentiment alongside the risk-sensitive Australian Dollar (AUD), with the AUD/USD pair testing 0.6900, up 0.41% on the day as of writing.
US-China Trade War FAQs
Generally speaking, a trade war is an economic conflict between two or more countries due to extreme protectionism on one end. It implies the creation of trade barriers, such as tariffs, which result in counter-barriers, escalating import costs, and hence the cost of living.
An economic conflict between the United States (US) and China began early in 2018, when President Donald Trump set trade barriers on China, claiming unfair commercial practices and intellectual property theft from the Asian giant. China took retaliatory action, imposing tariffs on multiple US goods, such as automobiles and soybeans. Tensions escalated until the two countries signed the US-China Phase One trade deal in January 2020. The agreement required structural reforms and other changes to China’s economic and trade regime and pretended to restore stability and trust between the two nations. However, the Coronavirus pandemic took the focus out of the conflict. Yet, it is worth mentioning that President Joe Biden, who took office after Trump, kept tariffs in place and even added some additional levies.
The return of Donald Trump to the White House as the 47th US President has sparked a fresh wave of tensions between the two countries. During the 2024 election campaign, Trump pledged to impose 60% tariffs on China once he returned to office, which he did on January 20, 2025. With Trump back, the US-China trade war is meant to resume where it was left, with tit-for-tat policies affecting the global economic landscape amid disruptions in global supply chains, resulting in a reduction in spending, particularly investment, and directly feeding into the Consumer Price Index inflation.
- USD/CAD may gain amid rising odds of a December Fed rate hike following strong jobs data.
- Traders await upcoming US CPI and PPI reports for further central bank policy signals.
- Tumbling crude oil prices continue to weigh on the commodity-linked Canadian dollar.
USD/CAD loses ground after two days of gains, trading around 1.4110 during Asian hours on Monday. However, downside momentum could be restrained as the US Dollar (USD) may regain ground. This potential strength is driven by rising odds of a December Federal Reserve rate hike after strong US labor data. Investors are now closely watching Tuesday's US Consumer Price Index (CPI) report and Friday's Producer Price Index (PPI) for further signals regarding the Fed's upcoming policy decisions.
According to the CME FedWatch tool, the probability of another 25-basis-point rate hike at the December Federal Open Market Committee (FOMC) meeting has climbed above 78%. Robust US employment figures are providing significant support for the Greenback. Specifically, Nonfarm Payrolls (NFP) increased by 165,000 in October—easily topping the market consensus of 65,000 and building on September's revised total of 60,000—while the Unemployment Rate edged down to 4.1%, beating expectations of 4.2%.
Additionally, the USD/CAD pair could find support as the commodity-linked Canadian Dollar (CAD) faces downward pressure from falling oil prices. Crude prices dropped after US President Donald Trump stated that further military strikes on Iran are "highly unlikely," provided progress continues on Iran's nuclear program and the Strait of Hormuz remains open. Trump also noted that the unpopular Middle East conflict, which pushed up energy costs, contributed to the Republicans' recent midterm election losses.
In a phone interview with CNN reported by Reuters, Trump reaffirmed that additional military action would likely be unnecessary if Iran signs a firm agreement. Despite earlier hints at resuming major attacks after the midterms, no large-scale US military operations have been launched. Meanwhile, Iran has warned that it will retaliate against any future strikes by targeting US and Israeli assets.
Technical Analysis:
In the daily chart, USD/CAD trades at 1.4110. The pair holds above both the 50- and nine-day Exponential Moving Averages (EMAs), which suggests a constructive near-term bias as price extends its recovery off the recent lows. The 14-day Relative Strength Index (RSI) at 55.3 has eased back from prior overbought extremes but remains in neutral-to-positive territory, hinting that bullish momentum is still present without being stretched.
On the downside, initial support is located at the 50-day EMA at 1.4054, followed closely by the nine-day EMA at 1.4047, forming a tight demand cluster that underpins the short-term trend as long as it holds. With no clear resistance levels in the provided dataset, traders would likely monitor psychological and recent swing highs above 1.4111 for signs of fatigue, while a daily close back below the EMA cluster would undermine the bullish bias and signal a deeper corrective phase.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- USD/JPY weakens to around 158.25 in Monday’s early Asian session.
- BoJ meeting minutes suggested policymakers are prepared to accelerate monetary tightening.
- US NFP climbed by 165,000 in October; Unemployment Rate fell to 4.1%.
The USD/JPY pair loses ground to near 158.25 during the early Asian session on Monday. The Japanese Yen (JPY) edges higher against the US Dollar (USD) as Bank of Japan (BOJ) meeting minutes indicate policymakers are prepared to accelerate monetary tightening.
The BoJ kept rates steady last month but stressed its resolve to combat inflationary risk, reinforcing market bets of a December hike. According to the minutes of September meeting released on Thursday, most of the BoJ policymakers agreed that further interest rate increases would be appropriate as underlying inflation approached the central bank's 2% target.
On Friday, BoJ former top economist Seisaku Kameda said that the central bank is expected to raise interest rates in December and keep lifting borrowing costs next year until they reach 2% to combat mounting inflationary pressure.
US Nonfarm Payrolls (NFP) rose by 165,000 in October, compared to 60,000 recorded in September, the US Bureau of Labor Statistics (BLS) showed on Friday. This figure blew past expectations for a 65,000 gain. The Unemployment Rate in the US fell to 4.1% in October from 4.2% in September.
Stronger-than-expected US jobs report keeps the Federal Reserve (Fed) on track to raise interest rates in December. "The labor market is heating up across-the-board and supports our view that the Fed will raise the policy rate again in December," said Kathy Bostjancic, chief economist at Nationwide.
Financial markets priced in a roughly 79.6% chance of a rate hike at the US central bank's meeting next month, up from 72.8% before the US jobs report, the CME FedWatch tool showed.
Yen gains on haven flows as BoJ normalisation expectations build
Strategists at ABN Amro highlight that “haven demand favoured the JPY over the USD” during the latest bout of risk aversion. They note that the “DXY Index was unchanged at 101.6 despite the equity rout, as falling US yields eroded the greenback’s appeal.” In contrast, the Yen drew support both from safe-haven inflows and domestic policy signals, with ABN Amro pointing out that “the JPY appreciated by 0.5% to 157.70 per USD, underpinned by the Bank of Japan minutes, which reinforced expectations of further normalisation.”
Daly flags inflation as top priority, reinforcing hawkish Fed bias
Fed’s Daly delivers a notably more hawkish tone, with an FXS Speechtracker score of 8/10 compared to the established baseline of 6.4/10, underscoring a stronger emphasis on tightening risks. The key remarks highlight that while the jobs report is “good news” and wage growth “isn’t booming,” real wages are falling and inflation has been “high for too long,” making inflation the number 1 priority and justifying further policy tightening despite a resilient labor market. Daly’s insistence that the strong labor market gives the Fed latitude to act, combined with readiness to raise rates if called for, supports a firmer DOLLAR bias and keeps risk assets on notice.
The FXS Fed Sentiment Index rose by 0.95 points to 143.10, reinforcing a firmly hawkish stance well above the neutral 100 threshold and aligning with the elevated FXS Speechtracker reading. This move signals that, despite acknowledgment of uncertainties around tariffs, war, and AI, the dominant market takeaway is that the Fed remains inclined toward additional tightening, a backdrop that should continue to underpin the DOLLAR against the EURO and YEN.
Technical Analysis: USD/JPY remains capped below the 100-day SMA
In the daily chart, USD/JPY holds in a tight range just beneath the 100-day Simple Moving Average (SMA) while hovering above the Bollinger Bands middle line. This configuration suggests a broadly range-bound bias, with price capped by the upper Bollinger Band and the 100-day SMA overhead, even as the Relative Strength Index (14) at 52.93 hints at mildly constructive but non-directional momentum.
On the topside, immediate resistance is clustered near the Bollinger upper band at 158.95, followed by the 100-day SMA at 159.05, where a daily close above would be needed to reopen a more decisive bullish leg. On the downside, initial support aligns with the Bollinger middle band at 157.95, with a deeper floor at the lower band around 156.95; a drop through this lower boundary would shift the focus toward a broader corrective phase in the pair.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- AUD/USD remains stronger as China CPI climbed 0.7% YoY in October, against 0.8% expected.
- US Dollar declines despite high market expectations for a 25-basis-point US Federal Reserve rate increase.
- Solid US employment data and upcoming inflation reports may support the Greenback.
AUD/USD rises after two days of losses, trading around 0.6890 during Asian hours on Monday. The pair appreciates as the Australian Dollar (AUD) remains stronger following the release of Consumer Price Index (CPI) data from China, Australia’s close trading partner.
China CPI climbed 0.7% in October from a year ago after arriving at a rise of 0.9% in September. The market consensus was for 0.8% in the reported period. Chinese CPI inflation arrived at 0% MoM in October versus a rise of 0.2% prior, in line with expectations. China’s Producer Price Index (PPI) jumped 5.7% YoY in October, following a 5.0% increase in September. The data came in stronger than the market consensus of 5.3%.
Moreover, the AUD/USD pair rises as the US Dollar (USD) declines even though the CME FedWatch tool indicates that the odds of another 25-basis-point rate hike at the December 8-9 Federal Open Market Committee (FOMC) meeting have risen to near 80%.
Meanwhile, stronger US jobs data could potentially lift the Greenback and act as a headwind for the pair. Nonfarm Payrolls (NFP) rose by 165,000 in October, surpassing the market consensus of 65,000 and improving from September's figure of 60,000, while the Unemployment Rate nudged down to 4.1% against a forecast of 4.2%. Traders will be closely watching Tuesday's US Consumer Price Index (CPI) report and Friday's Producer Price Index (PPI) for further signals regarding the Federal Reserve’s upcoming policy decisions.
According to analysts at ABN Amro, the latest bout of financial market stress has driven a classic flight to quality, with investors “seeking safety in US Treasuries and reassessing the need for additional tightening amid financial market stress.” This reassessment of the Fed’s policy path aligns with the broader market narrative of fading hike expectations and reinforces the sense that the Dollar may struggle to draw further support from risk-off episodes if Treasury yields continue to decline.
Economic Indicator
Consumer Price Index (YoY)
The Consumer Price Index (CPI), released by the National Bureau of Statistics of China on a monthly basis, measures changes in the price level of consumer goods and services purchased by residents. 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. Generally, a high reading is seen as bullish for the Renminbi (CNY), while a low reading is seen as bearish.
Read more.Last release: Mon Nov 09, 2026 01:30
Frequency: Monthly
Actual: 0.7%
Consensus: 0.8%
Previous: 0.9%
Source: National Bureau of Statistics of China
- GBP/USD edges higher to around 1.3370 in Monday’s early Asian session.
- Markets price three more BoE hikes.
- US NFP increased by 165,000 in October, well above the forecast.
The GBP/USD pair gains ground to near 1.3370, snapping the two-day losing streak during the early Asian session on Monday. The British Pound (GBP) strengthens against the US Dollar (USD) on a hawkish-than-expected policy stance from the Bank of England (BoE).
Last week, the BoE raised its benchmark interest rate by 25 basis points (bps) to 4.00%, marking its first rate increase in over three years. BoE Governor Andrew Bailey emphasized the war in the Middle East, which is pushing up energy prices, as the main factor in deciding future rates. Markets price three more hikes by the end of next year, more than most economists expect.
Bailey said falling oil prices following the market reacting to the US midterms would not have changed the decision made today but admitted it "obviously" has an impact on his view going forward.
On the other hand, a stronger-than-expected US Nonfarm Payrolls (NFP) report might help limit the USD’s losses. The US Bureau of Labor Statistics (BLS) revealed on Friday that the US economy added 165,000 jobs in October, compared to 60,000 recorded in September. This figure surpassed the market expectation of 65,000. Additionally, the Unemployment Rate fell to 4.1% in October from 4.2% in September.
Markets are now pricing in nearly a 79.6% chance that the Fed will raise rates in December, compared with 72.8% before the US jobs report, according to the CME FedWatch tool.
BoE hike aligns with Fed as MPC flags inflation risks into 2027
Analysts at ABN Amro highlight that the BoE has taken another step along its tightening path, noting that the central bank "raised the bank rate by 25 bps to 4.00%, matching the upper bound of the 3.75-4.00% Fed Funds Rate range." They point out that the decision was firmly supported within the committee, with "eight members" backing the increase, while "one preferred a 50-bps increase," underscoring a still-hawkish bias on the MPC. Looking ahead, ABN Amro emphasises that the committee "projected inflation to reach around 5% by mid-2027 and signalled another increase unless the Middle East conflict is resolved," suggesting that lingering geopolitical risks remain a key factor in the BoE’s policy calculus.
BoE’s Pill opens door to flexible 2026 rate path
The FXS Speechtracker score of 4.2/10, well below the historic 6.4/10 baseline for Pill, signals a notably more dovish and uncertain tone. By stressing that nothing is baked in for interest rates next year and that there is no preset upward path from spring and beyond, the speech clearly backs away from a tightening bias and emphasizes data dependence.
The remark that Bank Rate could stay on hold or even fall if growth stalls, with the key determinant being margin squeeze on companies and corporate reactions, reinforces this shift toward caution. For GBP, the combination of heightened uncertainty and explicit openness to rate cuts if growth falters leans modestly negative, suggesting reduced support for the currency compared with Pill’s usual stance.
Technical Analysis: GBP/USD holds a bearish tone under the 100-day SMA
In the daily chart, GBP/USD holds a capped tone as it sits just beneath the 100-day simple moving average (SMA). Price trades slightly above the 20-day Bollinger middle band, suggesting nearby underlying demand, but the proximity of the 100-day SMA overhead keeps the topside constrained. The Relative Strength Index (RSI) at 51.1 is broadly neutral, hinting that momentum is not yet strong enough to challenge the prevailing resistance structure.
On the downside, immediate support emerges at the 20-day Bollinger middle band near 1.3355, with a deeper cushion at the lower Bollinger band around 1.3225 if selling pressure extends. On the topside, initial resistance is located at the 100-day SMA at 1.3395, followed by a higher barrier at the 20-day Bollinger upper band near 1.3485, which would need to be reclaimed to shift the near-term bias toward a more constructive bullish outlook.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
On Monday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.7188 compared to the previous day's fix of 6.7168.
(The story was corrected on November 9 at 1:45 GMT to start the first line with saying "On Monday, and not Friday".)
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.
China’s Consumer Price Index (CPI) climbed 0.7% in October from a year ago after arriving at a rise of 0.9% in September, 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% MoM in October versus a rise of 0.2% prior, in line with the expectation.
China’s Producer Price Index (PPI) jumped 5.7% YoY in October, following a 5.0% increase in September. The data came in stronger the market consensus of 5.3%.
Market reaction to China’s CPI, PPI data
The mixed Chinese data fail to boost the China-proxy Australian Dollar (AUD). At the press time, the AUD/USD pair is up 0.36% on the day to trade at 0.6888.
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.
- EUR/USD rises as strong ECB policymaker comments and 4% Eurozone inflation boost December rate hike prospects.
- US Dollar declines despite high market expectations for a 25-basis-point US Federal Reserve rate increase.
- Solid US employment data and upcoming inflation reports may limit further gains for the EUR/USD pair.
EUR/USD gains ground after two days of losses, trading around 1.1150 during Asian hours on Monday. The currency pair is appreciating as the Euro (EUR) gains support following statements from several European Central Bank (ECB) policymakers, including the heads of the German and Italian central banks, suggesting that a December interest rate increase may be likely.
Eurozone inflation rose to a three-year high of 4% in October, driven by higher energy costs, which adds to the case for further monetary tightening. ECB President Christine Lagarde noted on Thursday that the central bank is actively monitoring incoming data to determine whether a rate hike is warranted next month.
Additionally, the EUR/USD pair is climbing as the US Dollar (USD) declines even though the CME FedWatch tool indicates that the odds of another 25-basis-point rate hike at the December 8-9 Federal Open Market Committee (FOMC) meeting have risen to near 80%.
Meanwhile, stronger US jobs data could potentially lift the Greenback and act as a headwind for the pair. Nonfarm Payrolls (NFP) rose by 165,000 in October, surpassing the market consensus of 65,000 and improving from September's figure of 60,000, while the Unemployment Rate nudged down to 4.1% against a forecast of 4.2%. Looking ahead, investors will be closely watching Tuesday's US Consumer Price Index (CPI) report and Friday's Producer Price Index (PPI) for further signals regarding the Federal Reserve’s upcoming policy decisions.
Dollar fails to capitalize as yields and Fed expectations retreat
Strategists at ABN Amro observe that the Dollar has been unable to draw support from the latest bout of risk aversion, noting that "the USD struggled to benefit as US Treasury yields and Fed hike expectations fell." This aligns with broader market commentary that softer rate expectations are limiting upside for the Dollar even in a risk-off environment.
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.
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