Forex News
- The Australian Dollar faces selling pressure as the RBA’s next monetary policy adjustment is expected to be on the downside.
- In May, the Australian headline CPI arrived lower at 4% YoY.
- Traders have trimmed the Fed’s at least two interest rate hike bets.
The Australian Dollar (AUD) underperforms its major currency peers, trading 0.25% lower to near 0.6890 against the US Dollar (USD) during the European trading session on Friday. The antipodean weakens as market participants expect the next move by the Reserve Bank of Australia (RBA) on the downside.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.14% | -0.10% | -0.10% | -0.05% | 0.28% | 0.03% | -0.22% | |
| EUR | 0.14% | 0.03% | 0.06% | 0.12% | 0.42% | 0.14% | -0.08% | |
| GBP | 0.10% | -0.03% | 0.04% | 0.06% | 0.40% | 0.13% | -0.11% | |
| JPY | 0.10% | -0.06% | -0.04% | 0.05% | 0.38% | 0.10% | -0.13% | |
| CAD | 0.05% | -0.12% | -0.06% | -0.05% | 0.33% | 0.04% | -0.20% | |
| AUD | -0.28% | -0.42% | -0.40% | -0.38% | -0.33% | -0.26% | -0.52% | |
| NZD | -0.03% | -0.14% | -0.13% | -0.10% | -0.04% | 0.26% | -0.24% | |
| CHF | 0.22% | 0.08% | 0.11% | 0.13% | 0.20% | 0.52% | 0.24% |
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).
According to a Reuters report, the market is flirting with the prospect of rate cuts in the second half of 2027.
Dovish RBA prospects have improved as Australian headline inflation cools again in May. The Australian headline Consumer Price Index (CPI) arrives lower at 4% Year-on-Year (YoY) from 4.2% in April. Also, the return of oil prices close to pre-Middle East war levels, which were on the downside, has anchored global inflation expectations.
Meanwhile, the US Dollar trades slightly lower as traders reconsider hawkish Federal Reserve (Fed) bets for the current year. The CME FedWatch tool shows that the odds of the Fed delivering at least two interest rate hikes this year are 41.7%, down from 50.2% seen a week ago.
At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.12% lower to near 101.30.
AUD/USD technical analysis
AUD/USD trades lower at around 0.6890, extending its bearish bias as spot holds clearly below the 20-period Exponential Moving Average (EMA) at 0.7015. The pair remains pressured by this overhead dynamic barrier, while the Relative Strength Index (RSI) at 27.96 signals oversold conditions, hinting that downside momentum is stretched even as sellers retain control below the short-term trend line defined by the EMA.
On the topside, immediate resistance is located at the June 11 low around 0.6980, followed by the 20-period EMA near 0.7015, where a daily close above would ease the current bearish pressure and open the way for a corrective recovery. On the downside, the pair could extend its decline towards the March 30 low at 0.6833; a downside move below the same would expose the pair to 0.6800.
(The technical analysis of this story was written with the help of an AI tool.)
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
Deutsche Bank strategists note that tech weakness extended from the Magnificent 7 and Apple into Asian markets, weighing on risk sentiment and US equity futures. However, gains in semiconductors, led by Micron, alongside strength in small caps and equal-weighted stocks, showed that the broader US market backdrop was more mixed than the headline tech selloff suggested.
Tech selloff spreads across Asia
"There seems to be a mini ice-age in Asia this morning with tech again selling off. The KOSPI is slumping -8.01% as I type with the Nikkei -4.54% lower. SoftBank is around -14% lower after the NYT suggested that OpenAI may delay its IPO until 2027."
"This follows a sharp decline for the Magnificent 7 (-2.54%) yesterday. The tech mega cap index moved deeper into correction territory after the news that Apple (-6.12%) would be raising the price of its Macs and iPads."
"Elsewhere in Asia the Shanghai Comp is -2.14% lower with the Hang Seng -1.87%. S&P 500 (-0.71%), NASDAQ (-1.45%) and European Stoxx (-0.79%) futures are also notably lower."
"That backdrop of strong data and more dovish Fed pricing meant most US stocks advanced even with some tech wobbles. However, the S&P 500 (-0.01%) ended up narrowly posting a fourth consecutive loss, as the tech sell-off we mentioned at the top dragged."
"It wasn't all bad news for tech as the Philly Semiconductor index rose +3.59%, with Micron surging +15.7% after Wednesday night's results. And more broadly, both the equal-weighted S&P (+0.67%) and the small-cap Russell 2000 (+0.71%) had solid days"
"Over in Europe, investors continued to price out the chance of further ECB rate hikes. In fact, the number of hikes priced by the December meeting fell to just 26bps by the close, down -3.2bps on the day. So that helped to push the STOXX 600 (+0.80%) to a record high by the close, alongside gains for the DAX (+1.03%), the CAC 40 (+0.55%) and the FTSE 100 (+0.65%). A large amount of that will likely reverse at the open this morning with the overnight sell-off."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- XAG/USD approaches the $58.00 area after bouncing up from seven-month lows at $55.60.
- The precious metal is on track for a 10% weekly decline amid rising Fed tightening bets.
- Technically, the current rebound is a corrective reaction from oversold levels.
Silver (XAG/USD) has bounced up from seven-month lows below $56.00 on Friday, to reach session highs at $57.80 at the moment of writing. The precious metal is trimming some losses, favoured by a mild US Dollar (USD) pullback, but remains on track for a 10% weekly decline, hammered by broad USD strength.
Recent US macroeconomic figures highlight a resilient economy and an improving labour market, while the AI boom is funnelling massive investment flows into the country. This has revived the theory of US economic exceptionalism and is boosting the Greenback against its main peers.
US inflation, on the other hand, remains out of control, despite the recent decline in oil prices. Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s inflation gauge of choice, accelerated to a 4.1% year-on-year growth in May, its highest level in more than three years, endorsing the central bank’s hawkish stance. In this context, investors' repricing of interest rate hikes in the coming months is fuelling the US Dollar’s rally and crushing precious metals.
Technical Analysis: A dead cat's bounce for Silver
XAG/USD trades at $57.91, after reaching heavily oversold levels with the bearish near-term bias intact, as the Relative Strength Index (14) remains below 40, on the weak side. At the same time, the Moving Average Convergence Divergence (MACD) ticks modestly into positive territory, hinting at only a tentative attempt to stabilize rather than a clear bullish reversal.
Bears are being contained above $55.60 so far, although upside attempts remain limited. Further down, the October and mid-November 2025 lows, in the area between $54.85 and $54.40, might provide some support ahead of the $50.00 psychological level.
On the topside, initial resistance is seen at the $59.00 area (Thursday's high), followed by the June 11 low, at $61.50, and the weekly high, in the $67.15 area.
(The technical analysis of this story was written with the help of an AI tool.)
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.
United Overseas Bank’s Quek Ser Leang and Lee Sue Ann note GBP/USD failed to test major support at 1.3110, instead rebounding from 1.3152 to 1.3218 before closing at 1.3190. Short term, they expect Pound-Dollar to hold a 1.3160–1.3220 range, but maintain that there is still a chance of a drop toward 1.3110 unless 1.3245 resistance is broken.
Pound steady but bias still lower
"24-HOUR VIEW: While we held the view yesterday that GBP “could test 1.3135,” we indicated that “the major support at 1.3110 is likely out of reach.” Our view was incorrect, as after dipping to 1.3152, GBP rebounded strongly to 1.3218, before pulling back to close at 1.3190 (+0.16%). There has been no shift in either downward or upward momentum, and the fluctuations appear to be part of a range-trading phase. Today, we expect GBP to trade between 1.3160 and 1.3220."
"1-3 WEEKS VIEW: We continue to hold the same view as yesterday (25 Jun, spot at 1.3165). As highlighted, “there is a chance for GBP to drop to 1.3110.” On the upside, a breach of 1.3245 (no change in ‘strong resistance’ level) would mean that the weakness that started last Thursday has stabilised."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- EUR/CAD recovers its daily losses on ECB rate hike bets.
- ECB policymaker Isabel Schnabel stated that monetary tightening is not over.
- The Canadian Dollar may struggle as the BoC is expected to hold interest rates steady all year.
EUR/CAD remains flat after paring intraday losses, trading around 1.6150 during the European hours on Friday. The currency cross receives support as the Euro (EUR) gains ground following European Central Bank (ECB) policymaker Isabel Schnabel's comments, reiterating on Thursday that the central bank’s monetary tightening cycle is not yet over.
While acknowledging that short-term economic conditions have outpaced expectations, Schnabel warned that a recent ceasefire should not prompt policymakers to lower their guard. She emphasized that, from today's perspective, further interest rate hikes will be necessary to steer inflation back down to the ECB's 2% medium-term target.
However, ECB President Christine Lagarde noted earlier this week that the central bank can avoid aggressive policy reactions to geopolitical spillovers from the Middle East. While Lagarde acknowledged that the Eurozone's inflation shock is too significant to ignore, she emphasized it remains insufficient to drive up long-term inflation.
The EUR/CAD cross may further advance as the commodity-linked Canadian Dollar’s (CAD) upside could be capped as the Bank of Canada (BoC) is expected to hold interest rates steady for the remainder of the year.
According to the minutes from the BoC’s policy meeting, the governing council agreed to keep its monetary policy nimble to respond to the simultaneous risks of new US trade restrictions and volatile energy prices. Reflecting this cautious outlook, Reuters data shows traders have sharply scaled back expectations for further tightening, now pricing in just 17 basis points by December, down from 60 basis points last month.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.03% | -0.08% | -0.05% | 0.26% | 0.05% | -0.16% | |
| EUR | 0.06% | 0.01% | -0.02% | 0.03% | 0.31% | 0.07% | -0.10% | |
| GBP | 0.03% | -0.01% | -0.02% | -0.02% | 0.30% | 0.08% | -0.12% | |
| JPY | 0.08% | 0.02% | 0.02% | 0.02% | 0.32% | 0.08% | -0.09% | |
| CAD | 0.05% | -0.03% | 0.02% | -0.02% | 0.30% | 0.06% | -0.13% | |
| AUD | -0.26% | -0.31% | -0.30% | -0.32% | -0.30% | -0.22% | -0.42% | |
| NZD | -0.05% | -0.07% | -0.08% | -0.08% | -0.06% | 0.22% | -0.18% | |
| CHF | 0.16% | 0.10% | 0.12% | 0.09% | 0.13% | 0.42% | 0.18% |
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 Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
- GBP/JPY fluctuates between tepid gains and minor losses amid a combination of diverging forces.
- A softer USD benefits the GBP, though the UK political turbulence keeps a lid on any further gains.
- Intervention fears and the BoJ’s hawkish stance support the JPY, capping the upside for spot prices.
The GBP/JPY cross struggles to capitalize on the previous day's modest recovery gains and seesaws between tepid gains/minor losses through the early European session on Friday. Spot prices currently trade just below mid-213.00s, nearly unchanged for the day amid mixed fundamental cues.
The British Pound (GBP) benefits from a modest US Dollar (USD) pullback from its highest level since May 2025 and acts as a tailwind for the GBP/JPY cross. However, the UK political crisis holds back the GBP bulls from placing aggressive bets. Adding to this, speculations that authorities will step in again to prop up the Japanese Yen (JPY) contribute to capping the upside for the currency pair.
UK Prime Minister Keir Starmer announced his resignation on June 22 after mounting pressure within the Labour Party. Labour will now begin the process of choosing a new leader and wants the process to be completed before the Parliament reconvenes in September. In the meantime, a leadership vacuum might continue to undermine the GBP, warranting some caution for the GBP/JPY bulls.
Meanwhile, Japan's Finance Minister Satsuki Katayama and US Treasury Secretary Scott Bessent agreed to take steps on currencies if necessary. Also, Japan’s Chief Cabinet Secretary Minoru Kihara said on Tuesday that he will take appropriate action against the foreign exchange moves if needed. This, along with a hawkish Bank of Japan (BoJ), supports the JPY and keeps a lid on the GBP/JPY cross.
The Summary of Opinions from the BoJ's June meeting showed that policymakers debated mounting inflation risks, with some calling for faster rate increases to raise borrowing costs to near levels deemed neutral to the economy. Adding to this, the Tokyo Consumer Price Index (CPI) report indicated that inflation in Japan was now picking up, endorsing the BoJ’s stance to further tighten the policy.
The aforementioned diverging forces, in turn, make it prudent to wait for strong follow-through buying before confirming that the GBP/JPY cross has formed a near-term bottom and positioning for any meaningful appreciation. Bearish traders, on the other hand, might wait for a sustained break and acceptance below the 100-day Simple Moving Average (SMA) before placing bets for deeper losses.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.03% | -0.10% | -0.05% | 0.22% | 0.01% | -0.18% | |
| EUR | 0.06% | 0.02% | -0.02% | 0.04% | 0.28% | 0.04% | -0.12% | |
| GBP | 0.03% | -0.02% | -0.02% | -0.01% | 0.27% | 0.01% | -0.14% | |
| JPY | 0.10% | 0.02% | 0.02% | 0.05% | 0.31% | 0.07% | -0.10% | |
| CAD | 0.05% | -0.04% | 0.00% | -0.05% | 0.27% | 0.03% | -0.16% | |
| AUD | -0.22% | -0.28% | -0.27% | -0.31% | -0.27% | -0.22% | -0.39% | |
| NZD | -0.01% | -0.04% | -0.01% | -0.07% | -0.03% | 0.22% | -0.18% | |
| CHF | 0.18% | 0.12% | 0.14% | 0.10% | 0.16% | 0.39% | 0.18% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
ING strategists Warren Patterson and Ewa Manthey note that Oil rebounded after a vessel was struck in the Persian Gulf, but they stress that price momentum remains to the downside as flows through the Strait of Hormuz recover. They highlight fragile regional security, potential slowing of vessel traffic, and ongoing risks to future supply dynamics.
Hormuz risks and OPEC tensions
"The sell-off in the oil market came to an abrupt halt yesterday after reports of a commercial vessel being struck in the Strait of Hormuz. It highlighted the fragile state of the ceasefire, while also demonstrating the risks facing vessels in the Persian Gulf. This latest development saw ICE Brent reverse its earlier-day losses, settling more than 2% higher."
"However, despite this move, market momentum still appears to be largely downward. The market is largely focused on the resumption of oil flows through the Strait of Hormuz, which continues to increase. However, much of the increase reflects previously stranded vessels leaving the Persian Gulf."
"It suggests that once stranded vessels have moved out, we could see a pullback in flows. Also, the latest strike on a vessel will likely slow traffic, with the International Maritime Organisation suspending its evacuation plan for stranded ships."
"OPEC is facing additional challenges following the UAE's recent exit. Iraq’s oil ministry is now pressuring the group for a higher production quota, threatening to rethink its membership if it doesn't receive a larger one. Iraq is the second-largest producer within the group."
"Comments from the oil ministry appear more like a threat. Clearly, if things become more serious, it will only add to the surplus narrative for 2027. Iraq has a production capacity of almost 4.7m b/d"
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- The Swiss Franc outperforms as market sentiment turns risk-averse.
- The US Dollar drops as traders reconsider hawkish Fed bets.
- Improved energy flows through the Strait of Hormuz have anchored global inflation expectations.
The USD/CHF pair trades 0.2% lower at around 0.8085 during the European trading session on Friday, extending its correction from the 10-month high of 0.8140 posted on Wednesday. The Swiss Franc pair faces selling pressure as the US Dollar (USD) corrects further due to easing hopes of at least two interest rate hikes from the Federal Reserve (Fed) this year.
During press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges down to near 101.35.
The CME FedWatch tool shows that the odds of the Fed delivering at least two interest rate hikes this year are 41.7%, down from 50.2% seen a week ago.
Lower oil prices due to sustained progress in technical talks between the United States (US) and Iran and an improvement in energy flows through the Strait of Hormuz have anchored global inflation projections, which have forced traders to reconsider hawkish Fed prospects.
Meanwhile, the Swiss Franc (CHF) outperforms its major currency peers amid a cautious market mood. Artificial Intelligence (AI) stocks-led sell-off in global markets have triggered risk-off market sentiment. As of writing, S&P 500 futures are down 0.43% to near 7,330, reflecting a decline in investors' risk appetite.
Swiss Franc Price Today
The table below shows the percentage change of Swiss Franc (CHF) against listed major currencies today. Swiss Franc was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.04% | -0.05% | -0.08% | 0.17% | -0.01% | -0.14% | |
| EUR | 0.06% | -0.00% | 0.02% | 0.00% | 0.23% | 0.02% | -0.08% | |
| GBP | 0.04% | 0.00% | 0.02% | -0.03% | 0.23% | 0.03% | -0.09% | |
| JPY | 0.05% | -0.02% | -0.02% | -0.02% | 0.22% | 0.02% | -0.10% | |
| CAD | 0.08% | -0.00% | 0.03% | 0.02% | 0.24% | 0.04% | -0.09% | |
| AUD | -0.17% | -0.23% | -0.23% | -0.22% | -0.24% | -0.19% | -0.30% | |
| NZD | 0.00% | -0.02% | -0.03% | -0.02% | -0.04% | 0.19% | -0.12% | |
| CHF | 0.14% | 0.08% | 0.09% | 0.10% | 0.09% | 0.30% | 0.12% |
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 Swiss Franc from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CHF (base)/USD (quote).
USD/CHF technical analysis
USD/CHF trades lower at around 0.8085; however, the near-term bias is bullish as it holds above the 20-period exponential moving average (EMA), which is at 0.8007. The Relative Strength Index (RSI) at 65.37 is approaching overbought territory, hinting that upward momentum remains strong but may be prone to consolidation phases after sharp gains.
On the downside, the March 31 high at 0.8043 is the immediate support, followed by the 20-day EMA at 0.8007. Looking up, the pair could rise towards the August 1 high at 0.8172, followed by 0.8200 once it resumes its advance and break above the 10-month high of 0.8140 posted on June 24.
(The technical analysis of this story was written with the help of an AI tool.)
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.
- Dow Jones futures face downward pressure as an attack on a cargo ship near Oman sparks global energy anxieties.
- Iranian forces fired on a vessel, prompting Tehran to stop guaranteeing security for ships outside designated Hormuz lanes.
- Wall Street experienced a mixed overnight session as renewed weakness in megacap technology stocks offset optimism surrounding chipmakers.
Dow Jones futures decline 0.13%, trading near 52,270 during the early European hours on Friday. Meanwhile, S&P 500 futures fall by 0.60% to near 7,380, and Nasdaq 100 futures plunge 1.29%, trading near 29,350 at the time of writing.
Global energy anxieties and intensifying geopolitical risks have put downward pressure on US stock futures. The market pullback follows a suspected projectile attack on a cargo vessel near Oman, an incident that has halted United Nations (UN) evacuation efforts in the vital Strait of Hormuz and cast a shadow over potential US-Iran peace negotiations.
The friction escalated significantly after Thursday's market close when two US officials reported that Iranian forces had fired on the vessel as it navigated the strait. In response, Iranian authorities issued a stark warning, stating they will no longer guarantee the security of any ships traveling outside of designated Hormuz shipping lanes.
This geopolitical uncertainty follows a mixed regular trading session on Wall Street, where renewed weakness in megacap technology stocks offset optimism surrounding chipmakers. The Dow Jones Industrial Average managed a slim 0.14% gain, while the S&P 500 finished almost flat. Meanwhile, the Nasdaq Composite slid 0.46%, marking its fourth consecutive day of losses.
An early market rally, initially sparked by Micron Technology's upbeat forecast, ultimately gave way to broad selling across the tech sector. Micron shares surged 15.7% after the company reported strong earnings and issued a robust revenue outlook for the August quarter, initially lifting the broader semiconductor space. However, these gains were ultimately canceled out as megacap technology giants faced continued selling pressure through the close.
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
- US Dollar Index edges lower to around 101.40 in Friday's early European session.
- July Fed hike odds dropped to roughly 28.9% from 34.2%, CME FedWatch showed.
- The US PCE Price Index climbed 4.1% YoY in May; Core PCE inflation rose 3.4% YoY during the same period.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, currently trades near 101.40 during the early European trading hours on Friday. The DXY declines as the latest US inflation data eases Federal Reserve (Fed) rate hike expectations. The Michigan Consumer Sentiment Index report will be in the spotlight later on Friday.
Data released by the US Bureau of Economic Analysis (BEA) on Thursday showed that the core Personal Consumption Expenditures (PCE) Price Index, the Fed’s primary price gauge, rose 3.4% year-over-year (YoY) in May, compared to 3.3% in April. The annual core PCE reading was the highest since October 2023.
Additionally, the headline PCE inflation jumped to 4.1% YoY in May from 3.8% in April. Both core and headline figures came in line with expectations. On a monthly basis, the PCE increased 0.4%, below the market consensus of 0.5%.
Markets continued to expect the Fed to approve a rate hike in September, though they lowered odds slightly. Traders are now pricing in nearly a 28.9% chance for a rise of at least 25 basis points (bps) at the Fed's July meeting, down from 34.2% in the previous session, according to the CME FedWatch tool. For the September policy meeting, expectations for a hike fell to 60.1% from 65.7% on Wednesday.
New York Fed President John Williams said on Thursday that interest rates are well positioned to bring inflation back toward the central bank’s target. Meanwhile, Chicago Fed President Austan Goolsbee noted that there was a "glimmer of hope" on services inflation in the latest US inflation report, but underlying inflation pressures are still too high and are trending the wrong way.
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.
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