Forex News
- The Canadian Dollar gains ground as the US Dollar retreats from recent highs.
- Traders await Wednesday’s US CPI report for fresh clues on the Fed’s interest rate outlook.
- Wide US-Canada bond yield gaps and diverging central bank outlooks remain headwinds for the Canadian Dollar.
USD/CAD falls around 0.45% on Tuesday as US Dollar (USD) bulls take a breather ahead of Wednesday’s US inflation report. The pullback gives the Canadian Dollar (CAD) some relief, although diverging monetary policy expectations for the Bank of Canada (BoC) and the Federal Reserve (Fed) could keep the Loonie’s gains in check. At the time of writing, the pair trades around 1.4216.
The US Dollar Index (DXY), which tracks the Greenback against six major currencies, trades around 102.25, below Monday’s peak of 102.61, its highest since April 2025.
Headline Consumer Price Index (CPI) is expected to rise 0.6% MoM, accelerating from 0.4% in August. Annual inflation is forecast to climb to 3.7% from 3.4%. Core CPI, which excludes food and energy, is projected to increase 0.2% monthly from 0.3%, although the annual rate is expected to edge up to 2.5% from 2.4%.
Strategists at OCBC note that markets “currently expect the Fed to remain on hold in October before delivering a fully priced 25bp rate hike in December.” They argue that the “key question for the USD is whether upcoming CPI data can alter that sequencing by bringing forward expectations for further tightening.” While consensus forecasts point to “firmer headline inflation due to higher energy costs,” OCBC highlights that “core inflation is expected to remain relatively contained.”
In their view, “if core inflation moderates as expected, markets could further trim expectations for additional Fed tightening, limiting the scope for further USD gains.” OCBC adds that “it would likely take a core CPI print of 0.4% m/m or higher to materially shift market pricing and strengthen the case for earlier Fed action.” Absent such a surprise, they expect the “USD is likely to remain supported but not break decisively higher.”
Across the broader market, the Canadian Dollar has remained under sustained selling pressure since early September, largely reflecting a widening gap between US and Canadian bond yields as monetary policy expectations diverge.
While markets anticipate further Fed tightening, the case for higher interest rates in Canada remains weaker. The inflationary impact of elevated energy costs has so far been limited, with underlying inflation near the BoC’s 2% target.
Meanwhile, last week’s employment report showed that Canada lost 68.3K jobs in September, marking a second consecutive monthly decline in employment. The weaker labour market gives the BoC another reason to remain cautious about raising interest rates, leaving the Canadian Dollar on the defensive in the near term.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.30% | -0.28% | -0.14% | -0.45% | -0.28% | -0.45% | -0.19% | |
| EUR | 0.30% | 0.01% | 0.16% | -0.14% | 0.00% | -0.14% | 0.11% | |
| GBP | 0.28% | -0.01% | 0.13% | -0.19% | -0.04% | -0.16% | 0.11% | |
| JPY | 0.14% | -0.16% | -0.13% | -0.30% | -0.13% | -0.30% | -0.03% | |
| CAD | 0.45% | 0.14% | 0.19% | 0.30% | 0.16% | -0.00% | 0.27% | |
| AUD | 0.28% | 0.00% | 0.04% | 0.13% | -0.16% | -0.16% | 0.10% | |
| NZD | 0.45% | 0.14% | 0.16% | 0.30% | 0.00% | 0.16% | 0.28% | |
| CHF | 0.19% | -0.11% | -0.11% | 0.03% | -0.27% | -0.10% | -0.28% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
- DXY gives back most of Monday's climb to an 18-month high as Brent eases.
- US CPI is due Wednesday, and traders already fully expect a December Fed hike.
The September Consumer Price Index (CPI) is due on Wednesday at 12:30 GMT, with headline inflation forecast to rise to 3.6% from 3.4%. Core prices, which leave out food and energy, are forecast up 0.2% in the month against 0.6% overall. Traders fully expect a quarter-point Fed hike in December, and some analysts reckon a 0.4% monthly core reading would pull it forward to the October 27-28 meeting.
Higher US yields pay investors more to hold Dollars than Euros or Yen, and the 10-year Treasury yield, near 5.2%, is close to a 24-year high. Fed Governor Waller said the climb reflects growth, not inflation, and cited research that Treasuries have lost part of their convenience yield, the lower rate investors accept for the safety of US debt. He put the cost at 0.5 to 0.7 points, so part of the extra pay for holding Dollars compensates for lending to Washington at all.
Brent slipped back under $106 from Monday's high above $107 on expectations of more Russian diesel supply. A cheaper barrel means European and Japanese importers buy fewer Dollars to pay for it, reversing the flow behind Monday's high.
The Dollar Index fell from just under 102.60 to a low just under 102.20, giving back most of Monday's climb to just above 102.60, its highest since April 2025. It fell in steps through the session rather than on any one release, and the bounce off the low to 102.30 faded.
On the charts
The index is trading near 102.20, close to Tuesday's low and well above the 50-day Exponential Moving Average (EMA) near 100.70. The drop is about a tenth of the climb from the September 9 low near 98.60 to Monday's high. Daily momentum is still overbought after that run and has been cooling since early October.
DXY 5-minute chart
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.
- GBP/USD gains 0.28% as November BoE tightening expectations strengthen.
- BoE's Greene warns delayed tightening risks fueling persistent inflation pressures.
- IMF upgrades UK growth outlook to 1.3% but flags stagflation risks.
The Pound Sterling (GBP) gains against the US Dollar (USD) on Tuesday, up 0.28%, as investors seem confident the Bank of England (BoE) will raise rates at its November meeting, while they brace for the release of US inflation figures. At the time of writing, GBP/USD trades at 1.3244.
GBP/USD advances toward 1.3250 as UK policy divergence supports Sterling ahead of US CPI
Improved market mood weighed on the Greenback, even though US economic data was mixed. The ADP Employment Change 4-week average dipped from 25.25K to 24.75K, while Existing Home Sales improved from 3.93 million to 3.99 million, exceeding forecasts of 3.96 million, up 1.5% MoM in September.
Two Federal Reserve (Fed) officials crossed the wires. Chicago Fed President Austan Goolsbee said that the jobs market is very stable, growth has been solid and that “If inflation remains persistent, then I think it’s clear what the Fed has to do.”
Earlier, Fed Governor Christopher Waller spoke about AI, saying that the buildout is definitely having an impact on US yields, that it could do some of the Fed’s work on demand, and that inflation expectations are well anchored.
The International Monetary Fund (IMF) said it expects the UK economy to grow 1.3% in 2026, up from a previous forecast of 0.5%, but warned of a potential “stagflation” scenario in which inflation and the unemployment rate could rise.
The Pound was supported by solid Retail Sales data from the British Retail Consortium and hawkish comments from Bank of England (BoE) policymaker Megan Greene. Greene warned that second-round inflationary effects could emerge if the central bank fails to raise rates soon.
Investors' focus shifts to the release of US Consumer Price Index (CPI) figures. In the UK, Gross Domestic Product (GDP) data is expected on Thursday, while the focus remains on the Autumn Budget release on October 28.
GBP/USD Price Forecast: Technical outlook
In the daily chart, GBP/USD trades at 1.3248, keeping a bearish near-term bias as spot holds below the cluster of simple moving averages (SMA) and trend-line levels. The latest triple SMA reading around 1.3430 sits decisively above price, reinforcing the idea of a capped market, while the downward-sloping resistance line derived from 1.3869 now comes in near 1.3289, limiting any corrective bounces. A Relative Strength Index (RSI) at 42.35 stays below the midline, hinting at persistent downside pressure rather than a full recovery phase.
On the topside, initial resistance is seen at the former resistance trend-line break area around 1.3289, ahead of the descending barrier from 1.3653 near 1.3417. Above that, the grouped daily SMAs around 1.3430 form a dense technical ceiling, followed by higher structural caps at the upward-sloping support lines turned resistance at 1.3588 and 1.3779. With no clear nearby support levels from the current dataset, the pair would likely need to reclaim the 1.3289 zone to ease immediate selling pressure, while sustained trading below the moving averages keeps risks skewed toward further downside exploration.
(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.
(This story was corrected on October 13 at 17:36 GMT to say that the previous Existing Home Sales reading was 3.93 million instead of 3.98 million)
Three banks agree the US Dollar (USD) is on solid footing for now, but none expects a decisive breakout or a sharp reversal soon. OCBC, Commerzbank and ING credit the Greenback's support to higher Oil prices, firm US yields and sticky Federal Reserve (Fed) tightening expectations. They also warn that the rally looks stretched and that the next big move will need a clear trigger. The most immediate test is upcoming US core Consumer Price Index (CPI) inflation data.
Supported but capped: How the banks see the US Dollar's next move
The three banks broadly agree that the USD's downside looks limited, but that its upside is capped for now. OCBC's base case is a well-supported but range-bound USD, and it says only a core CPI print of 0.4% MoM or higher would change that. Commerzbank says the Fed's credibility, reinforced by last month's rate hike, is the anchor behind the US Dollar's recovery. ING acknowledges that the USD is overvalued against most G10 currencies and that positioning is extended, but it sees no catalyst for a reversal.
OCBC: Core CPI holds the key to a US Dollar breakout
OCBC strategists Sim Moh Siong and Christopher Wong note that markets expect the Fed to stay on hold in October before a fully priced 25 basis point (bp) hike in December. Consensus forecasts point to firmer headline inflation on higher energy costs, while core inflation is expected to stay relatively contained. That combination would trim bets on further tightening and limit the room for more USD gains.
"If core inflation moderates as expected, markets could further trim expectations for additional Fed tightening, limiting the scope for further USD gains. In our view, it would likely take a core CPI print of 0.4% m/m or higher to materially shift market pricing and strengthen the case for earlier Fed action. Until then, the USD is likely to remain supported but not break decisively higher."
Commerzbank: Fed credibility matters more than Warsh's guidance shift
Commerzbank's Thu Lan Nguyen notes that the US Dollar came under pressure over the summer, when Fed Chair Kevin Warsh deliberately stopped giving clear guidance on the path of interest rates. That move probably fuelled concerns that the US administration was influencing the US central bank. Since then, US rate expectations have moved markedly higher and the US Dollar has recovered, even though Warsh hasn't changed his stance on forward guidance. In Nguyen's view, the currency depends more on the central bank's credibility than on its communication toolkit.
"The Fed reinforced precisely this confidence with last month's rate hike. Notably, Warsh himself supported the decision. As long as markets believe that the Fed will make the right policy choice when it matters most, they appear willing to overlook the fact that the Chair is reluctant to commit to a specific future path for interest rates."
ING: A stretched rally that still lacks a reversal trigger
ING strategists Francesco Pesole, Frantisek Taborsky and Chris Turner say firmer Oil prices, following increased military activity in the Gulf, kept the USD on solid footing at the start of the week. Their short-term valuation model shows the US Dollar overvalued against every G10 currency except the British Pound (GBP), where it is at fair value. On an equally weighted basis, the USD is 1.1% overvalued against the G10. Even so, they recall that in March 2025 it took a Sell-America shock to derail an overbought USD.
"A clear macro or market catalyst is needed for a reversal, and we do not see one. Fed tightening expectations remain stickier than those for most other central banks, limiting USD downside even if oil prices retreat. At the same time, weakness across global bond markets continues to support demand for a liquid defensive currency."
The takeaway
The near-term bias for the US Dollar is still supportive, but a breakout isn't the base case. The next catalyst to watch is US core CPI. A print at or above OCBC's 0.4% MoM threshold could bring forward Fed tightening bets and push the USD out of its range. A softer reading would cap gains without necessarily triggering a reversal. Further ahead, ING flags the US midterms as a somewhat underappreciated risk for the USD. It adds that markets have long priced in a possible Republican loss of Congress, and that precautionary positioning that could weigh on the USD may not appear until late October.
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
DBS economist Ma Tieying expects the Central Bank of the Republic of China to raise its policy discount rate by 12.5bp to 2.125% in December as CPI stays above 2% and electricity price risks build. Financial conditions are already tighter, while gradual easing of housing credit controls is seen supporting a modest recovery in Taiwan’s housing market into 2027.
Central bank path and property
"We continue to expect a modest 12.5bp rate hike at the December meeting, bringing the policy rate to 2.125%. By then, CPI inflation is likely to have remained above 2% for around six consecutive months. The possibility of an increase in electricity prices following the November local elections could further lift inflation expectations, strengthening the case for a December rate hike."
"The central bank has continued to ease housing credit controls gradually. At its September meeting, it raised the LTV cap on second-home mortgage loans to 70%, the second easing of housing credit controls this year."
"A gradual and modest recovery in the housing market is expected from 4Q26 into 2027. The existing-home market has already shown early signs of recovery, with Sinyi housing prices returning to slightly positive yoy growth since 2Q. Total building transactions also returned to positive yoy growth in 3Q."
"The new-home market remains under pressure. The number of new units under construction has started to decline since 2023, while new completions are only beginning to ease this year. Demand remains weak, as potential buyers continue to wait for lower prices."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/USD gains as the US Dollar retreats from recent highs.
- Markets await US inflation figures to assess the likelihood of further Fed tightening.
- France’s fiscal concerns complicate the ECB outlook as inflation risks persist.
EUR/USD gains ground on Tuesday as the US Dollar (USD) retreats from recent highs, giving the Euro (EUR) some breathing room despite persistent concerns over France’s fiscal and political outlook. At the time of writing, the pair trades around 1.1192, up 0.33% on the day.
An earlier pullback in US Treasury yields dragged the US Dollar lower. Yields have since partly recovered, limiting further losses in the Greenback as traders turn their attention to the US Consumer Price Index (CPI) report, due on Wednesday.
The US Dollar Index (DXY), which measures the currency against six major peers, trades around 102.25 after touching 102.61 on Monday, its highest since April 2025. The benchmark 10-year yield rebounds to around 5.21% from 5.17%, remaining below last week’s peak of 5.36%, its highest since 2002.
September’s headline CPI is expected to rise 0.6% MoM, up from 0.4% in August, with annual inflation forecast to climb to 3.7% from 3.4%. Core CPI, which excludes food and energy, is projected to increase 0.2% MoM, easing from 0.3%, although the annual rate is expected to edge up to 2.5% from 2.4%.
The inflation report arrives ahead of the Federal Reserve’s (Fed) October 27-28 meeting. The CME FedWatch Tool shows an 80% probability that interest rates will remain unchanged at 3.75%-4.00%, while traders still anticipate another hike before year-end.
Elevated energy prices remain a source of inflation pressure as diplomatic efforts between Washington and Tehran show no breakthrough on reopening the Strait of Hormuz.
The European Central Bank (ECB) faces similar inflation pressures, keeping further interest-rate hikes on the table. However, higher energy costs and a widening spread between French and German government bond yields amid France’s fiscal concerns add to risks to growth and financial stability, complicating the central bank’s policy decisions.
Analysts at Nordea note that the ECB’s September account, which was released before the latest bout of bond-market volatility, “nevertheless confirmed that policymakers saw inflation risks as tilted to the upside, while avoiding any commitment to a future rate path.” They add that the “subsequent widening of French spreads adds a downside risk to growth, but the account remains consistent with our baseline of further 25bp rate increases in December and March.”
Economic Indicator
Consumer Price Index (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Next release: Wed Oct 14, 2026 12:30
Frequency: Monthly
Consensus: 3.6%
Previous: 3.4%
Source: US Bureau of Labor Statistics
The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
Societe Generale strategists note EUR/GBP has continued its pullback after failing at the 0.8610 graphical hurdle linked to the February and March troughs. The cross has slipped below the July lows, reinforcing prevailing downside momentum. They warn that inability to reclaim last week’s 0.8500 high could see the decline extend towards 0.8405 and 0.8370/0.8355.
Cross struggles to regain 0.8500
"EUR/GBP has extended its pullback after struggling to overcome the graphical hurdle at 0.8610, which corresponds to the February/March troughs."
"The pair has dipped below the July lows highlighting prevalence of downward momentum."
"Failure to reclaim last week's high at 0.8500 could result in a continuation of the decline."
"The next projections could be located at 0.8405 and 0.8370/0.8355."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold reverses earlier gains as a rebound in US Treasury yields limits the upside.
- Middle East tensions keep inflation risks elevated, reinforcing expectations of further Fed tightening.
- Traders await Wednesday’s US CPI report for fresh clues on the interest rate outlook.
Gold (XAU/USD) reverses earlier gains on Tuesday as US Treasury yields recover after falling earlier in the day. With the US Dollar (USD) still under pressure, the metal trades little changed during American trading hours. At the time of writing, XAU/USD trades around $4,164, down from an intraday high near $4,200.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 102.25 after reaching 102.61 on Monday, its highest since April 2025. Meanwhile, the benchmark 10-year US Treasury yield rebounds to around 5.22% from an intraday low of 5.17%.
Gold struggles to gain traction as the broader fundamental backdrop keeps buyers cautious. The US Dollar and Treasury yields remain near recent highs as energy-driven inflation risks linked to Middle East tensions reinforce expectations that the Federal Reserve (Fed) may need to keep interest rates higher for longer.
Cleveland Fed President Beth Hammack said on Monday that she prefers smaller interest-rate adjustments but wants the Fed to act “relatively quickly.” Hammack added that trend inflation is in the “mid-to-high 2% range” and expects it will take time to return to the central bank’s 2% target despite appropriate monetary policy.
Energy prices remain volatile at elevated levels, with no sign of a breakthrough in diplomatic efforts to reach a US-Iran agreement on reopening the Strait of Hormuz. Escalating fighting between Saudi Arabia and Yemen’s Houthis adds to concerns over regional security and energy supplies.
Geopolitical tensions and inflation risks would normally support Gold. However, elevated borrowing costs encourage investors to favour interest-bearing assets. Traders now look ahead to the US Consumer Price Index (CPI) report, due on Wednesday, for fresh clues on the interest-rate path.
Analysts at MUFG/BTMU highlight that “the recent run of softer US data (PCE deflator report for August and NFP report for September) alongside cautious comments over the need for another back-to-back hike from the Fed’s leadership have dampened expectations for another rate hike as soon as this month.” They note that “market expectations for the Fed to stay on hold this month will be tested by the release on Wednesday of the latest US CPI report for September,” which is seen as the key near-term catalyst for rate pricing.
MUFG/BTMU add that “unless there is a significant upside surprise for underlying inflation, we expect the Fed to leave rates on hold this month,” while stressing that “it is likely to be only a temporary pause as the Fed currently plans to hike rates again before the end of this year in December.”
Technical analysis: XAU/USD consolidates below key moving averages
On the daily chart, XAU/USD maintains a pattern of lower highs and lower lows since peaking near $4,700 in late August and subsequently slipping back below its key Simple Moving Averages (SMAs). The broader structure remains bearish, although selling pressure shows signs of easing.
The Relative Strength Index (RSI) near 45 hints at subdued downside pressure, whereas the Moving Average Convergence Divergence (MACD) is turning slightly positive, though the overhead moving averages remain barriers to a stronger recovery.
On the topside, initial resistance lies at the 100-day SMA near $4,252, followed by the 50-day SMA around $4,339. A stronger barrier stands at $4,450, ahead of the 200-day SMA near $4,527.
On the downside, initial support emerges at $4,100. A break below this level could expose the $4,000-$3,950 zone, while holding above this floor would allow Gold to consolidate within the current bearish framework.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
Scotiabank strategists Shaun Osborne and Eric Theoret reports the Canadian Dollar (CAD) up 0.2% versus the US Dollar (USD) but underperforming other G10 currencies, with markets still pricing Bank of Canada (BoC) tightening into year-end despite weak labour data. Their fair value for USD/CAD is 1.4214, slightly below spot, and they flag resistance in the mid-1.42s with support at 1.41 and 1.40 ahead of BoC speeches.
Loonie steady as BoC risk priced
"The CAD is entering Tuesday’s NA session with a 0.2% gain vs. the USD, a relative underperformer against all of the G10 currencies in an environment of renewed and broad-based USD weakness."
"The CAD looks to be holding in relatively well following Friday’s surprise labor market disappointment, as market participants have generally maintained pricing of BoC tightening into year-end."
"Short-term rates markets are currently pricing 6bpts of tightening for October and a cumulative 21bpts for December, and risk is elevated into the three public BoC speaking engagements scheduled for later this week."
"Our FV estimate for USD/CAD is currently at 1.4214, slightly below spot and largely reflecting the latest widening in spreads."
"We continue to feel that the mid-1.42s offer resistance with limited gains above the level. We see support at 1.41 and 1.40."
"USD/CAD short-term technicals: Bullish/neutral – the RSI’s drift into the mid-60s is important as it reveals a clear moderation in bullish momentum following the September rally that had pushed the RSI toward 80, well above the overbought threshold (70)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann report AUD/USD slipping as the stronger US Dollar weighs on commodity currencies. Short‑term momentum has turned lower, with scope for a test of major support at 0.6935, though a sustained break is seen as unlikely. Over 1–3 weeks, the outlook is neutral, with the Australian Dollar expected to trade between 0.6935 and 0.7020.
Australian Dollar pressured but still range-bound
"24-HOUR VIEW: While we expected AUD to “edge higher” yesterday, we were of the view that “it is unlikely to break above 0.7000.” We were not wrong as AUD rose to 0.6995, but we did not expect the subsequent sharp pullback that reached a low of 0.6956. Downward momentum is starting to build, and today, there is a chance for AUD to test the major support at 0.6935. A sustained drop below this level appearsunlikely. Resistance is at 0.6965, followed by 0.6975."
"1-3 WEEKS VIEW: We turned neutral on AUD last Wednesday (07 Oct, spot at 0.6980) and indicated that it “is likely to trade between 0.6935 and 0.7020.” There is no change in our view."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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