Forex News
- EUR/USD posts modest gains around 1.1470 in Tuesday’s early Asian session.
- German political risks rise following two more disappointing state election outcomes.
- Fed's Musalem said more rate hikes are likely needed to combat inflation.
The EUR/USD pair trades with mild gains near 1.1470 during the early Asian trading hours on Tuesday. Middle East diplomacy hopes provide some support to the riskier assets such as the Euro (EUR) against the US Dollar (USD). Traders await the Fedspeak later on Tuesday for fresh impetus.
President Masoud Pezeshkian will lead an Iranian delegation at the United Nations General Assembly in New York on Tuesday, amid renewed hopes for a diplomatic solution to the Middle East conflict, per CNBC. Traders will closely monitor the geopolitical developments surrounding US-Iran talks.
US President Donald Trump said that he’d “probably” be open to meeting his Iranian counterpart on the sidelines of the UN General Assembly.
On the other hand, political risks in Germany could weigh on the shared currency. The far-right Alternative for Germany took first place in state elections in northeastern Germany on Sunday, with Chancellor Friedrich Merz's conservative party suffering its worst regional election defeat in postwar Germany, leaving him clinging to power.
Hawkish comments from the US Federal Reserve (Fed) officials could lift the Greenback and act as a headwind for the major pair. Chicago Fed President Austan Goolsbee said on Monday that US inflation may have moved beyond the tariff and energy price shocks of the last 18 months and is now being driven by strong demand as well, potentially requiring a faster pace of Fed rate increases.
Meanwhile, St. Louis Fed President Alberto Musalem stated that the US central bank will likely need to hike interest rates further to lower inflation resulting from strong demand as well as a commodity price shock that has moved beyond oil.
Euro sentiment pressured as German political risks rise
Analysts at MUFG warn that “the latest political and fiscal developments in European could contribute to undermining confidence in the Euro in the near-term.” They highlight that “there is a higher risk of political instability in Germany after two more disappointing state election results for the ruling parties over the weekend,” a backdrop that they believe could further weigh on investor sentiment toward the single currency.
Technical Analysis: EUR/USD keeps a bearish vibe under the 100-day SMA
In the daily chart, EUR/USD keeps a bearish near-term tone as spot holds beneath the 100-day simple moving average (SMA) and the Bollinger middle band. Price is only slightly above the lower Bollinger band, suggesting the pair is pressing the lower edge of its recent volatility envelope, while the Relative Strength Index (RSI) around 34.5 hovers just above oversold territory, hinting at persistent but not yet extreme downside pressure.
On the topside, initial resistance emerges at the 100-day SMA at 1.1545, followed by the Bollinger SMA centerline around 1.1575, with the upper Bollinger band near 1.1705 acting as a stronger cap if a corrective bounce develops. On the downside, the lower Bollinger band at 1.1445 offers immediate support; a decisive break below this level would open the door to an extension of the current bearish phase.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
US President Donald Trump administration has proposed investing $5 billion in a new fund to help rebuild critical infrastructure across the Middle East damaged in the war with Iran and reduce their reliance on the Strait of Hormuz to transport oil and gas, the Wall Street Journal reported on Monday.
The Partnership for Allied Construction & Trust would be led by the US Development Finance Corporation to encourage investment, reconstruction and economic expansion.
The document identifies four project categories as priorities for the platform. There are investments to help bypass the Strait of Hormuz, restore energy flows and critical material exports, hardening assets against future attacks, and rebuild essential domestic infrastructure and import flows.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 3.60% on the day at $91.80.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
The Reserve Bank of Australia (RBA) Assistant Governor Sarah Hunter confirmed the need for further rate hikes this year, to keep inflation in check. This has increased the chances for a rate increase at the September 29 meeting.
In a podcast, Hunter stated the board’s concern that inflation has been too high for too long, with increasing risks of it becoming entrenched. Hunter added that “We can see lots of reasons why inflation might be a bit higher than what we currently think.”
Traders should note that the RBA has raised rates three times by 75 basis points this year, bringing the cash rate back to post-pandemic levels of 4.35%.
Money markets forecast a 94% probability that the RBA will increase rates by 25 basis points at the September 29 meeting, with expectations centered around this move, as per Prime Terminal.
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.
Yemeni government forces said that they struck Houthi fighters and supply lines near the Bab al-Mandeb Strait and in al-Bayda governorate and shot down a Houthi drone in southwestern Taiz province, aljazeera news agency reported on Monday.
Additionally, the Yemeni Ministry of Human Rights on Tuesday condemned Houthi attacks on a popular commercial market in Lahj province.
According to the statement, the market was targeted by two ballistic missiles that struck approximately an hour apart at midday and resulted in many civilian injuries as well as damage to commercial properties and vehicles. The Ministry also said that surveillance footage captured the attack and that initial data indicated that they were launched from Houthi-controlled areas in the al-Sabrah district of Ibb.
Early Monday, Yemen’s Houthis pushed to seize strategic heights in Yemen to cut off the Red Sea coast from remaining areas held by Saudi-backed forces, after a report that US President Donald Trump had called off US strikes on the group at the last minute, Reuters reported.
Riyadh was apparently struck on Saturday for the first time since the escalation began, with explosions heard and smoke visible near the airport. The Houthis claimed they had fired missiles at the Saudi capital.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 3.60% on the day at $91.80.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
The European Central Bank (ECB) Chief Economist Philip Lane stated that the European economy will expand steadily at a moderate pace if the energy shocks ease, according to Le Temps.
Lane said that a second surge in energy costs will push inflation higher before it eases towards the ECB’s 2% goal, from mid-2027 onwards.
So far, money markets have priced in nearly 35 basis points of tightening by year-end but have fully priced in a rate hike by the December 17 meeting, revealed Prime Terminal.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.13% | 0.18% | 0.28% | 0.33% | 0.07% | 0.16% | -0.16% | |
| EUR | -0.13% | -0.01% | 0.11% | 0.13% | -0.12% | -0.05% | -0.34% | |
| GBP | -0.18% | 0.01% | 0.11% | 0.14% | -0.10% | -0.05% | -0.32% | |
| JPY | -0.28% | -0.11% | -0.11% | 0.06% | -0.25% | -0.11% | -0.39% | |
| CAD | -0.33% | -0.13% | -0.14% | -0.06% | -0.29% | -0.18% | -0.47% | |
| AUD | -0.07% | 0.12% | 0.10% | 0.25% | 0.29% | 0.10% | -0.20% | |
| NZD | -0.16% | 0.05% | 0.05% | 0.11% | 0.18% | -0.10% | -0.30% | |
| CHF | 0.16% | 0.34% | 0.32% | 0.39% | 0.47% | 0.20% | 0.30% |
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).
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger 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.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
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 European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
- Aussie holds near 0.7120 despite increasingly hawkish Fed rhetoric.
- RBA hike odds reach 94%, reinforcing Australia’s policy support.
- Trump-Xi summit and Bullock speech headline upcoming market catalysts.
The Aussie Dollar holds firm versus the Greenback at the start of the week, hovering near 0.7119 as risk appetite remains positive despite Fed officials turning more hawkish than expected, ahead of the Trump-Xi summit in the US, later this week.
AUD/USD stays firm as risk appetite offsets renewed Fed tightening pressure
Last week, the Federal Reserve unanimously raised interest rates to 3.75%-4%, with Fed Chair Warsh saying they’re removing a dose of “accommodation.” After the decision, US Treasury yields soared as the dot plot revealed that at least one more hike is expected.
The market’s tone also improved on US President Trump’s openness to meet Iranian President Pezeshkian at the UN General Assembly. The news weighed on Oil prices, with WTI edging lower by over 3.60%.
The US economic schedule was scarce, with Fed officials grabbing the headlines. Boston Fed Susan Collins said she favoured a rate hike due to the resumption of hostilities in the Middle East and expected another increase towards the year’s end.
St. Louis Fed President Alberto Musalem said inflation will likely stay above 2% in 18 months without more policy restraint and that further rate hikes are necessary.
Austan Goolsbee of the Chicago Fed said they can’t ignore repeated supply shocks and must respond, which may cause hardship. He noted bringing inflation back to 2% may not be painless.
In Australia, the docket will feature the ANZ-Roy Morgan Australian Consumer Confidence, with traders eyeing a speech by the Reserve Bank of Australia Governor, Michele Bullock.
Recently, the RBA’s Assistant Governor Sarah Hunter stated the central bank's policy board was concerned that inflation had been too high for too long and risked getting baked into price-setting behavior.
Money markets expect the RBA to raise rates by 25 basis points at the September 29 meeting, with odds standing at 94%, according to Prime Terminal.
AUD/USD Price Forecast: Technical outlook
In the daily chart, AUD/USD trades at 0.7119, holding above the latest read of the simple moving average triple near 0.7088 and a dense cluster of upward-sloping trend-line supports. This configuration hints at a still constructive near-term bias, although the Relative Strength Index (14) hovering just below the 50 line at 47.3 suggests momentum has cooled, leaving the pair vulnerable to deeper pullbacks if buyers fail to press higher.
On the topside, initial resistance is seen at the horizontal barrier around 0.7198, which caps the recent recovery and would need to be decisively cleared to reopen the way toward higher medium-term levels. On the downside, immediate support aligns with the 50–100–200-day simple moving average composite near 0.7088, backed by a series of rising trend lines originating from the mid-0.68s; a daily close below this moving-average floor would weaken the bullish structure and expose a broader corrective phase.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
President Masoud Pezeshkian will lead an Iranian delegation at the United Nations General Assembly in New York on Tuesday, amid renewed hopes for a diplomatic solution to the Middle East conflict, CNBC reported on Monday.
A high-ranking Iranian delegation, including Foreign Minister Abbas Araghchi, will accompany President Pezeshkian.
Pezeshkian is set to meet with and hold talks with several heads of state and senior officials attending the UN session. His agenda also includes meetings with prominent Iranians living in the US, as well as discussions with American intellectuals and think tanks.
US President Donald Trump signalled that he is “probably open to meeting Pezeshkian during the assembly amid heightened tensions between Washington and Tehran.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 3.60% on the day at $91.80.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- Gold price drifts lower to around $4,365 in Tuesday’s early Asian session.
- Fed’s Musalem said more rate hikes are likely needed to cool prices.
- Hopes for diplomatic progress between the US and Iran might cap gold’s downside.
Gold price (XAU/USD) declines to near $4,365, snapping the two-day winning streak during the early Asian session on Tuesday. The precious metal loses ground on the prospect of further monetary tightening by the US Federal Reserve (Fed). Traders will keep an eye on the Fedspeak later on Tuesday.
Hawkish signals from the Fed over the possibility of further interest rate hikes weigh on the yellow metal. Last week, the US central bank raised interest rates by a quarter of a percentage point to the 3.75%-4.0% range. Traders are now pricing in nearly a 90.3% chance of a US rate hike in December, according to the CME FedWatch Tool.
St. Louis Fed President Alberto Musalem said on Monday that additional interest rate increases may be needed to achieve the central bank’s inflation goal, adding that monetary policy may still be stimulating the economy after this month’s hike. Higher interest rates typically weigh on gold because the precious metal does not pay interest, making yield-bearing assets relatively more attractive.
"We are seeing some lingering concerns among the bulls about tighter US monetary policy, which has pushed the US dollar index to a more than two-month high on Friday. Those bearish elements are working against the precious metals," said Jim Wyckoff, a market analyst at American Gold Exchange.
On the other hand, Middle East diplomacy hopes and easing supply concerns might help limit gold’s losses. CNBC reported on Monday that Iran’s President Masoud Pezeshkian will go to the United Nations General Assembly in New York on Tuesday, amid renewed hopes for a diplomatic solution to the Middle East conflict.
Gold softens as Fed rate hike reinforces higher-for-longer narrative
Analysts at ING note that gold "edged lower at the start of the week as investors assessed the implications of the Federal Reserve's first rate hike since 2023 and the prospect of further policy tightening." They highlight that comments from Fed officials have "reinforced concerns that inflation remains elevated," in turn "supporting expectations that rates will stay higher for longer." ING cautions that "tighter monetary policy remains a headwind for bullion," but also points to supportive underlying flows, with "ETF holdings...sitting at a six-month high" and "continued central bank buying" expected to "help limit downside."
Musalem flags need for earlier, incremental hikes as inflation risks persist
Musalem’s speech scores 8/10 on the FXS Speechtracker, modestly above the 7.4/10 historical average and signaling a distinctly hawkish tilt relative to the established baseline. The warning that without further policy restraint inflation is likely to remain substantially above the 2% target in 18 months, alongside the view that interest rates need to rise further to tackle both demand- and supply-driven pressures, underscores a preference for pre-emptive tightening even as the labor market is seen as near full employment and not the main source of inflation. Additional emphasis on broad commodity shocks beyond oil, persistent underlying inflation near 3%, and business plans for price increases closer to 3% reinforces the message that the current policy stance is not yet sufficiently restrictive.
The FXS Fed Sentiment Index rose by 0.42 points to 149.96, deep in hawkish territory and consistent with the above-baseline tone captured by the FXS Speechtracker. This elevated level signals that, in aggregate, Fed communication is firmly skewed toward further policy tightening, a backdrop that should remain supportive of the Dollar against lower-yielding peers.
Technical Analysis: Gold is well-supported above the 100-day SMA
In the daily chart, XAU/USD sits just under the 20-day Bollinger simple moving average, keeping the topside mildly capped, while holding above the 100-day simple moving average (SMA), which underpins the broader uptrend. The Relative Strength Index (RSI) at 49.95 is neutral, suggesting a consolidative phase as price fluctuates around the recent opening pivot at $4,363.65 rather than showing a clear directional impulse.
On the topside, initial resistance is seen at the Bollinger middle band around $4,405, ahead of a stronger barrier at the upper band near $4,615. On the downside, immediate support is provided by the 100-day SMA at $4,320, with a deeper cushion at the lower Bollinger band around $4,200, where buyers would be expected to defend the prevailing medium-term bullish structure if the current range breaks lower.
(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.
- GBP/USD slips again under 1.3400 as bets on an October Fed hike build.
- UK August borrowing forecast at £15.7 billion, after £1.8 billion in July.
- Three of the six Bank of England members who voted to hold speak on Thursday.
GBP/USD has stalled at 1.3400 in each of the last three sessions, and it trades just under that level again on Monday. The Dollar is up against most major currencies, so this is more a Dollar move than a Pound one. Traders put the odds of a second Fed increase on October 28 at 53%, according to CME FedWatch, up from about 40% straight after the September 16 decision. The UK calendar before Friday has a borrowing figure, two surveys and three speeches, and none of them changes the UK's interest rate.
A second Fed increase is now more likely than not, eight days before the Bank of England next meets
Chicago Fed President Goolsbee said in London on Monday that if US inflation is coming from overheated demand as well as from oil and tariffs, the Fed's increases should be bigger and come sooner. Talk like that raises the odds of an October increase, and higher odds have meant a stronger Dollar against the Pound since September 16. Fed Chair Warsh said on September 16 that the Fed needn't hurt the job market to cut inflation, and President Goolsbee's remarks say doing it fast means pushing employment below the Fed's goal.
The UK's Bank Rate, which is what the Bank of England (BoE) calls its main interest rate, has been 3.75% since December 2025, and the BoE doesn't meet again until November 5. A Fed increase on October 28 would lift what a Dollar deposit earns more than a week before the BoE can do the same for a Pound deposit. That timing is why the odds move this pair.
August's borrowing forecast is bigger than the Chancellor's remaining margin
UK public sector borrowing for August is due at 06:00 GMT on Tuesday, forecast at £15.7 billion. The jump from £1.8 billion in July happens every year, because July is when the self-employed pay their second tax instalment. KPMG estimated on Monday that Chancellor Healey's margin against the government's borrowing rules has shrunk to about £12 billion from £23.6 billion at the spring forecast, with about £9 billion of that lost to higher interest costs. Investors who worry about Britain's budget hold fewer Pounds.
The Office for Budget Responsibility (OBR) works out the government's interest bill for the October 28 Budget from yields on gilts, the UK government's bonds, averaged over ten working days, and it hasn't said which ten. The 10-year gilt yield hit its highest since 2008 on September 1, and every high-yield day that falls inside the window means bigger tax rises or spending cuts. Both slow the economy and make a November increase harder for the BoE to justify, and that increase is what would lift the Pound.
A November increase needs two of the six to switch, and three of them speak on Thursday
Early readings of the UK Purchasing Managers Index (PMI) surveys are due at 08:30 GMT on Wednesday, and anything above 50 means business activity is growing. Manufacturing is forecast at 51.4 after 51.7 and services at 52 after 52.5. BoE Chief Economist Pill and external members Greene and Mann, the three who voted for an increase, argued that stronger growth means spare capacity has stopped growing. Soft surveys help the six who held and make a November increase less likely, which is bad for the Pound.
BoE Deputy Governor Breeden and external member Dhingra speak at 09:30 GMT on Thursday and Deputy Governor Lombardelli at 14:00 GMT. All three held on September 17, so any hint of a switch from them would lift the Pound. In the minutes, external member Dhingra still saw value in waiting, and Deputy Governor Breeden said an increase grows more appropriate if knock-on rises in wages and prices appear. Deputy Governor Lombardelli said the case for an increase builds the longer the Middle East war runs without a lasting resolution, which is a vote written in pencil.
The US PMI surveys follow at 13:45 GMT on Wednesday, with services forecast at 56 after 56.5. Durable goods orders are due at 12:30 GMT on Friday, forecast at -0.3% after 1.1%. The University of Michigan survey at 14:00 GMT on Friday is forecast to show one-year inflation expectations steady at 4.6%. Strong numbers from any of them raise the chance of an October increase, which means a lower GBP/USD.
Speculators held 58.7K more contracts betting against Sterling than for it in the latest weekly count from the Commodity Futures Trading Commission (CFTC), and the next count is due at 19:30 GMT on Friday. Anything on Thursday that makes November look likely would push some of those speculators to cut their bets, and cutting them means buying Pounds.
Levels and bias
Resistance: The Pound has failed to hold above 1.3400 in three straight sessions, with the 200-day average just above that level. Beyond it, 1.3500 is where the September 16 fall started.
Support: The session low just above 1.3350 comes first, then the September low just under it, set on September 17 and tested again on September 18. Below that, the Pound hasn't traded under 1.3300 since late July.
Bias: Bearish while the Pound stays below 1.3450, with 1.3300 as the first objective and 1.3200 as the second. The daily Stochastic Relative Strength Index (Stoch RSI), a momentum gauge, is near 15 and has been flat near the bottom of its range for more than a week, so the fall has slowed without turning. A daily close above 1.3450 would put the Pound back over its 200-day average and end the bearish case.
USD/JPY daily chart
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.
- USD/JPY rises for a fifth session in six after the Bank of Japan's split vote.
- Tokyo markets shut until Thursday, when the new 1.25% rate takes effect.
- Japan spent ¥15.4 trillion buying Yen between July 30 and August 26.
Japan's markets are shut from Monday to Wednesday for national holidays, which is when a government that wants to move its currency gets the most for its money. USD/JPY is higher for a fifth session in six and is trading just below 157.50. On Friday the Nikkei reported that Japanese officials had called banks to check exchange rates, a step that often comes before Japan buys Yen.
The Fed and the Bank of Japan each added a quarter-point, and the gap ends up where it was
The Bank of Japan (BoJ) raised its rate to 1.25% from 1% on September 18, the highest since 1995, and the Yen fell on the decision anyway. BoJ board members Asada and Sato voted against, saying inflation under 2% and an economy that hasn't sped up don't justify an increase. Traders had been buying the Yen on the expectation of more increases, and two votes against this one made that harder to believe.
Japan's core inflation rate, which leaves out fresh food, came out at 1.7% for August on the day of the decision, down from 1.8%. That's the measure board member Asada cited for his vote. Board members Takata and Tamura voted for the increase and then objected that the BoJ's own forecast understates inflation. A board that disagrees in both directions gives no date for the next increase, and a date is what Yen buyers are waiting for.
The Fed raised its rate to 3.75-4.00% on September 16. Once the BoJ's increase takes effect, the Fed's rate will still be 2.50 to 2.75 points above the BoJ's, the same gap as before either meeting. That gap is what you're paid for holding Dollars instead of Yen, and an intervention doesn't change it. St. Louis Fed President Musalem said on Monday that the Fed's rate still isn't high enough to slow the US economy, and the BoJ said on Friday that its new rate will keep supporting Japan's.
Japan bought Yen on two days of Golden Week, and Tokyo is shut until Thursday
Japan's Ministry of Finance decides when to buy Yen, and the BoJ carries it out. Finance Minister Katayama said in July that Japan would act whenever it needed to, including during US market holidays. Japan bought Yen on May 4 and May 6, during Golden Week, when Tokyo's markets were shut. Fewer people trade Yen while Tokyo's banks and exporters are away, so the same amount of official buying moves the price further, and they're away again until Thursday.
The ministry spent ¥15.4 trillion between July 30 and August 26, its largest monthly amount on record, and the US bought Yen alongside Japan on July 31 for the first time since 1998. USD/JPY had reached just under 164.00 in July, the Yen's weakest since 1986, before the buying began. It now trades about where it was at the end of July 31, the day the US joined in.
Nine Fed speeches and one Japanese survey between Tuesday and Friday
Japan's first release after the holiday is the Jibun Bank Purchasing Managers Index (PMI) at 00:30 GMT on Thursday. It's an early survey of company purchasing managers, and a reading over 50 means growth. A strong number supports another BoJ increase, and doubt about another increase is what pushed the Yen down after the decision. The two board members who voted against said the economy hadn't sped up enough to justify an increase, and the manufacturing reading is forecast at 55.
The US versions of the same surveys are due on Wednesday at 13:45 GMT, where the services reading is expected to ease to 56 from 56.5. Weekly jobless claims follow on Thursday at 12:30 GMT, expected at 203K after 196K, and Friday's durable goods orders, also at 12:30 GMT, are expected to fall 0.3% after a 1.1% rise. New York Fed President Williams gives three of the nine Fed speeches, on Tuesday, Thursday and Friday. Anything that makes an October Fed increase more likely would widen the gap in the Dollar's favour.
Speculators had 120.4K more futures contracts on a stronger Yen than on a weaker one going into the BoJ meeting, according to the Commodity Futures Trading Commission (CFTC). The CFTC publishes its next count on Friday at 19:30 GMT, covering Tuesday, in the middle of the holiday, and every bet cut since the meeting means Yen sold. Thursday is also when Tokyo's traders return and the BoJ's new rate takes effect, which ends the thin trading that makes Japan's buying go further.
Levels and bias
Resistance: The session high just above 157.50 is right under the 200-day average, which has capped every daily close since early September. Friday's high just above 158.00 is where the rally turned back on the day of the Nikkei's rate-check report.
Support: The pair is holding above 156.50 on Monday, and below that, 156.00 is where it was trading before the BoJ decision. Further down, 155.00 is where it was before the Fed's increase on September 16.
Bias: Bearish under 158.00, first toward 156.00 and then 155.00. On the daily chart, the Stochastic Relative Strength Index (Stoch RSI), a gauge of momentum, is near 27 and just turning up from the bottom of its range, which favours the Dollar, so the call depends on 158.00 holding. A daily close over 158.00 ends it, because that would put the pair above both Friday's high and its 200-day average.
GBP/USD daily chart
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.
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