Forex News
Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to raise key rates by 25 basis points (bps) at the September policy meeting and responds to questions from the press.
Key quotes
"This is predominantly a supply shock."
"Markets do what they have to do."
"Discussion was focused on today's decision, did not debate future rate path."
"Not taking a view on which direction to go at next meeting."
"Uncertainty can change things almost overnight."
"Can't anticipate what will be the next move."
"Neutral rate band is a work in progress on constant basis."
"Neutral band highly conceptual."
"Not attaching great importance to neutral rate."
"Decision was a no brainer."
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
- Oil prices advance as attacks on vessels and energy facilities revive concerns over Middle East supply.
- Iran says it is ready to intensify the conflict if US strikes on its territory and infrastructure continue.
- US crude Oil inventories decline modestly ahead of the release of official stockpile data.
West Texas Intermediate (WTI) US Oil rises sharply on Thursday, trading around $97.00 per barrel at the time of writing, up 2.93% on the day. Oil prices benefit from a renewed geopolitical risk premium as the intensifying conflict between the United States (US) and Iran raises concerns over potential disruptions to energy supplies from the Middle East.
Tensions have escalated significantly over the past week following roughly a month of relative calm. A senior Iranian official said on Wednesday that the Islamic Republic was ready for a more intense war and would step up its counterstrikes if the US continued attacking its territory and infrastructure.
Risks to maritime traffic have now become a major concern for the Oil market. According to Reuters, Iran attacked 10 ships near the Strait of Hormuz after the US sank five Iranian Oil tankers, marking the largest wave of attacks on shipping by both sides since the conflict began six months ago.
The Strait of Hormuz represents a critical route for Middle Eastern energy exports, leaving the market particularly sensitive to any threat that could reduce Oil flows through the region. Attacks by Iran-backed Houthi militants on several energy facilities in Saudi Arabia, which prompted the temporary suspension of some operations, are also adding to supply concerns.
Prospects for a rapid de-escalation also remain limited. US President Donald Trump expects the conflict to continue beyond the November midterm elections and warns that significant relief in gasoline prices is unlikely before then. These comments reinforce expectations that geopolitical tensions could continue supporting Oil prices in the near term.
On the US supply front, data from the American Petroleum Institute (API) showed that crude Oil inventories in the US declined by 300K barrels in the week ending September 4. However, the draw was smaller than the 1.3M decline expected by the market and the 2.6M drop recorded in the previous week.
Investors now await official inventory figures from the Energy Information Administration (EIA), due later on Thursday. A larger-than-expected decline in US stockpiles could provide additional support to WTI US Oil, while developments surrounding the conflict between the US and Iran are likely to remain the main driver of prices in the near term.
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.
Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to raise key rates by 25 basis points (bps) at the September policy meeting and responds to questions from the press.
ECB highlights resilient Eurozone growth but flags persistent inflation risks
The FXS Speechtracker score of 6.4 versus a 6.0 historic average signals a mildly more confident tone as the ECB President Lagarde underscores resilient growth, robust labour markets and an improved near-term outlook, even as employment gains slow and exports face competitiveness headwinds. The emphasis on consumption, public and private investment, and a recovered services sector leans modestly hawkish by reducing perceived urgency for rapid easing.
At the same time, guidance that headline inflation will stay above target through the first half of 2027, with energy shocks feeding into core and food, reinforces a hawkish bias despite longer-term expectations anchored near 2%. For Euro traders, the combination of stronger growth and sticky inflation argues for a higher-for-longer policy stance, while downside risks from wars, energy disruptions and climate-related food price shocks temper the hawkish tilt and may cap Euro upside on risk-off episodes.
Key quotes
"Economy proving resilient."
"Resilience likely to persist into Q3."
"Manufacturing is solid."
"Consumer confidence rebounded."
"Services sector recovered."
"Labour market is robust."
"Growth in employment continues to slow."
"Near-term growth outlook has improved."
"This reflects resilience of consumption, public investment."
"Growth will be bolstered by business, housing investment."
"Exports held back by competitveness challenges, trade policies."
"Refining margins made strong contribution to inflation."
"Rising labour productivity has helped contain growth in unit labour costs."
"Wage tracker points to modest uptick in negotiated wage growth."
"Inflation expectations over shorter horizons remain at elevated levels."
"Most measures of longer-term inflation expectations stand at around 2%."
"Headline inflation to remain above target through first half of 2027."
Higher energy prices to feed throught to core, food gradually."
"Better economic outlook to feed into core."
"Headline inflation to return to target towards end of 2027."
"Risks to the growth outlook are to the downside."
"Downside risk due to Middle East war, Ukraine."
"Energy disruptions, worsening market sentiment, trade frictions among risks to growth."
"The energy shock could intensify further and its effects on other prices and wages could be stronger than currently expected."
"Extreme weather events, potentially reinforced by intensifying El Niño conditions, and the unfolding climate and nature crises more broadly, could drive up food prices."
"Gas prices, in particular, could increase in the event of further supply disruptions or an unusually cold winter coinciding with low storage levels."
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.
- EUR/USD extends its decline as the Euro gains little support from the ECB rate hike.
- The ECB lifts its deposit facility rate to 2.50% and raises its longer-term inflation forecasts.
- US PPI data and rising US Treasury yields help the US Dollar recover.
EUR/USD extends its intraday decline on Thursday as a recovery in the US Dollar (USD) weighs on the Euro (EUR), while the European Central Bank’s (ECB) widely expected rate hike fails to offer support. The Greenback also finds some support from US Producer Price Index (PPI) data, which showed hotter-than-expected annual headline inflation. At the time of writing, the pair trades around 1.1604, down roughly 0.25% on the day.
ECB raised its three key interest rates by 25 basis points, marking its second hike this year and bringing the deposit facility rate to 2.50%. The ECB said, “The conflict in the Middle East continues to generate inflation pressures, and inflation is set to remain well above target for an extended period. Today’s decision underscores the Governing Council’s commitment to setting monetary policy to ensure that inflation stabilises at its 2% target in the medium term.”
Updated projections show headline inflation averaging 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028. Inflation excluding food and energy is expected to average 2.5% in 2026, 2.6% in 2027 and 2.3% in 2028.
The central bank warned that inflation risks are tilted to the upside, while risks to economic growth are tilted to the downside. It reiterated that future decisions will depend on incoming data and will be taken meeting by meeting, adding that it is not committing to a particular interest-rate path.
US PPI rose 0.4% MoM in August, matching market expectations and accelerating from the 0.1% increase recorded in July. Annual producer inflation climbed to 5.4%, slightly above the 5.3 forecast and up from 4.8%. Core PPI rose 0.2% MoM in August, below the 0.3% forecast and the previous 0.3% increase. On an annual basis, core producer inflation rose to 4.6% from 4.3%, in line with expectations.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99.10, recovering from an intraday low of 98.71. Rising US Treasury yields offer additional support to the Greenback, with the benchmark 10-year yield climbing to around 4.90%, its highest level since November 2023.
The PPI figures suggest that inflation pressures remain elevated, strengthening the case for a Federal Reserve (Fed) rate hike next week. Elevated Oil prices add to these concerns and could make it harder for inflation to return to the Fed’s 2% target. According to the CME FedWatch Tool, traders price in around a 64% probability of a 25-basis-point increase at the September 15-16 meeting.
Attention now turns to Friday’s US Consumer Price Index (CPI) report, which could play a more decisive role in shaping the Fed’s decision.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.25% | 0.29% | 0.51% | 0.16% | 0.71% | 0.58% | 0.35% | |
| EUR | -0.25% | 0.04% | 0.25% | -0.10% | 0.45% | 0.32% | 0.10% | |
| GBP | -0.29% | -0.04% | 0.21% | -0.14% | 0.42% | 0.29% | 0.07% | |
| JPY | -0.51% | -0.25% | -0.21% | -0.33% | 0.24% | 0.07% | -0.12% | |
| CAD | -0.16% | 0.10% | 0.14% | 0.33% | 0.56% | 0.41% | 0.18% | |
| AUD | -0.71% | -0.45% | -0.42% | -0.24% | -0.56% | -0.13% | -0.34% | |
| NZD | -0.58% | -0.32% | -0.29% | -0.07% | -0.41% | 0.13% | -0.18% | |
| CHF | -0.35% | -0.10% | -0.07% | 0.12% | -0.18% | 0.34% | 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 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).
The US Producer Price Index (PPI) rose 5.4% in August from a year earlier, according to the latest figures from the Bureau of Labor Statistics (BLS). The print came in just above estimates (5.3%) and the 4.8% gain recorded in the previous month (revised from 4.7%).
Stripping out food and energy, core Producer Prices matched consensus, gaining 4.6% YoY, up from the previous 4.3% increase (revised from 4.2%YoY).
On a monthly basis, the headline PPI edged up 0.4%, and the core PPI rose by 0.2%.
Market reaction
The Greenback manages to gather renewed upside traction, leaving behind three daily pullbacks in a row and hitting three-day highs past the 99.00 mark when measured by the US Dollar Index (DXY).
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
Royal Bank of Canada (RBC) economist Nathan Janzen assesses that new U.S. tariff retaliation and import bans on selected Canadian products represent a modest escalation in the trade dispute. Section 338 measures still cover a small share of bilateral trade, with targeted sector disruption but limited macroeconomic impact. The main concern remains potential future escalation into a broader Canada/U.S. trade war.
Targeted tariffs, contained macro impact
"The U.S. administration’s latest response to Canada’s retaliatory tariffs following the breakdown of bilateral trade negotiations may sound alarming, but they represent a relatively minor escalation in the trade war."
"Section 338 tariffs continue to affect a small share of trade (5% of U.S. imports from Canada), causing significant disruption in targeted sectors, but with limited broader impact on the economy."
"The real risk remains further escalation into a tit-for-tat trade war covering a much larger share of trade—something that hasn’t occurred with this latest development yet."
"This marks an escalation, but with a 50% tariff on these products, many were already likely too expensive for U.S. importers to buy."
"Therefore, the marginal impact of the change on the Canadian economy is likely relatively small (again, notwithstanding the significant impact on specific exporters targeted)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Initial Jobless Claims went down to 206K vs. the previous week.
- Continuing Jobless Claims fell to 1.774M.
According to a report from the US Department of Labour (DOL) released on Thursday, the number of US citizens submitting new applications for unemployment insurance decreased to 206K for the week ending September 5. The latest print came in above initial estimates (205K) and was a tad lower than the previous week’s 207K (revised from 206K).
Additionally, the 4-week moving average went down by 1.5K to 206K vs. the previous week’s revised prints.
The report also indicated that Continuing Jobless Claims fell by 1K to 1.774M for the week ending August 29.
Market reaction
The Greenback trades with decent gains, challenging the key 99.00 barrier when gauged by the US Dollar Index (DXY), as investors continue to assess the jobs report as well as wholesale inflation data.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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