Forex News
- EUR/USD may find the initial barrier at the 12-week high of 1.1849.
- The 14-day Relative Strength Index of 56 indicates constructive upside momentum.
- The immediate support lies at the nine-day EMA of 1.1744.
EUR/USD extends its losses for the second successive day, trading around 1.1760 during the Asian hours on Tuesday. The daily chart technical analysis indicates an ongoing bullish bias as the pair is remaining within the ascending channel pattern.
The EUR/USD pair is holding above both the nine-period and 50-period Exponential Moving Averages (EMAs), keeping a mild bullish bias. The short-term EMA running above the longer one, together with a 14-day Relative Strength Index (RSI) hovering around 56, suggests that upside momentum remains constructive, even if not yet in overbought territory.
On the upside, the primary barrier lies at the 12-week high of 1.1849, reached on April 17. A break above this level would lead the pair to test the upper boundary of the ascending channel around 1.2020. Further advances above the channel would lead the pair to explore the region around 1.2082, the highest since June 2021, reached on January 27.
The EUR/USD pair may find immediate support at the nine-day EMA of 1.1744, followed by the lower ascending channel boundary around 1.1730 and the 50-day EMA of 1.1697. Further declines will put downward pressure on the pair to navigate the region around the nine-month low of 1.1411, recorded on March 13.
(The technical analysis of this story was written with the help of an AI tool.)
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.
- AUD/JPY strengthens to around 114.00 in Tuesday’s early European session.
- The constructive outlook for the cross remains intact above the 100-day EMA, with bullish RSI momentum.
- The immediate resistance level emerges at 114.32; the initial support level is seen at 113.75.
The AUD/JPY cross gathers strength near 114.00 during the early European trading hours on Tuesday. A hawkish tone from the Reserve Bank of Australia (RBA) provides some support to the Australian Dollar (AUD) against the Japanese Yen (JPY).
The Australian central bank signaled that more rate hikes were on the horizon, with its economic forecasts pencilling in a 4.70% policy rate by the end of 2026, with no cuts expected until 2028, according to CNBC.
On the other hand, the potential for further intervention from the Japanese authorities might underpin the JPY and cap the upside for the cross. Japanese officials reportedly intervened in the currency market again during the Golden Week.
Furthermore, Japan’s Finance Minister Satsuki Katayama said on Tuesday that Japan and the United States (US) reaffirmed their close cooperation on currency moves. Last week, Japan’s top foreign exchange official Atsushi Mimura stated that continued intervention was possible.
Technical Analysis:
In the daily chart, AUD/JPY holds a constructive bullish tone as it consolidates above the 20-day Bollinger simple moving average and well above the 100-day exponential moving average. Price is lodged in the upper half of the Bollinger envelope with the upper band acting as nearby resistance, while the Relative Strength Index at about 59 stays in positive territory without yet signaling overbought conditions, suggesting persistent but not overstretched upside momentum.
On the topside, immediate resistance emerges at the May 6 high of 114.32. The next hurdle to watch is the Bollinger upper band of 114.80, and a daily close above this cap would open the way for a continuation of the uptrend. On the downside, initial support is provided by the Bollinger middle band at 113.75, ahead of secondary protection at the lower band around 112.67, with the 100-day EMA further below near 109.82 acting as a deeper trend-defining floor as long as the pair trades comfortably above it.
(The technical analysis of this story was written with the help of an AI tool.)
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.
Gold prices fell in India on Tuesday, according to data compiled by FXStreet.
The price for Gold stood at 14,560.78 Indian Rupees (INR) per gram, down compared with the INR 14,589.66 it cost on Monday.
The price for Gold decreased to INR 169,834.20 per tola from INR 170,170.90 per tola a day earlier.
Unit measure | Gold Price in INR |
|---|---|
1 Gram | 14,560.78 |
10 Grams | 145,608.50 |
Tola | 169,834.20 |
Troy Ounce | 452,904.00 |
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.
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.
(An automation tool was used in creating this post.)
- USD/CHF scales higher for the second straight day as rising Iran tensions underpin the USD.
- The USD bulls, however, seem hesitant and keenly await the US consumer inflation figures.
- The technical setup warrants some caution before positioning for any further appreciation.
The USD/CHF pair attracts some follow-through buying for the second straight day, with bulls looking to extend the momentum further beyond the 0.7800 mark during the Asian session. Spot prices, however, remain within striking distance of a nearly two-month low, touched last Friday, as traders keenly await the release of the latest US consumer inflation figures before placing fresh directional bets.
The crucial US Consumer Price Index (CPI) report will influence expectations about the Federal Reserve's (Fed) policy outlook amid the possibility of a rate hike by the end of this year and drive the US Dollar (USD) demand. In the meantime, rising US-Iran tensions remain supportive of elevated Crude Oil prices, fueling inflation fears and underpinning the USD's reserve currency status. This, in turn, is seen as a key factor acting as a tailwind for the USD/CHF pair.
From a technical perspective, the recent failure to find acceptance above the 200-period Simple Moving Average (SMA) on the 4-hour chart and the subsequent slide favor bearish traders. Meanwhile, the price action has stabilised off recent lows, and the Relative Strength Index (RSI) has nudged above the midline towards 53, while the Moving Average Convergence Divergence (MACD) histogram has turned mildly positive but is yet to offset the weight of the trend barrier.
Furthermore, the broader structure still suggests a capped recovery, with the USD/CHF pair retaining a bearish bias in the near term. Hence, any further move up is likely to confront significant resistance near the 200-period SMA at 0.7873. A sustained break above this level would be needed to ease the current downside pressure and open the door to a more durable rebound. Until then, the USD/CHF pair remains vulnerable to renewed selling on rallies.
(The technical analysis of this story was written with the help of an AI tool.)
USD/CHF 4-hour chart
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.23% | 0.22% | 0.25% | 0.11% | 0.23% | 0.13% | 0.26% | |
| EUR | -0.23% | -0.02% | 0.04% | -0.15% | 0.00% | -0.12% | 0.03% | |
| GBP | -0.22% | 0.02% | 0.04% | -0.13% | 0.00% | -0.11% | 0.04% | |
| JPY | -0.25% | -0.04% | -0.04% | -0.17% | -0.05% | -0.14% | -0.01% | |
| CAD | -0.11% | 0.15% | 0.13% | 0.17% | 0.12% | 0.03% | 0.15% | |
| AUD | -0.23% | 0.00% | 0.00% | 0.05% | -0.12% | -0.09% | 0.03% | |
| NZD | -0.13% | 0.12% | 0.11% | 0.14% | -0.03% | 0.09% | 0.12% | |
| CHF | -0.26% | -0.03% | -0.04% | 0.01% | -0.15% | -0.03% | -0.12% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the 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).
- EUR/JPY rises as the Japanese Yen weakens following disappointing Japanese household spending data and shrinking consumer demand.
- The BoJ Summary shows some members favor rate hikes while others urge caution regarding Middle East instability.
- The Euro gains ground as hawkish ECB rhetoric fuels expectations for continued interest rate hikes through June.
EUR/JPY extends its gains for the fourth successive day, trading around 185.40 during the Asian hours on Tuesday. The currency cross appreciates as the Japanese Yen (JPY) struggles following the disappointing release of Japan's Household Spending data.
Japan’s economic outlook faced renewed pressure on Tuesday after the internal affairs ministry reported a significant 2.9% year-over-year drop in consumer spending for March. This steeper-than-expected decline marks the fourth consecutive month of shrinking personal expenditures, as persistent inflationary pressures continue to erode household purchasing power. The data underscores a fragile domestic recovery, further complicated by growing global economic anxiety stemming from the escalating tensions between the United States and Iran.
Inside the Bank of Japan (BoJ), policymakers appear to be navigating a complex path toward normalization. The Summary of Opinions from the April meeting revealed that while some members believe real interest rates are low enough to support further hikes, others remain wary of the unpredictable Middle East situation. Despite these geopolitical uncertainties, the consensus suggests that a rate hike remains likely as early as the next meeting. This hawkish tilt was complemented by diplomatic efforts, as Finance Minister Satsuki Katayama reaffirmed close cooperation on currency stability with US Treasury Secretary Scott Bessent.
Meanwhile, the EUR/JPY cross continues to gain traction, bolstered by a resilient Euro (EUR) and a decisively hawkish European Central Bank (ECB). Governing Council member Martin Kocher emphasized that the bank will not hesitate to push forward with interest rate hikes if energy prices remain elevated. With financial markets now pricing in a 92% probability of a rate hike in June and anticipating three total increases by 2026, the widening policy divergence between the ECB and the BoJ is providing a steady tailwind for the pair.
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.
- Silver price clings to gains near $86.50 in the countdown to the US CPI data for April.
- The white metal reflects strength despite oil prices remaining elevated.
- Investors will pay close attention to the Trump-Xi meeting during the May 13-15 period.
Silver price (XAG/USD) holds onto its almost week-long rally to near $86.50 during the Asian trading session on Tuesday. The white metal trades firmly even as oil prices are broadly stable amid fears that military actions between the United States (US) and Iran could resume.
According to a report from CNN, US President Donald Trump has grown increasingly frustrated with how the Iranians are handling talks to end the conflict, and some Trump aides say that he is now more seriously considering a resumption of major combat operations than he has in recent weeks.
The resumption of the war in the Middle East would prompt fears of a prolonged closure of the Strait of Hormuz, a vital passage to almost 20% of global energy supply.
Higher oil prices bode poorly for non-yielding assets, such as Silver, as they boost global inflation expectations, which discourage central bankers from easing monetary conditions.
Meanwhile, investors await the US Consumer Price Index (CPI) data for April, which will be published at 12:30 GMT. The CPI report is expected to show that the headline inflation rose to 3.7% Year-on-Year (YoY) from the previous reading of 3.3%.
This week, the major trigger for the Silver price and global markets would be the bilateral meeting between US President Donald Trump and Chinese leader Xi Jinping, which is expected during the May 13-15 period.
Silver technical analysis
XAG/USD trades at around $86.50 in the Asian trade. The white metal holds a firm bullish bias as it is well above the 20-day Exponential Moving Average (EMA) at roughly $77.90. The clustering of the spot above this short-term trend gauge suggests underlying demand remains constructive, while the Relative Strength Index (RSI) near 67 stays shy of overbought territory, hinting that upside momentum is strong and not yet exhausted.
On the downside, initial support is at the April 17 high of $83.06, with stronger backing at the 20-day EMA near $77.90, which reinforces the broader uptrend as long as it holds. Looking up, the Silver price aims to extend its advance towards $90.00, followed by the March 3 high of $92.06.
(The technical analysis of this story was written with the help of an AI tool.)
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- US Dollar Index rises as persistent geopolitical instability in the Middle East drives a flight to safety.
- President Trump is increasingly frustrated by the stalemate in peace talks, signaling a potential shift in regional conflict strategy.
- Traders eye Tuesday’s US inflation report for the Iran war's economic impact on Federal Reserve policy.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is gaining ground for the second successive day and trading around 98.10 during Asian hours on Tuesday.
The Greenback strengthens on the back of intensifying geopolitical risks. Global investors are pivoting toward safe-haven assets following reports of deteriorating diplomatic relations in the Middle East. The shift in sentiment comes as market participants weigh the possibility of a return to major combat operations, a move that typically triggers a flight to quality and bolsters the Greenback against more sensitive currency valuations.
According to a CNN report released Monday, US President Donald Trump has expressed growing frustration over the current state of negotiations to end regional hostilities. Aides suggest that the administration is now more seriously considering a resumption of military action than in previous weeks. Compounding these fears, Iranian Parliament speaker Mohammad Bagher Ghalibaf warned via Reuters that Iran’s military remains fully prepared to retaliate against any future strikes, putting the region’s fragile ceasefire under immense strain.
Investors are closely watching April’s consumer inflation report due on Tuesday for insight into how the war with Iran is impacting the economy and influencing Federal Reserve policy. Additionally, President Trump’s high-stakes meeting with Chinese President Xi Jinping this week is expected to center on trade, artificial intelligence, and global energy security.
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 loses traction to around 1.3590 in Tuesday’s early Asian session.
- Trump's rejection of Iran's peace proposal renewed risk-off sentiment, supporting the US Dollar.
- UK Prime Minister Starmer is under pressure after heavy election losses.
The GBP/USD pair loses momentum to near 1.3590 during the early Asian session on Tuesday. The British Pound (GBP) weakens against the US Dollar (USD) as traders focus on key US economic data and Middle East geopolitical tensions.
The US Consumer Price Index (CPI) inflation report for April will be published later in the day. Markets expect the headline CPI to show a rise of 3.7% YoY in April, compared to 3.3% in March, while the core CPI is projected to show an increase of 2.7% YoY in April, versus 2.6% prior. A hotter-than-expected reading could bolster the Greenback as it would support the narrative of the Federal Reserve (Fed) keeping rates higher for longer.
US President Donald Trump has grown increasingly frustrated with how the Iranians are handling talks to end the conflict, and some Trump aides say that he is now more seriously considering a resumption of major combat operations than he has in recent weeks, per CNN. Meanwhile, Iranian Parliament speaker Mohammad Bagher Ghalibaf warned that Iran’s military was fully prepared to retaliate against any future attacks.
Over the weekend, Trump rejected new Iran peace proposals to end the war as "totally unacceptable.” Signs of prolonged conflict in the Middle East could support a safe-haven currency such as the Greenback in the near term.
UK Prime Minister Keir Starmer is facing rising pressure to set a date for his departure after elections across much of the country resulted in massive losses for his ruling Labour Party. While Starmer stated he will not resign, the resulting political "noise" and rising UK gilt yields have created localized pressure on the GBP.
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.
- USD/CAD rises as Middle East tensions boost the US Dollar's safe-haven appeal.
- President Trump is increasingly frustrated by the stalemate in peace talks, signaling a potential shift in regional conflict strategy.
- Rising oil prices bolster the CAD but complicate the Bank of Canada’s policy outlook by fueling persistent inflationary pressures.
USD/CAD gains ground after being nearly flat the previous day, trading around 1.3690 during Asian hours on Tuesday. The pair is seeing renewed upward pressure as the US Dollar (USD) strengthens on the back of intensifying geopolitical risks.
Global investors are pivoting toward safe-haven assets following reports of deteriorating diplomatic relations in the Middle East. The shift in sentiment comes as market participants weigh the possibility of a return to major combat operations, a move that typically triggers a flight to quality and bolsters the Greenback against more sensitive currency valuations.
According to a CNN report released Monday, US President Donald Trump has expressed growing frustration over the current state of negotiations to end regional hostilities. Aides suggest that the administration is now more seriously considering a resumption of military action than in previous weeks. Compounding these fears, Iranian Parliament speaker Mohammad Bagher Ghalibaf warned via Reuters that Iran’s military remains fully prepared to retaliate against any future strikes, putting the region’s fragile ceasefire under immense strain.
Despite the USD's strength, the Canadian Dollar (CAD) is finding a vital safety net in the energy sector. As the largest crude exporter to the United States, Canada’s currency remains intrinsically linked to oil prices, which have spiked following President Trump’s comments on the instability of the ceasefire. With the potential for regional conflict to disrupt global supply chains and prevent Middle Eastern exports, crude prices are surging, providing a natural tailwind for the commodity-linked CAD and limiting the USD/CAD’s total upside.
The spike in energy costs is reigniting fears of an inflation shock within the Canadian economy. Recent data for March already showed the impact of volatile energy prices, with the annual inflation rate hitting 2.4%, matching its highest level in a year. While higher oil prices generally support the CAD, they also complicate the outlook for the Bank of Canada (BoC). Although the central bank recently held interest rates steady and indicated that energy-driven inflation might not become entrenched, a prolonged conflict could force a reassessment of its neutral stance.
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
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