Forex News
TD Securities’ Prashant Newnaha now expects the Reserve Bank of Australia (RBA) to raise the cash rate by 25bps to 4.60% at the late-September meeting. The change follows stronger-than-expected Q2 Gross Domestic Product (GDP) and firm discretionary consumption. Newnaha notes growth is running slightly above trend and sees a further hike this year as possible but not its base case.
TD shifts to September rate hike call
"TD now expects the RBA to deliver a 25bps hike at its meeting at the end of the month, taking the target cash rate to 4.60%. The details of today's Q2 GDP print add to the case for the Bank to hike. A follow-up hike this year is a possibility but is not our central view."
"Annual growth is running a touch above trend, but the Bank has clearly stated growth needs to slow to get on top of inflation. Following today's Q2 GDP release, implied q/q GDP growth to meet the Bank's Aug '26 MPS forecasts is 0.3% q/q in Q3 and Q4."
"S&P's Australia Composite PMI survey covering July and August so far points to growth improving in Q3 and likely exceeding the RBA's implied Q3 q/q GDP forecast."
"Household consumption was roughly in line with the Bank's 0.4% q/q projection, but growth in discretionary spending has accelerated over recent quarters. The monthly household spending data does not exactly track the measure of spending in the national accounts but the monthly household spending data for July revealed discretionary spending remains firm."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
BNY’s Geoff Yu notes that Canadian Dollar (CAD) positioning remains weak ahead of the Bank of Canada (BoC) decision, with USD/CAD dominating flows and cross-currency activity surprisingly limited. The report highlights that recent CAD inflows were mainly mean reversion, while fundamentals offer little support. Despite trade tensions with the United States (US) and BoC lagging G10 peers on hikes, positioning suggests scope for further USD/CAD-driven mean reversion.
USD/CAD flows dominate CAD dynamics
"CAD interest remains light ahead of today’s BoC meeting. Selling resumed after the July decision, and efforts at an offset have been tame. Early August inflows appeared to be a case of mean reversion for July, while the rest of the month was largely flat."
"Some light interest is re-emerging ahead of the decision, but there is no conviction behind it. The only potential source of support is that a two-month rolling average of -0.29 in scored flow is very weak by G10 standards, providing strong scope for mean reversion opportunities."
"Crucially, there is no sign of damage from the escalating trade dispute with the U.S. Neither is there an impact from the BoC’s inability to hike rates while many G10 peers are moving in the opposite direction. This underscores the strength of weak positioning, leading to mean reversion."
"USD/CAD is fully driving CAD flow. This also shows that there is very limited activity in CAD on the crosses, which is a surprise."
"The challenge is now for USD/CAD to find selling interest based on CAD fundamentals, which are lacking for now."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Brown Brothers Harriman’s (BBH) Elias Haddad reports the New Zealand Dollar (NZD) underperformed after the Reserve Bank of New Zealand (RBNZ) delivered a 25 bps hike to 2.75% but signaled reduced need for further tightening. Haddad notes the RBNZ’s virtually unchanged OCR path peaking near 3.25% contrasts with market pricing near 4.00%, leaving room for dovish repricing that could continue to pressure NZD.
Policy path gap pressures NZD
"NZD underperformed across the board after the RBNZ delivered a dovish hike. As was widely expected, the RBNZ raised the Official Cash Rate (OCR) for a second straight time by 25bps to 2.75%."
"However, the RBNZ cautioned that “this decision reduces the risk that the OCR needs to increase by more later.”"
"Indeed, the RBNZ stressed that “spare capacity remains in the economy, particularly in the labour market.” The RBNZ also left its OCR path virtually unchanged from May, still projecting a peak of around 3.25% in 2028."
"In contrast, the swaps curve implies the OCR at 4.00% in the next two years. This gap leaves ample room for a dovish repricing which is a drag on NZD."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
OCBC’s Sim Moh Siong and Christopher Wong highlight that higher Oil prices and renewed US-Iran tensions have pushed global bond yields higher and strengthened the US Dollar, with markets fully pricing a 25bp Federal Reserve (Fed) rate hike by October. Fed Governor Barr’s comments that further rate increases may be warranted reinforce this hawkish backdrop, while they remain modestly constructive on the USD through early 2027.
Higher yields and policy repricing
"The renewed escalation in the Middle East has brought inflation risks back into focus, pushing global bond yields higher. The move was accompanied by a bearish flattening of the US yield curve, a stronger USD and lower gold prices as markets moved to fully price a 25bp Fed rate hike by October."
"Fed Governor Barr reinforced the hawkish policy backdrop, stating that further rate increases may be warranted if inflation fails to moderate. His comments build on Chair Warsh's hawkish message at Jackson Hole."
"Meanwhile, JOLTS job openings data continues to point to a low-hiring, low-firing labour market. The recent uptick in the vacancy-to-unemployment ratio suggests the moderation in wage growth could soon stabilise."
"We have updated our FX forecasts to reflect recent market moves following the USD's weakness during a period of policy uncertainty triggered by the Treasury's surprise EUR/JPY intervention and expanded buyback programme. Despite these adjustments, we remain modestly constructive on the USD through early 2027."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
In an interview with CNBC on Wednesday, New York Federal Reserve (Fed) Bank President John Williams said that tariffs and the Middle East war are big drivers of inflation over target, per Reuters.
Williams flags strong economy-driven yields as Fed stays focused on 2% inflation goal
Fed's Williams delivered a slightly more hawkish-than-usual tone, with a 6/10 FXS Speechtracker score marginally above the 5.9/10 historical average, emphasizing that rising yields reflect a strong economy and robust outlook rather than an unanchored inflation profile. By stressing that yields are being pushed up by strong investment demand and geopolitical factors such as tariffs and the Middle East conflict, while highlighting contained inflation expectations and a trend toward lower inflation, the speech framed higher yields as an information signal rather than a policy trigger. The insistence that achieving 2% inflation remains “job number one” and that the labor market is “stable and solid” underscores a data-dependent stance that keeps the bar high for any rapid policy easing.
The FXS Fed Sentiment Index slipped by 1.42 points to 127.44, signaling a modest pullback in perceived hawkishness even as the overall level remains firmly above the neutral 100 mark. This configuration suggests that, despite a slight softening in tone versus recent communications, the Fed is still viewed as operating in hawkish territory, consistent with a strong economy narrative and a cautious approach to easing priced into the FXS Speechtracker.
Key takeaways
"Yields don't seem to be driven by inflation outlook."
"It's more about economy driving financial conditions."
"There is coorelation between bond yields and Middle East conflict."
"Bond yields are important information for Fed."
"Fed looks at totality of data when setting monetary policy."
"It's Fed's job to get price stability, 2% inflation is job number one."
"Strong investment demand is pressuring yields up."
"Not seeing second round inflation impact from tariffs."
"Inflation expectations are contained."
"Seeing trend toward lower inflation."
"The labor market is stable and solid."
"Need to get to 2% inflation in forseeable future."
"Recent data have been encouraging on inflation."
"Optimistic about long term economic impact from artificial intelligence."
"Supported July FOMC meeting outcome."
"Need to collect data for next FOMC meeting."
"Things are working really well with monetary policy implementation."
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
ING’s Chris Turner notes that USD/JPY is slightly lower after BoJ hawk Hajime Takata signalled the possibility of a 50bp September hike or back-to-back moves. However, with Takata still in the minority on the policy board, ING expects the BoJ to pause after any September hike, while a hawkish Fed could keep USD/JPY trading around the 160–162 area for longer.
BoJ hawks versus Fed stance
"USD/JPY is a little lower in early Europe as one of the Bank of Japan hawks, Hajime Takata, has implied that the BoJ could possibly hike 50bp in September or deliver back-to-back hikes, meaning a further hike in October."
"Takata has been in the minority as one of the three hawks on the BoJ policy board and his comments should not be particularly surprising. He is a fan of getting the policy rate to neutral at 2.00% quite quickly."
"However, a BoJ hike in September would already represent a quickening in the pace of hikes after the tightening in June. And we suspect that after a September hike, the BoJ will prefer to wait until early next year before tightening again to see how weak domestic consumption has performed."
"For USD/JPY, the hawkish Fed is a game-changer and suggests USD/JPY can spend much more time in this 160/162 area."
"Scott Bessent will not be particularly happy with the hawkish Fed working against the yen buying operation, but he will no doubt appreciate the benefits of Fed independence here."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Employment in the United States' (US) private sector increased by 38K in August, the Automatic Data Processing (ADP) reported on Wednesday. This print followed the 46K increase (revised from 44K) recorded in July and came in below the market expectation of 47K.
Assessing the survey's findings, "pay can tell us a lot about today's choppy hiring. To understand hiring patterns, you have to look deeply into where pay growth is accelerating, where it's slowing, and for whom. Once-predictable wage growth has been overtaken by the complexities of demographic change, persistent inflation, and AI's effects on jobs," said Dr. Nela Richardson, ADP Chief Economist.
Market reaction to US ADP Employment Change data
This report failed to trigger a noticeable market reaction. At the time of press, the US Dollar (USD) Index was up 0.1% on the day at 99.75.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.40% | -0.27% | 0.09% | 0.17% | 1.67% | 0.72% | |
| EUR | -0.03% | 0.38% | -0.30% | 0.06% | 0.14% | 1.59% | 0.70% | |
| GBP | -0.40% | -0.38% | -0.77% | -0.32% | -0.24% | 1.21% | 0.24% | |
| JPY | 0.27% | 0.30% | 0.77% | 0.28% | 0.42% | 1.82% | 0.88% | |
| CAD | -0.09% | -0.06% | 0.32% | -0.28% | 0.08% | 1.55% | 0.56% | |
| AUD | -0.17% | -0.14% | 0.24% | -0.42% | -0.08% | 1.45% | 0.49% | |
| NZD | -1.67% | -1.59% | -1.21% | -1.82% | -1.55% | -1.45% | -0.96% | |
| CHF | -0.72% | -0.70% | -0.24% | -0.88% | -0.56% | -0.49% | 0.96% |
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).
This section below was published as a preview of the ADP Employment Change data at 10:00 GMT.
- The US ADP Employment Change report is expected to show that net private employment increased by 47K in August.
- A weak ADP reading might cast doubt about Friday’s NFP report and dampen hopes of a Fed rate hike in September.
- The US Dollar picks up but remains relatively close to three-month lows.
The Automatic Data Processing (ADP) Research Institute will release its monthly report on private-sector job creation for August next Wednesday. The ADP Employment Change report is expected to show that the United States (US) private sector added 47K new positions this month, little changed from the 44K new jobs reported in July.
The ADP report precedes the all-important Nonfarm Payrolls (NFP) report, which will be released by the US Bureau of Labor Statistics on Friday. The ADP is hardly an advanced indicator of NFP trends; however, it holds significant relevance as it tends to set the tone for the official employment report, which is a cornerstone for the Federal Reserve’s (Fed) monetary policy. In that sense, a surprise in ADP data often triggers significant US Dollar (USD) volatility.
ADP jobs report, likely to shed some light on the Fed’s monetary policy
August’s ADP report comes out at a moment when the Federal Reserve’s policy is gathering increasing attention, as Chairman Kevin Warsh strives to deal with US President Donald Trump’s pressure to cut interest rates, persistent inflation concerns pulling in the opposite direction, and a split Federal Open Market Committee (FOMC).
Beyond that, the US Treasury Secretary, Scott Bessent, announced a plan to double buybacks of long-term government Bonds, another sign that the US government wants to avoid a more restrictive monetary policy by all means.
Commerzbank analysts expect political resistance to monetary tightening to increase heading into September’s Fed meeting: “The impression created by these actions (Treasury buyback plans) is that the US fiscal authorities are keen to contain upward pressure on yields, albeit through unconventional measures rather than through greater fiscal discipline that might convince markets to demand lower risk premia.”
The experts caution that “this is a development that the Federal Reserve cannot ignore,” since “Fed rate hikes would make it more difficult for the Treasury's efforts to cap yields,” reinforcing the case for policy restraint even as inflation remains elevated.
Bearing this in mind, a 47K increase in ADP employment is far from the reading needed to assure a Federal Reserve rate hike in September. July’s 44K figure marked the weakest job creation since January and, unless the final reading beats the market consensus by a wide margin, August data will not show any significant improvement in job creation, let alone a miss.
When will the ADP report be released, and how could it affect the USD?
The US ADP Employment Change report will be out on Wednesday at 12:15 GMT, and is expected to show that private-sector employment increased by 47K in August. The reading comes with the US Dollar struggling to extend its recovery from mid-August lows.
Investors' aversion to risk amid growing tensions in the Middle East and higher global yields, together with Fed Chair Warsh’s hawkish comments at the Jackson Hole meeting, are supporting the Greenback, but concerns about the ballooning US government debt and the US Treasury’s buyback plan continue to act as headwinds.
Guillermo Alcalá, Analyst at FXStreet, observes the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is “picking up from lows near 98.50, but likely to meet relevant resistance at the 100.00 psychological area, which capped rallies several times in August.” “Momentum indicators on the daily chart are turning positive, and price action crossed above the 200-day Simple Moving Average (SMA), at 99.14 last week, which is a bullish sign,” says Alcalá.
“The index, however, is not out of the woods, after dropping nearly 3% in the first two weeks of August. Bulls would need strong employment figures this week, ideally combined with hot CPI data next week to convince Fed policymakers that conditions are set for some monetary policy tightening. This scenario would push the DXY beyond the 38.6% Fibonacci retracement, at 99.76, which is capping rallies this week and probably also above the mentioned 100.00 level,” according to Alcalá.
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.
- EUR/GBP attempts to break above its recent consolidation range, reaching its highest level since July 1.
- Diverging ECB and BoE monetary policy expectations provide modest support to the Euro.
- Traders await Eurozone PPI and Retail Sales data later this week.
EUR/GBP edges higher on Wednesday, extending its advance for the third consecutive day and attempting to break above the narrow consolidation range that has been in place since late July. At the time of writing, the cross trades around 0.8589, its highest level since July 1. Price action remains limited amid a light economic calendar in both the Eurozone and the United Kingdom.
The Euro (EUR) receives modest support from diverging near-term monetary policy expectations. The European Central Bank (ECB) is widely expected to raise its deposit rate by 25 basis points to 2.50% at its September 9-10 meeting, which would mark its second rate increase this year. Policymakers are seeking to contain inflation fuelled largely by the war in the Middle East, now in its seventh month, which has kept Oil prices elevated.
Tuesday’s Eurozone inflation figures reinforced expectations of another ECB rate increase. The preliminary Harmonized Index of Consumer Prices (HICP) accelerated to 3.3% YoY in August from 2.9% in July, moving further above the ECB’s 2% target. ECB policymaker Gediminas Šimkus said on Tuesday, “It is clear that we should hike rates in September,” adding, “New projections are likely to move the rate path up a bit.”
In contrast, the Bank of England (BoE) is expected to leave its policy rate unchanged at 3.75% later this month despite UK inflation running above the central bank’s 2% target. BoE Governor Andrew Bailey said last week that the second-round effects of higher energy prices remained subdued. At its last monetary policy meeting, most policymakers judged that the tightening in financial conditions since the war in the Middle East began was providing sufficient protection against inflation risks stemming from higher energy prices.
According to a Reuters poll conducted between August 13 and 18, nearly 90% of economists, or 56 of 64, expect the BoE to leave interest rates unchanged at 3.75% through the end of 2026, up from 83% in the previous month’s survey. All respondents forecast no change at the central bank’s September meeting.
Looking ahead, the UK economic calendar remains relatively quiet for the rest of the week. In the Eurozone, the Producer Price Index (PPI) is due on Thursday, followed by Retail Sales data on Friday.
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.12% | 0.25% | -0.37% | 0.20% | -0.04% | 1.12% | 0.28% | |
| EUR | -0.12% | 0.12% | -0.48% | 0.08% | -0.15% | 0.97% | 0.16% | |
| GBP | -0.25% | -0.12% | -0.60% | -0.05% | -0.28% | 0.82% | 0.04% | |
| JPY | 0.37% | 0.48% | 0.60% | 0.56% | 0.32% | 1.44% | 0.64% | |
| CAD | -0.20% | -0.08% | 0.05% | -0.56% | -0.24% | 0.89% | 0.08% | |
| AUD | 0.04% | 0.15% | 0.28% | -0.32% | 0.24% | 1.12% | 0.33% | |
| NZD | -1.12% | -0.97% | -0.82% | -1.44% | -0.89% | -1.12% | -0.79% | |
| CHF | -0.28% | -0.16% | -0.04% | -0.64% | -0.08% | -0.33% | 0.79% |
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).
Commerzbank’s Michael Pfister expects the Bank of Canada to hold its key rate at 2.25%, a move he says is fully priced with only a small chance of a hike. While officials may hint at tightening early next year, he argues the Canadian Dollar’s outlook is dominated by strained US relations, tariffs and growth risks rather than domestic monetary policy.
BoC on hold as politics dominate
"The Bank of Canada is widely expected to keep its key interest rate at 2.25% for another meeting. But this outcome has already been fully priced in, with only a small residual probability of a rate hike being anticipated."
"Although the Canadian real economy has slowly recovered in recent weeks, the BoC has remained cautious in its announcements regarding monetary policy tightening."
"This has weighed on the Canadian dollar, given that most other central banks were expected to implement significantly more rate hikes simultaneously. Officials may provide clearer indications today of a rate hike early next year."
"The main problem for the CAD is nevertheless likely to remain unresolved: Relations between Canada and the US have once again hit a low point, and it is unclear whether the situation will improve in the coming weeks."
"The labour market is likely to be affected by the new tariffs, and growth is also expected to slow down slightly. Until the situation eases, interest rate hikes are unlikely to be a priority."
"Even if officials drop hints today, market participants should thus be aware that the CAD's fate currently depends more on US relations than on Canadian monetary policy."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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