Forex News
DBS Group Research notes that after earlier rupee outperformance driven by intervention and inflows, USD/INR has settled around the mid-94 handle. With Oil prices rising and the Dollar supported by US rate hike expectations, they expect USD/INR pullbacks to be shallow, although recent inflows have reduced the risk of sharp one-sided rupee depreciation in the near term.
Inflows support the rupee as RBI liquidity pressures persist
"Markets attention is squarely on the liquidity after-effects of strong inflows under the swap windows. The banking system surplus jumped past INR 10trn this week surpassing 2022 and Covid highs, with the durable balance widening sharply higher to INR 14trn, suppressing overnight call rates. This compares to average INR 1trn surplus in late-June."
"After the initial bout of rupee outperformance on account of intervention and inflows, the USD/INR settled into a range around the mid-94 handle this week. With oil prices creeping higher and the dollar benefiting from US rate hike expectations, pullback attempts in the USD/INR are expected to be shallow."
"Recent inflows have nonetheless given the authorities additional firepower, which has helped to lower the tail risk of a sharp one-sided depreciation in the currency in the near-term. August inflation, due next week, could quicken to 4.8-4.9% from 4.4% month before, on a broader rise in food, apart from a pick-up in precious metals, pushing up core as well."
"The weak take-up at yesterday's 30-day VRRR suggests market participants are resistant to lock up funds ahead of a potentially higher policy rate, implying that longer-tenor VRRRs may remain less effective until the October meeting should current rate hike expectations remain. If the RBI seeks to drain liquidity before then, measures will likely exert further upward pressure on bond yields"
"Indian rates continue to face upward pressure as the RBI has little incentive to push back against the recent hawkish repricing at a time when system liquidity remains exceptionally abundant. The immediate challenge is that surplus liquidity has become more difficult to absorb."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- XAG/USD treads water, just above $66.00, halfway through the monthly range
- The precious metal is drawing support for a soft US Dollar, with all eyes on the US CPI release due later this week.
- HSBC experts say that weaker US data, inflation concerns, policy credibility and political risks are all weighing on the USD.
Silver (XAG/USD) is trading flat at the $66.00 area on Tuesday, holding minor gains on the weekly chart after bouncing from the mid-range of the $64.00s last week. The precious metal is drawing some support from a soft US Dollar, as US markets return from a long weekend, with traders awaiting Friday’s US Consumer Price Index (CPI) release to assess the outcome of next week’s Federal Reserve (Fed) meeting.
Analysts at HSBC observe that a combination of “weaker US data, persistent inflation concerns, policy credibility questions, and political risks all weigh on the Dollar, fueling the debasement conversation.” However, they note that Fed Chairman Warsh’s Jackson Hole remarks marked an important turning point, as his speech “helped ease one key part of that story by restoring confidence in the Fed’s commitment to fight inflation.”
This has “helped reduce the risk that weak policy credibility would become a lasting drag on the Dollar and denting the debasement narrative, at least for now,” say the HSBC experts. Even so, the bank cautions about "broader structural concerns, especially around US fiscal sustainability, which could still return and weigh on the Dollar yet again.”
Technical Analysis: Looking for direction halfway through the mintly range
XAG/USD trades at $66.02 halfway through the monthly range, roughly between $63.00 and $71.00, just below the key 200-day Simple Moving Average, at the $73.00 area. Momentum indicators in the daily chart are neutral, with the Relative Strength Index (14) around 52 and the Moving Average Convergence Divergence (MACD) slipping modestly below zero, all in all reflecting a lack of clear bias.
Initial resistance is seen at the August 25 and 27 lows around $67.40, ahead of the June 12 and August 28 highs, between $71.12 and $71.56, and the mentioned 200-day SMA at $72.95.
On the downside, Friday's low, near $64.75, might hold bears ahead of a key support level in the $63.00 area. A break of that level would confirm a bearish Head & Shoulders (H&S) pattern, increasing pressure towards the August 6 low at $60.87.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- WTI prolongs its uptrend and continues to draw support from persistent geopolitical uncertainties.
- The US-Iran standoff over the Strait of Hormuz fuels supply concerns and lends additional support.
- The fundamental backdrop favors bulls and backs the case for a further near-term appreciation.
West Texas Intermediate (WTI) – the benchmark US Crude Oil price – attracts follow-through buying for the second straight day and climbs to its highest level since July 23 during the early part of the European session on Tuesday. Bulls now look to build on the momentum beyond the $92.00 mark amid the widening US-Iran confrontation.
In the latest development surrounding the Middle East crisis, US forces struck and disabled three Iranian oil tankers over the weekend. This comes in a retaliation for an Islamic Revolutionary Guard Corps (IRGC) ballistic missile attack targeting two US Navy warships in the region, which keeps the geopolitical risk premium in play and continues to support crude oil prices.
Oil risk premium underpinned as US-Iran tensions resurface
According to commodity strategists at TD Securities, the latest flare-up in geopolitical tensions is reinforcing the vulnerability of the current détente in energy markets. They stress that “renewed hostilities between the US and Iran continues to highlight the fragility of any non-concrete deal or short-term de-escalation,” underscoring how quickly sentiment around supply security can shift in the absence of a durable agreement.
Meanwhile, Iran threatened to retaliate against any new US attacks on its assets, warning that energy infrastructure across the Gulf was vulnerable. Moreover, Iran’s security chief, Mohsen Rezaei, said that Tehran is preparing to enforce a full blockade around the Strait of Hormuz in response to economic sanctions. Intensifying fears of a prolonged disruption to oil supplies.
This turns out to be another factor acting as a tailwind for the black liquid and validates the positive outlook, suggesting that any corrective pullback is more likely to be bought into and remain limited. On the top side, the July swing high, around the $93.25 region, could act as an immediate hurdle, which, if cleared, should pave the way for further upside in the near term.
WTI daily chart
Technical Analysis
The near-term bias is bullish as WTI holds above the 100-day Simple Moving Average (SMA) at roughly $85.24 and has reclaimed the 61.8% Fibonacci retracement at about $91.59. Moreover, momentum indicators stay constructive. In fact, the Relative Strength Index (14) is pressing into the mid-60s without yet signaling extreme overbought conditions. Meanwhile, the Moving Average Convergence Divergence (MACD) line remains above zero and its signal line, with a positive, slightly expanding histogram that hints at persistent upside pressure.
On the downside, initial support is now seen at the 50% retracement around $86.78 and the 100-day SMA at $85.24, which together form a broader demand zone if prices correct lower. On the topside, a sustained break higher would expose the 78.6% Fibo. retracement at approximately $98.44, with the prior swing high at $107.16 acting as a subsequent resistance barrier if the current bullish momentum extends.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
Here is what you need to know on Tuesday, September 8:
The Japanese Yen (JPY) gathered strength against its major rivals on Monday and extended its rally during the Asian trading hours on Tuesday, reaching its highest level against the US Dollar (USD) since mid-February. The economic calendar will not feature any high-impact macroeconomic data releases. Later in the day, Bank of England (BoE) Governor Andrew Bailey and other members of the Monetary Policy Committee (MPC) will testify before the UK Treasury Select Committee on July's Monetary Policy Report.
Markets continue to price in an aggressive Bank of Japan (BoJ) policy-tightening cycle, boosting the JPY. At the time of press, USD/JPY was trading below 154.00, EUR/JPY was fluctuating near 178.75 and GBP/JPY was edging lower toward 208.00, with all three losing more than 1% so far this week.
Japanese Yen Price This week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.00% | -0.11% | -1.34% | -0.29% | -0.22% | 0.53% | 0.19% | |
| EUR | 0.00% | -0.11% | -1.32% | -0.28% | -0.20% | 0.55% | 0.20% | |
| GBP | 0.11% | 0.11% | -1.31% | -0.17% | -0.09% | 0.66% | 0.31% | |
| JPY | 1.34% | 1.32% | 1.31% | 1.16% | 1.21% | 1.96% | 1.61% | |
| CAD | 0.29% | 0.28% | 0.17% | -1.16% | 0.12% | 0.83% | 0.48% | |
| AUD | 0.22% | 0.20% | 0.09% | -1.21% | -0.12% | 0.75% | 0.40% | |
| NZD | -0.53% | -0.55% | -0.66% | -1.96% | -0.83% | -0.75% | -0.35% | |
| CHF | -0.19% | -0.20% | -0.31% | -1.61% | -0.48% | -0.40% | 0.35% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
Yen support builds as Japan wage surge bolsters BoJ hike case
Analysts at Deutsche Bank highlight that the recent Yen strength has “likely been helped by Japan’s real wages increasing by +2.4% year-on-year in July, exceeding expectations of +1.8% and marking the strongest growth since May 2021.” They add that “total cash earnings rose +4.7%, the largest increase since January 1997, accelerating from a revised +4.0% increase in June.” According to the bank, this “stronger-than-expected wage data reinforces the overwhelming case for the Bank of Japan (BoJ) to raise interest rates at next week’s policy meeting, following its previous hike three months ago, and supports the prospect of further monetary policy tightening in the months ahead.”
Crude Oil prices push higher as there are no signs of a de-escalation of the conflict in the Middle East. Secretary of Iran's Supreme National Security Council, Mohsen Rezaei, warned on Tuesday that Tehran would respond to what it calls US "economic warfare" by imposing a maritime exclusion zone across the Persian Gulf. Meanwhile, citing Kpler data, Al Jazeera reported that "an average of 10 commodity ships transited the strait per day over the past 10 days, marking the lowest level since May following US and Iranian strikes on tankers." After rising more than 1.5% on Monday, the barrel of West Texas Intermediate (WTI) is up about 1.4% so far Tuesday, trading above $92.
Gold (XAU/USD) continues to fluctuate in a relatively narrow range at around $4,400 after closing virtually unchanged on Monday.
AUD/USD stays in a consolidation phase above 0.7200 after closing the fourth consecutive trading day in positive territory on Monday. Earlier in the day, the data from Australia showed that the Westpac Consumer Confidence Index declined to -5.2% in September from 6% in August.
EUR/USD edges slightly lower after posting marginal gains on Monday but manages to hold above 1.1600 in the European morning on Tuesday.
GBP/USD struggles to gather recovery momentum after rising 0.2% on Monday and stays below 1.3550.
Sterling steadies as UK fiscal message aims to reassure markets
According to strategists at ING, Sterling "enjoyed a decent session yesterday," with some marginal support likely stemming from Chancellor John Healey’s first major speech. ING notes that Healey delivered "a firm message on fiscal discipline," which helped keep the rise in long-end gilt yields "broadly in line with the wider global bond sell-off." The bank adds that this stance is "likely intended to reassure markets ahead of what could be a steady flow of headlines about the October budget in the weeks ahead."
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.
(This story was corrected at 07:41 GMT to note in the introduction that this article is for Tuesday, September 8, not Monday.)
ING’s Frantisek Taborsky highlights that Hungarian inflation rebounded to 1.3% in August but stayed below expectations and the NBH’s forecast, with price growth seen remaining under target this year. Markets are focused on a potential pause in rate cuts and a lower inflation target ahead of Euro adoption, while EUR/HUF could move back above 364 if rising energy prices curb recent forint strength.
Benign inflation but policy watch
"Today's data confirmed the expected rebound in Hungarian inflation, from 1.2% in July, the lowest reading in nearly 10 years, to 1.3% in August, though it again came in below market expectations. Even so, we expect inflation to remain below the central bank’s target for the rest of the year. The NBH had forecast 1.8% for August, implying a forecast miss of 0.5pp, compared with 0.7pp in July."
"The inflation outlook remains benign, but the NBH story has become more compelling since Bloomberg reported last week that the central bank was considering pausing rate cuts in September to pave the way for a lower inflation target ahead of euro adoption."
"Subsequent NBH comments suggest that any policy shift will have to wait until the September meeting and its new forecast. Since last week, the curve has flattened sharply and the Hungarian forint has strengthened, moves that today’s data are unlikely to reverse."
"We expect euro-area spreads to tighten further, although higher global energy prices may limit additional forint gains. EUR/HUF has fallen below 364, but if gas and oil prices continue to rise, we may return above this level again given how the forint has recently returned to its previous high-beta behaviour."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- The Euro rebounds from 177.85 to near 178.85 but is still 0.3% down against the Japanese Yen.
- Both the ECB and the BoJ are expected to hike interest rates in their upcoming policy meetings.
- Market experts warn that moderate Eurozone growth could cloud the ECB’s tightening path.
The Euro (EUR) claws back some of its early losses against the Japanese Yen (JPY) during the European trading session on Tuesday. At press time, EUR/JPY is down 0.3% to near 178.85 even after recovering from its intraday low of 177.85.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.06% | 0.04% | -0.34% | -0.16% | 0.06% | 0.51% | 0.14% | |
| EUR | -0.06% | -0.03% | -0.39% | -0.21% | 0.02% | 0.50% | 0.07% | |
| GBP | -0.04% | 0.03% | -0.40% | -0.19% | 0.00% | 0.49% | 0.11% | |
| JPY | 0.34% | 0.39% | 0.40% | 0.21% | 0.42% | 0.88% | 0.51% | |
| CAD | 0.16% | 0.21% | 0.19% | -0.21% | 0.21% | 0.67% | 0.31% | |
| AUD | -0.06% | -0.02% | -0.01% | -0.42% | -0.21% | 0.47% | 0.10% | |
| NZD | -0.51% | -0.50% | -0.49% | -0.88% | -0.67% | -0.47% | -0.37% | |
| CHF | -0.14% | -0.07% | -0.11% | -0.51% | -0.31% | -0.10% | 0.37% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
The outlook of the pair remains bearish as market experts see a strong Japanese Yen’s outlook amid expectations that the Bank of Japan (BoJ) will extend its monetary tightening cycle even after hiking interest rates at the policy meeting next week.
Yen support builds as markets price rapid BoJ tightening
Analysts at Commerzbank highlight that “an interest rate hike next week is now priced in at roughly 96%, and the market expects further hikes to follow quickly thereafter,” underscoring how swiftly expectations have shifted.
In Commerzbank’s view, “as long as expectations continue to shift in such a hawkish direction, the yen should have little trouble appreciating further,” with the currency seen as well positioned to benefit from this increasingly aggressive policy path.
On the Euro front, financial markets keenly await the European Central Bank’s (ECB) interest rate decision on Thursday. Experts seem confident that the ECB will hike interest rates in the policy meeting, but warn that moderate Eurozone economic growth and higher energy prices would complicate the central bank’s monetary policy path.
According to ABN Amro, “for now, the path for the ECB is clear, and a rate hike at next Thursday’s Governing Council meeting is fully priced by financial markets.” However, they stress that “less clear now is what comes after,” setting out a baseline in which “the ECB” is expected to keep “rates on hold for the remainder of the year, and even cut rates in Q2-Q3 next year.”
Strategists at OCBC have highlighted that “higher energy prices have complicated the outlook for the ECB’s tightening cycle,” noting that inflation risks are “becoming less comfortable against a backdrop of only moderate growth.”
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
Danske Bank notes European equities were broadly flat on Monday, with the Stoxx 600 unchanged and OMX Nordic slightly higher, while Asian markets rallied in thin trading as US markets were closed for Labor Day. The bank highlights strong performance in technology, particularly semi-conductors and AI-linked hardware, while rising bond yields weighed on real estate and other rate-sensitive sectors.
Tech strength offsets rate headwinds
"European equities were little changed on Monday, while Asian markets rallied sharply, but in thin trading as US markets were closed for Labor Day."
"The Stoxx 600 finished flat and OMX Nordic gained 0.4%. Tech led performance, with semi-conductors and AI-linked hardware at the forefront, ignited by ChatGPT's launch of its new Astra model on Friday. "
"Astra is designed to handle more complex reasoning tasks, which also increases the need for compute power, memory capacity and GPU intensity. Astra challenges that narrative."
"The market reaction reflected this yesterday. Korean equities rallied 5% and another 2% this morning. European technology stocks also performed well, although gains elsewhere were constrained by another rise in bond yields."
"Real estate and other rate-sensitive sectors lagged. US equity futures are broadly unchanged this morning."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/GBP extends losses to 0.8580 as Eurozone data fails to impress.
- German trade surplus widened in July although exports contracted against expectations.
- British Pound bulls remain subdued, as the market digests Chancellor Healey's first speech.
The Euro (EUR) extends losses for the third consecutive day against the British Pound (GBP) on Tuesday, as German Trade Balance data added to evidence of the frail recovery of the Euro Area's leading economy. This leaves the EUR/GBP on its back foot, trading at 0.8580 after rejection at the 0.8600 area last week
German Trade Balance data from July beat expectations earlier on Tuesday, as the surplus widened to EUR 21.3 billion, well above the EUR 16 billion expected and the EUR 15.4 billion seen in June. Looking at the details, however, data from the Federal Statistics Office of Germany revealed that the surplus was due to a 5.7% decline in imports, which offset a 0.8% decline in exports.
German data reflects frail economic growth
These figures add to evidence of a softening German economic growth, highlighted on Monday by the negative surprise in the German Industrial Production report. Factory output dropped 1.1% in July, against expectations of a 0.3% increase, weighed by a sharp decline in the country’s automotive sector.
German data offset optimism from positive Eurozone Gross Domestic Product (GDP) data, which was revised up to 0.6% growth in the second quarter, up from the previously estimated 0.4%.
The pound, meanwhile, remains subdued as markets digest John Healey's first speech as UK Chancellor. Strategists at Brown Brothers Harriman note that Healey has pledged to build a solid fiscal “buffer against uncertainty” in the October 28 Budget. They argue this commitment “points to a mix of tax rises and spending cuts” as higher borrowing costs are estimated to have halved the government’s fiscal headroom to around “£12bn,” underscoring the scope for a tighter fiscal stance ahead.
Against this background, BBH assesses that “the UK’s negative output gap, a policy rate above the mid-point of the BoE’s 2% to 4% neutral range estimate and the prospect of tighter fiscal policy” are factors that “argue for a less aggressive hiking cycle,” leaving the Pound vulnerable to a dovish repricing if incoming data fail to justify the degree of tightening currently implied by rates markets.
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.
- USD/CHF holds steady around 0.8090 in Tuesday’s early European session.
- Traders see a 60.6% chance of rate hike at the Fed's policy meeting next week, according to CME FedWatch Tool.
- Iran threatened the US with new missiles.
The USD/CHF pair flatlines near 0.8090 during the early European trading hours on Tuesday. Traders brace for crucial US Producer Price Index (PPI) and Consumer Price Index (CPI) inflation data later this week.
The CME FedWatch tool showed probability hovering around 60.6% for another quarter-point Federal Reserve (Fed) rate hike, whereas the Swiss National Bank (SNB) is widely projected to leave its policy rate anchored at 0% well into next year.
Traders will take more cues from the upcoming US Producer Price Index (PPI) and Consumer Price Index (CPI) inflation data, which could shape expectations for the Fed’s next policy move. If the reports show hotter-than-expected outcomes, this could lift the US Dollar (USD) against the Swiss Franc (CHF).
On the geopolitical front, Iran threatened the US with "economic warfare" and said it had fired an advanced missile at American warships, underscoring the risks of further escalation only days after both sides traded blows again. Rising tensions in the Middle East could boost a safe-haven currency such as the CHF in the near term.
Franc support tempered as SNB seen on hold until 2027
Analysts at Brown Brothers Harriman note that, despite the recent upside surprise in Swiss inflation, the policy outlook remains remarkably benign. They highlight that “the swaps curve continues to fully price in a first 25bps hike to 0.25% in June 2027,” underscoring market confidence that the SNB can stay on hold for an extended period. In their view, “the SNB has plenty of room to keep rates at 0.00% for some time, given that inflation remains well within the bank’s price stability mandate of less than 2% per annum,” a backdrop that helps cap how far the Franc can benefit from the latest data surprise.
Technical Analysis: USD/CHF retains a bullish vibe above the 100-day SMA
In the daily chart, USD/CHF holds a modestly bullish near-term bias as it trades above the Bollinger middle band and stays well supported over the rising 100-day moving average. The Relative Strength Index (14) hovers just above the 50 line, hinting at steady, rather than aggressive, upside momentum while price grinds higher within the upper half of its Bollinger envelope.
On the topside, initial resistance is aligned with the Bollinger upper band near 0.8175, where recent gains could face supply if volatility picks up. On the downside, the Bollinger middle band at 0.8075 acts as immediate support, with the 100-day moving average at 0.8000 and the lower Bollinger band around 0.7980 reinforcing a broader demand zone that would need to give way to undermine the current constructive structure.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
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