Forex News
European Central Bank (ECB) José Luis Escrivá said on Tuesday that they are still in not restrictive territory, as reported by Reuters.
Escrivá flags long-term rate risks but stops short of calling policy restrictive
FXS Speechtracker scores Escrivá at 6.2/10, slightly above the historic 6/10 baseline, pointing to a modestly more cautious tone. By stating that policy is “still not in a restrictive territory,” Escrivá leans mildly dovish on near-term Euro rate settings, yet the focus on the global upward trajectory of long-term rates and the pressure this can add to interest rates introduces a clear warning signal for bond markets.
The concern about persistently high energy prices and potential second-round effects is a classic inflation vigilance message, adding a hawkish layer to the otherwise non-restrictive policy assessment. Overall, the speech tilts toward a balanced stance: short-term dovishness on current Euro policy levels, offset by medium-term hawkishness on inflation risks and the possibility that rising long-term yields could force higher Euro interest rates.
Key takeaways
"What I would start to worry about is the global upward trajectory of long-term rates."
"This can add pressure to interest rates."
"In current situation high energy prices are worrisome if this persists and has second round effects."
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
- XAG/USD found support around $60.50, but it seems unable to return above $61.00.
- The precious metal remains on the defensive with the US Dollar Index on track for a 2% monthly rally.
- Price action has broken the neckline of a large Head & Shoulders pattern.
Silver (XAG/USD) remains practically flat on Tuesday, trading at its lowest levels in nearly two months on Tuesday, around $60.80, failing to find follow-through above $61.00 and on track for a 8.5% monthly selloff in September. Precious metals are struggling, as the US Dollar surges with long-term yields at multi-decade highs and markets pricing in at least one more Federal Reserve (Fed) rate hike in Q4.
The USD Index, which measures the value of the Greenback against a basket of six majors, is trading at 101.37 after hitting its highest level in more than one year, at 101.49. The hawkish Fed repricing has fuelled a nearly 2% USD rally in September, which explains precious metals’ decline, amid their negative correlation with the Greenback.
John Velis, analyst at BNY Markets, affirms that “instead of long-term inflation driving yields higher, it was ironically perceptions of central bank credibility – markets are expecting the Fed (and other central banks) to raise rates in response to rising inflation.” In other words, the market is pricing in confidence that policymakers will respond forcefully to any renewed price pressures, pushing real yields up even as longer-term inflation expectations remain relatively contained, and weighing heavily on precious metals.
Technical Analysis: Price action breaks below the H&S's neckline
XAG/USD's impulsive reversal printed on Tuesday broke the neckline of a bearish Head & Shoulders (H&S) pattern, at the $62.20 area. Momentum indicators in the daily chart reinforce the bearish view, as the Relative Strength Index (14) slides below 40, and the Moving Average Convergence Divergence (MACD) indicator steadies within negative territory.
Bears are pushing against support around the September 9 low of $60.87. Further down, the next target might be the September 8 low, at the $59.30 area, and the 78.6% Fibonacci retracement of the July - August rally, at $58.15. The H&S's measured target lies below the year-to-date low at $54.71
On the topside, initial resistance is seen at the mentioned H&S neckline, just above $62.20. A break of this level would be needed to ease bearish pressure and shift the focus towards the September 5 high, in the $65.00 area.
(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.
- GBP/JPY falls as intervention fears lift the Japanese Yen.
- The cross keeps a bearish bias below key daily moving averages, with 207 and 205 marking the next support areas.
- A sustained recovery above the 210-212 region would be needed to ease the near-term downside pressure.
GBP/JPY trades lower on Tuesday as the Japanese Yen (JPY) outperforms its major peers, supported by growing concerns that Japanese authorities could intervene in the currency market again. At the time of writing, the cross trades around 208.20, approaching September’s low near 207.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.17% | 0.08% | -0.13% | 0.07% | 0.24% | 0.21% | 0.15% | |
| EUR | -0.17% | -0.09% | -0.27% | -0.13% | 0.07% | 0.03% | -0.03% | |
| GBP | -0.08% | 0.09% | -0.17% | 0.02% | 0.15% | 0.13% | 0.06% | |
| JPY | 0.13% | 0.27% | 0.17% | 0.18% | 0.34% | 0.31% | 0.25% | |
| CAD | -0.07% | 0.13% | -0.02% | -0.18% | 0.16% | 0.14% | 0.08% | |
| AUD | -0.24% | -0.07% | -0.15% | -0.34% | -0.16% | -0.02% | -0.09% | |
| NZD | -0.21% | -0.03% | -0.13% | -0.31% | -0.14% | 0.02% | -0.06% | |
| CHF | -0.15% | 0.03% | -0.06% | -0.25% | -0.08% | 0.09% | 0.06% |
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).
Japanese Finance Minister Satsuki Katayama said on Tuesday that an “undervalued Yen generally poses problems” and that Tokyo “will keep close talks with the US Treasury to ensure stable foreign exchange markets.”
Her remarks follow comments from Japan’s top currency diplomat, Atsushi Mimura, who said on Monday that markets should take the “very clear” warning from Tokyo and Washington over the Yen’s weakness “at face value.” Mimura added that he was “neither satisfied nor reassured” by recent currency moves.
On the British Pound side, the outlook also remains fragile. Analysts at HSBC warn that “weak UK labour demand and sluggish private sector momentum could weigh on the GBP in the near term.” They note that “markets are already pricing around 100bp of tightening from the Bank of England by July 2027,” but caution that “higher energy prices create a difficult policy mix: inflation risks are rising even as growth momentum faces a challenging outlook.”
HSBC adds that the “run-up to the budget update on 28 October may add further pressure, with elevated gilt yields … and difficult fiscal choices ahead for the new Chancellor.”
Technical analysis
On the daily chart, GBP/JPY maintains a bearish near-term bias as it holds below the 50-day, 100-day and 200-day Simple Moving Averages (SMA), leaving price capped by a dense band of overhead supply, while the Relative Strength Index (RSI) around 36 hints at lingering downside pressure without reaching oversold territory, and a mildly positive Moving Average Convergence Divergence (MACD) reading suggests only modest recovery attempts within a broader corrective phase.
On the topside, initial resistance appears at the 210 hurdle, followed by the 212 horizontal level, ahead of the clustered 200-day and 50-day SMAs around 213.13-213.19 and the 100-day SMA near 214. On the downside, immediate support is seen around the 207 horizontal floor, with a deeper pullback exposing the 205 level, and only a sustained daily close above the 210-212 band would start to weaken the current bearish bias.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
OCBC’s Christopher Wong observes that Singapore Dollar (SGD) has held relatively steady despite softer Asian FX, with USD/SGD around 1.2780. Strong manufacturing output and persistent underlying price pressures lead OCBC to expect Monetary Authority of Singapore (MAS) to slightly steepen the S$ Nominal Effective Exchange Rate Index (S$NEER) slope at the mid‑October meeting.
Data and MAS stance underpin SGD
"On the data front, August manufacturing output rose 15.4% YoY, up from a revised 6.9% in July, supported by strong gains in electronics and precision engineering, although output slipped 0.5% MoM."
"The data points to still-resilient activity, helped by AI-related demand. Following the CPI data last week, we now expect MAS to slightly steepen the S$NEER slope at the next MPC meeting in mid-Oct, as underlying price pressures remain intact."
"Near term, the pair should continue to take its cue from moves in USD/rates and RMB, while the prospect of further MAS tightening should help keep SGD relatively resilient against some of the higher-beta Asian FX."
"USD/SGD last at 1.2777. Bullish momentum on daily chart intact but there are tentative signs of it slowing while RSI shows signs of easing lower. Consolidation likely."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Brown Brothers Harriman highlights that the Reserve Bank of Australia delivered a widely expected 25 bps hike to 4.60%, a 15-year high, and kept the door open to further tightening. AUD/USD initially rallied on the hawkish statement but reversed as Governor Michele Bullock signaled less urgency.
RBA tightening and AUD reaction
"As was widely expected, the RBA delivered a 25bps hike to a 15-year high of 4.60% after pausing tightening in June and August. The decision was unanimous with the statement noting that “some of the upside risks [to inflation] flagged in August are materialising.” The RBA also reiterated readiness to “increasing the cash rate target further if needed.”"
"AUD/USD initially rallied on the hawkish RBA statement, then reversed as Governor Michele Bullock suggested less urgency for additional tightening. Her hope that the four hikes this year would prove sufficient alongside confirmation that the Board considered a pause at today’s meeting took some of the hawkish edge off the decision."
"RBA cash rate futures price in 36bps of tightening in the next twelve months. That limits policy divergence with the Fed and offers AUD/USD support. Moreover, Australia’s strategic exposure to commodities linked to energy, AI, and defense remains an important long-term tailwind for AUD."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Societe Generale’s FX strategy team reports EUR/USD remains under pressure, trading at a three-month low and moving toward the June low at 1.1325. The bank flags support at 1.1325 and 1.1270, with resistance at 1.1410. Widening 2-year UST/EGB spreads and upcoming US PCE and NFP data are seen pulling EUR/USD closer to these vital support levels.
Pair grinds lower toward key floors
"EUR/USD: 1.1343 - 1.1372 overnight range."
"Bearish bias intact with spot at 3-month low and converging on the June low of 1.1325."
"Support below 1.1300 at 1.1270, resistance 1.1410."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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