Forex News
Rabobank's Senior FX Strategist Jane Foley discusses United Kingdom (UK) markets’ reaction to PM Burnham’s new cabinet and fiscal plans, noting 10-year gilt yields above 5% and British Pound (GBP) weakness in G10. Foley highlights uncertainty over funding Burnham’s agenda, the UK’s low savings ratio and large current account deficit, and argues that UK debt markets are particularly sensitive to perceived negative news.
Burnham agenda unsettles UK assets
"UK markets have now had a few hours to react to PM Burnham’s new cabinet, many of whom have been involved in UK politics for years. 10-year gilt yields are currently above the 5% level, which is a sign of some anxiety. Similarly, the pound is the worst performing G10 currency on a 1-day view."
"However, it is still uncertain as to how Burnham plans to fund his agenda. Later this year, Burnham will announce his 10-year plan. Yesterday he commented that he will use ‘flexibility’ within the fiscal rules."
"In the short-term, Burnham has promised measures to ease cost-of-living pressures. He kicked this off this morning with the news that VAT on household electricity bills will be cut from October. The market is now bracing itself for a list of further announcements."
"The UK has a low savings ratio and a large current account deficit. These metrics can increase the sensitivities of its debt market to perceived bad news. The UK may not have the largest debt/GDP ratio in the developed world, but arguably it has one of the most sensitive debt markets."
"Given the jittery reaction in gilts and the pound to Burnham’s early announcements, his honeymoon period could be short-lived. We look for EUR/GBP to push higher to 0.8650 on a 3-month view. We see scope for dips in cable back to the GBP/USD 1.32 area on a 3-month view."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Scotiabank strategists Shaun Osborne and Eric Theoret note the Canadian Dollar (CAD) has recovered overnight losses versus the US Dollar (USD) after news that President Trump may impose new tariffs on Canadian exports. They see these measures as an additional headwind for CAD, with fair value for USD/CAD nudging higher and short-term gains in the Canadian Dollar likely capped.
Tariff threat keeps CAD restrained
"President Trump is threatening 50% tariffs on some Canadian exports in response to “unfair treatment” of US autos, dairy and alcohol. The tariffs will become effective in 30-days—giving time for an off ramp to be found perhaps—and might hit some 5% of Canadian exports into the US, early estimates suggest."
"The CAD is opening up modestly higher against the generally softer USD after reversing losses seen overnight on news that the US is poised to impose more tariffs on Canadian exports."
"The CAD has largely taken the news its stride but it is another minor headwind to add to all the other trade-related drags that will keep the currency trading on the back foot, all else equal. Our fair value estimate for spot has nudged up to 1.4015 this morning."
"Neutral—The CAD’s latest stumble leaves spot trading right on the 40-day MA (1.4059). A solid rebound in the USD yesterday suggests the mild improvement in the CAD of late has found a short-term peak at least around the 1.40 point."
"The break under the USD May/June bull trend line remains intact, as do the CAD-supportive signals from the daily oscillators which prompts us to think that spot may not rise significantly—at least not yet. USD resistance remains 1.4125 and 1.4160/70."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold rebounds from the $4,000 area as markets monitor the latest US-Iran developments.
- Elevated Oil prices and the prospect of tighter Federal Reserve policy limit the metal’s upside.
- XAU/USD tests the Bollinger midline near $4,062, with the $4,175 upper band acting as the next resistance.
Gold (XAU/USD) edges higher on Tuesday as buying interest around the $4,000 psychological level supports prices, while traders assess developments in the Middle East and their potential economic fallout. At the time of writing, XAU/USD trades around $4,060, up 1.30% on the day.
The United States military carried out a tenth consecutive night of strikes against Iran on Monday, while Iran’s Revolutionary Guard targeted US military assets across the region.
Despite the continued military exchanges, diplomatic efforts are underway. The Associated Press reported that Iranian officials began meeting with mediators in Pakistan on Tuesday. Reuters reported on Monday that mediators had offered Tehran a 10-day ceasefire to try to bring last month’s interim agreement back on track.
With the situation still in flux, the US Dollar (USD) remains the preferred safe-haven asset, while Oil prices hold close to their highest level in more than a month. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is hovering around 101.00, little changed on the day.
Although Gold is attempting to establish a base above the $4,000 psychological level, its upside remains limited as elevated energy prices stoke inflation concerns and strengthen expectations that the Federal Reserve (Fed) will keep monetary policy tighter for longer or even raise interest rates.
Higher borrowing costs reduce Gold's appeal, prompting investors to rotate toward interest-bearing assets such as government bonds.
Dollar support builds as Gulf tensions weigh on Gold
Analysts at ING note that “the FX market is gradually catching up with developments in the Gulf, where tensions still appear to be escalating, and the Dollar has found broad-based support.” They highlight that US President Donald Trump has “pledged retaliation against Iran following the killing of three US service members in Jordan,” while Ansar Allah militants are “threatening a blockade of Saudi Arabia in the Red Sea,” reinforcing the bid for the US Dollar as geopolitical risks intensify.
Strategists at OCBC say Gold has "continued to consolidate around recent lows following the sharp pullback earlier this month," adding that "near term, price action may remain two-way, but a more sustained recovery likely requires [O]il prices to back off, some easing in real yields and Fed tightening expectations. Until then, upside may remain capped."
Technical analysis: XAU/USD stabilizes above $4,000
XAU/USD is testing the 20-day Simple Moving Average (SMA) at $4,061. The Relative Strength Index (RSI) at 45 on the daily chart is below the neutral 50 level, indicating weak bullish momentum. Meanwhile, the Average Directional Index (ADX) near 39 suggests the prevailing trend remains strong despite the near-term stabilization.
On the downside, immediate support lies at the $4,000 psychological level, followed by the lower Bollinger Band at $3,948. A break below this area could expose the horizontal support at $3,800.
On the topside, a sustained move above the Bollinger midline at $4,061 could open the door toward the upper band at $4,174, followed by the $4,200 resistance level. A decisive break above $4,200 would bring the more distant $4,500 barrier into focus.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- EUR/GBP gains as UK fiscal concerns weigh on the British Pound.
- Stronger-than-expected Eurozone and German ZEW surveys provide support for the Euro.
- UK CPI and PPI data remain the next key catalyst for the cross.
EUR/GBP gains on Tuesday as doubts over the UK’s fiscal outlook weigh on the British Pound (GBP) following Andy Burnham’s appointment as Prime Minister. At the time of writing, the cross trades around 0.8527.
UK fiscal jitters cap Pound gains as banks see EUR/GBP downside fading
Strategists at OCBC add that Burnham’s confirmation as UK Prime Minister and his appointment of John Healey as “the chancellor of the exchange, while unexpected, was seen as market-friendly.” However, they highlight that Burnham “unsettled the gilt market by suggesting he would use ‘any flexibility’ within the UK’s fiscal rules,” reinforcing investor unease over the fiscal outlook.
Against this backdrop, OCBC argues that “the recent EUR/GBP correction, which has taken the cross to its lowest level in a year, is close to running its course.” The bank says it “continues to expect EUR/GBP to recover toward 0.87 over the coming months, in line with our broader view of a range-bound GBP”. They note that while “higher energy prices raise the risk of additional rate hikes in Europe,” the BoE “still appears less likely than its regional peers to tighten policy, limiting GBP upside.”
Euro draws support from stronger ZEW sentiment data
The Euro (EUR) also finds support from stronger-than-expected ZEW surveys. Eurozone Economic Sentiment jumped to 23.4 in July from 9.5 in June, beating the forecast of 11.2. Germany’s Economic Sentiment Index climbed to 26.3 from 10.5, well above the market expectation of 18.
On the UK side, labour market data offered little support to the Pound. Employment increased by 147K in the three months to May, following a prior 100K gain. The ILO Unemployment Rate held at 4.9%, slightly below the 5.0% forecast. Attention now shifts to the UK Consumer Price Index (CPI) and Producer Price Index (PPI) data due on Wednesday.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | 0.33% | 0.18% | 0.05% | -0.22% | 0.00% | 0.12% | |
| EUR | 0.00% | 0.34% | 0.19% | 0.06% | -0.19% | 0.01% | 0.13% | |
| GBP | -0.33% | -0.34% | -0.17% | -0.27% | -0.52% | -0.32% | -0.21% | |
| JPY | -0.18% | -0.19% | 0.17% | -0.13% | -0.37% | -0.19% | -0.06% | |
| CAD | -0.05% | -0.06% | 0.27% | 0.13% | -0.25% | -0.05% | 0.06% | |
| AUD | 0.22% | 0.19% | 0.52% | 0.37% | 0.25% | 0.20% | 0.31% | |
| NZD | -0.00% | -0.01% | 0.32% | 0.19% | 0.05% | -0.20% | 0.11% | |
| CHF | -0.12% | -0.13% | 0.21% | 0.06% | -0.06% | -0.31% | -0.11% |
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Brown Brothers Harriman’s (BBH) Elias Haddad reports NZD/USD has rallied toward a seven-week high after New Zealand Q2 Consumer Price Index (CPI) surprised slightly on the upside versus consensus but came in just below the Reserve Bank of New Zealand's (RBNZ) projection. Above-target inflation and a stronger domestic growth outlook argue for additional RBNZ rate hikes, with the swaps curve pricing significant tightening toward the top of the neutral range, which Haddad sees as NZD supportive.
Inflation backdrop backs NZD
"NZD/USD rallied to near a seven-week high. New Zealand Q2 CPI was mixed. Headline CPI rose more than expected in Q2 but was marginally lower than the RBNZ projected in May."
"Headline CPI increased 1.5% q/q (consensus: 1.4%, RBNZ: 1.6%) vs. vs. 0.9% in Q1 driven by higher petrol prices. Year-over-year inflation quickened to 4.1% (consensus: 4.0%, RBNZ projection: 4.2%) vs. 3.1% in Q1. Core inflation (average of the sectoral factor model, factor model, and CPI ex. petrol prices) rose to the top of the RBNZ 1-3% target range."
"Above target inflation and a more favorable domestic growth outlook argue for additional RBNZ rate hikes which is NZD supportive. At its last July 8 meeting, the RBNZ raised the Official Cash rate (OCR) 25bps to 2.50% and indicated that “further OCR increases appear likely at upcoming meetings.”"
"The swaps curve price in 60bps hikes by year-end and a total of 100bps of tightening over the next twelve months to 3.50% - near the top of the RBNZ estimated neutral range (2.20%-4.10%)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
ING’s Warren Patterson and Ewa Manthey highlight a softening Aluminium supply picture. Global primary output fell in June on both monthly and yearly bases, even as first-half production stayed broadly stable. China’s output dipped month-on-month but remains higher year-to-date, while Europe, Asia ex‑China and Gulf producers all saw declines, with Gulf weakness linked to Iran-related disruptions.
Global production slips across regions
"The latest data from the International Aluminium Institute (IAI) showed global primary aluminium production fell 2.9% month-on-month and 1.5% year-on-year to 5.98mt in June, although first-half output remained broadly stable at 36.4mt."
"China’s aluminium production declined 3.2% month-on-month to 3.7mt in June, but year-to-date output was still 2.2% higher year-on-year at 22.3mt."
"Production, meanwhile, weakened across most other major regions. Output in Europe (including Russia) fell 1.7% month-on-month, while Asia ex-China saw a 2.9% decline. Gulf production dropped to 332kt, down 34.5% year-on-year, reflecting the impact of disruptions linked to the Iran conflict."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- US private employers added an average of 16.5K jobs per week in early July.
- Job gains lose further momentum, adding to the previous week’s decline.
Private-sector hiring in the US has further cooled in early July. According to the NER Pulse, the weekly companion to the ADP National Employment Report, companies added an average of 16.5K jobs per week in the four weeks ending July 4.
That marks another pullback from the prior reading (19.25K), showing an extra impasse in hiring.
Market reaction
The Greenback alternates gains with losses on Tuesday, prompting the US Dollar Index (DXY) to navigate just above the 101.00 barrier and extending its multi-day recovery.
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.
Lee Hardman at MUFG highlights that the Pound has modestly recovered after losses following Andy Burnham’s appointment as UK Prime Minister, while long-dated gilts remain under pressure. Market focus is on Burnham’s use of flexibility within existing fiscal rules, planned VAT cuts on electricity bills, and the appointment of John Healey as Chancellor, which together increase uncertainty over the UK’s fiscal trajectory.
Pound tracks evolving UK fiscal stance
"The pound has strengthened modestly overnight retracing some of the losses sustained yesterday after Andy Burnham was formally appointed as the new Prime Minister. There has been a bigger and more sustained sell-off in the gilt market where the 30-year yield remains around 7bps higher. The pound and gilt market sell-off yesterday was triggered by comments from Andy Burnham stating that “we’ll stick to the existing fiscal rules and use obviously any flexibility with them”."
"One of the first policy changes to be announced will help to reduce the cost of living. He has announced a GBP850 million plan to cut domestic energy bills by removing VAT on household electricity bills. The reduction in VAT on electricity bills from 5% to 0% is expected to lower inflation by 0.1ppt according to the government."
"Prime Minster Burnham has emphasized that any measures to cut the cost of living would be fully funded, and further policy measures are under consideration. The VAT cut on electricity bills will be funded by axing the digital ID scheme. Adding to uncertainty over the fiscal policy outlook was the surprise announcement that former Defence Minister John Healey has been chosen as the new Chancellor."
"It has fuelled speculation that defence spending will be increased more going forward given he resigned from Keir Starmer’s government citing concern over inadequate defence spending plans. He wanted the government to commit to raising defence spending more quickly to 3% of GDP by 2030. He is viewed as being on the moderate or centre-left wing of the Labour party helping to ease concerns over the risk of a much looser fiscal policy."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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