Forex News
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann report that GBP/USD briefly dipped to 1.3178 before rebounding to 1.3267 and closing at 1.3238, invalidating a prior downside-biased view. Momentum indicators have turned flat, and the pair is now expected to consolidate between 1.3200 and 1.3280 intraday, and 1.3160–1.3310 over the coming weeks, while a weekly close below 1.3300 could trigger deeper losses.
Pound steadies inside broader range
"Today, GBP could trade between 1.3200 and 1.3280."
"Momentum indicators are turning flat, and for the time being, we expect GBP to trade between 1.3160 and 1.3310."
"A weekly close below the key support at 1.3300 could trigger a decline toward the major support zone at 1.2945/1.3010."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- USD/JPY steadies near 160.00 as investors await the outcome of Trump’s Iran deadline.
- US President Trump threatens to obliterate Iranian power plants and bridges if it doesn’t reopen the Hormuz.
- Japan’s Overall Household Spending declines unexpectedly at a faster pace of 1.7% against estimates of 0.7%.
The USD/JPY pair trades calmly around 160.00 during the European trading session on Tuesday. The pair trades broadly sideways amid uncertainty surrounding the ongoing war in the Middle East.
Market participants remain cautious about how the ongoing war will flare after the completion of United States (US) President Donald Trump’s deadline to Iran for reopening the Strait of Hormuz.
Over the weekend, US President Trump threatened to destroy Iranian civilian infrastructure if it doesn’t reopen the Strait of Hormuz before Tuesday, 08:00 PM ET.
On Monday, US President Trump threatened again, stating that Iran “can be taken out in one night, and that might be tomorrow night” if it denies accepting the proposal.
In Japan, weak Overall Household Spending data for February could force traders to pare hawkish Bank of Japan (BoJ) bets in the near term. Earlier in the day, the data arrived -1.7% Year on Year (YoY), surprisingly lower than -0.7% estimates. In January, Overall Household Spending declined by 1%.
This week, major triggers for the US Dollar will be the Federal Open Market Committee (FOMC) minutes of the March policy meeting and the US Consumer Price Index (CPI) data for March.
USD/JPY technical analysis
USD/JPY trades almost flat at around 160.00 as of writing. The near-term bias is mildly bullish as price holds above the rising 20-day Exponential Moving Average (EMA) and trades in the upper half of an ascending parallel channel. The recent series of higher lows above the channel floor near 158.40 supports the uptrend, while the RSI around 58 stays comfortably above the 50 line, signaling persistent upside momentum rather than exhaustion.
Initial support emerges at the channel bottom near 158.40, where a break would expose deeper downside towards 157.70. On the topside, the first resistance aligns with the channel top near 160.90, and a daily close above that level would confirm a bullish extension towards 162.00.
(The technical analysis of this story was written with the help of an AI tool.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Danske Bank analysts observe that global equities are about 4% above recent lows, with investors increasingly pricing a future de-escalation in the Middle East. Cyclical sectors have outperformed and volatility has declined across regions and asset classes. They note that markets are trying to look through near-term geopolitical noise while tracking US and Asian moves.
Cyclicals lead as volatility eases
"Equity markets traded broadly sideways over the Easter period in the regions that remained open, following the rebound seen into the holiday."
"Markets in the US edged higher yesterday, while Asian trading this morning is mixed."
"Importantly, this does not change the bigger picture: global equities are still ~4% above the recent lows, reflecting a market that is increasingly pricing when - not if - we get a de-escalation in the Middle East."
"Cyclicals have, not surprisingly, outperformed from the lows."
"More notably, however, volatility has declined across regions and asset classes, reinforcing the notion that investors are trying to look through the near-term noise."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- EUR/JPY extends gains for the second consecutive day and reaches 184.50.
- Euro bulls are focusing on two-month highs at the 184.67-184.75 area.
- Concerns about the consequences of high Oil prices to Japan's economy are hammering the Yen.
The Euro (EUR) is crawling up against a weak Japanese Yen (JPY) on Tuesday. The pair extends gains for the second consecutive day, trading at 184.47 at the time of writing, with bulls focusing on the two-month highs in the 184.65-184.75 area.
The Yen is struggling on Tuesday, weighed down by growing concerns about the economic consequences of high Oil prices, if Iran does not open the Strait of Hormuz soon.
Concerns about an inflation spiral in Japan
Investors are wary that the price pressures stemming from high energy costs in a major Oil importer such as Japan, coupled with Prime Minister Sanae Takaichi’s stimulus programs, might trigger an inflation spiral, forcing the Bank of Japan (BoJ) to hike rates while the Government increases an already ballooning debt to soften the inflationary impact on households.
Underlying inflation in Japan has reached the BoJ’s 2% target and is expected to keep accelerating if the war in Iran extends. Futures markets are pricing a 50% chance of a BoJ rate hike in April and almost fully pricing a hike before the summer. A former BoJ Monetary Policy Committee member, Seiji Adachi, endorsed this view on Tuesday, affirming that the bank is under pressure to move quickly if it doesn’t want to fall behind the curve.
The European Central Bank (ECB) is also expected to hike interest rates in the near term, probably also in April, although the newest member of the ECB’s Governing Council, Dimitar Radev, refused to commit on that date in a recent interview with Reuters. Radev acknowledged that inflation expectations are at risk of rising faster than in the past but said that the bank will need further data to confirm April’s decision.
(This story was corrected on April 7 at 09:05 GMT to say that the pair has reached 184.50, and not 154.50, and that 184.75 is the last two months' high, and not March's high as previously reported, )
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.
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