Forex News
Brown Brothers Harriman’s (BBH) Elias Haddad argues that United Kingdom (UK) July Gross Domestic Product (GDP), expected flat month-on-month, is unlikely to alter Bank of England (BoE) expectations. The swaps curve implies 75 bps of tightening to 4.50%, which Haddad deems too aggressive, warning this leaves British Pound (GBP) exposed to a dovish BoE repricing given the negative output gap, above-midpoint policy rate and prospects for tighter fiscal policy.
Market pricing seen too aggressive
"UK July GDP is due Friday but is unlikely to shift the dial on Bank of England (BOE) rate expectations. Real GDP is expected at 0.0% m/m vs. +0.3% in June, as July’s decline in retail sales volumes offset an improvement in the composite PMI. For reference, the BoE’s baseline Q3 forecast is 0.1% q/q."
"The swaps curve implies 75bps of BOE rate hikes in the next twelve months to 4.50%. That’s too aggressive in our view and leaves GBP vulnerable to a dovish BoE repricing."
"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 all argue for a less aggressive hiking cycle."
"UK Chancellor John Healey has pledged to build a solid fiscal “buffer against uncertainty” in the October 28 Budget. That 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."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Here is what you need to know on Monday, September 7:
Financial markets cling to a cautious stance at the beginning of the week as investors assess the latest developments in the Middle East. Stock and bond markets in the United States (US) will be closed in observance of the Labor Day holiday on Monday. The European economic calendar will feature revisions to second-quarter Employment Change and Gross Domestic Product growth data, as well as the Sentix Investors Confidence for September.
US Dollar Price Last 7 Days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.32% | 0.03% | -2.77% | -0.56% | -0.86% | 0.80% | 0.24% | |
| EUR | 0.32% | 0.36% | -2.44% | -0.24% | -0.54% | 1.08% | 0.58% | |
| GBP | -0.03% | -0.36% | -2.88% | -0.59% | -0.90% | 0.72% | 0.13% | |
| JPY | 2.77% | 2.44% | 2.88% | 2.21% | 1.96% | 3.55% | 2.99% | |
| CAD | 0.56% | 0.24% | 0.59% | -2.21% | -0.31% | 1.33% | 0.73% | |
| AUD | 0.86% | 0.54% | 0.90% | -1.96% | 0.31% | 1.63% | 1.04% | |
| NZD | -0.80% | -1.08% | -0.72% | -3.55% | -1.33% | -1.63% | -0.58% | |
| CHF | -0.24% | -0.58% | -0.13% | -2.99% | -0.73% | -1.04% | 0.58% |
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).
The data from the US showed on Friday that Nonfarm Payrolls rose by 162K in August. This reading followed July's increase of 21K and beat the market expectation of 56K by a wide margin. Additionally, the Unemployment Rate remained unchanged at 4.1% in this period, even though the Labor Force Participation Rate increased to 61.6% from 61.4%. Following the upbeat labor market data, the US Dollar (USD) gathered strength against its rivals, while the CME FedWatch Tool's probability of a 25 basis points Federal Reserve (Fed) rate hike at the upcoming policy meeting climbed to 60% from about 50% before the release. In the European morning on Monday, the USD Index holds steady, slightly above 99.00.
US Dollar underperforms as equities tighten inverse correlation
Analysts at ING argue that, given “high energy prices and an above-consensus August NFP reading,” the Dollar “should really be doing better than it is.” They suggest the currency’s muted performance “probably owes to the still constructive investment environment, where global equity markets, including emerging markets, continue to perform well.” ING notes that, among the various relationships they track, “the inverse correlation between global equities and the Dollar seems to be the strongest right now – far higher than the Dollar's link to oil prices.”
Over the weekend, the US military attacked three Iran-linked oil tankers, reportedly disabling two and destryoing a third in the Gulf of Oman. In response, Iran targeted three US-affiliated vessels in addition to three oil tankers attempting to pass through the Strait of Hormuz. Meanwhile, Tehran said that they will declare a restricted zone near the Strait of Hormuz and unveil the new shipping route agreed on with Oman "in the coming days." After rising about 8% in the previous week, the barrel of West Texas Intermediate push higher to start the new week and it was last seen gaining nearly 1% on the day at $90.00.
Strait of Hormuz tensions stoke energy security fears
Deutsche Bank’s Jim Reid and team note that the Iran conflict over the weekend saw “a tit-for-tat escalation targeting commercial shipping in and around the Gulf,” with multiple tanker incidents reported. Citing Reuters and other major news agencies, they highlight that “several tanker incidents and maritime attacks heightened concerns about the security of energy supplies moving through the Strait of Hormuz,” as both sides traded accusations over responsibility for the disruptions.
Gold (XAU/USD) lost about 1% on Friday and snapped a two-day winning streak. As tensions in the Middle East remain high, XAU/USD stays on the back foot on Monday and was last seen losing about 0.7% on the day near $4,400.
Following Friday's choppy action, EUR/USD stays relatively quiet in the early European session and fluctuates in a narrow band above 1.1600.
AUDUSD gathers bullish momentum to start the week and trades at its highest level since mid-May above 0.7200.
USD/JPY edges lower and trades near 155.50 after losing about 2.5% in the previous week.
GBP/USD holds steady above 1.3500 in the European morning on Monday.
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.
- New Zealand Dollar faces pressure from cautious sentiment regarding the Reserve Bank of New Zealand's interest rate outlook.
- US Dollar downside remains limited after August Nonfarm Payrolls rose by a strong 162,000.
- Upcoming US inflation data could determine whether the Federal Reserve pauses or proceeds with rate hikes.
NZD/USD depreciates after two days of gains, trading around 0.5880 during European hours on Monday. The pair depreciates as the New Zealand Dollar (NZD) faces pressure from cautious sentiment surrounding the Reserve Bank of New Zealand’s (RBNZ) policy outlook. The weakness persisted despite the central bank’s decision last week to raise its official cash rate for a second consecutive meeting.
However, downside risks for the NZD/USD pair could remain limited as the US Dollar (USD) weakens amid broader market uncertainty ahead of crucial US inflation data. Goldman Sachs noted that a benign Consumer Price Index reading could prevent the Federal Reserve from raising interest rates, even after robust August labor market figures cleared a major hurdle for a potential rate hike.
According to the US Bureau of Labor Statistics, August Nonfarm Payrolls increased by 162,000, comfortably exceeding expectations of 56,000. Meanwhile, the Unemployment Rate held steady at 4.1%.
Dollar focus shifts to upcoming US CPI print
Deutsche Bank highlights that “attention now turns to inflation,” with the bank’s US economists expecting a notable pickup in price pressures in the August report. They forecast that headline CPI, due on Friday, will “rise by +0.38% month-on-month in August, up from +0.07% previously,” while core CPI is “expected to print at +0.21% month-on-month, broadly unchanged from July’s +0.22%.”
Technical Analysis:
In the daily chart, NZD/USD trades at 0.5880, hovering in a neutral near-term stance as it sits just above the 50-day Exponential Moving Average (EMA) but remains capped by the nine-day EMA. This narrow band underscores a range-bound phase, while the 14-day Relative Strength Index (RSI) near 48 hints at fading upside momentum rather than outright bearish pressure, suggesting the pair may consolidate as traders await a clearer catalyst.
On the topside, immediate resistance is located at the nine-day EMA around 0.5894, and a daily close above this barrier would open the door to a more constructive recovery phase. On the downside, initial support comes from the 50-day EMA at 0.5867; a break below this level would expose lower levels and tilt the short-term bias back in favor of sellers.
Hammack flags policy as too loose, backing case for further Fed hikes
Fed’s Hammack delivered a notably more hawkish tone, with the FXS Speechtracker score at 9.2/10 versus a historical average of 7.6/10, signaling a clear shift above the established baseline. The assertion that current Fed policy is “not restrictive” and that inflation is “too high,” combined with local contacts indicating “now is time for Fed to hike,” underscores a strong bias toward additional tightening and raises the perceived probability of near-term rate increases. This rhetoric is likely to support the Dollar as markets reprice the path of policy toward a more aggressive stance.
The FXS Fed Sentiment Index rose by 1.14 points to 125.72, reinforcing that overall Fed communication remains firmly in hawkish territory well above the neutral 100 mark. The combination of a higher FXS Fed Sentiment Index and an elevated FXS Speechtracker score suggests a coordinated shift toward tighter policy guidance, which should keep upward pressure on US yields and the Dollar.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
MUFG’s Lloyd Chan notes the Dollar strengthened after a stronger-than-expected August US jobs report, with Nonfarm Payrolls and labour participation surprising to the upside while wage growth eased. Markets now price a significant chance of further Federal Reserve tightening by December, but DXY remains little changed since Fed Chair Warsh’s Jackson Hole speech, suggesting investors are not yet convinced of a sustained Dollar rally.
Jobs data bolster Fed tightening risks
"The US dollar ended last week on a firmer footing after a much stronger-than-expected August nonfarm payrolls report. Nonfarm payrolls rose by 162k in August, well above consensus expectations of 55k, while July employment was revised higher to a gain of 21k from an initially reported decline. The unemployment rate held steady at 4.1% and labour force participation improved to 61.6%, pointing to a labour market that remains resilient."
"Meanwhile, average hourly earnings slowed slightly to 3.1%yoy from 3.2%yoy, suggesting wage pressures continue to ease gradually."
"Importantly, markets continue to price more than 60% probability of a 25bps Fed hike at the September FOMC meeting and approximately 35bps of cumulative tightening by December, equivalent to around 1.4 hikes by year-end."
"DXY gained 0.3% on Friday, though essentially unchanged since Fed Chair Warsh's Jackson Hole speech. This divergence suggests dollar bulls may not be convinced yet that higher yields can generate a sustained dollar rally."
"Renewed calls by President Trump for lower interest rates, together with his threat to stop trading with countries that the US has a trade deficit with, may also contribute to some negative policy premium on the dollar."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/CAD kicks off the new week on a subdued note amid a combination of diverging forces.
- Bullish crude oil prices offset Friday’s dismal Canadian jobs report and underpin the Loonie.
- Rising Fed hike bets and geopolitical risks favor USD bulls, lending some support to the pair.
The USD/CAD pair extends its sideways consolidative price move through the early European session on Monday and currently trades just below mid-1.3800s. Moreover, spot prices remain confined within Friday's broader range, warranting caution before placing aggressive intraday directional bias amid mixed fundamental cues.
Crude oil prices stand firm near the highest level since July 24 amid escalating US-Iran confrontation in the Strait of Hormuz. This offsets Friday's dismal Canadian employment details and offers some support to the commodity-linked Loonie. Apart from this, a modest US Dollar (USD) downtick turns out to be another factor acting as a headwind for the USD/CAD pair. The supporting fundamental backdrop, however, helps limit the downside amid relatively thin liquidity on the back of a holiday in the US and Canada.
The better-than-expected US Nonfarm Payrolls (NFP) report increased the chances of a rate hike by the US Federal Reserve (Fed) at the September 15-16 meeting amid concerns about price pressures stemming from elevated oil prices. Adding to this, the US-Iran standoff keeps the geopolitical risk premium in play, which should further act as a tailwind for the safe-haven Greenback. Hence, strong follow-through selling is needed to confirm that the USD/CAD pair's attempted recovery from last week's swing low has run out of steam.
Dollar underperforms as equity strength trumps energy tailwinds
Analysts at ING argue that, given “high energy prices and an above-consensus August NFP reading,” the Dollar “should really be doing better than it is.” They suggest the currency’s muted response “probably owes to the still constructive investment environment, where global equity markets, including emerging markets, continue to perform well.” ING notes that, among the various relationships they track, “the inverse correlation between global equities and the dollar seems to be the strongest right now – far higher than the dollar's link to oil prices.”
Traders might also opt to move to the sidelines ahead of this week's release of the latest US inflation figures – the Producer Price Index (PPI) and the Consumer Price Index on Thursday and Friday, respectively. The crucial data will be looked at for more cues about the Fed's policy path, which, in turn, will drive USD demand. Apart from this, crude oil price dynamics might influence the USD/CAD pair.
USD/CAD daily chart
Technical Analysis
The USD/CAD pair holds below the 100-day Simple Moving Average (SMA) at 1.3923 and the 50.0% Fibonacci retracement of the latest upswing at 1.3899. Spot prices, however, hold just above the 61.8% retracement, suggesting that while sellers retain control beneath the clustered overhead resistance, immediate downside follow-through may initially stall around this nearby support.
A decisive break under the 61.8% Fibo. level at 1.3817 would expose the next support at the 78.6% retracement near 1.3701, with a deeper slide pointing toward the structural floor around 1.3554. On the topside, initial resistance emerges at the 50.0% retracement at 1.3899, followed by the 100-day SMA at 1.3923, while further gains would challenge the 38.2% level near 1.3980 and the 23.6% retracement around 1.4081.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
According to UOB strategists Oil prices extended gains, with Brent crude settling above $96 and posting a strong weekly rise as disruptions to Middle East supply routes and renewed geopolitical tensions supported energy markets. Brent and WTI futures advanced further, with weekly gains approaching 8% and 10% respectively, while markets watch developments in the Strait of Hormuz.
Brent and WTI log strong week
"Oil prices also advanced, with Brent crude settling above US$96/bbl and notching a strong weekly gain, as ongoing disruptions to Middle East supply routes and renewed geopolitical tensions continued to support energy prices."
"Oil prices gained more than 7% for the week after the US and Iran resumed military exchanges in the seventh month of their conflict, while US diesel prices hit a record high."
"Brent crude futures gained 76 cents to close at $96.28/bbl, and West Texas Intermediate crude futures advanced 18 cents to settle at $91.48/bbl."
"Brent was up nearly 8% for the week and WTI gained almost 10%."
"Financial markets will be keeping a close watch on developments in the Middle East and the Strait of Hormuz, with any signs of further disruption to energy supplies likely to influence risk sentiment and oil prices."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- XAG/USD hits session lows at $65.46, following Friday's reversal from $68.00.
- Strong US NFP data boosts hopes of a Fed rate hike this week and weighs on precious metals.
- Recent price action shows a potential bearish "Head & Shoulders" pattern in progress.
Silver (XAG/USD) nudges lower on Monday, hitting session lows in the mid-$65.00s after a reversal from the $68.00 area. Precious metals are struggling on Monday, as US Nonfarm Payrolls (NFP) figures beat expectations last Friday, boosting hopes that the US Federal Reserve (Fed) will hike rates next week, although the market awaits Friday’s Consumer Price Index (CPI) release for confirmation.
US NFP figures showed a 162K increase in net employment in August, well above the 57K forecasted by market analysts, easing concerns about a softening labour market. The data prompted investors to ramp up bets on a Fed rate hike at the September 15-16 monetary policy meeting to a 58% chance, from around 50% before the release, according to data from the CME FedWatch Tool.
Analysts at ING point to Friday’s August CPI release as the main focus this week, where they see “month-on-month readings at 0.4% and 0.2% for headline and core (inflation) should be enough to sway the Fed towards a 25bp rate hike on 16 September,” a move they note is “just priced with a 58% probability at the moment.”
Technical Analysis: The neckline of a H&S formation lies around $63.30
XAG/USD trades at $65.79, keeping a bearish near-term tone as it holds well below the 200-day simple moving average (SMA). Friday's reversal from $68.00 looks like the second shoulder of a bearish Head & Shoulders (H&S) formation, while momentum indicators in the daily chart highlight growing bearish pressure.
The 14-period Relative Strength Index (RSI) is hovering near a neutral 52 zone, and the Moving Average Convergence Divergence (MACD) stays in negative territory, which suggests that upside attempts could remain capped.
On the downside, the pair might find support at Friday's low near $64.75, although the key level is the September 2 low, at $63.30, which would confirm the H&S pattern and add pressure toward the August 6 low, near $61.00.
On the topside, initial resistance emerges at a previous support area around $67.50, which held bulls on Friday. Further up, the mid-June highs around $71.60 and the 200-day SMA at $72.90 are likely to pose a significant challenge for bulls.
(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.
DBS strategist Philip Wee argues that downside risk in EUR/JPY is less straightforward than in CHF/JPY. He notes that Euro (EUR) strength versus the Swiss Franc (CHF) and British Pound (GBP), and an anti-USD trade, support the Euro as markets price in rate hikes from both the European Central Bank (ECB) and Bank of Japan (BoJ). However, he warns EUR/JPY could fall below 180 if the BoJ accelerates normalization.
Euro support but BOJ a risk
"The downside risk in EUR/JPY is less straightforward."
"First, the EUR and its anti-USD trade could remain supported by the USD debasement theme."
"Second, strength in EUR/CHF and EUR/GBP provides a synthetic tailwind for the EUR from the European Central Bank’s relatively more hawkish stance compared to its Swiss and British counterparts."
"Markets are pricing in a 95-100% probability of rate hikes at both Thursday’s ECB meeting and next week’s BoJ meeting."
"However, JPY may gain the upper hand if the BoJ affirms an accelerated pace of normalization, pushing EUR/JPY below its psychological support at 180."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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