Forex News
Australia's Trade Balance narrowed to A$495M MoM in August, followed a surplus of A$1,351M in the previous reading (revised from A$1,923M), according to the latest foreign trade data published by the Australian Bureau of Statistics on Thursday.
Further details reveal that Australia's Exports rose by 3.7% MoM in August from a fall of 3.6% seen a month earlier (revised from -3.3%). Meanwhile, Imports climbed by 5.8% MoM in August, compared to a decrease of 2.4% seen in July (revised from -2.5%).
Market reaction to Australia’s Trade Balance
The Australian Dollar (AUD) has little to no impact following the Australia’s Trade Balance report. At press time, the AUD/USD pair is trading at 0.6944, losing 0.02% on the day.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- USD/CAD prolongs a multi-week-old upward trajectory amid a supportive fundamental backdrop.
- A relatively dovish BoC stance and the recent slide in oil prices continue to undermine the Loonie.
- The USD sits near a two-month high amid elevated US bond yields and geopolitical uncertainties.
The USD/CAD pair holds steady around the 1.4235 area during the Asian session on Thursday, consolidating its recent strong gains registered over the past four weeks or so. Meanwhile, the fundamental backdrop seems tilted in favor of bulls and suggests that the path of least resistance for spot prices remains to the upside.
The Canadian Dollar (CAD) continues with its relative underperformance amid the Bank of Canada's (BoC) predominantly dovish policy stance and US-Canada trade tensions. Adding to this, the recent slide in crude oil prices further undermines the commodity-linked Loonie, which, along with a bullish US Dollar (USD), acts as a tailwind for the USD/CAD pair and validates the near-term positive outlook.
The US PCE data, released on Wednesday, tempered market bets for an October Federal Reserve (Fed) rate hike, though oil-driven inflation fears keep US bond yields elevated near multi-year highs. Furthermore, traders are still pricing in a greater chance that the US central bank will raise borrowing costs by the end of this year. This, along with the US-Iran standoff, continues to support the Greenback.
In the latest developments surrounding the Middle East crisis, US President Donald Trump had turned down a seven-day ceasefire proposal from Iran. Moreover, US officials believe that Trump could order a return to major combat after the November midterm elections. This keeps the geopolitical risk premium in play, favoring USD bulls and backing the case for a further move up for the USD/CAD pair.
Traders now look forward to the US economic docket – featuring the usual Weekly Initial Jobless Claims and the ISM Manufacturing PMI. This, along with speeches from a slew of influential FOMC members and the incoming geopolitical headlines, will drive the USD. Apart from this, oil price dynamics should provide some impetus to the USD/CAD pair ahead of the US Nonfarm Payrolls (NFP) report on Friday.
USD/CAD daily chart
Technical Analysis
The USD/CAD pair keeps a bullish near-term bias in place, though is stretched on momentum. In fact, the Relative Strength Index (14) is hovering in overbought territory near 78, which hints that upside may be vulnerable to a corrective pause rather than a sustained acceleration at current levels.
Nevertheless, the broader setup favors dips being bought, even if overbought conditions trigger short-term consolidation or a mild pullback. Hence, any corrective slide is more likely to attract some buyers near the 1.4200 round figure ahead of the 1.4170-1.4165 region, below which the USD/CAD pair could slide to the 1.4100 mark.
(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.
US President Donald Trump unveiled a $200 billion investment plan from South Korea, $54 billion of which is slated to go to a liquefied natural gas (LNG) project in Alaska, Reuters reported on Thursday.
The plan builds on the $350 billion trade agreement reached last year. The package included $150 billion for shipbuilding and $200 billion for strategic investments.
Trump said that the investment would include the construction of eight large-scale nuclear power plants, a natural gas pipeline, and a 6-gigawatt power generation facility in Texas.
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.
- WTI dips as Middle East shipments rebound toward pre-war levels, boosted by Saudi pipeline restoration.
- Flows through the Strait of Hormuz hit 13.2 million barrels daily despite ongoing U.S.-Iran territorial disputes.
- Tehran received a US proposal on reopening the waterway, while OPEC+ prepares to hold output quotas steady.
West Texas Intermediate (WTI) oil price loses ground after posting modest gains in the previous day, trading around $89.10 per barrel during Asian hours on Thursday. Crude oil prices declined as investors weighed signs of a recovery in Middle East flows against an ongoing impasse in United States (US)-Iran negotiations.
Regional crude shipments neared pre-war levels after Saudi Arabia restored half the capacity of its East-West pipeline, pushing flows through the Strait of Hormuz up to 13.2 million barrels per day.
However, prices may rebound as markets remain cautious about the durability of this recovery without a lasting agreement to end the war, particularly with both Tehran and Washington claiming full control over the strategic waterway.
Meanwhile, Iranian spokesperson Fatemeh Mohajerani confirmed Tehran received a U.S. proposal regarding the strait's reopening, as OPEC+ prepares to keep November output quotas unchanged at its upcoming weekend meeting.
Oil benchmarks diverge as US taps final strategic reserves
Analysts at Deutsche Bank point out that the US has announced it will "offer up to 40m barrels from its Strategic Petroleum Reserve, in what would be its last drawdown in the coordinated global release of oil announced earlier in the year." They note that this additional supply "helped oil prices stage a decent intraday turnaround," even as the complex remained under pressure into the close. Deutsche Bank highlights that "Brent settled -2.59% lower while WTI crude (-3.48%) saw a larger decline to a 4-week low of $89.48/bbl," with the move accompanied by a widening in the spread between the two benchmarks "as the current front-month Brent future expires today."
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.
The US official stated on Monday that US Secretary of State Marco Rubio told the Iranian delegation to the United Nations General Assembly immediately leave the United States (US) after talks stalled, Axios reported.
"Secretary Rubio kicked out the Iranian delegation who had overstayed their welcome. The UN General Assembly was over, so it was time for them to go," the US official said.
Earlier Wednesday, US President Donald Trump said that Washington will soon have to decide whether to "blow up" Iran or reach a deal with Tehran.
Meanwhile, Iranian Parliament Speaker Mohammad Bagher Ghalibaf pushed back claims by US Treasury Secretary Scott Bessent that Iran faces an imminent economic collapse, arguing instead that Washington is heading toward a debt crisis of its own.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 0.16% on the day at $89.60.
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.
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