Forex News
Here is what you need to know on Monday, August 3:
Market mood improves at the beginning of the new week as the United States (US) and Iran revive efforts for a diplomatic solution to the conflict. In the second half of the day, the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) data for July will be featured in the US economic calendar.
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 weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.13% | -0.93% | -4.20% | -0.35% | -0.39% | -1.23% | -0.84% | |
| EUR | 1.13% | 0.19% | -3.11% | 0.78% | 0.76% | -0.10% | 0.29% | |
| GBP | 0.93% | -0.19% | -3.40% | 0.60% | 0.57% | -0.28% | 0.10% | |
| JPY | 4.20% | 3.11% | 3.40% | 4.00% | 3.96% | 3.09% | 3.40% | |
| CAD | 0.35% | -0.78% | -0.60% | -4.00% | -0.07% | -0.88% | -0.50% | |
| AUD | 0.39% | -0.76% | -0.57% | -3.96% | 0.07% | -0.84% | -0.46% | |
| NZD | 1.23% | 0.10% | 0.28% | -3.09% | 0.88% | 0.84% | 0.38% | |
| CHF | 0.84% | -0.29% | -0.10% | -3.40% | 0.50% | 0.46% | -0.38% |
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).
US President Donald Trump announced over the weekend that he held off a planned "massive attack" and said a day later that negotiations with Iran will resume on Monday. Iranian President Masoud Pezeshkian urged the US to “remain committed” to the Memorandum of Understanding (MoU) signed in June.
Crude Oil prices opened with a huge bearish gap on this development and the barrel of West Texas Intermediate was last seen trading at around $78, losing more than 8% on the day. Reflecting the upbeat market mood, the US Dollar (USD) Index stays below 100.00 after losing more than 1.5% in the previous week and US stock index futures are up between 0.5% and 0.8% on the day.
Brent retreats as US-Iran talks resume after aborted strike
Analysts at Danske Bank highlight a sharp pullback in Brent following signs of de-escalation in the US-Iran confrontation. They note that in the context of the US-Iran war, “Trump confirmed on Sunday that negotiations with Iran would resume on Monday after calling off what he described as the ‘biggest attack since World War II’ at the request of Gulf allies.” The US President “declined to set a deadline or disclose the location and participants,” but the prospect of renewed talks has eased immediate geopolitical risk.
According to Danske Bank, “oil prices fell sharply on signs of de-escalation, with Brent crude trading just below USD84/bbl this morning after closing around USD90/bbl on Friday.”
Meanwhile, recent comments from Federal Reserve (Fed) officials failed to support the USD.
Dallas Fed President Lorie Logan delivered a distinctly more hawkish message on Friday, with an FXS Speechtracker score of 8.7/10, notably above the 6.7/10 historical average and signaling a stronger tightening bias relative to the established baseline. The emphasis that “risks to inflation are to the upside,” that monetary policy is “not restraining” the economy, and that inflation is “not on course” to 2%—combined with a stated preference for a quarter-point rate increase—underscored concern that without additional policy restraint, inflation will remain above target and may ultimately require sharper action.
Following the previous week's sharp decline, USD/JPY came under heavy bearish pressure in the Asian session on Monday and touched its lowest level since early May below 155.50. The pair staged a rebound afterward and erased a large portion of its losses. At the time of press, USD/JPY was trading near 156.80, losing about 0.4% on the day.
Japan's Finance Minister Satsuki Katayama said on Monday that she has no comment on whether there was foreign exchange (FX) intervention today, Reuters reported.
Earlier in the day, Katayama stated that Japanese authorities conducted coordinated Yen-buying intervention with the US on Friday, adding that officials will not hesitate to carry out more FX intervention with Washington.
EUR/USD struggles to preserve its bullish momentum after rising in the Asian session and trades virtually unchanged at around 1.1520 in the European morning on Monday.
GBP/USD corrects lower following a three-day rally and trades slightly above 1.3450.
Gold finds it difficult to set a near-term direction and extends its sideways grind above $4,000 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.
MUFG’s Michael Wan highlights that the Japanese Yen (JPY) has strengthened sharply, with USD/JPY dropping from around 164 after suspected intervention by Japan’s Ministry of Finance (MoF) and confirmed joint action with the US Treasury. He notes that past joint JPY interventions often coincide with turning points in USD/JPY, but stresses that fundamentals must shift for a durable move lower.
Historic joint action in Yen markets
"The Japanese Yen strengthened further below the 158 level heading into the weekend, with the media including the FT and Bloomberg reporting that the US Treasury intervened to strengthen the Japanese Yen on Friday by selling Euros to buy Yen."
"In Asia morning time, Japan’s Finance Minister Satsuki Katayama released a statement confirming that both Japan and the US Treasury intervened on Friday, and that they will not hesitate to conduct further joint intervention if necessary in close coordination with the US."
"Historical episodes of joint JPY intervention show that these events have typically taken place around key turning points in USD/JPY, but this is not always the case and tends to take some time before the broader trend changes."
"For instance, in June 1998, USD/JPY fell sharply from 146 to 136 within a few days, helped by joint FX intervention, but it took at least two more months after that and shifts in the underlying dynamics of the Asian Financial Crisis before USD/JPY’s longer-term trend broke."
"Overall, while we think that the joint intervention is certainly historic and significant, and could certainly play an important role in the short-term in clearing out Yen shorts, the fundamentals likely still need to change for a more durable move lower in USD/JPY."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/CAD edges higher to around 1.4030 in Monday’s early European session.
- Trump announced that fresh talks with Iran would begin on Monday.
- Traders will closely watch the US NFP report, which is due later on Friday.
The USD/CAD pair gathers strength to near 1.4030 during the early European session on Monday. A fall in crude oil prices weighs on the commodity-linked Canadian Dollar (CAD) against the US Dollar (USD). The US ISM Manufacturing Purchasing Managers Index (PMI) data will be released later on Monday.
Oil prices drop sharply on hopes of US-Iran talks. US President Donald Trump called off a planned military strike on Iran and said that fresh talks with Tehran would begin later in the day, easing concerns over potential supply disruptions. It is worth noting that Canada is a major oil-exporting country, and low crude oil prices generally have a negative impact on the Loonie.
The US employment data will take center stage on Friday. The US Nonfarm Payrolls (NFP) are expected to increase by 91,000 in July, versus 57,000 prior. The Unemployment Rate is projected to jump to 4.3% in July, up from 4.2% in June. If the reports show stronger-than-expected outcomes, this would reinforce bets on a US September rate hike and support the Greenback.
The US Federal Reserve (Fed) decided to leave interest rates unchanged at its July policy meeting last week. Markets have priced in nearly a 64.7% probability of a rate hike in September, down from about 77% before the July Fed meeting, according to the CME FedWatch tool.
Canadian Dollar gains capped as USD/CAD stalls near 1.40
Analysts at Scotiabank note that the Canadian Dollar has drawn support from “the generally softer USD undertone that has developing the past couple of days,” but they add that the currency “is having some trouble progressing through the 1.40 area” in USD/CAD, highlighting lingering resistance despite the improved backdrop.
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.
Commerzbank’s FX Research team reports that Brent Oil opened over 7% lower under USD84 into the Asian session after President Trump said the US would hold off on new strikes against Iran. Despite OPEC+ approving a modest output increase for September, the Strait of Hormuz remains effectively closed, keeping Persian Gulf export disruptions and inflation concerns in focus.
Trump decision hits Brent sharply
"The dominant story heading into the Asian open is that Brent oil prices have opened lower by over 7% to under USD84. This followed reports over the weekend that President Donald Trump said the US would hold off on new strikes against Iran. Iran and other Gulf nations indicated they are working toward a deal."
"President Trump posted on social media that he had agreed to cancel the attack “subject to being able to rapidly make a DEAL”, adding “Get to work, everybody, and get it DONE”. Saudi Arabian Crown Prince Mohammed bin Salman had reportedly urged Trump to refrain from further military action."
"The Strait of Hormuz remains effectively closed, continuing to disrupt Persian Gulf oil exports and stoking inflation concerns across Asia and Africa."
"On the energy front, OPEC+ approved a further increase of 188k barrels a day to collective output targets for September on Sunday, completing the theoretical unwinding of the 1.65mn barrels a day in voluntary cuts made in April 2023."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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