Forex News
Commerzbank’s Dr. Henry Hao highlights that China’s July activity data undershot expectations across industrial output, retail sales and fixed-asset investment, reflecting weather disruptions and a deepening property slump. Exports remain a relative bright spot, but H2 Gross Domestic Product (GDP) growth is now seen as fragile and below target, increasing pressure on Beijing to deliver more meaningful fiscal and monetary support in the coming months.
Weak data heighten policy support pressure
"China's July activity data missed consensus across every major indicator, confirming that the economy's second-half recovery is off to a fragile start."
"Persistent consumer caution and sub-target GDP growth are intensifying pressure on Beijing to deploy more substantive fiscal and monetary support in H2."
"The July data miss raises the stakes for Beijing's policy response in the months ahead."
"With the year-to-date GDP growth trajectory running below the official target range, a sustained H2 recovery is now a prerequisite for meeting the full-year goal."
"Whether that calibrated approach proves sufficient given the scale of the demand shortfall will be the defining policy question for Q3."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
ING’s Ewa Manthey and Warren Patterson report that LME copper has surged to a record high above $14,000/t, with a sharply backwardated cash/3M spread underscoring near-term tightness. Falling LME inventories, weaker Chilean output expectations, and strong speculative net longs on COMEX are all cited as key drivers of Copper’s ongoing multi-week rally.
Copper rally driven by tight fundamentals
"LME copper rose 1.7% this morning to a record high of $14,396/t, extending its rally for a third session and marking a seventh consecutive week of gains. The cash/3M spread widened to a backwardation of $518.5/t, the strongest since October 2021, highlighting acute near-term supply tightness."
"LME inventories fell for a 42nd consecutive session to 204,975 tonnes, their lowest level since February. Continued flows to the US and China, where prices trade at premiums to the LME, have drained stocks, while nearly half of remaining inventories are already earmarked for withdrawal."
"On the supply side, Chile's copper commission Cochilco expects national copper output to fall 2.6% year-on-year to 5.3mt in 2026, reflecting weaker production from Codelco and BHP operations. Copper is now up around 16% year-to-date."
"Speculative positioning remains supportive, with money managers increasing net long COMEX copper positions by 3,084 lots to 80,880 lots, the highest since February 2021."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/JPY ticks up from lows as Japanese GDP reactivates concerns about the economy.
- Japan's economic growth eased to 0.3% in Q2, against expectations of a steady 0.5% reading.
- The US Dollar is failing to capitalize on Yen's weakness, weighed by the Fed's dovish repricing.
The Japanese Yen holds marginal gains against the US Dollar (USD) on Wednesday, although the USD/JPY pair has returned to levels above 159.00 during the European session, after hitting daily lows around 158.85. Weaker-than-expected Japanese Gross Domestic Product (GDP) figures have cast doubts about the Bank of Japan’s tightening plans, adding pressure on the Yen.
Economic growth slowed down to a 0.3% pace in the second quarter in Japan, against expectations of a steady 0.5% reading, according to data released by the Japanese Cabinet Office earlier on Monday. Likewise, the yearly GDP growth decelerated to 1.1% year-over-year from 1.8% in the previous quarter, against expectations of an uptick to 2%.
Strategists at Brown Brothers Harriman note that "Japan real GDP growth underwhelmed in Q2 and details were poor," with "private consumption" essentially "flat, while private non-residential investment shaved -0.2ppt off growth." BBH argues that such "sluggish domestic demand activity will do little to ease Japan’s fiscal concerns, a major headwind for JPY," especially as "10-year JGB yields (2.91%) are catching up to Japan nominal GDP growth (3.2% y/y in Q2), putting the country’s debt dynamic on a more fragile footing."
Fed's dovish repricing is keeping USD bulls subdued
The US Dollar, on the other hand, remains depressed as investors reprice the Federal Reserve's (Fed) near-term tightening chances, following last week's figures. Data released last Friday showed that Retail Sales fell 0.6% in July, against market expectations of a 0.1% gain, following a 0.2% increase in June. Before that, producer and consumer price figures had shown easing inflationary pressures, and Nonfarm Payrolls revealed that net employment fell unexpectedly in July.
Against this background, traders have dialed back their bets for a September rate hike to 30%, from above 50% one week ago, according to data by the CME Group's FedWatch Tool, which has undermined speculative demand for the USD.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- Gold holds near $4,400, supported by a weaker US Dollar and fading expectations of further Federal Reserve rate hikes.
- XAU/USD maintains a constructive technical bias on both the four-hour and one-hour charts, with prices holding above key moving averages.
- A break above $4,450 could reinforce bullish momentum, while $4,365 acts as the nearest key support.
Gold (XAU/USD) maintains a bullish bias around $4,400, supported by a weaker US Dollar (USD) and fading expectations of further interest rate hikes by the Federal Reserve (Fed). However, geopolitical risks and tensions in energy prices continue to fuel inflation concerns, limiting the precious metal’s upside for now.
In the four-hour chart below, XAU/USD holds a constructive near-term bias as it trades comfortably above the 100-period simple moving average (SMA) at $4,205.68 and the 200-period SMA at $4,142.35, keeping the broader uptrend intact. The nearby horizontal support at $4,365.00 underpins the latest consolidation, while the Relative Strength Index (RSI) at 56.32 has eased out of overbought territory and now points to moderately positive, but not stretched, momentum.
On the downside, initial support is seen at the recent floor around $4,365.00, with deeper demand emerging at the 100-period SMA near $4,205.68 and then the 200-period SMA around $4,142.35, where the broader bullish structure would be expected to reassert if tested. On the topside, a break above the horizontal resistance at $4,450.00 would open the way for renewed gains, as the absence of closer overhead technical barriers suggests that a clear move through this cap could accelerate bullish pressure.
In the one-hour chart below, XAU/USD is also holding a constructive near-term bias as price remains above the 100-period simple moving average (SMA) at $4,382.90 and the 200-period SMA at $4,324.87. This positioning suggests dips are still being bought, while the Relative Strength Index (RSI) near 56 keeps a mildly bullish tone without yet signaling overbought conditions.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
TD Securities expects the UK labour market to remain soft but stable in June, with employment rising 100k on a three‑month basis and unemployment edging down to 4.7%. Headline average weekly earnings are forecast to slow to 4.0%, while ex‑bonus pay holds at 3.4%. TD argues these wage dynamics should reassure the Bank of England and support keeping Bank Rate unchanged.
Wage slowdown aligns with inflation target
"We expect the labour market to continue along the steady but lacklustre path seen since the start of the year, with June delivering 100k change in employment on a 3m/3m basis (mkt: 120k; prior: 148k)."
"The unemployment rate is likely to come down slightly as a result, but remain elevated at 4.7% (mkt: 4.8%; prior: 4.9%)."
"Elsewhere, we could see a fair drop in the headline average weekly earnings growth measure to 4.0% 3m/y (mkt: 4.0%) from 4.3% in May, as March's outsized bonus figures fall out of scope and reverse the upward pressures seen in the past three months."
"Ex-bonus wage growth should remain at 3.4% 3m/y (mkt: 3.4%) while private earnings ex-bonus growth is set to dip to 2.7% 3m/y (mkt: 2.8%; prior: 2.9%)."
"The latter two measures sit within reach of levels consistent with the BoE's inflation target, likely reassuring the majority of the MPC that labour market dynamics are limiting second-round inflation pressures and supporting a majority vote to keep Bank Rate on hold."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- The US Dollar Index hits a fresh two-month low at 99.30 as investors reassess Fed rate hike bets.
- US Retail Sales and benign inflationary figures have sent the US Dollar tumbling across the board.
- FX Analysts at BBH see the DXY supported above the 200-day SMA, at 99.15.
The US Dollar Index (DXY) extends losses for the third consecutive day on Monday, with bears testing levels at two-month lows below 99.40 during the European session. The US Dollar keeps bleeding as recent US data has prompted investors to reassess their expectations for immediate interest rate hikes by the US Federal Reserve (Fed).
US data released on Friday revealed that Retail Sales fell 0.6% in July, against market expectations of a 0.1% gain, following a 0.2% increase in June. Before that, producer and consumer price figures had shown easing inflationary pressures, and Nonfarm Payrolls revealed that US jobs fell unexpectedly in July. These numbers have prompted investors to dial back the odds for a September rate hike to 30%, from above 50% one week ago, according to data by the CME Group's FedWatch Tool.
Strategists at Brown Brothers Harriman highlight that the USD has “extended last week’s decline triggered by the downward adjustment to Fed funds rate expectations,” but stress that there was “no fresh catalyst behind today’s broad-based USD slump,” which in their view “suggests the DXY index should stabilize around its 200-day moving average.”
Technical Analysis: The 200-Day SMA is at 99.15
Dollar Index Spot trades at 99.40, showing a bearish near-term tone, with sellers pushing against the bottom of the last two months' trading range, looking at the 200-day SMA, at 99.15. Momentum indicators in the daily chart are pointing lower, with the Relative Strength Index (14) at 35, and the Moving Average Convergence Divergence (MACD) below zero.
On the downside, the key support area is at the mentioned 200-day SMA at 99.15. Below here, May's bottom, in the 98.75-98.90 area, is likely to hold bulls ahead of April's lows, in the 97.70 area. On the topside, a daily close above 99.40 would be the first signal of easing bearish pressure, while a stronger recovery through the 100.00 level would be needed to suggest a more durable shift back toward a constructive dollar bias.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- WTI gains 0.70% on Monday and trades around $82.10 at the time of writing.
- The lack of negotiations between Washington and Tehran keeps concerns over the Strait of Hormuz elevated.
- Tensions in Lebanon and Ukrainian attacks on Russian refineries add to risks surrounding global supply.
West Texas Intermediate (WTI) US Oil advances on Monday and trades around $82.10 at the time of writing, up 0.70% on the day. Oil prices remain supported by the deadlock between the United States (US) and Iran, which keeps concerns about Oil flows through the Strait of Hormuz elevated.
The prospects for a full reopening of the Strait of Hormuz remain uncertain as talks between Washington and Tehran appear to have reached a standstill. Iranian Foreign Minister Abbas Araghchi says that no negotiations are currently taking place between the two countries and that the United States must accept Iran's conditions for shipping to resume through the strategic waterway.
Tensions intensified further over the weekend. Iranian Deputy Foreign Minister Kazem Gharibabadi called on US President Donald Trump to “accept the reality of defeat,” after Trump suggested that he would soon declare the Strait of Hormuz a “territory of the United States.”
The Oil market is also monitoring developments in Lebanon following a renewed escalation in fighting between Israel and the Iran-backed Hezbollah. A further deterioration in the conflict could heighten concerns about the stability of energy supplies in the Middle East and maintain a geopolitical risk premium in WTI prices.
Supply risks are not limited to the Middle East. Russia is facing fuel shortages after Ukraine resumed near-daily attacks on Russian Oil refineries, adding another source of uncertainty over the availability of energy products.
Traders now turn their attention to the American Petroleum Institute (API) weekly Crude Oil inventory report, due on Tuesday.
Oil risk premium builds as Middle East ceasefire frays and curves swing deeper into backwardation
Rabobank’s Bas van Geffen flags that, as Bloomberg notes “the ceasefire is set to expire today,” there is “little left of that truce to begin with.” Negotiations have broken down and, over the weekend, Israel launched fresh strikes in Lebanon, a bulk carrier attempting to exit the Strait of Hormuz “was hit by a projectile,” and Yemen’s main port suspended operations after Houthi missile attacks. Against this backdrop, Rabobank warns that additional US sanctions on Iran could prove costly at home as well, with Bloomberg having explored what a further “economic isolation” of Tehran might entail given it is already subject to extensive sanctions and a naval blockade, “most of them” carrying “some repercussions for the US too.” The bank argues that Washington’s “strongest move might be to sanction Chinese banks that finance the trade in Iranian oil,” but cautions this “will surely worsen US-China relations ahead of a scheduled Trump-Xi meeting.”
On the energy side, Rabobank notes that Washington has been trying to offset the fallout via the Strategic Petroleum Reserve, but “that hasn’t stopped prices from going up.” More importantly, these buffers are finite: “The SPR has fallen below 300 million barrels for the first time since it was filled in the 1980s,” a level that “adds to concerns about the integrity of the caverns – as experts are divided over the amount of oil that needs to remain to prevent structural damage to the storage sites.”
Societe Generale highlights that “since February 28, the Iran-US conflict has injected significant volatility into oil prices.” The bank observes that “the forward curve has fluctuated sharply but has remained predominantly in backwardation, only briefly slipping into front-end contango during periods when hopes of de-escalation gained traction.” With the conflict “effectively at a stalemate and inventories continuing to draw,” Societe Generale judges that “the current degree of backwardation appears fundamentally justified.” It adds that “the Strait of Hormuz crisis further widened this gap,” as “front-end oil prices surged to multi-year highs, pushing crude oil curves into deep backwardation.” In index space, the bank notes that “as a result, oil and refined products now account for roughly 51% of the GSCI, versus around 30% of the BCOM.”
WTI US Oil technical analysis
In the one-hour chart, WTI US Oil trades at $82.13. The contract holds a constructive short-term bias as price moves above the former descending trend-line barrier near $82.02 and trades above both the 100-period simple moving average (SMA) at $81.54 and the 200-period SMA at $78.99, keeping the intraday trend underpinned. The Relative Strength Index (RSI) at 62.8 leans into bullish territory, suggesting buyers retain control but are not yet stretched into overbought conditions.
On the topside, initial resistance is aligned at the horizontal barrier around $83.57, with a further cap emerging at $84.60 if upside pressure extends. On the downside, the trend-line near $82.02 is now immediate support ahead of the 100-period SMA at $81.54, while a deeper pullback would look toward the $80.00 horizontal floor and then the 200-period SMA around $78.99 as a stronger structural base.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Brown Brothers Harriman’s (BBH) Elias Haddad expects the Riksbank to keep its policy rate at 1.75% for a seventh consecutive meeting while leaving the door open to a later hike as inflation runs above projections. However, with inflation still well below target, he sees a high bar for hawkish repricing, leaving Swedish Krona (SEK) facing a policy headwind.
High bar for hawkish repricing
"The Riksbank is widely expected to keep the policy rate at 1.75% for a 7th consecutive meeting (Thursday). Importantly, the Riksbank will likely keep the door open for a rate hike later this year because inflation is tracking above its projection."
"In July, Sweden CPIF was 0.7% y/y vs. Riksbank’s forecast of 0.5%, while CPIF ex-energy was 0.6% y/y vs. Riksbank forecast of 0.2%."
"Nonetheless, with inflation still well below the 2% target, the bar for a hawkish Riksbank repricing is high which is a headwind for SEK. The swaps curve continues to fully price in a 25bps hike to 2.00% in December."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Dow Jones futures fall as weaker-than-expected economic data shifted expectations around Federal Reserve monetary policy.
- CME FedWatch tool indicates Fed rate hike odd next month down to 30.6%.
- Traders await major retail earnings, including Home Depot, Lowe’s, and Walmart, and Wednesday's Fed meeting minutes.
Dow Jones futures decline by 0.12%, trading around 53,740 during European hours on Monday. Meanwhile, S&P 500 futures gain, hovering around 7,820, and Nasdaq 100 futures surge by 0.5%, trading near 30,290.
US stock futures deliver mixed results as weaker-than-expected economic data from the prior week shifted expectations around Federal Reserve (Fed) monetary policy. Data released by the US Census Bureau revealed that July Retail Sales contracted by 0.6% month-over-month, reversing June's 0.2% gain and missing market expectations for 0.1% growth. On an annual basis, Retail Sales rose 5.0% in July, marking a noticeable slowdown from the 6.8% expansion recorded in the previous month.
Traders have significantly scaled back their expectations for near-term Federal Reserve rate hikes. According to the CME FedWatch tool, financial markets are currently pricing in just a 30.6% probability of a rate hike next month, representing a sharp decrease from the 52.2% chance estimated just a week prior.
Goolsbee flags better inflation data but keeps Fed tone cautiously hawkish
Fed’s Goolsbee delivered a softer-than-usual message, with a 4.6/10 FXS Speechtracker score undershooting the 6.8/10 historical average and signaling a more dovish tilt relative to the established baseline. Emphasis on “a little bit better” inflation readings and the view that tariffs and oil were largely one-off drivers points to growing confidence that price pressures can drift back toward 2% if recent trends persist. At the same time, the description of the US economy as “steady” keeps the Federal Reserve biased toward patience rather than an imminent pivot, limiting immediate downside for the Dollar.
The FXS Fed Sentiment Index slipped 2.36 points to 134.61, indicating a modest pullback in perceived hawkishness following the interview. Even after the decline, the index remains firmly in hawkish territory above 100, underscoring that policy expectations are still skewed toward restrictive settings, albeit with a slightly softer edge than suggested by the FXS Speechtracker historical baseline.
Looking ahead, investors are bracing for a relatively quiet week on the macro front, turning their focus instead toward earnings reports from major US retailers for fresh clues on consumer health. Home Depot is scheduled to report on Tuesday, followed by Lowe's on Wednesday and Walmart on Thursday. Investors will also scrutinize the Federal Reserve’s latest meeting minutes, scheduled for release on Wednesday, for further monetary policy guidance.
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
Commerzbank’s Tatha Ghose notes that the Central Bank of the Republic of Türkiye's (CBRT) survey shows market participants revising inflation forecasts higher and expecting only gradual rate cuts from current effective levels. While respondents are slightly more optimistic on USD/TRY than Commerzbank for year-end, the convergence of one-year-ahead forecasts underscores limited confidence in sustained disinflation or a stable Lira.
Survey shows worsening inflation expectations
"Subsequent to us expressing skepticism regarding the inflation report forecasts and the outlook for the lira, the Turkish central bank’s (CBRT’s) own survey of market participants highlighted worsening expectations: market participants forecast inflation at 29.2% for year-end 2026 (CBRT: now revised 28%) and 23.7% for end-2027 (CBRT: 15%)."
"We describe the longer-term forecast as often passively mean reverting, in the absence of concrete information, not really a high conviction view about disinflation."
"As far as interest rates are concerned, participants see the repo rate staying at 37.0% for now, but declining to c.35% by year-end – which would imply 500bp easing from the current effective 40% rate."
"Respondents are more optimistic than us about USD/TRY for year-end (market: 51.66; us: 53.0), but the one-year ahead forecast has caught up with our own 56.0. In summary, the market does not have much confidence in the disinflation or stable exchange rate story."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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