Forex News

TD Securities highlights asymmetric upside risk in USD/CAD as US–Canada trade tensions escalate. Section 338 tariffs are expected to shave around 0.3 percentage points from Canada’s Gross Domestic Product (GDP) by 2027, with limited inflation impact, supporting a more extended Bank of Canada (BoC) rate hold. Their models show CAD as a funding currency, and they retain a bearish CAD view with a year-end USD/CAD forecast at 1.39.

Tariffs, carry and CAD funding

"Increased US/Canada trade tension reinforces the CAD's role as a carry funding currency. BoC rate hold could become more extended on the back of the trade deal setback; we also find little near-term catalysts that could push USD/CAD below its 200d SMA at 1.3840."

"Trade tension escalation between US and Canada presents asymmetric upside risk in USD/CAD and reinforces CAD's role as a carry funding currency in FX market."

"From a carry/vol perspective, CAD is now on par with JPY as a global funding currency. While USD/CAD spot price has rallied over the past week, the size of the move still trails below our estimated short-term fair value for this pair."

"MRSI model continues to hold a bearish CAD bias vs global currencies; systematic factors are broadly bearish CAD except for momentum and long-term fair value. We hold a near-term bearish CAD view and maintain 1.39 as our year-end USD/CAD forecast."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• Silver falls more than 2.5% on Tuesday and trades around $64.85, below the key $65.50 area.
• Expectations of potential monetary tightening in the United States weigh on precious metals.
• Investors await US manufacturing and employment data before placing fresh directional bets.

Silver (XAG/USD) extends its decline on Tuesday, trading around $64.85 at the time of writing, down 2.54% on the day. The white metal slips below the key $65.50 area as prospects of tighter US monetary policy continue to weigh on precious metals.

Expectations surrounding the Federal Reserve (Fed) have shifted significantly following Chair Kevin Warsh’s hawkish comments at the Jackson Hole Symposium on Friday. The US central bank chief indicated that interest rates may need to rise if inflation fails to slow sufficiently, increasing pressure on non-yielding assets such as Silver.

Rising energy prices add to inflation concerns. Tensions in the Middle East support Oil prices and fuel the risk of renewed price pressures, a scenario that could strengthen the case for a more restrictive Fed monetary policy.

According to the CME Group FedWatch Tool, markets now see more than a 65% chance of an interest rate hike at the September 15-16 meeting. These expectations also help support the US Dollar (USD), creating an additional headwind for Silver.

Investors, however, remain cautious ahead of several US macroeconomic releases that could reshape these expectations. The Institute for Supply Management (ISM) releases its Manufacturing Purchasing Managers Index (PMI) for August on Tuesday, while the Job Openings and Labor Turnover Survey (JOLTS) report is expected to provide fresh insights into US labor demand.

Attention will then turn to the Nonfarm Payrolls (NFP) report on Friday. The employment figures are likely to play an important role in shaping expectations for the Fed’s policy path ahead of its September meeting. Strong data could reinforce monetary tightening expectations and keep Silver under pressure, while clearer signs of labor market weakness could temper hawkish Fed bets.

• The New Zealand Dollar slides to near 0.5895 against the US Dollar due to upbeat Fed interest rate hike expectations.
• Investors keenly await the US Manufacturing PMI and Job Openings data.
• The RBNZ is anticipated to raise its cash rate in the policy meeting on Wednesday.

The New Zealand Dollar (NZD) is down 0.35%, marginally below 0.5900 against the US Dollar (USD) during the European trading session on Tuesday. The Kiwi pair weakens as the US Dollar outperforms its peers, with financial markets becoming increasingly confident that the Federal Reserve (Fed) will raise interest rates at its policy meeting this month.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.2% higher to near 99.60.

USD steadies as Fed pricing stays firm

Strategists at Brown Brothers Harriman note that the "USD recovered most of yesterday’s pullback" as Fed expectations remain firmly embedded in futures pricing. They highlight that "Fed funds futures price in 67% odds of a 25bps hike on September 16 and imply 60bps of tightening over the next twelve months," adding that this elevated pricing is likely to persist into the September meeting, with "the August CPI on September 11 the decisive test."

In Tuesday’s session, investors will pay close attention to the US ISM Manufacturing PMI data for August and the US JOLS Job Openings data for July, which will be published at 14:00 GMT.

Analysts at BBH see the headline reading "at 55.2 vs. 55.6 in July consistent with resilient manufacturing activity." More importantly for the policy outlook, the "Prices Paid index is seen falling to a six-month low at 70.8 vs. 71.1 in July signaling diminishing upside inflation risk."

On the labor side, BBH flags the "July Job Openings and Labor Turnover Survey (JOLTS) "is expected to reinforce the US labor market’s low hire, low fire backdrop."

According to the FXS Economic Calendar, US employers are expected to have posted 7.3 million fresh jobs, slightly lower than 7.359 million in June.

“Together, these data points are seen as key inputs for the Fed and potential drivers of further Dollar moves into the September decision,” BBH added.

On the New Zealand Dollar front, investors await the Reserve Bank of New Zealand’s (RBNZ) monetary policy decision on Wednesday.

RBNZ hike seen as fully priced, focus shifts to hawkish tone and projections

Analysts at ING expect the Reserve Bank of New Zealand to deliver a “25bp” rate increase “to 2.75%” at tomorrow’s meeting, noting that “consensus is unanimous and markets are fully pricing in the move.” With the hike largely anticipated, ING argues that the reaction in the New Zealand Dollar will hinge on the policy communication, stressing that “the impact on the New Zealand dollar will be highly dependent on whether the statement will still include firmly hawkish guidance, and on updated rate/economic projections.”

NZD/USD Technical Analysis

In the daily chart, NZD/USD trades at 0.5894, maintaining a mildly bearish near-term bias as it holds just beneath the 20-day Exponential Moving Average (EMA) at 0.5907, which acts as immediate overhead resistance. The Relative Strength Index (RSI) at 50 suggests neutral momentum after the recent pullback, hinting that directional conviction is currently driven more by the pair’s position under the short-term trend barrier than by momentum signals.

On the topside, initial resistance is defined by the 20-day EMA at 0.5907; a daily close above this level would ease downside pressure and open the path for a more sustained recovery. With no clear nearby structural supports derived from the provided data, traders may look to prior lows on the chart as potential demand zones, while the current configuration leaves NZD/USD vulnerable to further slippage as long as it remains capped below the short-term EMA.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• EUR/GBP erases back to the 0.8560 area but remains within the previous day's range.
• Eurozone HICP grew at a steady pace in August, but core inflation eased unexpectedly.
• In the UK, all eyes are on BoE Bailey's speech on Friday for confirmation of a rate hike in September.

The Euro (EUR) heads south against the British Pound (GBP) on Tuesday, weighed by somewhat softer inflationary pressures on the Eurozone and downbeat German Retail Sales figures. The EUR/GBP pair has pulled back to 0.8560 from session highs around 0.8575 but remains trapped within the last two days’ range, supported above 0.8555.

Data released by Eurostat earlier on Tuesday revealed that the preliminary Eurozone’s Harmonized Index of Consumer Prices (HICP) grew at a steady 3.3% year-on-year (Y-o-Y) pace in August, unchanged from July and in line with market expectations. Core inflation, however, slowed down to 2.4% Y-o-Y against expectations of a steady 2.5% reading.

Before that, the Eurozone HCOB Manufacturing PMI was revised down to a 52.7 reading in August, from previous estimations of 52.7, and German Retail Sales contracted 3.4% in July, their sharpest decline in more than four years, and a significant disappointment, as investors had anticipated a 0.4% increase.

In the UK, the calendar is thin on Tuesday, and the focus is on the Bank of England’s (BoE) Governor Andrew Bailey’s speech on Friday, looking for confirmation of the market’s expectations that the bank will hike interest rates at its monetary policy meeting on September 16.

Technical Analysis: Rangebound trading continues

EUR/GBP trades at 0.8562, holding a mildly capped tone, yet with momentum indicators entering bearish territory, as the 4-hour Relative Strength Index (14) dips below 50 while the Moving Average Convergence Divergence (MACD) indicator flatlines around the zero line,

Bears are likely to be tested at the area between 0.8555 and 0.8545 (August 25, 28 and 31 lows), although the key support level is the August 12 low, at 0.8531. A break below here will confirm a multiple top between 0.8575 and 0.8585 and shift the focus towards the July 20 and 21 lows at 0.8485 and 0.8490, respectively.

On the topside, last week's highs at 0.8578, and the late July highs around 0.8585 need to be broken to confirm a bullish extension, targeting late June lows just above 0.8600.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• WTI gains 1.76% on Tuesday, supported by renewed hostilities between the United States and Iran.
• Risks surrounding the Strait of Hormuz and Iranian oil infrastructure fuel concerns over potential supply disruptions.
• Strikes on Russian refineries add to tensions across global energy markets.

West Texas Intermediate (WTI) US Oil extends its rebound for a second consecutive day on Tuesday, gaining 1.76% on the day to trade around $86.95 at the time of writing. The Crude Oil benefits from a renewed geopolitical risk premium as fresh hostilities between the United States (US) and Iran raise concerns over global supply.

US forces struck two Iranian rocket launchers on Larak Island in the Strait of Hormuz on Sunday, marking the first US attack since late July. Tehran responded by targeting US facilities in Jordan, while US President Donald Trump warned that further military action remains possible and threatened to hit Iran hard.

Oil market concerns are also fueled by threats against Kharg Island, which plays a central role in Iranian Oil exports. Any disruption to these facilities could affect volumes available to the global market, keeping the risk premium elevated for WTI.

The situation in the Strait of Hormuz also remains in focus. Operational risks along this strategic shipping route were highlighted after a supertanker caught fire following a collision with two naval mines. Oil flows through the strait have not come to a complete halt, however, as several major Gulf producers, including Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, continue to ship part of their volumes.

Meanwhile, Ukrainian drone and missile attacks on Russian refineries are adding to concerns over refined-product supplies. Reduced Russian refining capacity, combined with risks to Middle Eastern supply, is supporting refining margins and intensifying concerns over the global availability of fuels.

Against this backdrop, developments in the conflict between the United States and Iran, along with the security of the Strait of Hormuz, remain the main short-term drivers for WTI. Any further escalation threatening Iranian oil infrastructure or causing additional disruption to maritime traffic could keep upward pressure on Crude Oil prices.

Middle East tensions drive yields higher as US signals limited response

Analysts at Deutsche Bank highlight that the latest move higher in yields has been driven primarily by “the weekend escalation in the Middle East that saw the US and Iran exchange strikes for the first time since late July.” They note that the political backdrop remains tense, with President Trump indicating that the US “would respond to Iran’s latest attacks against US facilities in the region,” even as he attempted to temper perceptions of a broader conflict by stressing that strikes against Iran will be limited and that “this is a relatively little war for us”.

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann highlight that EUR/USD has bounced strongly from 1.1573 after an excessive selloff, but momentum remains subdued. Intraday, the Euro (EUR) is expected to hold within 1.1595–1.1640. On a 1–3 week horizon, downside risks persist toward 1.1550, though oversold conditions suggest this major support may not be tested immediately. Longer-term targets remain at 1.1800 and 1.1850.

Euro recovery faces limited upside

"24-HOUR VIEW: EUR plummeted to a low of 1.1577 last Friday. When EUR was at 1.1585 yesterday, we highlighted that “the sharp decline appears excessive, but with no signs of stabilisation yet, EUR could decline further.” We pointed out that “the major support at 1.1550 is likely out of reach,” and we noted that “there is another support level at 1.1570.” However, instead of declining further, EUR rebounded strongly from 1.1573 to 1.1620. While EUR could continue to rebound today, given that there has been no clear increase in momentum, EUR should remain within a 1.1595/1.1640 range."

"1-3 WEEKS VIEW: Last Friday (28 Aug, spot at 1.1650), we indicated that EUR “appears to have entered a range-trading phase between 1.1600 and 1.1685.” After EUR subsequently fell below 1.1600, we highlighted yesterday (31 Aug, spot at 1.1585) that “the rapid increase in downward momentum suggests EUR could decline further.” We also highlighted that “oversold short-term conditions suggest the major support at 1.1550 may not come into view so soon.” While downward momentum has slowed somewhat with the subsequent strong rebound, only a breach of 1.1650 (no change in ‘strong resistance’ level) would indicate that 1.1550 is not coming into view."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

MUFG’s Derek Halpenny notes the US Dollar has gained modestly after Fed Chair Warsh’s Jackson Hole speech, with US Dollar Index (DXY) up around 0.3% since Friday’s open and 2‑year Treasury yields sharply higher. Warsh’s emphasis on inflation not falling at sufficient speed shifts risks toward a hike, but the FOMC’s recent caution and upcoming NFP and CPI data could still justify holding rates, limiting aggressive Dollar buying.

Fed rhetoric and data-dependent risks

"The US dollar advanced 0.5% on Friday (DXY basis) in response to the speech by Fed Chair Warsh at Jackson Hole but some of that move retraced yesterday and the dollar’s gain since Friday’s open is now a more modest 0.3% with front-end yields across G10 also rising, in part on a renewed increase in energy prices following the renewed escalation in hostilities between the US and Iran."

"The more modest US dollar reaction makes sense from a number of perspectives. Firstly, as laid out below, every G10 central bank is meeting this month and some will be hiking, some may surprise and hike and some will remain on hold. But if energy prices remain elevated and/or grind higher the tone of rhetoric from most central bankers is likely to be hawkish and this could well be curtailing the appetite to buy the US dollar at this stage"

"Secondly, while Fed Chair Warsh was hawkish on Friday in Jackson Hole the gist of his speech was similar to his previous speeches – he talked tough on inflation and was clear that if inflation did not decline at “sufficient speed” that the Fed had “work to do”."

"But Warsh and the FOMC haven’t hiked at the previous two meetings under the leadership of Warsh and it remains the case that the Board of Governors have a more dovish tendency than the regional Presidents."

"So the decision remains a close call ahead of NFP and CPI and hence with front-end yields moving higher globally and with an elevated degree of uncertainty given the busy month of central bank meetings, the dollar buying has been curtailed."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Commerzbank’s Michael Pfister highlights that Brazil’s very high real interest rates have not prevented solid GDP growth, as expansionary fiscal policy has offset restrictive monetary conditions. With elections approaching and spending rising again, he warns that budget consolidation may be slow. Pfister argues that upcoming fiscal data, rather than monetary policy, will be key for the Brazilian Real in coming weeks.

Fiscal policy overshadowing monetary stance

"A remarkable phenomenon has been observed in Brazil for several quarters now. The key rate stands at 14%, while inflation has recently fallen to just under 4.5%. This is likely to correspond to one of the highest real interest rates worldwide."

"Higher levels of spending are reflected in improvements in most leading indicators of economic growth. In other words, the government has started spending more again, thereby offsetting some of the impact of restrictive monetary policy. A significant part of this development is likely to be linked to the approaching election at the beginning of October: the government has approved a large number of new spending measures in recent months."

"Market participants should be aware that it will take some time for the budget to return to balance. If growth proves to be stronger than expected, this would suggest that fiscal policy is overshadowing monetary tightening."

"Today’s GDP figures are thus less decisive for the real economy than the fiscal data due in the coming weeks. Above all, the outcome will depend on whether the government consolidates the budget after the election next month or continues to spend. In the short term, monetary policy is likely to play a rather secondary role for the real, as long as it primarily reacts to fiscal policy. We therefore continue to expect that the coming weeks will be more challenging for the real."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Silver prices (XAG/USD) fell on Tuesday, according to FXStreet data. Silver trades at $64.76 per troy ounce, down 2.69% from the $66.55 it cost on Monday.

Silver prices have decreased by 8.90% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 67.55 on Tuesday, up from 66.84 on Monday.

(An automation tool was used in creating this post.)