Forex News
- WTI declines as traders weigh potential progress toward a US-Iran peace agreement.
- US-Iran peace optimism decreased after US airstrikes and Iranian claims of targeting an American F-35 and several drones.
- US Secretary Rubio stated that a final US-Iran deal faces days of delays over frozen assets and maritime guarantees.
West Texas Intermediate (WTI) oil price depreciates nearly 4% after registering over 3% gains in the previous day, trading around $88.90 per barrel during the European hours on Wednesday. Crude oil prices decline as traders weigh potential progress toward a US-Iran peace agreement.
However, optimism for a US-Iran deal eroded following American "self-defense" airstrikes in southern Iran. In response, Iran's Revolutionary Guard claimed to have targeted a US F-35 fighter jet and several drones for allegedly violating its airspace. The Iranian foreign ministry strongly condemned the early Tuesday morning strikes in Hormozgan province, calling them a "gross violation" of a fragile, seven-week-old ceasefire. This escalation threatens ongoing talks aimed at reopening the Strait of Hormuz, a vital global energy conduit, which had shown progress following an April truce.
Saudi Arabia, Qatar, and the United Arab Emirates are actively pressing US President Donald Trump to prioritize diplomacy. These neighboring states fear that further military escalation could push Iran to launch retaliatory strikes across the wider region.
US Secretary of State Marco Rubio noted that a final agreement could still take several days to conclude. Key friction points remain, notably the release of Tehran's frozen assets and Iran's reluctance to guarantee unrestricted maritime passage through the strategic Strait of Hormuz.
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.
- AUD/USD comes under heavy selling pressure in reaction to softer Australian inflation figures.
- This, along with the dismal Aussie jobs report, tempers RBA rate hike bets and weighs on the AUD.
- Geopolitical risks and hawkish Fed bets favor the USD bulls, backing the case for further losses.
The AUD/USD pair attracts fresh selling following an intraday uptick to the 0.7180 supply zone on Wednesday and continues losing ground through the first half of the European session. The downward trajectory drags spot prices to a fresh weekly low, around the 0.7135 region in the last hour, and seems rather unaffected by a mildly softer US Dollar (USD).
Investors remain hopeful about tentative progress in US-Iran diplomatic talks, easing fears of severe energy supply disruptions and leading to a modest downtick in Crude Oil prices. The resultant fall in US Treasury bond yields undermine the USD, though the AUD/USD pair struggles to lure buyers amid reduced bets for further interest rate hikes by the Reserve Bank of Australia (RBA).
The Australian Bureau of Statistics (ABS) reported that the headline Consumer Price Index (CPI) slowed from the 4.6% YoY rate in March to 4.2% in April. Moreover, an unexpected rise in Australian Unemployment Rate to 4.5% in April and a fall in the number of employed people dampen hawkish RBA expectations. In fact, traders are now pricing in only around a 10% chance of a June rate hike.
Moreover, market expectations are largely shifting toward a potential rate hold or a single 25-basis-point (bps) hike later in the year, which, in turn, weighs heavily on the Australian Dollar (AUD). Meanwhile, the US and Iran remain at odds over Tehran's nuclear program and the Strait of Hormuz. Furthermore, renewed US attacks on Iran tempered hopes for a deal to end a three-month-old war.
This keeps geopolitical risk premium in play, which, along with bets for at least one 25 bps rate hike by the US Federal Reserve (Fed) in 2026, favors the USD bulls and suggests that the path of least resistance for the AUD/USD pair is to the downside. Hence, some follow-through downfall towards retesting the monthly swing low, levels below the 0.7100 mark, looks like a distinct possibility.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
Commerzbank analyst Norman Liebke notes that Gold and Silver have dropped as renewed US strikes in the Gulf reinforced the inverse link with Oil. Higher energy prices raise inflation and rate fears, weighing on non-yielding metals. However, he expects de-escalation to support both Gold and Silver, with prices projected to recover by the end of the year.
Inverse oil link and de-escalation upside
"The price of gold fell by nearly 2% following the latest US military strikes in the Persian Gulf. Silver followed this trend almost exactly. As has been the case in recent weeks, the inverse relationship between the price of gold (or silver) and the price of oil continues to hold (at least roughly)."
"If there are new risks of escalation in the Iran conflict, the gold price tends to fall, as higher energy prices increase the risk of higher inflation and, consequently, rising interest rates. Since gold does not pay interest, the yellow metal becomes less attractive. On the other hand, any de-escalation generally has a positive effect on the gold price, which is why we expect the gold price to rise again by the end of the year."
"At the same time, the price of silver moves almost in parallel with the price of gold; the gold-to-silver ratio has remained between 60 and 65 since the end of January — when the risk of escalation increased significantly — and has barely moved at all in the last two weeks."
"We also expect corresponding upside potential for the price of silver in the event of de-escalation. However: Even if the war were to end immediately, it would likely take some time for the situation to normalize."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Dow Jones futures gain as easing safe-haven demand reflected optimism that the US and Iran could still reach an agreement.
- US-Iran peace optimism faded after US airstrikes and Iranian claims of targeting an American F-35 and several drones.
- Ongoing tech strength drove the S&P 500 and Nasdaq 100 to historic closes on Tuesday.
US stock futures ticked higher during European trading on Wednesday ahead of the Wall Street opening bell. Dow Jones futures climb 0.24% to clear 50,650, while S&P 500 futures rise 0.15% toward 7,550. Meanwhile, Nasdaq 100 futures gain 0.23%, trading near 30,150.
US future indices advance on fading safe-haven demand as traders remain hopeful that the United States (US) and Iran could still secure an agreement despite renewed tensions in the Middle East.
However, US-Iran optimism eroded following US military "self-defense" airstrikes in southern Iran. In response, Iran’s Revolutionary Guard claimed to have targeted an American F-35 fighter jet and several drones for allegedly violating Iranian airspace. Iran's foreign ministry strongly condemned the strikes in the southern Hormozgan province, branding them a "gross violation" of a fragile, seven-week-old ceasefire. The diplomatic fallout follows state media reports of heavy explosions echoing through the region early Tuesday morning.
In Tuesday's regular US session, the Dow Jones dipped 0.23%, while the S&P 500 and Nasdaq 100 gained 0.61% and 1.19%, respectively. Driven by sustained momentum in tech stocks, both the S&P 500 and Nasdaq 100 closed at new all-time highs.
Traders are highly focused on upcoming commentary from Fed Vice Chair Philip Jefferson and Governor Lisa Cook for clues on how sticky inflation might shape interest rates. Additionally, traders are awaiting Thursday's release of the April US Personal Consumption Expenditures (PCE) data for definitive policy cues.
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.
- USD/CHF stalls below 0.7860 after bouncing from 0.7810 lows earlier this week
- Concerns about resuming hostilities in Iran are weighing on risk appetite.
- Oil prices remain below the key $100 level, providing some support to the Swissie.
The US Dollar (USD) is trading flat against the Swiss Franc (CHF) on Wednesday, as the rebound from Tuesday's weekly lows near 0.7810 has been halted below a previous support level in the area of 0.7860. Markets are struggling to find direction in the absence of key macroeconomic data and with news from the Middle East offering contrasting views.
Risk appetite remains subdued after US attacks on southern Iran earlier in the week, which, according to Tehran, have violated the ceasefire. Investors, however, remain hopeful of a negotiated end of the war, which is keeping US Dollar rallies limited so far, and Oil prices about 10% below last week’s highs.
Technical Analysis: The near-term trend remains positive
The USD/CHF found support at the broken trendline of a descending wedge pattern on Monday and bounced up, keeping the immediate bullish structure in place. Momentum indicators, however, are hinting at a lack of clear bias. The 4-hour Relative Strength Index (RSI) is wavering around the 50 midline, and the Moving Average Convergence Divergence (MACD) has inched into positive territory, yet showing a tentative attempt to base out rather than a confirmed bullish reversal.
Bulls should breach the mentioned resistance area around 0.7860 (May 20, 21 lows) and a key resistance area between 0.7905 and 0.7925, which held gains several times in April and May, to confirm a trend shift and set sail to the April peaks above 0.8000.
On the contrary, a bearish reaction below the mentioned trendline, now at 0.7800, would put sellers back in charge, and expose the May 8 low, at 0.7762, ahead of the wedge bottom, now near 0.7700
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.12% | 0.00% | 0.10% | 0.09% | 0.42% | -0.68% | -0.05% | |
| EUR | 0.12% | 0.12% | 0.20% | 0.20% | 0.49% | -0.56% | 0.07% | |
| GBP | -0.01% | -0.12% | 0.04% | 0.08% | 0.39% | -0.66% | -0.04% | |
| JPY | -0.10% | -0.20% | -0.04% | 0.00% | 0.32% | -0.75% | -0.11% | |
| CAD | -0.09% | -0.20% | -0.08% | -0.01% | 0.31% | -0.73% | -0.11% | |
| AUD | -0.42% | -0.49% | -0.39% | -0.32% | -0.31% | -1.04% | -0.40% | |
| NZD | 0.68% | 0.56% | 0.66% | 0.75% | 0.73% | 1.04% | 0.63% | |
| CHF | 0.05% | -0.07% | 0.04% | 0.11% | 0.11% | 0.40% | -0.63% |
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).
- EUR/USD ticks higher to near 1.1640 despite the US-Iran deal uncertainty persists.
- Iran condemned defensive attacks by the US Central Command in southern Iran.
- Investors await the US-German inflation data.
The EUR/USD pair trades marginally higher to near 1.1640 during the European trading session on Wednesday. The major currency pair edges up as the Euro (EUR) trades broadly firm, even as uncertainty regarding the United States (US)-Iran deal continues to persist.
The US-Iran deal concerns have escalated as Tehran condemns so-called “defensive strikes” from the US Central Command. On Monday, the US Central Command launched strikes on Iran, which were described as "self-defense" and aimed at “protecting our troops from threats posed by Iranian forces".
Meanwhile, the US Dollar (USD) trades marginally lower during the European trade, with the US Dollar Index (DXY) trading 0.1% lower at around 99.05.
Going forward, investors will focus on the US-German inflation data, which will be released on Thursday and Friday, respectively.
The US core PCE inflation – which is the Federal Reserve’s (Fed) preferred inflation gauge – is estimated to have grown at an annualized pace of 3.3%, faster than 3.2% in March, with monthly figures growing steadily by 0.3%.
In Germany, preliminary Harmonized Index of Consumer Prices (HICP) data for May is expected to remain steady at 2.9% Year-on-Year (YoY).
EUR/USD technical analysis
EUR/USD trades higher at around 1.1645 as of writing. However, the near-term trend of the pair remains bearish as it remains capped by the 20-day Exponential Moving Average (EMA) at 1.1664.
The Relative Strength Index (RSI) at 46.7 sits below the 50 line, hinting at waning bullish momentum rather than outright oversold conditions.
On the downside, initial support is seen near the former upward support trend line region around 1.1602, where a break lower would likely expose deeper losses in the sessions ahead toward 1.1500. On the topside, a daily close above the 20-period EMA at 1.1664 is needed to ease immediate downside pressure and open the door to a more sustained recovery towards 1.1700.
(The technical analysis of this story was written with the help of an AI tool.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Societe Generale’s Kenneth Broux and colleagues note that the Reserve Bank of New Zealand (RBNZ) held rates at 2.25% but turned more hawkish, while Australia’s softer Consumer Price Index (CPI) and underwhelming jobs data have markets trimming Reserve Bank of Australia (RBA) hike expectations. They argue AUD/NZD has likely peaked, with narrowing RBA/RBNZ rate differentials pointing to a cheaper cross and a potential break below 1.2130 opening 1.20.
Cross seen destined to cheapen
"Elsewhere in G10, the RBNZ earlier today left the OCR unchanged at 2.25% but turned hawkish. With the RBA cycle nearly complete, the obvious question for FX is whether AUD/NZD has or is in the process of peaking."
"Governor Breman’s casting vote was instrumental in today’s hold after the MPC split 3-3. The statement signalled that the key rate will most likely need to increase sooner and by more than envisaged in February."
"It also laid out three different scenarios and assumptions for oil prices/demand in which the OCR could rise to (a) 4.3% - higher global oil prices and persistent price behaviour, (b) 3.6% - higher global oil prices and restrained pricing behaviour and (c) monetary policy remains accommodative with OCR on hold at 2.25% in near term due to weaker global and domestic demand. "
"The money markets are fully pricing a total of five rate hikes by in the next 12 months with next 25bp hike fully priced by September. In Australia, CPI slowed more than forecast to 4.2% yoy in April from 4.6% in March but core rose a tick to 3.4% yoy. This follows the underwhelming employment report last week and money markets are trimming odds of a fourth rate increase by December to 80%."
"AUD/NZD retreated from the 13-year high and the prospect of narrowing RBA/RBNZ rate differentials is a signal that the cross is destined to cheapen. A break below 1.2130 (50dma) opens 1.20."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Gold remains on the back foot as the USD continues to benefit from persistent geopolitical uncertainties.
- Inflation fears lift hawkish central bank expectations and further cap the upside for the non-yielding bullion.
- Traders look to the US PCE Price Index data and the preliminary US GDP on Thursday for a fresh impetus.
Gold (XAU/USD) attracts some sellers for the second consecutive day and drops to a one-week low, around the $4,575 region, during the first half of the European session on Wednesday. Persistent geopolitical uncertainties continue to support the safe-haven US Dollar (USD) and undermine demand for the commodity. Moreover, inflationary concerns have raised expectations for more hawkish central banks, including the US Federal Reserve (Fed), contributing to driving flows away from the yellow metal.
US forces launched self-defense strikes on southern Iran on Monday, targeting Iranian missile sites and boats attempting to place mines. Iran’s Foreign Ministry condemned the US attacks as a violation of a ceasefire that has been in place since early April. Adding to this, the Islamic Revolutionary Guard Corps (IRGC) said that Iran had the legitimate and definite right to retaliate against any US ceasefire violations. Furthermore, Iranian Supreme Leader Mojtaba Khamenei declared that regional countries would no longer act as protective zones for US military bases. This keeps geopolitical risk premium in play and underpins the Greenback's reserve currency status, weighing on the Gold price.
Meanwhile, the US-Iran standoff, along with the effective closure of the Strait of Hormuz and the US blockade of Iranian ports, might continue to support Crude Oil prices and fuel inflation fears. This, in turn, prompts major central banks to adopt a more hawkish stance, with the Reserve Bank of Australia (RBA) hiked interest rates in May, while the European Central Bank (ECB), the Bank of Japan (BoJ), and the Reserve Bank of New Zealand (RBNZ) are expected to raise interest rates by the end of this year. Adding to this, traders are now pricing in roughly a 50% chance of a rate increase by December. This offers additional support to the USD and contributes to capping the upside for the non-yielding Gold.
Moving ahead, there isn't any relevant market-moving economic data due for release from the US on Wednesday, leaving the USD at the mercy of comments from influential FOMC members and fresh developments surrounding the Middle East crisis. Traders, however, might refrain from placing aggressive bets and opt to wait for the release of the US Personal Consumption Expenditures (PCE) Price Index, along with the Preliminary (second estimate) US GDP report on Thursday. In the meantime, the aforementioned fundamental backdrop seems tilted firmly in favor of the XAU/USD bears, warranting some caution before positioning for any meaningful intraday recovery in the Gold price.
XAU/USD 4-hour chart
Gold bears seize control as breakdown below $4,500 pivotal support comes into play
From a technical perspective, the precious metal keeps a mildly bearish near-term tone following this week's failure near the $4,580 horizontal barrier. The said area now coincides with the 100-period Exponential Moving Average (EMA) on the 4-hour chart and should now act as a key pivotal point. A sustained recovery above this hurdle is needed to ease the current bearish structure and open the way for a more durable rebound.
Meanwhile, the Relative Strength Index (RSI) stays below the neutral band, near 41, and the Moving Average Convergence Divergence (MACD) sits in negative territory. Momentum indicators, in turn, suggest persistent downside pressure despite a lack of fresh momentum extremes. Nevertheless, a clean break below the monthly swing low, around the $4,450 area, would likely invite an extension of the current corrective phase.
(The technical analysis of this story was written with the help of an AI tool.)
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
Standard Chartered’s Bader Al Sarraf and Nicholas Chia note that the Reserve Bank of New Zealand kept the OCR at 2.25% in a split 3-3 decision, with the governor’s casting vote preventing a hike. The RBNZ now signals tightening this year as inflation forecasts rise, and Standard Chartered expects three 25bps hikes, lifting the OCR to 3.00% by end-2026. NZD reaction has been modest so far.
RBNZ pivot underpins NZD outlook
"The Reserve Bank of New Zealand (RBNZ) kept the official cash rate (OCR) unchanged at 2.25%, but this was not a neutral hold."
"More importantly, all members agreed that OCR increases are likely to be required this year."
"This marks a clear pivot away from the post-easing-cycle pause and towards a renewed tightening bias, in our view."
"We revise our OCR forecasts and now expect three consecutive 25bps hikes, taking the OCR to 3.00% by end-2026 (2.25% prior); we had previously expected the RBNZ to stay on hold through the year."
"We believe further upside will likely require either stronger conviction around the hiking cycle, firmer domestic data, or a broader improvement in global risk sentiment."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- NZD/USD regains positive traction on Wednesday in the wake of the RBNZ’s hawkish outlook.
- Geopolitical risks and Fed rate hike bets continue to underpin the USD, capping spot prices.
- The focus now shifts to the US PCE Price Index and the preliminary US GDP report on Thursday.
The NZD/USD pair catches aggressive bids in reaction to the Reserve Bank of New Zealand's (RBNZ) hawkish on-hold rate decision on Wednesday, reversing the previous day's losses to a nearly one-week low. Spot prices, however, struggle to build on the momentum and remain capped near the 0.5880 region through the first half of the European session.
As was widely expected, the RBNZ held the Official Cash Rate (OCR) at 2.25% for the third consecutive meeting in May. The central bank, however, struck a more hawkish tone in the accompanying policy statement and stated that the OCR will most likely need to increase sooner and by more than envisaged in the February monetary policy statement. This, in turn, provides a goodish intraday lift to the New Zealand Dollar (NZD).
Meanwhile, investors remain hopeful about tentative progress in US-Iran diplomatic talks, which eases fears of severe energy supply disruptions and leads to a modest downtick in Crude Oil prices. This offsets inflationary concerns and undermines the US Dollar (USD), lending additional support to the NZD/USD pair. However, the US-Iran standoff over key issues, including Tehran's nuclear program and the Strait of Hormuz, caps the optimism.
Furthermore, US attacks on Iran have dented hopes for a deal to end a three-month-old war and keep geopolitical risks in play. Adding to this, bets that the US Federal Reserve (Fed) will raise interest rates by the end of this year should limit USD losses and act as a headwind for the NZD/USD pair. This makes it prudent to wait for a move beyond the 200-period Simple Moving Average (SMA) on the 4-hour chart before positioning for further gains.
Moving ahead, there isn't any relevant market-moving US economic data due for release on Wednesday, leaving the USD at the mercy of fresh developments surrounding the Middle East crisis. Apart from this, the US Personal Consumption Expenditures (PCE) Price Index, along with the prelim US GDP on Thursday, would play a key role in influencing the USD price dynamics and provide some meaningful impetus to the NZD/USD pair.
New Zealand Dollar Price Today
The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.11% | 0.02% | 0.03% | 0.09% | 0.43% | -0.61% | -0.05% | |
| EUR | 0.11% | 0.14% | 0.15% | 0.19% | 0.50% | -0.49% | 0.06% | |
| GBP | -0.02% | -0.14% | 0.00% | 0.05% | 0.37% | -0.62% | -0.07% | |
| JPY | -0.03% | -0.15% | 0.00% | 0.06% | 0.38% | -0.62% | -0.06% | |
| CAD | -0.09% | -0.19% | -0.05% | -0.06% | 0.33% | -0.66% | -0.12% | |
| AUD | -0.43% | -0.50% | -0.37% | -0.38% | -0.33% | -0.98% | -0.41% | |
| NZD | 0.61% | 0.49% | 0.62% | 0.62% | 0.66% | 0.98% | 0.55% | |
| CHF | 0.05% | -0.06% | 0.07% | 0.06% | 0.12% | 0.41% | -0.55% |
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 New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).
Forex Market News
Our dedicated focus on forex news and insights empowers you to capitalise on investment opportunities in the dynamic FX market. The forex landscape is ever-evolving, characterised by continuous exchange rate fluctuations shaped by vast influential factors. From economic data releases to geopolitical developments, these events can sway market sentiment and drive substantial movements in currency valuations.
At Rakuten Securities Hong Kong, we prioritise delivering timely and accurate forex news updates sourced from reputable platforms like FXStreet. This ensures you stay informed about crucial market developments, enabling informed decision-making and proactive strategy adjustments. Whether you’re monitoring forex forecasts, analysing trading perspectives, or seeking to capitalise on emerging trends, our comprehensive approach equips you with the insights needed to navigate the FX market effectively.
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