Forex News
- Australian Dollar gains support from growing expectations of an RBA rate hike in March.
- RBA’s Hauser said oil price volatility and Middle East tensions pose a genuine challenge for central banks.
- The US Dollar may recover amid rising safe-haven demand.
AUD/USD extends its winning streak for the fourth successive session, trading around 0.7130 during the Asian hours on Wednesday. The pair advances as the Australian Dollar (AUD) gains support from growing expectations of a Reserve Bank of Australia (RBA) rate hike next week.
RBA Deputy Governor Andrew Hauser said on Tuesday that volatility in oil prices and tensions in the Middle East pose a genuine challenge for central banks. Hauser added that the policy response depends on the magnitude and persistence of the price shock, which remains highly uncertain. He also noted that the Australian economy is in relatively good shape, with recent data indicating the economy has limited spare capacity.
Australia’s headline inflation stands at 3.8% and may exceed 4% as petrol prices rise, while core inflation remains at 3.4%, above the RBA’s 2–3% target band.
The AUD/USD pair also advances as the US Dollar (USD) edges lower after posting modest gains in the previous session. The Greenback may regain its ground amid increased safe-haven demand, which could be attributed to mounting uncertainty over the Middle East conflict.
US President Donald Trump said late Monday that the conflict could end soon. However, US officials indicated on Tuesday that military operations were intensifying and that there were limited prospects for diplomatic negotiations, Reuters reported.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- GBP/USD regains positive traction following the overnight pullback from the 1.3500 neighborhood.
- A positive risk tone and easing inflationary concerns weigh on the USD, lending support to the pair.
- Persistent geopolitical uncertainties could limit deeper USD losses ahead of the key US CPI report.
The GBP/USD pair attracts fresh buyers during the Asian session on Wednesday and stalls the previous day's retracement slide from the 1.3485 region, or over a one-week high. Spot prices currently trade around the 1.3430 region, up 0.10% for the day.
Crude Oil prices retreated sharply following a massive rally early this week and eased inflationary concerns. This, along with a generally positive tone around the equity markets, weighs on the safe-haven US Dollar (USD), which, in turn, is seen as a key factor acting as a tailwind for the GBP/USD pair.
The British Pound (GBP), on the other hand, benefits from the repricing of the Bank of England (BoE) interest rate expectations. In fact, bets for three rate cuts by the BoE have now been replaced with a roughly 70% probability of a rate hike by year-end. This offers additional support to the GBP/USD pair.
However, a further escalation of geopolitical tensions in the Middle East and economic consequences of the closure of the Strait of Hormuz could underpin the USD's global reserve currency status. This might hold back traders from placing aggressive bullish bets around the GBP/USD pair and cap the upside.
Despite US President Donald Trump's remarks that the war could be over soon, the fighting showed no signs of slowing down. The Israel Defense Forces said that it had unleashed a new wave of strikes on Iran, and launched more missiles at Lebanon, targeting infrastructure that belongs to Iran-backed Hezbollah.
This might keep a lid on any optimism in the markets and help limit deeper USD losses. Traders might also opt to wait for the release of the latest US consumer inflation figures before placing fresh directional bets. Nevertheless, the broader fundamental backdrop seems tilted in favor of the GBP/USD bulls.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling 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, its currency will benefit 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.
On Wednesday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 6.8917 compared to the previous day's fix of 6.8982 and 6.8824 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
- EUR/USD gains ground to near 1.1620 in Wednesday’s early Asian session.
- Trump’s comments that the conflict would be over “very soon” support riskier currencies, such as the Euro.
- ECB’s Lagarde said the degree of uncertainty and volatility is very surprising and will take necessary steps to control inflation.
The EUR/USD pair holds positive ground around 1.1620 during the early Asian session on Wednesday. The Euro (EUR) rebounds from a four-month low of 1.1507 against the Greenback as safe-haven demand softens. The final reading of the Harmonized Index of Consumer Prices (HICP) from Germany and the US Consumer Price Index (CPI) data will be released later on Wednesday.
US President Donald Trump said on Tuesday that the conflict is “very complete, pretty much” and the military operation is “very far” ahead of its initial four- to five-week timeframe, per Bloomberg. His comments eased concerns about a prolonged war in the Middle East and improved market sentiment.
However, uncertainty remains as Trump gave no clear timeline for halting attacks that have rattled the Middle East and global markets. Meanwhile, the Israel Defense Forces said that it had unleashed a new wave of strikes on Iran and also launched more missiles at Lebanon. The Israeli military said it's targeting infrastructure that belongs to Iran-backed Hezbollah in the south of the Lebanese capital. Signs of the ongoing tensions in the Middle East could boost safe-haven demand for the US Dollar and create a headwind for the major pair.
The European Central Bank (ECB) President Christine Lagarde said late Tuesday that the degree of uncertainty and volatility is very surprising, making it hard to manage the situation. She further stated that the central bank will take the necessary measures to control inflation.
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.
- WTI declines as the International Energy Agency considers its largest-ever oil reserve release to stabilize markets.
- The Israel Defense Forces launched a new wave of strikes targeting Iran and Lebanon.
- Major Middle Eastern producers cut output by over 6 million bpd as the Strait of Hormuz remains effectively closed.
West Texas Intermediate (WTI) crude oil price gave up gains from the previous session, trading around $81.70 per barrel during the Asian hours on Wednesday. Oil prices fall after the Wall Street Journal reported the International Energy Agency (IEA) is considering its largest-ever oil reserve release to stabilize markets. The proposed drawdown would surpass the 182 million barrels released in 2022 following Russia’s invasion of Ukraine.
However, losses in oil prices may remain limited due to rising uncertainty surrounding the Iran conflict and shipping disruptions through the crucial Strait of Hormuz. Meanwhile, US Central Command reported that the US military had “eliminated” 16 Iranian mine-laying vessels near the Strait of Hormuz on Tuesday. The action followed warnings from United States (US) President Donald Trump that any mines placed in the Strait by Iran must be removed immediately.
The Israel Defense Forces reported launching a new wave of strikes on Iran after explosions were heard in Tehran. Israel also fired additional missiles toward Lebanon, where its military said it was targeting infrastructure linked to Iran-backed Hezbollah in southern Beirut.
President Trump said late Monday that the conflict could end soon. However, US officials indicated on Tuesday that military operations were intensifying, with limited prospects for diplomatic negotiations, Reuters reported.
Major Middle Eastern producers, including Saudi Arabia, the United Arab Emirates (UAE), Kuwait, and Iraq, have collectively reduced output by more than 6 million barrels per day (bpd) as the Strait of Hormuz remains effectively closed. In addition, the largest oil refinery in the UAE halted operations after being hit by a drone strike.
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.
Update: Qatar intercepts missile attack
The Ministry of Defense of the State of Qatar said that armed forces intercepted a missile attack that targeted the country, Reuters reported on Wednesday. The statement came as Iran continues to target its neighboring countries and US assets in the region amid the ongoing US and Israeli campaign against the Islamic regime in Tehran.
The Israel Defense Forces said that it had unleashed a new wave of strikes on Iran, shortly after a round of explosions was heard in Tehran.
Israel also launches more missiles at Lebanon, where the Israeli military says it's targeting infrastructure that belongs to Iran-backed Hezbollah in the south of the Lebanese capital.
The Financial Times reported late Tuesday that Israel rejected Lebanon’s request for cessation in fighting to allow for talks, demanding negotiations only take place “under fire.”
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 1.06% on the day at $83.85, retreating from over three-year highs of $113.28 reached earlier this week.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
The European Central Bank (ECB) President Christine Lagarde said late Tuesday that the degree of uncertainty and volatility is very surprising. Lagarde added that the central bank will take the necessary measures to control inflation.
Key quotes
We're in a very different situation from 2022.
We have a better capacity to absorb shocks.
The degree of uncertainty and volatility is very surprising.
The degree of volatility makes it hard to manage the situation.
We will take the necessary measures to control inflation.
I can't say precisely what we will decide on rates.
I won't allow Europe to feel the same inflation as 2022/2023.
We are not at all in a situation of stagflation.
Market reaction
At the time of writing, the EUR/USD pair is down 0.22% on the day at 1.1610.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger 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.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
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 European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
The US Central Command said in a statement that US forces eliminated multiple Iranian naval vessels, including 16 minelayers operating near the Strait of Hormuz, Reuters reported on Wednesday.
The announcement followed US President Donald Trump's claim that 10 "inactive" minelayers had been "completely destroyed."
US President Donald Trump stated on Tuesday that if mines were placed and they are not removed, Iran will face consequences “at a level never before seen.”
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 1.33% on the day at $83.73, retreating from over three-year highs of $113.28 reached earlier this week.
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.
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.
Stay ahead with our comprehensive forex news coverage, designed to keep you informed and prepared to seize profitable opportunities in the dynamic world of forex trading.
