Forex News
Danske Bank notes European equities were broadly flat on Monday, with the Stoxx 600 unchanged and OMX Nordic slightly higher, while Asian markets rallied in thin trading as US markets were closed for Labor Day. The bank highlights strong performance in technology, particularly semi-conductors and AI-linked hardware, while rising bond yields weighed on real estate and other rate-sensitive sectors.
Tech strength offsets rate headwinds
"European equities were little changed on Monday, while Asian markets rallied sharply, but in thin trading as US markets were closed for Labor Day."
"The Stoxx 600 finished flat and OMX Nordic gained 0.4%. Tech led performance, with semi-conductors and AI-linked hardware at the forefront, ignited by ChatGPT's launch of its new Astra model on Friday. "
"Astra is designed to handle more complex reasoning tasks, which also increases the need for compute power, memory capacity and GPU intensity. Astra challenges that narrative."
"The market reaction reflected this yesterday. Korean equities rallied 5% and another 2% this morning. European technology stocks also performed well, although gains elsewhere were constrained by another rise in bond yields."
"Real estate and other rate-sensitive sectors lagged. US equity futures are broadly unchanged this morning."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/GBP extends losses to 0.8580 as Eurozone data fails to impress.
- German trade surplus widened in July although exports contracted against expectations.
- British Pound bulls remain subdued, as the market digests Chancellor Healey's first speech.
The Euro (EUR) extends losses for the third consecutive day against the British Pound (GBP) on Tuesday, as German Trade Balance data added to evidence of the frail recovery of the Euro Area's leading economy. This leaves the EUR/GBP on its back foot, trading at 0.8580 after rejection at the 0.8600 area last week
German Trade Balance data from July beat expectations earlier on Tuesday, as the surplus widened to EUR 21.3 billion, well above the EUR 16 billion expected and the EUR 15.4 billion seen in June. Looking at the details, however, data from the Federal Statistics Office of Germany revealed that the surplus was due to a 5.7% decline in imports, which offset a 0.8% decline in exports.
German data reflects frail economic growth
These figures add to evidence of a softening German economic growth, highlighted on Monday by the negative surprise in the German Industrial Production report. Factory output dropped 1.1% in July, against expectations of a 0.3% increase, weighed by a sharp decline in the country’s automotive sector.
German data offset optimism from positive Eurozone Gross Domestic Product (GDP) data, which was revised up to 0.6% growth in the second quarter, up from the previously estimated 0.4%.
The pound, meanwhile, remains subdued as markets digest John Healey's first speech as UK Chancellor. Strategists at Brown Brothers Harriman note that Healey has pledged to build a solid fiscal “buffer against uncertainty” in the October 28 Budget. They argue this commitment “points to a mix of tax rises and spending cuts” as higher borrowing costs are estimated to have halved the government’s fiscal headroom to around “£12bn,” underscoring the scope for a tighter fiscal stance ahead.
Against this background, BBH assesses that “the UK’s negative output gap, a policy rate above the mid-point of the BoE’s 2% to 4% neutral range estimate and the prospect of tighter fiscal policy” are factors that “argue for a less aggressive hiking cycle,” leaving the Pound vulnerable to a dovish repricing if incoming data fail to justify the degree of tightening currently implied by rates markets.
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.
- USD/CHF holds steady around 0.8090 in Tuesday’s early European session.
- Traders see a 60.6% chance of rate hike at the Fed's policy meeting next week, according to CME FedWatch Tool.
- Iran threatened the US with new missiles.
The USD/CHF pair flatlines near 0.8090 during the early European trading hours on Tuesday. Traders brace for crucial US Producer Price Index (PPI) and Consumer Price Index (CPI) inflation data later this week.
The CME FedWatch tool showed probability hovering around 60.6% for another quarter-point Federal Reserve (Fed) rate hike, whereas the Swiss National Bank (SNB) is widely projected to leave its policy rate anchored at 0% well into next year.
Traders will take more cues from the upcoming US Producer Price Index (PPI) and Consumer Price Index (CPI) inflation data, which could shape expectations for the Fed’s next policy move. If the reports show hotter-than-expected outcomes, this could lift the US Dollar (USD) against the Swiss Franc (CHF).
On the geopolitical front, Iran threatened the US with "economic warfare" and said it had fired an advanced missile at American warships, underscoring the risks of further escalation only days after both sides traded blows again. Rising tensions in the Middle East could boost a safe-haven currency such as the CHF in the near term.
Franc support tempered as SNB seen on hold until 2027
Analysts at Brown Brothers Harriman note that, despite the recent upside surprise in Swiss inflation, the policy outlook remains remarkably benign. They highlight that “the swaps curve continues to fully price in a first 25bps hike to 0.25% in June 2027,” underscoring market confidence that the SNB can stay on hold for an extended period. In their view, “the SNB has plenty of room to keep rates at 0.00% for some time, given that inflation remains well within the bank’s price stability mandate of less than 2% per annum,” a backdrop that helps cap how far the Franc can benefit from the latest data surprise.
Technical Analysis: USD/CHF retains a bullish vibe above the 100-day SMA
In the daily chart, USD/CHF holds a modestly bullish near-term bias as it trades above the Bollinger middle band and stays well supported over the rising 100-day moving average. The Relative Strength Index (14) hovers just above the 50 line, hinting at steady, rather than aggressive, upside momentum while price grinds higher within the upper half of its Bollinger envelope.
On the topside, initial resistance is aligned with the Bollinger upper band near 0.8175, where recent gains could face supply if volatility picks up. On the downside, the Bollinger middle band at 0.8075 acts as immediate support, with the 100-day moving average at 0.8000 and the lower Bollinger band around 0.7980 reinforcing a broader demand zone that would need to give way to undermine the current constructive structure.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
- The Canadian Dollar capitalizes on surging oil prices.
- The US Dollar is under pressure ahead of the US PPI and CPI data for August.
- USD/CAD declines after failing to hold above the 61.8% Fibonacci retracement at 1.3817.
The Canadian Dollar (CAD) trades higher against the US Dollar (USD) on Tuesday. The USD/CAD pair is down 0.25% to near 1.3780 at the time of writing as the Loonie outperforms due to surging oil prices.
Canadian Dollar Price Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.03% | 0.02% | -0.40% | -0.21% | 0.08% | 0.29% | -0.09% | |
| EUR | 0.03% | 0.04% | -0.36% | -0.14% | 0.09% | 0.32% | -0.07% | |
| GBP | -0.02% | -0.04% | -0.42% | -0.22% | 0.05% | 0.28% | -0.10% | |
| JPY | 0.40% | 0.36% | 0.42% | 0.20% | 0.49% | 0.71% | 0.33% | |
| CAD | 0.21% | 0.14% | 0.22% | -0.20% | 0.28% | 0.51% | 0.13% | |
| AUD | -0.08% | -0.09% | -0.05% | -0.49% | -0.28% | 0.24% | -0.16% | |
| NZD | -0.29% | -0.32% | -0.28% | -0.71% | -0.51% | -0.24% | -0.39% | |
| CHF | 0.09% | 0.07% | 0.10% | -0.33% | -0.13% | 0.16% | 0.39% |
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 Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
Also as of writing, the WTI Oil price is up around 0.8% to near $91.50. The oil price is close to its over a month high of $92.25, a level that was previously touched also in June 8.
Oil prices have rallied further amid fears of a prolonged energy supply disruption in the wake of the Strait of Hormuz closure.
Higher energy prices bode well for currencies from economies such as Canada, which are net energy exporters.
Meanwhile, the US Dollar is under pressure as investors turn cautious ahead of the United States (US) Producer Price Index (PPI) and the Consumer Price Index (CPI) data for August, which are scheduled for release on Thursday and Friday, respectively.
At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.11% lower to near 98.80.
USD/CAD Technical Analysis
On the daily chart, USD/CAD trades at 1.3783, keeping a bearish near-term tone as it holds beneath the 20-day Exponential Moving Average (EMA) at 1.3865 and the 61.8% Fibonacci retracement at 1.3817, which is plotted from the May low of 1.3550 to the June high at 1.4248.
The Relative Strength Index (RSI) at about 39 remains below the midline, hinting at persistent downside pressure rather than an oversold extreme, which suggests rallies may continue to be sold while price stays capped under the nearby EMA and retracement barriers.
On the topside, immediate resistance is seen at the 20-day EMA around 1.3865, followed by the 50.0% Fibonacci retracement at 1.3901 and then the 38.2% retracement near 1.3983, with the 23.6% level at 1.4085 acting as a more distant cap if a stronger rebound unfolds. On the downside, initial support emerges at the 78.6% Fibonacci retracement around 1.3701, with a deeper floor located at the 100.0% retracement near 1.3551, where bears would likely reassess the strength of the broader decline.
(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.
OCBC’s Christopher Wong notes EUR/USD is holding near 1.16 as a softer US Dollar (USD) and firmer Euro-area data offset higher Oil prices. Strong expectations for a 25bp European Central Bank (ECB) hike and improving Euro-area sentiment are seen limiting Euro downside in the near term, though elevated Oil and political uncertainty in Germany keep risks two-sided ahead of the ECB meeting and US Consumer Price Index (CPI).
Euro steadies as ECB looms
"EUR/USD held up around the 1.16 handle overnight despite the continued rise in oil prices. A softer USD backdrop and firmer euro-area sentiment data offered some support, while markets remain heavily positioned for a 25bp ECB hike this Thursday."
"Higher energy prices have also complicated the outlook for the ECB’s tightening cycle, with inflation risks becoming less comfortable against a backdrop of only moderate growth. Political uncertainty has edged higher following the AfD’s strong result in Saxony-Anhalt, although the broader implications for federal politics appear contained for now."
"Firm ECB tightening expectations, together with signs of improving euroarea activity, should help limit EUR downside in the near term, although we remain cautious about chasing the pair higher."
"EUR last at 1.1620 levels. Mild bearish momentum on daily chart intact while RSI is flat. 2-way risks likely to persist. Support at 1.1560 (100 DMA), 1.1510 (50 DMA). Resistance at 1.1630 (200 DMA), 1.1710 levels."
"Elevated oil prices remain a two-way risk for the euro, reinforcing inflation and ECB tightening risks while at the same time weighing on the region’s terms of trade and growth outlook. Focus now turns to the ECB meeting and US CPI later this week for the next directional catalyst."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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