Forex News
- EUR/USD edges higher to around 1.1385 in Friday’s early European session.
- ECB holds rates steady and keeps the door open to more tightening, supporting the Euro.
- The US military launched another night of strikes against Iranian targets.
The EUR/USD pair gathers strength to near 1.1385 during the early European trading hours on Friday, bolstered by the prospect of imminent European Central Bank (ECB) rate hikes. The preliminary readings of the Purchasing Managers Index (PMI) for July from the Eurozone, Germany and the US will be the highlights later on Friday.
As widely expected, the ECB decided to keep the key interest rates unchanged at its July policy meeting on Thursday but held the door open to another rate hike in September, as a surge in energy prices threatened to keep inflation well above its 2% target.
ECB President Christine Lagarde said during a press conference that the central bank anticipates inflation to remain “well above target” until the first half of 2027. Officials remain on high alert for a "second-round inflation shock" triggered by the US-Iran conflict, with markets broadly betting that rate hikes will resume later this year.
Hawkish ECB expectations could provide some support to the Euro (EUR) against the US Dollar (USD) in the near term. Markets are now pricing in around 95% odds of a 25-basis-point ECB rate hike in September and a similar chance of a further move by December, according to Reuters.
The US military carried out a 13th consecutive night of strikes on Iran, targeting drone facilities, coastal surveillance sites and more. US President Donald Trump said on Thursday that the US would hold Iran responsible for the Houthis’ actions and warned Iran and its Houthi allies would both soon receive a “major military punishment,” per the Guardian. Escalating tensions in the Middle East could boost a safe-haven currency such as the Greenback and create a headwind for the major pair.
Eurozone short-end leads as markets price in more hawkish ECB and Fed paths
Analysts at MUFG observe that “in response to rising energy prices, market participants have been moving to price in more hawkish expectations for major central banks including the ECB and Fed resulting in short-term yields rising to fresh year-to-date highs.” They note that “the euro-zone rate market is now pricing in two to three further ECB rate hikes in the year ahead while the US rate market is pricing in around two Fed hikes over the same period.” MUFG adds that “short-term yields have risen more recently in Europe than in the US resulting in yield spreads moving against the USD,” underscoring how the recent repricing has been more pronounced on the Eurozone side of the curve.
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.
- USD/CHF rises as the US Dollar trimmed losses, boosted by safe-haven demand from Middle East conflicts.
- CME FedWatch tool shows a 35.8% chance of a July Fed hike and an 82.1% probability for September.
- The Swiss Franc may gain support as Switzerland’s 10-year bond yield hits 0.52% amid Middle East conflict and energy costs.
USD/CHF continues its winning streak for the fifth successive day, trading around 0.8170 during the Asian hours on Friday. The pair appreciates as the US Dollar (USD) pares its daily losses amid rising safe-haven demand due to escalating conflicts in the Middle East.
US-Iran conflict pushes crude oil prices higher. An oil-driven inflation spike has fueled expectations that the US Federal Reserve (Fed) might resume raising interest rates. According to the CME FedWatch tool, money markets are currently pricing in roughly a 35.8% chance of a Fed rate hike this month, alongside an 82.1% probability of at least a quarter-point hike in September.
Yemen’s Iran-backed Houthi militant group attacked two Saudi oil tankers in the Red Sea for allegedly violating a blockade. In response, the US conducted its 13th consecutive night of military strikes on Iran. Tensions escalated further after US President Donald Trump warned of "major military punishment" for both the Houthis and Iran if attacks continue, stating he is close to deciding on a massive, unprecedented military operation against Iran.
The Swiss Franc (CHF) could receive support as Switzerland’s 10-year government bond yield rose near a two-month high of roughly 0.52% amid escalating Middle East tensions and rising energy costs.
The sharp increase in Swiss bond yields signals growing investor anxiety over inflation and future monetary policy. However, expected foreign exchange interventions by the Swiss National Bank (SNB), specifically selling CHF, are likely to cap any sudden currency surges.
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.
- NZD/USD gains some positive traction as the USD pauses the recent rally to a one-month high.
- Energy-driven inflation fears bolster Fed hike bets and favor USD bullish amid US-Iran tensions.
- Traders look to flash US PMIs for some impetus as the focus remains on the FOMC next week.
The NZD/USD pair attracts some buyers during the Asian session on Friday and moves away from a one-and-a-half-week trough, around the 0.5760 region touched the previous day. Spot prices, however, lack follow-through and remain below the 0.5800 mark amid the underlying bullish tone surrounding the US Dollar (USD).
In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, sits near its highest level on June 26 on the back of escalating US-Iran tensions and hawkish US Federal Reserve (Fed) expectations. The US military announced that it has completed another round of strikes against Iran on Thursday, marking the 13th straight night of operations. Meanwhile, Iran and its allies are launching retaliatory strikes against US-linked military assets in Kuwait, Bahrain and Jordan.
Adding to this, Iran-aligned Houthi forces struck two Saudi oil tankers in the Red Sea, describing the action as part of a naval blockade against Saudi Arabia. This comes on top of the closure of the Strait of Hormuz, exacerbating supply disruption concerns and lifting crude oil prices to a fresh high since June 11. This fuels inflationary worries and bolsters bets that the US central bank will raise borrowing costs by the end of this year, which supports the USD and caps gains for the NZD/USD pair.
Meanwhile, US President Donald Trump imposed sweeping new tariffs ranging from 10% to 12.5% on 60 of the country's key trading partners, covering 99.4% of US imports, threatening to reignite a global trade war. This further tempers investors' appetite for riskier assets, supporting the safe-haven buck. Traders, however, seem hesitant to place aggressive bullish bets on the USD and opt to move to the sidelines as the market focus now shifts to the highly-anticipated FOMC policy meeting next week.
In the meantime, stronger-than-expected inflation data from New Zealand reaffirmed expectations that the Reserve Bank of New Zealand (RBNZ) will deliver another rate hike at its September meeting. This is seen lending some support to the New Zealand Dollar (NZD) and the NZD/USD pair as traders now look to the flash US PMIs for some impetus. Nevertheless, spot prices seem poised to register heavy losses for the first time in four weeks and remain at the mercy of the USD price dynamics.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.07% | 0.03% | -0.02% | -0.03% | -0.06% | -0.07% | 0.06% | |
| EUR | 0.07% | 0.05% | 0.00% | -0.01% | -0.05% | -0.07% | 0.07% | |
| GBP | -0.03% | -0.05% | -0.04% | -0.07% | -0.09% | -0.10% | 0.01% | |
| JPY | 0.02% | 0.00% | 0.04% | -0.00% | -0.05% | -0.05% | 0.06% | |
| CAD | 0.03% | 0.01% | 0.07% | 0.00% | -0.05% | -0.06% | 0.07% | |
| AUD | 0.06% | 0.05% | 0.09% | 0.05% | 0.05% | -0.00% | 0.10% | |
| NZD | 0.07% | 0.07% | 0.10% | 0.05% | 0.06% | 0.00% | 0.11% | |
| CHF | -0.06% | -0.07% | -0.01% | -0.06% | -0.07% | -0.10% | -0.11% |
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).
Gold prices fell in India on Friday, according to data compiled by FXStreet.
The price for Gold stood at 12,504.78 Indian Rupees (INR) per gram, down compared with the INR 12,566.10 it cost on Thursday.
The price for Gold decreased to INR 145,853.30 per tola from INR 146,568.50 per tola a day earlier.
Unit measure | Gold Price in INR |
|---|---|
1 Gram | 12,504.78 |
10 Grams | 125,047.80 |
Tola | 145,853.30 |
Troy Ounce | 388,942.40 |
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
(An automation tool was used in creating this post.)
- AUD/JPY gains ground to near 114.25 in Friday’s early European session.
- The cross keeps a positive outlook above the 100-day SMA, with bullish RSI momentum on the daily chart.
- The immediate resistance level to watch is 114.70; the first downside target emerges at 113.55.
The AUD/JPY cross trades in positive territory around 114.25 during the early European trading hours on Friday. The Australian Dollar (AUD) strengthens against the Japanese Yen (JPY) on a strong Australian employment report for June.
Australia’s Unemployment Rate stayed at 4.4% in June, according to the official data released by the Australian Bureau of Statistics (ABS) on Thursday. The figure came in line with the market consensus. Meanwhile, the Employment Change came in at 76.3K in June from a rise of 44K in May (revised from 40.3K), better than the forecast of a 15K increase.
Nonetheless, fears of currency intervention from Japanese authorities could lift the JPY and cap the upside for the cross. Japan’s Finance Minister Satsuki Katayama said on Friday that officials are ready to act appropriately on currency shifts whenever necessary. Katayama added that the authorities are prepared to take decisive steps on the foreign exchange.
Technical Analysis:
In the daily chart, AUD/JPY retains a bullish bias as price holds firmly above the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-day SMA, keeping the broader uptrend intact. The Relative Strength Index (RSI) at 63 suggests firm positive momentum, edging toward overbought territory and hinting that upside progress could slow as buyers confront nearby resistance.
On the topside, immediate resistance is aligned with the Bollinger upper band around 114.70. A decisive break above the latter would open the way to the June 2 high of 114.92.
On the downside, initial support is seen at the June 16 high of 113.55. The next contention level is located at the Bollinger middle band at 112.95, followed closely by the 100-day SMA at 112.85; a sustained move below these levels would signal a deeper correction toward the lower Bollinger band around 111.22.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Audjpy faces seasonal headwinds into late summer
According to TD Securities, seasonal patterns argue for caution on AUD/JPY over the coming months. The bank highlights that the cross has "historically experienced bearish seasonality in July and August," noting that in particular, "the pair was down in August 71% of the time over the past 20 years for an average loss of -1.5%." TD Securities suggests this track record reinforces the case for a more defensive stance as the market moves deeper into the late-summer period.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- EUR/JPY trades within a rising wedge pattern, targeting the upper boundary at 186.80.
- The 14-day Relative Strength Index around 60 suggests constructive upside momentum
- The initial support lies at the nine-day EMA of 185.94.
EUR/JPY extends its gains for the fourth consecutive day, trading around 186.50 during the Asian hours on Friday. The currency cross is maintaining a bullish near-term bias as price holds above both the nine-period and 50-period Exponential Moving Averages (EMAs). The positioning above these trend filters, together with a 14-day Relative Strength Index (RSI) around 60, suggests constructive upside momentum while stopping short of overbought territory.
The daily chart technical analysis shows an ascending triangle has morphed into a rising wedge, signaling a shift from bullish accumulation to market exhaustion, typically indicating a strong bearish reversal risk.
The EUR/JPY cross is positioned within the rising wedge, with targeting the upper boundary around 186.80. Further advances would support the currency cross to navigate the region around the all-time high of 187.95, which was recorded on April 17.
On the downside, the initial support lies at the nine-day EMA of 185.94, with additional backing at the 50-day EMA of 185.26, aligned with the lower boundary of the rising wedge. Further declines below the wedge put downward pressure on the EUR/JPY cross to navigate the region around the five-month low of 181.87, recorded on March 16, and the seven-month low of 180.81.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.09% | 0.00% | -0.03% | -0.06% | -0.08% | -0.12% | 0.03% | |
| EUR | 0.09% | 0.06% | 0.02% | -0.02% | -0.06% | -0.09% | 0.06% | |
| GBP | -0.01% | -0.06% | -0.02% | -0.07% | -0.11% | -0.12% | 0.01% | |
| JPY | 0.03% | -0.02% | 0.02% | -0.02% | -0.07% | -0.09% | 0.04% | |
| CAD | 0.06% | 0.02% | 0.07% | 0.02% | -0.04% | -0.08% | 0.07% | |
| AUD | 0.08% | 0.06% | 0.11% | 0.07% | 0.04% | -0.02% | 0.09% | |
| NZD | 0.12% | 0.09% | 0.12% | 0.09% | 0.08% | 0.02% | 0.13% | |
| CHF | -0.03% | -0.06% | -0.01% | -0.04% | -0.07% | -0.09% | -0.13% |
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 Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
- The US Dollar Index holds gains near 101.50 on the resurgence of Fed’s interest rate hike prospects.
- Surging oil prices have revived hawkish Fed bets.
- US President Trump warns of major military punishment to Iran and Houthis.
The US Dollar (USD) clings to the previous day’s gains in the Asian session on Friday, as surging oil prices due to intensified Middle East energy supply risks have revived Federal Reserve (Fed) interest rate hike expectations.
At press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades firmly near an over three-week high at 101.50.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.43% | 1.05% | 0.92% | 0.45% | -0.13% | 0.98% | 1.08% | |
| EUR | -0.43% | 0.63% | 0.43% | 0.02% | -0.53% | 0.57% | 0.64% | |
| GBP | -1.05% | -0.63% | -0.22% | -0.62% | -1.17% | -0.06% | 0.05% | |
| JPY | -0.92% | -0.43% | 0.22% | -0.38% | -0.99% | 0.00% | 0.25% | |
| CAD | -0.45% | -0.02% | 0.62% | 0.38% | -0.54% | 0.39% | 0.66% | |
| AUD | 0.13% | 0.53% | 1.17% | 0.99% | 0.54% | 1.10% | 1.23% | |
| NZD | -0.98% | -0.57% | 0.06% | -0.01% | -0.39% | -1.10% | 0.13% | |
| CHF | -1.08% | -0.64% | -0.05% | -0.25% | -0.66% | -1.23% | -0.13% |
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).
In the Asian trade, the WTI Oil price trades 0.5% lower to near $90.60, but is close to its over six-week high of $92.25 posted on Thursday. Higher oil prices boost inflation expectations, a scenario that discourages Fed officials from considering loose monetary conditions.
The closure of the Bab el-Mandeb Strait, along with the Strait of Hormuz, has disrupted 27% of global energy supply.
Meanwhile, no signs of a diplomatic breakthrough between the US and Iran indicate that supply shocks could last long. On Thursday, US President Donald Trump said that Washington would hold Iran responsible for the Yemen-based Houthis’ actions and warned that Iran and its Houthi allies would both soon receive a “major military punishment”.
According to the CME FedWatch tool, the odds of the Fed delivering an interest rate hike in the policy meeting next week stand at 35.8%, significantly higher from 11.8% recorded last week. Fed’s interest rate hike prospects were similar to the current state a month ago, but they eased later after the release of the soft US Consumer Price Index (CPI) data for June.
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.
- Silver faces pressure as Middle East tensions raise oil prices, boosting Fed rate hike bets and depressing non-yielding assets.
- CME FedWatch tool shows a 35.8% chance of a July Fed hike and an 82.1% probability for September.
- Geopolitical tensions surged after Houthis attacked two Saudi tankers, prompting the US to conduct strikes on Iran.
Silver price (XAG/USD) inches higher after registering over 4% losses in the previous day, trading around $57.60 per troy ounce during the Asian hours on Friday. However, higher oil prices tied to Middle East tensions are strengthening bets on Fed rate hikes, threatening to weigh on non-yielding Silver.
According to the CME FedWatch tool, money markets are currently pricing in roughly a 35.8% chance of a Fed rate hike this month, alongside an 82.1% probability of at least a quarter-point hike in September.
Geopolitical tension continues to surge following reports that Yemen’s Iran-backed Houthi militant group attacked two Saudi oil tankers in the Red Sea for allegedly violating a blockade. In response, the US conducted its 13th consecutive night of military strikes on Iran.
Tensions escalated further after US President Donald Trump warned of "major military punishment" for both the Houthis and Iran if attacks continue, stating he is close to deciding on a massive, unprecedented military operation against Iran.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- GBP/USD rebounds to around 1.3325 in Friday’s Asian session.
- The US launched the 13th consecutive night of strikes against Iran.
- Traders await the UK June Retail Sales report on Friday for fresh impetus.
The GBP/USD pair recovers some lost ground to near 1.3325, snapping the five-day losing streak during the Asian trading hours on Friday. However, the potential upside might be limited amid heightened military tensions in the Middle East. Traders brace for the release of the UK Retail Sales data, which will be published later on Friday.
Renewed geopolitical tensions in the Middle East could underpin the US Dollar (USD) as a safe-haven currency. The US Central Command (CENTCOM) said it launched its 13th consecutive night against Iranian targets. US President Donald Trump said on Thursday that the US would hold Iran responsible for the Houthis’ actions and warned Iran and its Houthi allies would both soon receive a “major military punishment,” per the Guardian.
Traders expect the Bank of England (BoE) to keep its benchmark interest rate steady at 3.75% next week as it continues to assess the impact of the Middle East conflict. Financial markets were pricing in one or possibly two quarter-point interest rate hikes by the end of 2026, little changed from Tuesday, according to Reuters.
The UK Retail Sales data could offer more clues about the UK interest rate path. Retail Sales are expected to show a decline of 0.3% MoM in June, compared to a rise of 1.2% in May. In case of a surprise upside reading, this could reinforce the Bank of England (BoE) to maintain an aggressive tightening stance, supporting the Cable.
Pound steadies as markets look for BoE to hold Bank Rate at 3.75%
Analysts at Scotiabank note that policy expectations remain firmly anchored ahead of next week’s BoE decision, with “markets … expecting no policy change at the next MPC rate decision, where the Bank Rate is expected to be held at 3.75%.” This steady policy outlook, they suggest, continues to frame near-term trading conditions for the Pound against the US Dollar as investors look toward upcoming UK data for further direction.
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.
- USD/CAD meets with a fresh supply amid a softer USD, though the downside seems limited.
- Retreating oil prices, the divergent BoC-Fed expectations, and Trump’s tariffs favor USD bulls.
- Traders look to flash US PMIs for some impetus as the focus remains on the FOMC next week.
The USD/CAD pair attracts fresh sellers during the Asian session on Friday and currently trades around the 1.4070 zone, down 0.10% for the day amid a softer US Dollar (USD). Spot prices, however, hold above the previous day's swing low and remain on track to register modest gains for the first time in three weeks.
Crude oil prices retreat from the highest level since June 11 amid some profit-taking heading into the week. Adding to this, divergent Bank of Canada (BoC) and US Federal Reserve (Fed) policy expectations, along with US President Donald Trump's new tariffs, contribute to keeping a lid on the commodity-linked Loonie. Moreover, the underlying USD bullish tone warrants some caution before placing aggressive bearish bets on the USD/CAD pair.
This week's soft Canadian consumer inflation figures reaffirmed bets that the BoC will keep interest rates unchanged through the remainder of 2026. In contrast, traders have been pricing in a greater chance that the US central bank will raise borrowing costs by the end of this year amid concerns about energy-driven inflation. Apart from this, a further escalation of tensions between the US and Iran should help limit deeper losses for the safe-haven buck.
Meanwhile, the Trump administration is set to impose sweeping new tariffs of 10% to 12.5% on 60 of the top trading partners, covering nearly all of the country's imports. This further tempers investors' appetite for riskier assets amid persistent geopolitical uncertainties and favors USD bulls, making it prudent to wait for some follow-through selling before confirming that the USD/CAD pair's recovery from over a one-month low has run out of steam.
Traders now look forward to the release of the flash US PMIs, which might influence the USD. Furthermore, fresh developments surrounding the Middle East crisis will drive oil price dynamics and provide some impetus to the USD/CAD pair amid a broadly constructive setup. The focus will then shift to the highly-anticipated two-day FOMC meeting next week, which will help in determining the near-term trajectory for the Greenback and the currency pair.
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
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