Forex News
Commerzbank Rates Strategist Hauke Siemßen notes that the 30y Bund yields are testing their highest levels in 15 years, with bearish steepening dynamics in the market. The analysis highlights strong demand for recent syndications, particularly the BTP orderbook, which was notably robust. The report suggests that the market is well-prepared for upcoming auctions, indicating a cautious yet positive outlook.
30y Bund yields under scrutiny
"EGB yields are back at the highs with curves bear-steepening and 30y Bund yields testing the highest levels in 15 years."
"Nonetheless, the BTP orderbook of €157bn was super strong, indicating that there is sufficient investor demand at these valuations."
"While the bi-weekly SPGB and OAT auctions are still on the agenda tomorrow, markets are probably well-prepared for them and tenors only extend to 23y."
"We suggest holding on to BTPs longs for the time being given the positive carry environment amid supportive risk sentiment."
"Potential for further positive rating action after S&P attached a positive outlook to its BBB+ rating last week."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Deutsche Bank Research Team analyzes the European Central Bank's (ECB) monetary policy outlook, suggesting that the ECB is likely to remain on hold throughout 2026, with the next move expected to be a hike in mid-2027. The report highlights risks of further easing due to potential undershooting of inflation targets and external challenges, including the appreciation of the Euro. The analysis emphasizes the need for significant macroeconomic shifts to prompt a rate cut.
ECB policy outlook and risks
"In our baseline we see the ECB on hold through 2026 and the next move being a hike in mid-2027. The risk in 2026 has always been skewed to further easing given the expected undershoot of the inflation target. Recent events, like the appreciation of the euro exchange rate, underline this risk."
"The path of monetary policy in 2026 will depend on who wins the contest between external conditions and internal conditions. Our baseline assumes that domestic resilience will dominate and that leads to hikes in 2027."
"For the ECB to cut rates again it needs to expect a sufficient deviation from the inflation target: a large enough and persistent enough undershoot of the 2% target. Headline inflation undershoots the target later in 2026 and into 2027 - less than and later than previously assumed."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Silver prices (XAG/USD) rose on Wednesday, according to FXStreet data. Silver trades at $89.44 per troy ounce, up 5.20% from the $85.02 it cost on Tuesday.
Silver prices have increased by 25.83% since the beginning of the year.
Unit measure | Silver Price Today in USD |
|---|---|
Troy Ounce | 89.44 |
1 Gram | 2.88 |
The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 56.62 on Wednesday, down from 58.16 on Tuesday.
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.
(An automation tool was used in creating this post.)
TD Securities analysts Prashant Newnaha and Alex Loo discuss the implications of Japan's upcoming Lower House Election on fiscal policy and the USDJPY exchange rate. They expect that an absolute majority for PM Takaichi could lead to higher yields and a steepening curve, with inflation expectations potentially rising. This scenario is likely to push USDJPY higher as well.
Election impact on USDJPY and yields
"An absolute majority outcome should drive yields higher and the curve should steepen. To the extent this drives inflation expectations higher, USDJPY should track north as well."
"We expect buyers to emerge on yield back-ups as 1) the BoJ is likely to step in to stabilise the long-end through bond buying operations and 2) several Japanese institutions (e.g., SMBC, Meiji Yasuda) have indicated that they would be JGB buyers this year."
"All eyes are on the upcoming Lower House elections on Feb 8th. We are expecting PM Takaichi to secure an absolute majority. This outcome is likely to embolden her push for fiscal spending and markets are likely to drive JGB yields higher, lending a steepening bias, particularly to the 10y point."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- AUD/JPY gains as markets price an 80% chance of a May hike and 40 basis points of tightening this year.
- China’s Services PMI rose to 52.3 in January, beating expectations and up from 52.0 in December
- The Japanese Yen weakened ahead of the snap election, with Takaichi’s LDP expected to gain seats.
AUD/JPY extends its winning streak for the third successive session, trading around 110.00 during the European hours on Wednesday. The currency cross climbed to a record high of 110.18 during earlier hours, supported by the Australian Dollar (AUD) as the Reserve Bank of Australia’s (RBA) tightening cycle kicked off in February.
Markets have raised the probability of a May rate hike to 80% and now price in around 40 bps of additional tightening this year. The RBA lifted the Official Cash Rate (OCR) by 25 bps to 3.85% on Tuesday, citing stronger-than-expected growth and persistently high inflation.
China's Services Purchasing Managers' Index (PMI) rose to 52.3 in January from 52.0 in December. This figure came in stronger than the expectations of 51.8. China is a key trading partner of Australia, so any changes in the Chinese economy could impact the AUD.
The AUD/JPY cross also advanced as the Japanese Yen (JPY) weakened ahead of this weekend’s snap lower house election. Prime Minister Sanae Takaichi’s ruling LDP is expected to secure additional seats as she seeks voter support for higher spending, tax cuts, and a new security strategy. Her push for expansionary fiscal policies has fueled concerns over Japan’s fiscal outlook amid fears of debt-funded spending.
Takaichi characterized a weaker Yen as beneficial for export-oriented industries, signaling tolerance for a softer currency, before later clarifying that her remarks were intended to highlight economic resilience to exchange-rate fluctuations.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Forex Market News
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