Forex News
- Asian stocks track the overnight fall on Wall Street amid concerns about oil-driven inflation.
- The US PPI lifted September Fed rate hike and dents investors’ appetite for riskier assets.
- US-Iran tensions keep the geopolitical risk premium in play and further weigh on sentiment.
Asian stocks declined sharply on Friday, tracking the overnight fall on Wall Street, as a surge in energy prices and a global bond selloff trigger the broader risk-off move.
Crude oil prices shot to the highest level on May 21 as increasing attacks along key shipping routes in the Middle East fuel fears of a prolonged disruption to supplies. In fact, Iran-backed Houthis in Yemen seized the crucial Red Sea city of Mocha, expanding its control over the strategic Bab al-Mandeb Strait. This comes as shipping traffic through the Strait of Hormuz remains restricted due to the US-Iran standoff and continues to act as a tailwind for oil prices.
In further developments, the US Treasury plans to sanction a large, undisclosed bank on Monday as part of its ongoing economic pressure campaign against Iran. Meanwhile, US President Donald Trump said that the Iran war will likely continue until after the November midterm elections, keeping geopolitical risk premium in play and supporting oil prices. This might continue to fuel energy-driven inflation worries and weigh on investors' sentiment.
Meanwhile, the US Bureau of Labor Statistics (BLS) reported on Thursday that the headline Producer Price Index (PPI) rose to a 5.4% YoY rate in August, compared to the previous month's upwardly revised print of 4.8%. Stripping out food and energy, the core gauge matched forecasts and rose 4.6% YoY from 4.3% in July. This prompted traders to add to bets on a Federal Reserve (Fed) rate hike next week and further dented investors' appetite for riskier assets.
Asian stocks FAQs
Asia contributes around 70% of global economic growth and hosts several key stock market indices. Among the region’s developed economies, the Japanese Nikkei – which represents 225 companies on the Tokyo stock exchange – and the South Korean Kospi stand out. China has three important indices: the Hong Kong Hang Seng, the Shanghai Composite and the Shenzhen Composite. As a big emerging economy, Indian equities are also catching the attention of investors, who increasingly invest in companies in the Sensex and Nifty indices.
Asia’s main economies are different, and each has specific sectors to pay attention to. Technology companies dominate in indices in Japan, South Korea, and increasingly, China. Financial services are leading stock markets such as Hong Kong or Singapore, considered key hubs for the sector. Manufacturing is also big in China and Japan, with a strong focus on automobile production or electronics. The growing middle class in countries like China and India is also giving more and more prominence to companies focused on retail and e-commerce.
Many different factors drive Asian stock market indices, but the main factor behind their performance is the aggregate results of the component companies revealed in their quarterly and annual earnings reports. The economic fundamentals of each country, as well as their central bank decisions or their government’s fiscal policies, are also important factors. More broadly, political stability, technological progress or the rule of law can also impact equity markets. The performance of US equity indices is also a factor as, more often than not, Asian markets take the lead from Wall Street stocks overnight. Finally, the broader risk sentiment in markets also plays a role as equities are considered a risky investment compared to other investment options such as fixed-income securities.
Investing in equities is risky by itself, but investing in Asian stocks comes along with region-specific risks to be taken into account. Asian countries have a wide range of political systems, from full democracies to dictatorships, so their political stability, transparency, rule of law or corporate governance requirements may diverge considerably. Geopolitical events such as trade disputes or territorial conflicts can lead to volatility in stock markets, as can natural disasters. Moreover, currency fluctuations can also have an impact on the valuation of Asian stock markets. This is particularly true in export-oriented economies, which tend to suffer from a stronger currency and benefit from a weaker one as their products become cheaper abroad.
- USD/CHF appreciates as growing expectations for a September Federal Reserve rate hike strengthen the US Dollar.
- August US Producer Price Index rose 5.4% year-over-year, outpacing analyst expectations and fueling inflation worries.
- The Swiss Franc faces pressure from widening rate differentials, though safe-haven safe-flows from sliding yen carry trades cushion losses.
USD/CHF gains ground for the third consecutive day, trading around 0.8140 during the Asian hours on Friday. The pair appreciates as the US Dollar (USD) gains ground as expectations grow for a Federal Reserve (Fed) rate hike in September.
According to the CME FedWatch Tool, markets are currently pricing in a greater than 72% probability of a 25-basis-point rate increase next week, a notable jump from the 61% chance recorded prior to the recent Producer Price Index (PPI) data release. Investors are also closely bracing for the upcoming United States (US) consumer price index report, which could further solidify these monetary tightening expectations.
The US Bureau of Labor Statistics reported on Thursday that the headline PPI rose 5.4% year-over-year in August, climbing from July's 4.8% increase and outpacing analyst forecasts of 5.3%. On a monthly basis, headline PPI matched expectations with a 0.4% increase, while core PPI rose by 0.2%, coming in slightly softer than initial estimates.
The Swiss Franc (CHF) is under downward pressure due to a widening interest rate differential between Switzerland and the United States (US). While other global central banks navigate various tightening cycles, the Swiss National Bank (SNB) is widely anticipated to leave its key policy rate anchored at 0% through the end of the year, maintaining the lowest borrowing cost among major economies.
However, any steep or prolonged downside for the Swiss Franc (CHF) is expected to be cushioned by shifts in broader global currency markets. A combination of hawkish sentiment from the Bank of Japan (BoJ) and joint Yen-buying interventions by Washington and Tokyo has diminished the appeal of the Japanese Yen (JPY) for carry trades.
As a result, currency traders are actively shifting their positions out of the Yen and into alternative safe-haven destinations, with the Swiss Franc emerging as a primary beneficiary of this reallocation.
USD/CHF seen confined to tighter range as UOB trims near-term band
Strategists at UOB Group maintain a neutral, range-trading stance on USD/CHF, noting that their “most recent narrative from Monday (07 Sep, spot at 0.8100)” had called for the Dollar to hold between “0.8055 and 0.8155.” They now reiterate that they “continue to expect range-trading,” but judge that “a narrower range of 0.8060/0.8135 is likely enough to contain the price movements in USD for now.”
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 US Dollar trades firmly above 99.00 ahead of the US CPI data for August.
- The US headline CPI is seen remaining unchanged at 3.4% YoY.
- Stronger-than-expected US PPI growth has prompted Fed interest rate hike expectations.
The US Dollar (USD) clings to its Thursday gains in early session on Friday, driven by faster-than-expected growth in the United States (US) Producer Price Index (PPI) data for August.
At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades marginally higher at around 99.12.
On Thursday, the US PPI report showed that headline producer inflation accelerated to 5.4% Year-on-Year (YoY) from 4.8% in July. The headline inflation at the wholesale level was expected to arrive at 5.3%. The core PPI – which excludes volatile food and energy items – grew at a faster pace of 4.6% YoY, as expected, compared to the previous reading of 4.3%.
Higher-than-projected US PPI figures have prompted hawkish Federal Reserve (Fed) bets. The CME FedWatch tool shows that the odds of the Fed raising interest rates at the policy meeting next week have increased to 72.4% from 61.2% seen before the data release.
Later in the day, investors will pay close attention to the US Consumer Price Index (CPI) data for August, which will be published at 12:30 GMT.
US inflation risks seen tilted higher as TD flags tariff-related uncertainty
According to economists at TD Securities, August inflation likely showed only modest further progress. They “project that core CPI rose 2.3% on a y/y basis, down 10 bps vs July, while headline inflation likely stayed unchanged at 3.4% y/y.” However, they caution that “risks to our forecasts” are “skewed to the upside” given their assumption of “a number of large price declines in tariff-exposed goods categories,” leaving some uncertainty around the near-term disinflation path.
US Dollar Index Technical Analysis
In the daily chart, Dollar Index Spot trades at 99.13. The near-term bias stays bearish as price holds beneath the 20-period exponential moving average (EMA) at 99.27 and below the key 50% Fibonacci retracement at 99.72, keeping recent rebounds capped within a broader corrective phase.
The Relative Strength Index (14) has recovered toward the mid-40s, hinting at easing downside momentum, but it still falls short of signaling a decisive bullish shift while the index trades under these overhead levels.
On the topside, initial resistance is aligned with the 61.8% Fibonacci retracement near 99.24 and the 20-period EMA at 99.27, with further barriers at the 50% retracement at 99.72 and then the 38.2% level at 100.21; a sustained break above this band would be needed to challenge the 23.6% retracement at 100.81. On the downside, support emerges at the 78.6% retracement around 98.54, ahead of the 100% Fibonacci anchor at 97.66, where a failure would expose a deeper bearish extension.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
Producer Price Index (YoY)
The Producer Price Index released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).
Read more.Last release: Thu Sep 10, 2026 12:30
Frequency: Monthly
Actual: 5.4%
Consensus: 5.3%
Previous: 4.7%
Source: US Bureau of Labor Statistics
- Silver declines as markets price in a 72% probability of a 25-basis-point Federal Reserve rate hike next week.
- August US Producer Price Index rose 5.4% year-over-year, outpacing analyst expectations and fueling inflation worries.
- Escalating US-Iran conflict and Houthi advances near the Red Sea push oil prices higher, pressuring Silver.
Silver price (XAG/USD) extends its losses for the second successive day, trading around $63.30 per troy ounce during Asian hours on Friday. Silver prices are declining as expectations grow for a Federal Reserve (Fed) rate hike in September.
According to the CME FedWatch Tool, markets are currently pricing in a greater than 72% probability of a 25-basis-point rate increase next week, a notable jump from the 61% chance recorded prior to the recent Producer Price Index (PPI) data release. Investors are also closely bracing for the upcoming United States (US) consumer price index report, which could further solidify these monetary tightening expectations.
This downward pressure comes on the heels of a hotter-than-expected PPI report released by the US Bureau of Labor Statistics on Thursday. The report showed that the headline PPI rose 5.4% year-over-year in August, climbing from July's 4.8% increase and outpacing analyst forecasts of 5.3%. On a monthly basis, headline PPI matched expectations with a 0.4% increase, while core PPI rose by 0.2%, coming in slightly softer than initial estimates.
Beyond monetary policy concerns, Silver is also contending with headwinds from surging oil prices driven by the escalating US-Iran conflict, which has heightened broader inflation fears. Compounding these geopolitical tensions, BBC sources report that Yemen's Houthis have seized the strategic Red Sea port city of Mokha from Saudi-backed pro-government forces. This tactical capture places the Iran-backed group just 75 km (46 miles) away from the Bab al-Mandab Strait, a critical southern gateway connecting essential trade routes between Asia and Europe.
Industrial precious metals slump as rates rise and base metals falter
According to TD Securities, “industrial precious metals, such as silver and PGMs, are taking a beating as rising rates and weakness across base metals weigh heavy,” underscoring how the more cyclical segments of the precious metals complex are bearing the brunt of the current macro backdrop.
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.
According to a Reuters report, sources say that the Bank of Japan (BoJ) is set to raise interest rates, most likely by 25 basis points, at the policy meeting on September 18. This move will push interest rates higher to 1.25%, a level not seen in the last 31 years.
The report also showed that the BoJ might signal readiness to speed up rate hikes, but has no pre-set view on the terminal rate or the timing of further rate increases.
Market reaction
While covering the article, the Japanese Yen (JPY) was seen trading flat at around 154.40 against the US Dollar.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- AUD/USD loses ground to near 0.7155 in Friday’s Asian session.
- Traders raise their bets on a US September rate hike following hotter US PPI data, supporting the US Dollar.
- RBA’s hawkish comments have fueled expectations for RBA September rate increase.
The AUD/USD pair edges lower to around 0.7155 during the early Asian session on Friday. The US Dollar strengthens against the Australian Dollar (AUD) following signs of hotter inflation in the United States (US). The release of the US August Consumer Price Index (CPI) inflation data will be in the spotlight later on Friday.
The US Producer Price Index (PPI), a measure of wholesale prices and a gauge of pipeline cost pressures, rose 5.4% YoY in August, versus 4.8% prior, according to the Bureau of Labor Statistics (BLS) on Thursday. This figure came in above the market consensus of 5.3%.
On a monthly basis, the headline PPI increased 0.4% in August, in line with market expectations. The core PPI was up 0.2%, slightly softer than the forecast.
Following Thursday’s hotter Producer Price Index (PPI) release, traders raised the odds of a quarter-percentage-point increase to more than 73%, according to the CME FedWatch tool.
Traders will take more cues from the US CPI data later in the day. This report will be the last piece of the inflation puzzle the Federal Reserve (Fed) will get before making its decision on interest rates next week. The headline CPI is expected to show a rise of 3.4% in August, while the core CPI is projected to show an increase of 2.4% during the same period.
Nonetheless, a hawkish tone from the Reserve Bank of Australia (RBA) might help limit the Aussie’s losses. RBA Assistant Governor Sarah Hunter said on Tuesday that the central bank may need to raise interest rates again if inflation proves more persistent than expected, keeping alive the prospect of another hike at its September meeting.
Meanwhile, RBA Deputy Governor Andrew Hauser stated that inflation is "one big problem" Australia's economy is still facing, adding that the central bank stands ready to raise interest rates further if it believes it is needed.
Markets are now pricing in nearly a 72% chance that the RBA will raise the Official Cash Rate (OCR) to 4.60% at the next RBA Board meeting, according to RBA Rate Tracker.
RBA hawkish turn aligns with US policy preferences
Rabobank points out that the RBA’s policy stance has turned more hawkish after “Hauser [gave] a hawkish speech, which has markets thinking of hikes this month and in November.” The bank adds that this prospective tightening path is “very much what the US Treasury would like to see – plus a lot more action on non-housing parts of the economy,” underscoring the alignment between Australian policy signals and US official preferences for firmer restraint beyond the housing sector.
Technical Analysis: AUD/USD keeps a positive tone above the 100-day SMA
In the daily chart, AUD/USD holds a mild bullish bias as it trades above the 100-day Simple Moving Average (SMA), with the recent pullback still contained within the Bollinger Bands envelope. Price is hovering just under the Bollinger 20-period SMA, which acts as immediate resistance, while the Relative Strength Index (14) at 53.7 stays in neutral-to-positive territory, hinting at steady but not overextended upside momentum.
On the topside, initial resistance is located at the Bollinger 20-period SMA near 0.7165, followed by a stronger barrier at the upper boundary of Bollinger Band around 0.7238. On the downside, the first line of support is the nearby price floor at 0.7158, ahead of a more meaningful cushion at the lower limit of Bollinger Band near 0.7092, with the 100-day SMA at 0.7080 reinforcing that broader demand zone while above it the constructive tone is likely to persist.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
Japanese Finance Minister (FM) Satsuki Katayama said on Friday that the government will continue to closely communicate with the United States (US) to ensure orderly foreign exchange markets.
Key quotes
Won't discuss specific currency levels.
Stance unchanged since US-Japan coordination.
Will aim to ensure stable currency movements, will closely communicate with U.S.
Receives backing from Bessent, JPMorgan's Dimon on Japan's economic strategy at G20.
Market reaction
At the time of writing, the USD/JPY pair is up 0.03% on the day at 154.48.
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.
- USD/CAD appreciates as the commodity-linked Canadian Dollar (CAD) struggles due to lower oil prices.
- Crude oil prices may regain due to recent strikes targeting tankers and warships in the Persian Gulf, intensifying regional risks.
- US PPI rose 5.4% YoY in August, accelerating from July and exceeding analyst expectations of 5.3%.
USD/CAD extended its gains for the third consecutive day, trading around 1.3840 during the Asian hours on Friday. The pair appreciates as the commodity-linked Canadian Dollar (CAD) struggles due to lower oil prices.
However, crude oil prices may rebound as the escalating conflict between the US and Iran has fueled concerns over prolonged disruptions to global energy supplies. Top US officials reportedly warned President Donald Trump that the war could continue through the remainder of his term, which ends in January 2029.
Meanwhile, Iranian leaders are reportedly determined to continue fighting despite mounting economic costs, viewing the conflict as an existential threat. They also claim that Tehran has managed to rebuild its missile capabilities and could intensify attacks on US and Gulf assets if Washington escalates its own strikes.
CAD underpriced as commodities firm and US data risk looms
Strategists at Scotiabank observe that rate and credit “spreads have held relatively steady” so far, but caution they “could turn a little more volatile in the next few days as markets react to US inflation data.” They also highlight that “strengthening crude (and firmer commodities in general) do provide some additional lift to Canadian terms of trade,” a support they suggest is “not perhaps fully reflected in the CAD currently.”
The US Bureau of Labor Statistics (BLS) reported on Thursday that the Producer Price Index (PPI) rose 5.4% year-over-year in August, up from 4.8% in July. This figure came in hotter than analyst expectations of 5.3%.
On a monthly basis, the headline PPI increased by 0.4% in August, matching the market consensus. Meanwhile, the core PPI rose by 0.2%, coming in slightly softer than the initial forecast.
Traders have largely chosen to remain on the sidelines, holding off on major positions ahead of the crucial US Consumer Price Index (CPI) inflation report scheduled for release later on Friday.
Strategists at Scotiabank observe that the Dollar is trading with a modestly positive tone ahead of key US releases, noting that “the USD is again mixed to slightly firmer against the G10 currencies as traders await this morning’s data.” The bank frames the latest moves as part of a cautious pre-data consolidation rather than a decisive shift in trend, with investors reluctant to take strong directional views before the next round of US inflation signals.
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.
- NZD/USD attracts some buyers on Friday as USD stalls the US PPI-inspired rise.
- Rising Fed rate hike bets and geopolitical risks should limit deeper USD losses.
- Traders look forward to the crucial US CPI report for some meaningful impetus.
The NZD/USD pair gains some positive traction during the Asian session on Friday, reversing a part of the previous day's heavy losses to sub-0.5800 levels, or the lowest since late July. The upside potential, however, seems limited as traders might opt to wait for US consumer inflation figures before placing fresh directional bets.
The crucial US Consumer Price Index (CPI) will be watched for more cues about the US Federal Reserve's (Fed) policy path amid rising rate hike bets, bolstered by the upbeat US Nonfarm Payrolls (NFP) report and still sticky inflation. In fact, data released on Thursday showed that the US Producer Price Index (PPI) accelerated to a 5.4% YoY rate in August, beating consensus estimates. This, in turn, prompted traders to add to bets for a Fed rate hike next week, which favors US Dollar (USD) bulls and should cap gains for the NZD/USD pair.
Apart from this, escalating US-Iran tensions remain supportive of elevated crude oil prices, which shot to the highest level since May 21 on Thursday and add to concerns about inflation risks stemming from the Middle East conflict. In the latest development, the US Treasury plans to sanction a large, undisclosed bank on Monday as part of its ongoing economic pressure campaign against Iran. Moreover, Houthi forces have taken control of Mocha, a key Red Sea port, tightening their grip near the Bab el-Mandeb shipping route.
This raises the risk of a broader regional conflict and keeps the geopolitical risk premium in play, which should further benefit the safe-haven Greenback. Adding to this, a dovish tilt in the Reserve Bank of New Zealand’s (RBNZ) policy projections might contribute to capping the NZD/USD pair, warranting some caution for bulls and positioning for any further gains. Nevertheless, spot prices remain on track to register losses for the third straight week, and the fundamental backdrop suggests that the path of least resistance is to the downside.
NZD/USD daily chart
Technical Analysis
The NZD/USD pair trades above the 50.0% retracement at 0.5806 but keeps a capped tone below the 200-day Exponential Moving Average (EMA) at 0.5851. The proximity of the 38.2% retracement at 0.5848 to the 200-day EMA reinforces a nearby resistance band that needs to be cleared to ease immediate downside pressure.
On the downside, the 50.0% retracement at 0.5806 is the first support, ahead of the 61.8% level at 0.5763 and the deeper Fibonacci floors at 0.5702 and 0.5625, where buyers would be expected to show more interest if weakness extends.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- GBP/USD flatlines around 1.3510 in Friday’s early Asian session.
- US PPI rose 5.4% YoY in August, higher than the estimate.
- BoE's Bailey pushed back against the idea of a rate hike being inevitable.
The GBP/USD pair trades on a flat note near 1.3510 during the early Asian session on Friday. Traders prefer to wait on the sidelines ahead of the key US August Consumer Price Index (CPI) inflation report later on Friday.
The US Producer Price Index (PPI), a measure of wholesale prices and a gauge of pipeline cost pressures, rose 5.4% YoY in August, compared to 4.8% in July, according to the Bureau of Labor Statistics (BLS) on Thursday. This figure came in hotter than expectations of 5.3%.
On a monthly basis, the headline PPI increased 0.4% in August, in line with market consensus. The core PPI was up 0.2%, slightly softer than the forecast.
Traders await the upcoming US CPI inflation data on Friday as it might offer some hints about the US interest rate path.
Economists expect the headline CPI to show a rise of 3.4% in August, while the core CPI is projected to show an increase of 2.4% during the same period. If the reports show hotter-than-expected outcomes, this could reinforce the Federal Reserve (Fed) rate hike bets and boost the US Dollar (USD) against the British Pound (GBP) in the near term.
Bank of England (BoE) Governor Andrew Bailey said earlier on Tuesday that he wanted to dispel the idea that it's just a matter of time before the central bank raises interest rates, rather than a possibility that hinges on economic and geopolitical developments.
Markets expect one quarter-percentage-point BoE rate hike priced in by the end of this year, and two more for 2027, according to Reuters.
BoE hawkish hold expectations build as UK data and fiscal outlook loom
Strategists at Scotiabank flag that upcoming UK data will be a key catalyst for Sterling, noting that “next week’s jobs and CPI figures offer additional risk into Thursday’s BoE, where policymakers are widely expected to deliver a hawkish hold.” They emphasize that “next week’s BoE is a nonMPR (forecast) meeting, leaving the November 5th rate decision as the next likely meeting for a 25bpt rate hike—with short-term rates markets already pricing ~19bpts of tightening for the decision.” At the same time, Scotiabank highlights that “fiscal concerns remain front and center in terms of sentiment, as we continue to highlight the importance of the budget scheduled for late October,” but they add that “the trend in sentiment remains constructive for the GBP.”
Technical Analysis: GBP/USD retains a neutral tone in the near term
In the daily chart, GBP/USD consolidates in a neutral, range‑bound stance. The pair holds above the 100-day Simple Moving Average (SMA), while intraday price action hovers just over the lower Bollinger Band support, hinting at underlying demand on dips. However, the Bollinger middle band caps the topside together with the upper band and the Relative Strength Index (RSI) around 48 suggests only modest, directionless momentum.
On the upside, initial resistance is located at the Bollinger middle band near 1.3560, with a break there exposing the upper Bollinger Band around 1.3655 as the next barrier. On the downside, immediate support is seen towards the lower Bollinger Band at 1.3465, ahead of the firmer cushion offered by the 100-day SMA at 1.3445; a daily close below this latter level would weaken the current consolidation bias and open the door to a deeper correction.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
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