Forex News

• Silver falls more than 1% on Thursday as rising interest-rate expectations weigh on the non-yielding metal.
• New York Fed President John Williams says another rate hike by year-end would be reasonable as inflation remains a concern.
• US Treasury yields surge to multi-year highs despite better-than-expected weekly jobless claims.

Silver (XAG/USD) extends its decline on Thursday, falling 1.23% to trade around $63.65 at the time of writing. The precious metal comes under heavy selling pressure as increasingly hawkish expectations surrounding the Federal Reserve (Fed) push United States (US) Treasury yields sharply higher.

The latest downward move accelerated after New York Fed President John Williams signaled that another interest-rate increase this year remains possible. Williams said it is “reasonable to see another rate hike by end of year” and stressed the need to bring inflation back toward the central bank’s 2% target promptly.

The remarks reinforce market expectations that the Fed could continue tightening monetary policy after its latest 25-basis-point rate increase. According to the CME FedWatch tool, investors now assign a roughly 71% chance to another rate hike at the October meeting, up from around 55% a week earlier.

The shift in interest-rate expectations sent US Treasury yields sharply higher. The benchmark 10-year US Treasury yield rose toward 5.15% on Thursday, its highest level since 2007. Higher bond yields tend to weigh on Silver as they increase the opportunity cost of holding non-yielding assets. The accompanying strength of the US Dollar (USD) adds another headwind for the US Dollar-denominated metal.

Meanwhile, Thursday's US labor market data remain resilient. Initial Jobless Claims declined slightly to 197K in the latest week from a revised 198K previously, beating market expectations of 201K. Continuing Jobless Claims edged slightly higher to 1.719M from 1.717M, but remained below the 1.75M expected. The figures offer little evidence of a sharp deterioration in employment conditions and therefore provide limited grounds for the Fed to turn more accommodative.

XAG/USD technical analysis

In the one-hour chart, XAG/USD trades at $63.61, extending its bearish near-term bias as price holds beneath both the 100-period simple moving average (SMA) at $65.77 and the 200-period SMA at $64.90. A dense band of nearby horizontal resistance between $64.00 and $64.56 reinforces the downside tone, although the Relative Strength Index (14) at 27.85 shows oversold conditions that could slow immediate selling rather than signal a sustained recovery.

On the topside, initial resistance appears at $64.00 and $64.56, ahead of the 200-period SMA at $64.90 and the $64.95 barrier, while the 100-period SMA at $65.77 and the $65.80 level form a higher cap before $67.55 and $68.30. On the downside, first support is now seen at $63.33, with subsequent cushions at $62.85 and $62.30, where buyers would need to emerge to prevent a deeper slide in the short term.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Brown Brothers Harriman’s (BBH) Elias Haddad reports the Swedish Krona (SEK) rallied after the Riksbank delivered a hawkish hold, keeping rates unchanged but signaling more tightening ahead. The new rate path implies nearly 75 basis points of hikes over twelve months, aligning more closely with market pricing. Haddad sees this firmer policy stance as supportive for SEK against major peers.

Riksbank signals more tightening ahead

"SEK rallied against most major currencies. The Riksbank delivered a hawkish hold. As was widely expected, the Riksbank kept the policy rate at 1.75% for an eighth consecutive meeting and firmed up its hawkish bias."

"The statement noted that “the policy rate should be raised more going forward than projected in the June forecast” while signaling again it expects “the increases to the policy rate will begin this year.”"

"The Riksbank’s new policy rate forecast implies nearly 75bps of tightening in the next twelve months to 2.50%, up from 25bps in June. That brings its rate outlook closer to the 125bps priced by markets and is supportive of SEK."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• Initial Jobless Claims went down to 197K vs. the previous week.
• Continuing Jobless Claims went up to 1.719M.

According to a report from the US Department of Labour (DOL) released on Thursday, the number of US citizens submitting new applications for unemployment insurance decreased to 197K for the week ending September 19. The latest print came in below initial estimates (201K) and was lower than the previous week’s 198K (revised from 196K).

Additionally, the 4-week moving average went down by 1.75K to 202.25K vs. the previous week’s revised prints (204K).

The report also indicated that Continuing Jobless Claims rose by 2K to 1.719M for the week ending September 12.

Market reaction

The Greenback keeps its march north unabated, sending the US Dollar Index (DXY) to fresh two-month highs around 101.30 as investors continue to assess the latest data releases.

• GBP/JPY rebounds as broad-based Japanese Yen weakness drives the cross higher.
• The wide UK-Japan interest-rate gap keeps the British Pound favoured against the Yen.
• Traders stay alert to intervention risk as USD/JPY approaches the psychological 160 mark.

GBP/JPY rebounds on Thursday, supported mainly by broad-based weakness in the Japanese Yen (JPY) rather than strength in the British Pound (GBP), as traders assess the monetary policy outlooks of the Bank of Japan (BoJ) and the Bank of England (BoE). At the time of writing, the cross trades around 210, recovering from an intraday low of 208.78.

While the BoJ is gradually raising borrowing costs, the inflationary impact of the Middle East war is keeping other central banks hawkish, keeping Japan’s interest-rate gap wide and weighing on the Yen.

The BoJ raised its policy rate by 25 basis points (bps) to 1.25% at its September meeting. However, traders viewed the decision as slightly dovish as two policymakers voted to keep borrowing costs unchanged. Elevated Oil prices also increase Japan’s import costs, while broader fiscal concerns create another drag on the Yen. Traders will keep a close eye on the risk of intervention by Japanese authorities as USD/JPY climbs back toward the psychological 160.00 mark.

The BoE has stayed on hold so far this year, leaving its benchmark rate unchanged at 3.75% for a sixth straight meeting last week. Still, the 2.50% rate gap between the United Kingdom (UK) and Japan keeps the British Pound favoured against the Yen. Traders also keep the possibility of a BoE rate hike on the table as inflation risks stay tilted to the upside.

Comments from BoE officials on Thursday highlighted differing views within the central bank. Swati Dhingra said, “Financial conditions have done a lot of tightening work already in the UK,” adding, “We are not seeing broad-based price rises like those that happened in 2022.” She also noted that “winter energy prices will be critical for second-round effects.”

Deputy Governor Clare Lombardelli offered a more hawkish view, saying, “Wage growth remains too high to be consistent with inflation target.” She added, “Policy is increasingly likely to need to tighten if elevated energy prices persist, absent clear evidence of disinflation or weaker activity,” and warned that the “case for a hike grows the longer the conflict persists.”

For now, the wide interest-rate gap keeps GBP/JPY supported, but with USD/JPY grinding back toward 160, traders will stay alert to the risk of intervention by Japanese authorities.