Forex News
- USD/CHF holds gains amid strengthening Fed “higher-for-longer” policy stance amid persistent US inflation.
- Fed’s Waller warns prolonged Middle East conflict raises inflation and employment risks.
- SNB policymakers remain ready to intervene in FX markets to curb excessive Swiss Franc appreciation.
USD/CHF inches higher after registering modest losses in the previous trading day, hovering around 0.7820 during the early European hours on Monday. The pair advances as the US Dollar (USD) strengthens on fading expectations of Federal Reserve (Fed) rate cuts, driven by persistent inflation concerns linked to elevated energy prices amid Middle East tensions.
Fed Governor Christopher Waller said Friday that the job market’s break-even rate is likely near zero, adding that a prolonged Middle East conflict could heighten both inflation and employment risks. Meanwhile, San Francisco Fed President Mary Daly noted she is assessing whether rising oil prices are feeding into broader goods and services inflation.
The Greenback also benefits from increased safe-haven demand amid renewed US–Iran tensions. The Guardian reported Monday that Iran’s Foreign Ministry spokesman Esmail Baghaei described the US blockade of Iran’s ports and coastline as an act of aggression and a violation of the ceasefire. Baghaei stated on social media that deliberately imposing collective punishment on Iran’s population amounts to a war crime and crime against humanity.
However, the Swiss Franc (CHF) could also find support from safe-haven inflows amid escalating tensions, alongside rising concerns over a prolonged energy-driven inflation shock, which may reinforce expectations of a more hawkish Swiss National Bank (SNB). Meanwhile, SNB meeting minutes from March highlighted growing uncertainty surrounding Switzerland’s economic outlook.
SNB policymakers noted that, given heightened geopolitical tensions and safe-haven flows, the SNB is likely to remain highly willing to intervene in FX markets to curb a rapid and excessive appreciation of the CHF.
On the data front, the Swiss Trade Balance data will be eyed on Tuesday. Traders will shift their focus toward US Retail Sales data due later in the North American session.
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.
According to the Iranian Republic News Agency, Iran President Masoud Pezeshkian said during European trading hours on Monday that the "war is in no one's interest”, and “every rational and diplomatic path should be used to reduce tensions”.
The comments from Iran President Pezeshkian came at time when market participants doubt the resumption of negotiations between the US and Iran anytime soon.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- Gold attracts some dip-buyers following a bearish gap opening, though it lacks follow-through.
- Renewed US-Iran tensions provided a modest lift to the USD and weighed on the precious metal.
- Fading Fed rate hike bets keep a lid on any further USD appreciation and support the bullion.
Gold (XAU/USD) looks to build on its modest intraday recovery from the $4,737-$4,738 region or a one-week low touched earlier this Monday, and trades around the $4,800 mark heading into the European session. The US Dollar (USD) retreats from a one-week high and, for now, seems to have stalled its recovery move from a nearly two-month low set on Friday. This turns out to be a key factor lending some support to the commodity. However, an intraday rally in Crude Oil prices revived inflationary concerns and triggered a modest rise in US Treasury bond yields, which, in turn, might keep a lid on any meaningful upside for the non-yielding yellow metal.
The US-Iran standoff over the Strait of Hormuz tempers hopes for more peace talks before the current ceasefire ends on April 22. The US Navy intercepted and seized an Iranian-flagged cargo ship in the Gulf of Oman as part of its blockade. Iran viewed this as a breach of the ceasefire agreement and once again closed the strategic waterway after briefly opening it following a 10-day truce between Israel and the Lebanese group Hezbollah on Friday. Meanwhile, US President Donald Trump said that the naval blockade of Iranian ports would continue until a peace deal was agreed between the two countries.
The White House confirmed that US Vice President JD Vance would lead another delegation for a second round of talks on ending the war with Iran. Iranian state media has reported that officials will not participate while the US blockade remains in place. This dampens hopes for a peace agreement before the current ceasefire ends on April 22, which, in turn, triggers a fresh wave of the global risk-aversion trade and benefits the Greenback reserve currency status. The USD bulls, however, refrain from placing aggressive bets amid diminishing odds for an interest rate hike by the US Federal Reserve (Fed).
Instead, the CME Group's FedWatch Tool indicates that there is a roughly 40% chance of a Fed rate cut by the year-end, which keeps a lid on any meaningful USD appreciation and acts as a tailwind for the non-yielding Gold. The lack of follow-through buying, however, warrants some caution before positioning for the resumption of the precious metal's recent move up from the March swing low, around the $4,100 mark. There isn't any relevant market-moving economic data due for release from the US, leaving the USD and the commodity at the mercy of fresh developments surrounding the US-Iran saga.
XAU/USD 1-hour chart
Gold bulls await sustained strength and acceptance above 100-hour SMA/$4,800
The XAU/USD pair struggles to capitalize on the intraday recovery beyond the 100-hour Simple Moving Average (SMA) or find acceptance above the $4,800 mark. Moreover, the Relative Strength Index (RSI) around 44 hints at fading upside momentum, while the Moving Average Convergence Divergence (MACD) indicator stays in negative territory with the line below its signal and a negative histogram. This reinforces the idea that sellers retain control unless the Gold can push decisively back over the nearby average.
The said SMA at $4,805.60 is the first and only clear resistance, and a sustained break above this barrier would be needed to ease the current downside bias and open the door for a stronger recovery. As long as the XAU/USD pair trades under the said barrier, rallies are likely to face selling interest rather than signal a durable bullish reversal.
(The technical analysis of this story was written with the help of an AI tool.)
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
- NZD/USD weakens to near 0.5865 in Monday’s early European session.
- Renewed tensions between the US and Iran weigh on the Kiwi.
- The New Zealand CPI and US Retail Sales reports will be the highlights on Tuesday.
The NZD/USD pair attracts some sellers to around 0.5865 during the early European session on Monday. The New Zealand Dollar (NZD) softens against the US Dollar (USD) amid heightened tensions between the United States (US) and Iran and the re-closing of the Strait of Hormuz.
On Sunday, Iran’s Foreign Ministry spokesman Esmail Baghaei stated that the US blockade of Iran’s ports and coastline is an act of aggression that violates the ceasefire. His comments came after Iran's fresh maritime threats in reaction to the US blockade, which completely closed the vital Hormuz Strait.
The annual New Zealand trade deficit was NZD 3.1 billion in March, compared to NZD 3.0 billion in February. Exports rose to a record high of NZD 7.94 billion in March, while Imports increased to NZD 7.25 billion.
Traders will keep an eye on New Zealand’s Consumer Price Index (CPI) inflation report for the first quarter (Q1), which is due on Tuesday. Any signs of hotter inflation in New Zealand could boost the Kiwi against the USD in the near term. On the USD’s front, the March Retail Sales will be in the spotlight.
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.
UOB economists Quek Ser Leang Lee and Sue Ann note that GBP/USD spiked to 1.3599 before dropping sharply and then sliding again on Monday. They see a chance of a test of 1.3450, with 1.3400 unlikely to be threatened. For the next one to three weeks, they expect the Pound to trade in a 1.3400–1.3600 range as earlier upside momentum has fizzled.
Pound-Dollar shifts into range trading
"GBP popped to a high of 1.3599 and then pulled back sharply to 1.3505. Although GBP closed largely unchanged at 1.3518 (-0.07%), it dropped sharply today."
"The increase in downward momentum is not enough to indicate a continued decline. However, there is a chance for GBP to test 1.3450. "
"A break below this level is not ruled out, but the major support at 1.3400 is unlikely to come under threat. On the upside, a breach of 1.3545 (minor resistance is at 1.3510) would mean that GBP is likely to range-trade instead of testing 1.3450."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- US Dollar Index holds firm due to the strengthening Fed's “higher-for-longer” policy stance amid persistent inflation.
- Fed’s Waller warns prolonged Middle East conflict raises inflation and employment risks.
- The US Dollar gains support from safe-haven demand amid escalating US–Iran tensions.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is experiencing volatility and holding gains around 98.30 during the Asian hours on Monday.
The DXY maintains its position against its major peers as markets price in a Federal Reserve (Fed) “higher-for-longer” stance, driven by persistent inflation concerns and Middle East tensions. Traders will likely observe Tuesday’s US Retail Sales data, which is expected to rise 1.3% month-on-month (MoM) in March after 0.6% in February.
Fed member Christopher Waller said on Friday that the break-even rate for the job market is currently likely around zero. As the longer Middle East war remains unresolved, inflation and job risks increase, Waller added. Meanwhile, San Francisco Fed President Mary Daly indicated that, at this point, she is observing whether higher oil prices are affecting the prices of other goods and services.
The Greenback also draws support from heightened safe-haven demand amid re-escalating United States (US)–Iran tensions. The Guardian reported on Monday that Iran’s Foreign Ministry spokesman Esmail Baghaei said the US blockade of Iran’s ports and coastline is an act of aggression that violates the ceasefire. Baghaei posted on social media, "By deliberately inflicting collective punishment on the Iranian population, it amounts to a war crime and crimes against humanity.”
Iranian authorities had briefly indicated on Friday that the Strait would reopen, but reversed the move on Saturday after US President Donald Trump refused to lift the blockade on Iranian ports. Iran’s military stated that the US breached the ceasefire by firing on one of Iran’s commercial vessels and warned it would soon retaliate against it.
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.
- The Euro appreciates against a weaker Pound as pressure on UK Prime Minister Starmer grows.
- Markets opened the week in a cautious tone with the US-Iran peace process on tenterhooks.
- German PPI rose 2.5% in March, its strongest reading since August 2022.
The Euro (EUR) advances on Monday against a somewhat weaker British Pound (GBP), as the UK Prime Minister, Keir Starmer, heads to the House of Commons to answer questions about former US ambassador Peter Mandelson’s vetting process.
Lord Mandelson’s appointment caused a scandal last year, due to his ties with convicted sex offender Jeffrey Epstein. Opposition parties are blaming Starmer for failing the security vetting for the position and calling on him to resign for misleading parliament on previous statements related to the appointment.
Cautious markets with the US-Iran peace process teetering
The market, meanwhile, remains cautious, with most currencies trading within previous ranges as the US and Iran exchange threats, with the second round of peace talks in question. The US has seized an Iranian cargo ship attempting to cross the Strait of Hormuz, and Iranian authorities said that they might not attend the peace talks scheduled for next Tuesday due to US violations of the ceasefire.
In Europe, German Producer Prices Index (PPI) data revealed that inflation at factory gates jumped 2.5% in March, its highest monthly reading in nearly four years, confirming the inflationary impact of the war in the Middle East. Year-on-year, the PPI contracted 0.2% following a 3.3% drop in February.
In the UK, the economic calendar is thin on Monday, with the focus on February’s employment report due on Tuesday. Jobless claimants are expected to have eased to a 21.4K increase, from 24.7K in January, while the Unemployment rate is seen steady at 5.2%, and wage inflation is easing somewhat. This will provide the Bank of England with some margin to keep interest rates on hold for some time.
Economic Indicator
Producer Price Index (MoM)
The Producer Price Index released by the Statistisches Bundesamt Deutschland measures the average changes in prices in the German primary markets. 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 EUR, whereas a low reading is seen as negative (or bearish).
Read more.Last release: Mon Apr 20, 2026 06:00
Frequency: Monthly
Actual: 2.5%
Consensus: 1.4%
Previous: -0.5%
Source: Federal Statistics Office of Germany
Economic Indicator
Producer Price Index (YoY)
The Producer Price Index released by the Statistisches Bundesamt Deutschland measures the average changes in prices in the German primary markets. 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 EUR, whereas a low reading is seen as negative (or bearish).
Read more.Last release: Mon Apr 20, 2026 06:00
Frequency: Monthly
Actual: -0.2%
Consensus: -
Previous: -3.3%
Source: Federal Statistics Office of Germany
MUFG’s Teppei Ino reviews Japanese Yen's (JPY) performans, with noting the USD/JPY pair briefly tested 159.86 before retreating on shifting risk sentiment. Comments from Japanese officials and Bank of Japan (BoJ) Governor Ueda reduced expectations for further BoJ rate hikes, leaving the Yen softer and USD/JPY back in the lower 159 area by mid‑week.
Yen softens as BoJ hike hopes ebb
"The pair briefly dropped to a low of 158.27 on 16 April after the G7 finance ministers and central bank governors' meeting, with markets focusing on remarks by Finance Minister Satsuki Katayama and Vice Minister of Finance for International Affairs Atsushi Mimura on close Japan-US coordination on exchange rates."
"However, yen buying did not last, and the pair soon rebounded as remarks by Katayama and others also helped push BoJ rate hike expectations lower. The USD/JPY subsequently recovered to the lower 159 range."
"Markets were also focused on BoJ Governor Kazuo Ueda's press conference on 17 April, but he did not signal any clear willingness to push ahead with rate hikes, leaving the yen slightly softer at the time of writing."
"Both the dollar and the yen were sold among G10 currencies again this week. The EUR/JPY rose to a fresh record high, while the AUD remained strong as rate hikes are already under way, pushing the AUD/JPY above its March high into the 114 range"
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Silver price declines to near $79.30 on the re-closure of the Strait of Hormuz.
- Iran closes Hormuz again in retaliation for Washington’s blockade.
- Renewed Mideast tensions have improved the US Dollar’s safe-haven demand.
Silver price (XAG/USD) is down 1.7% to near $79.30 during the early European trading session on Monday. The white metal faces selling pressure as Iran closes the Strait of Hormuz, a vital passage to almost 20% of global energy supply, again, as part of retaliation against the United States (US) continuous blockade of Iranian sea ports.
On Friday, Iran announced the complete opening of the Hormuz for all commercial ships after the ceasefire between Israel and Lebanon.
The closure of the Strait of Hormuz has resulted in a sharp increase in oil prices, with the WTI Oil price surging 3.7% to near $88.
Higher oil prices lead to de-anchoring global inflation expectations, a scenario that weighs on dovish central banks’ expectations, which eventually diminishes the appeal of non-yielding assets, such as Silver.
Meanwhile, the US Dollar (USD) ticks higher as the Hormuz closure and Iran’s denial of the resumption of negotiations with the US, have improved its safe-haven appeal. As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.15% higher to near 98.35. Technically, a higher US Dollar makes the Silver price an unfavorable risk-reward bet for investors.
Silver technical analysis
XAG/USD trades lower at around $79.30 as of writing. However, the white metal holds a constructive bullish bias as price stays above the 20-day Exponential Moving Average (EMA) at $76.85 and the rising border of the Ascending Triangle formation coming in around $76. This positioning suggests buyers retain control after rebounding from recent lows, while a mid-range Relative Strength Index (RSI) near 56 hints at steady, rather than stretched, upside momentum.
On the downside, immediate support is seen first at the upward-sloping border of the above-mentioned chart pattern around $76. A close below $76 would weaken the near-term bullish structure and expose the price towards the April 13 low of $72.61. Looking up, the spot could extend its upward trend towards the March 12 high of $87.45 if it manages a decisive breakout above the April 17 high of $83.06.
(The technical analysis of this story was written with the help of an AI tool.)
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.
Commerzbank’s Thu Lan Nguyen argues that in the short term EUR/USD gains are capped as markets may be overestimating the European Central Bank's (ECB) reaction to the latest inflation shock. She notes the Euro (EUR) and Pound (GBP) have held up better than in 2022 thanks to expectations of quicker tightening. Over the longer term, she highlights greater inflation and policy risks for the US Dollar (USD) versus the Euro.
Short-term cap, longer-term Dollar risk
"How will the fx markets develop in this environment? I think it makes sense to distinguish between the short and the longer term. In the short term – and we have already seen this to some extent – the focus is likely to be very much on the immediate reactions of the central banks."
"This time things look a little different. The euro, and alongside it the British pound, are holding up fairly well against the US dollar. This is probably because markets trust both the ECB and the Bank of England to have learned from the mistakes of four years ago and to react early to inflation risks."
"We have already expressed our doubts about market expectations for the ECB on several occasions, which is why we see the further upside potential in EUR/USD as limited. But that is only the short-term view. In the longer term, the pendulum could swing back again."
"Therefore, in the longer term, the wheat is likely to be separated from the chaff, and only those currencies will prove robust where inflation falls back towards the 2% target more quickly. We see substantial risks in particular for the dollar. Apart from inflation, which has recently been firmer anyway due to the significant increases in import tariffs, further attacks by the US government are likely to make it difficult for the US central bank to respond adequately to an inflation shock."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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