Forex News
- Silver price edges higher to around $82.20 in Friday’s early Asian session.
- No signs of easing as Iran war continues to boost the Silver price.
- The US February employment report will be in the spotlight later on Friday.
Silver price (XAG/USD) holds positive ground near $82.20 during the early Asian session on Friday. The ongoing US-Israeli campaign against Iran provides safe-haven support, boosting the white metal. Traders await the release of the key US employment report for February for fresh impetus.
Iran launched a fresh wave of missile and drone strikes across the Gulf on Thursday, with attacks reported in the United Arab Emirates, Bahrain, Qatar, and Kuwait, per Bloomberg. US President Donald Trump said that Iranian officials reached out him in an attempt to reach an agreement to end the war, but he insisted it was too late and that the US was pushing to destroy Iran.
Meanwhile, Iranian Foreign Minister Abbas Araghchi stated that his country hadn’t requested a ceasefire and had no intention of negotiating. Rising tensions between the US and Iran and fears of a prolonged war in the Middle East could boost a safe-haven asset such as Silver in the near term.
Traders will closely monitor the US February employment data on Friday for more hints about the US interest rate path. The US Nonfarm Payrolls (NFP) is expected to increase by 59,000 jobs in February, while the Unemployment Rate is projected to hold steady at 4.3%. Any signs of improvement in the US labor market could lift the US Dollar (USD) and undermine the USD-denominated commodity price.
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.
- Japanese Yen may struggle amid Japan’s economic challenges, as the Iran war heightens external risks.
- BoJ’s Kazuo Ueda warned the Middle East conflict may hurt Japan’s economy; Ryozo Himino signaled policy adjustments amid volatility.
- US Dollar strengthens as Fed officials consider further rate hikes if inflation stays above target.
USD/JPY edges lower after posting modest gains in the previous session, trading around 157.40 during the Asian hours on Friday. However, the pair’s downside may remain limited as the Japanese Yen (JPY) faces pressure from Japan’s ongoing economic challenges, including subdued growth and elevated inflation driven by external risks. These conditions are prompting traders to reassess expectations for the Bank of Japan’s (BoJ) rate policy.
BoJ Governor Kazuo Ueda warned that the Middle East conflict could materially affect Japan’s economy, signaling that the central bank may keep interest rates on hold for an extended period. Meanwhile, BoJ board member Ryozo Himino said the central bank would still make necessary policy adjustments amid market volatility, indicating that rates could move toward neutral if underlying inflation accelerates toward the BoJ’s target.
The USD/JPY pair may find support as the US Dollar (USD) strengthens, with Federal Reserve (Fed) officials continuing to consider the possibility of further rate hikes if inflation remains above target, despite calls from some policymakers who argue that the time to begin rate cuts has arrived.
Market participants are also awaiting Friday’s Nonfarm Payrolls (NFP) report, where consensus expectations are around 59K for February, following January’s above-trend reading of 130K. A weaker-than-expected print could revive expectations for Fed rate cuts and weigh on the Greenback.
The US Dollar is also drawing support from rising geopolitical tensions in the Middle East. Iran launched a new wave of missile and drone strikes across the Gulf on Thursday, with attacks reported in the United Arab Emirates, Bahrain, Qatar, and Kuwait.
Iranian Foreign Minister Abbas Araghchi said Tehran has not sought a ceasefire and has no intention of negotiating, while Iran’s Islamic Revolutionary Guard Corps warned that retaliatory strikes would intensify in the coming days.
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.
Federal Reserve Bank of Chicago President Austan Goolsbee said on Friday that the Federated structure of the central bank has worked well, adding that Fed independence is critically important to controlling inflation.
Key quotes
Institutions facing a crisis of trust.
Federated structure of Federal Reserve has worked well.
Everyone on Fed takes the job very seriously.
Central bank independence is critically important to controlling inflation.
Market reaction
At the time of press, the US Dollar Index (DXY) is down 0.03% on the day at 99.01.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- WTI price climbs to near $78.10 in Friday’s early Asian session.
- A widening conflict between the US, Israel, and Iran severely disrupts global energy supplies, boosting the WTI price.
- The EIA reported a 3.475 million barrel build last week.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $78.10 during the early Asian trading hours on Friday. The WTI gains momentum following an 8.5% single-day gain, the largest since 2020. The rally of black gold is bolstered by an escalating conflict between the United States (US) and Iran.
Growing disruption to global oil supplies caused by the US-Israeli war with Iran could boost the WTI price in the near term. Iran on Tuesday has effectively halted traffic in the Strait of Hormuz, where about one-fifth of global oil shipments pass.
Furthermore, attacks on oil tankers continued on Thursday in the Gulf, as the Bahamas-flagged crude oil tanker Sonangol Namibe reported its hull was breached after a blast near Iraq's port of Khor al Zubair.
“Crude oil markets remained on edge as they face ongoing risks to supply following the attacks in the Middle East, and concerns are centred on the flow of supply through the Strait of Hormuz," said ANZ analysts.
On the other hand, bearish inventory reports from the Energy Information Administration (EIA) might cap the upside for the WTI. According to the EIA weekly report, crude oil stockpiles in the US for the week ending February 27 climbed by 3.475 million barrels, compared to a rise of 15.989 million barrels in the previous week. The market consensus was for 2.2 million barrels.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
US Interior Secretary Doug Burgum said that the US President Donald Trump administration is weighing a range of options for addressing the spike in oil and gasoline prices amid the war in Iran, Bloomberg reported on Friday.
Trump huddled with Burgum and other top advisers to consider a range of possibilities Tuesday before announcing plans to provide insurance guarantees and naval escorts to ensure safe passage for oil tankers and other vessels through the Strait of Hormuz.
Other options include releasing crude from the country’s emergency oil reserve, potentially in coordination with other nations to maximize effect. However, administration representatives have not yet taken any action to access the Strategic Petroleum Reserve.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 4.95% on the day at $78.30.
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.
US President Donald Trump said that Iranian officials reached out him in an attempt to reach an agreement to end the war, but he insisted it was too late and that the US is pushing to completely destroy Iran.
“They’re calling. They’re saying, how do we make a deal?” Trump said in remarks to reporters. “I said, you’re being a little bit late, and we want to fight now more than they do.”
Market reaction
At the time of writing, the Gold price (XAU/USD) is trading 0.80% lower on the day to trade at $5,093. Meanwhile, the West Texas Intermediate (WTI) is up 4.57% on the day at $78.00.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- Gold price falls to around $5,085 in Friday’s early Asian session.
- Conflicts in the Middle East have pushed up oil and gas prices, stoking fears of renewed inflation.
- Iran intensifies attacks across the Gulf, which might help limit the Gold’s losses.
Gold price (XAU/USD) tumbles to near $5,085 during the early Asian session on Friday. The precious metal loses ground amid a stronger US Dollar (USD). The US employment report for February will take center stage later on Friday.
Surging oil and gas prices due to Middle East conflicts have fueled fresh inflation fears, causing traders to scale back bets on further easing by the Fed. This, in turn, lifts the Greenback and weighs on the USD-denominated commodity price.
“The recent volatility does not mean demand for gold as a safe-haven asset has weakened,” said Morgan Stanley analysts. “The slowdown is largely being driven by two forces: a stronger US dollar and investors seeking liquidity.”
However, escalating tensions in the Middle East could boost a traditional safe-haven such as Gold. Iran launched a fresh wave of missile and drone strikes across the Gulf on Thursday, with attacks reported in the United Arab Emirates, Bahrain, Qatar, and Kuwait.
Iranian Foreign Minister Abbas Araghchi said that Tehran hadn’t asked for a ceasefire and had no intention to negotiate, and Iran’s Islamic Revolutionary Guard Corps said retaliatory attacks will intensify in the coming days.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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