Forex News
- WTI rebounds on Wednesday after five straight days of losses.
- US-Iran talks show some progress, but traffic through the Strait of Hormuz remains heavily restricted.
- US crude inventories rise by more than expected in the latest EIA report.
West Texas Intermediate (WTI) Oil rebounds on Wednesday after five straight days of losses as traders assess the latest Middle East developments and US inventory data. At the time of writing, WTI trades around $92, up over 2.5% on the day, recovering from an intraday low of $88.27, its lowest level in more than two weeks.
US Secretary of State Marco Rubio said the meeting with Iran was “positive, but it was not a breakthrough.” He described the talks as “a continuation of previous discussions” and “largely an exchange of ideas and messages.”
Rubio's remarks follow indirect talks between US and Iranian officials on the sidelines of the United Nations General Assembly in New York on Tuesday. A senior Iranian official told Reuters on Wednesday that reopening the Strait of Hormuz and lifting the US blockade were discussed, adding that “many differences remain between the Iranian and US positions, but diplomacy continues.”
Saudi Arabia’s restart of its East-West pipeline has eased some supply concerns, but shipping through Hormuz is still severely restricted. Preliminary Kpler data showed three commodity vessels crossing on Tuesday, down from four on Monday and below the recent 10-day average of about 15, Reuters reported.
Against this backdrop, traders appear reluctant to push Oil much lower while supply disruptions continue to hang over the market, even as diplomatic talks resume.
Meanwhile, US crude inventories rose by 2.969 million barrels last week, according to the Energy Information Administration (EIA). Markets had expected a 0.7 million-barrel draw, following a 0.64 million-barrel decline the previous week.
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.
- Tehran is reviewing Washington’s response to its proposal aimed at ending hostilities.
- Reopening the Strait of Hormuz and lifting the US blockade were discussed during indirect talks on Tuesday.
- Iran identifies permanently ending hostilities and lifting the US naval blockade as its key priorities.
Iran is reviewing the United States’ (US) response to its proposal aimed at ending hostilities, a senior Iranian official told Reuters on Wednesday, signaling that diplomatic efforts between Tehran and Washington remain underway.
According to the official, reopening the Strait of Hormuz and lifting the US blockade were among the issues discussed during indirect talks between Iran and the US on Tuesday.
The Iranian official also said that Tehran’s key priorities are permanently ending hostilities and securing the lifting of the US naval blockade.
Key takeaways
Tehran is reviewing US response to its proposal to end hostilities.
During indirect talks with US on Tuesday reopening hormuz strait and lifting US blockade were discussed.
Iran's key priorities are permanently ending hostilities and lifting US naval blockade.
Still many differences remain between Iran, US positions, but diplomacy continues.
Market reaction
Market reaction remains relatively contained, with the US Dollar Index (DXY) trimming some gains but still up 0.47% on Wednesday, slightly above 101.00, while West Texas Intermediate (WTI) US Oil also pulls back but remains 1.47% higher at around $90.80 per barrel.
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.
- EUR/USD slides toward 1.1400 as strong US PMI data lifts the US Dollar.
- Traders raise their bets on an October Fed hike after the PMI release.
- ECB rate hike prospects offer the Euro little support for now.
EUR/USD extends its intraday decline on Wednesday as stronger-than-expected US business activity data reinforces expectations of another Federal Reserve (Fed) rate hike and lifts the US Dollar (USD). At the time of writing, the pair trades around 1.1401, near levels last seen in late July.
The preliminary S&P Global US Composite Purchasing Managers’ Index (PMI) rose to 58.4 in September from 56.0 in August. Manufacturing PMI climbed to 57.0, beating the 53.5 forecast, while Services PMI rose to 58.7 against expectations of 56.0. Both readings also improved from August. The survey showed a sharp rise in prices paid by businesses, adding to inflation concerns.
The US Dollar was already drawing buyers after the Fed raised rates by 25 basis points last week and signalled that another increase could follow as it works to bring inflation back to its 2% target. The strong PMI figures give policymakers more room to focus on inflation. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades around 101.00, its highest level since July 31.
Traders now see a 68% chance of a hike at the October meeting, up from 53% before the PMI release, according to the CME FedWatch Tool. Fed Governor Michael Barr added to the hawkish tone on Wednesday. Barr said US growth is strong and the labour market is solid, while inflation is not clearly moving back towards the 2% target. Barr added that more rate hikes would likely be needed to bring inflation down in a timely manner.
Eurozone PMI data released earlier on Wednesday also beat forecasts and remain in expansion territory, supporting the case for another European Central Bank (ECB) rate hike. ECB policymaker Joachim Nagel said rates are still in neutral territory and that a move into “mild restrictive territory” cannot be ruled out. “I am not relaxed, core inflation is still too high,” he said, though he has not seen significant second-round effects from higher Oil prices so far.
Middle East developments remain in focus. A senior Iranian official said reopening the Strait of Hormuz and lifting the US blockade were discussed during indirect talks with the US on Tuesday. Tehran is reviewing Washington’s response to its proposal to end hostilities.
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.
Societe Generale’s Dev Ashish reviews Brazil’s updated macro-fiscal projections from the Finance Ministry, highlighting lower GDP forecasts for 2026-27, persistent household debt-service burdens and a less supportive external backdrop. The report notes upside risks to inflation from Oil, El Niño and supply factors, and argues Brazil faces a more challenging rebalancing phase as fiscal support fades.
Finance Ministry revises growth and inflation
"Brazil's Finance Ministry yesterday released its updated macro-fiscal forecasts, adopting a more cautious view on the near-term outlook. The ministry lowered its 2026 GDP growth forecast to 2.0% (in line with our forecast) from 2.3% and its 2027 forecast to 2.3% from 2.5% (SGe: 1.5%), citing the ongoing effects of restrictive monetary policy, weaker services activity and a softer industrial outlook."
"The report argues that Brazil is undergoing a gradual cyclical slowdown (rather than a sharp downturn) as services and manufacturing are feeling the effects of high borrowing costs. Household consumption is also increasingly constrained by record debt-service burdens. Although household indebtedness has stabilised, debt-service payments reached a historical high of 28.9% of income, limiting the pass-through of strong wage growth and a tight labour market into consumer spending."
"The report highlights a more challenging external backdrop. Higher oil prices, renewed Fed tightening, elevated global bond yields and China's continued economic slowdown all represent headwinds for Brazil. At the same time, China's shift toward exporting higher-tech manufactured goods such as EVs, batteries and semiconductors is increasing competitive pressure on global industry."
"The government revised its 2026 IPCA inflation forecast down to 4.9% from 5.1% but raised it for 2027 from 3.6% to 3.8%. While inflation has eased to 4.2% yoy in August, helped by lower food, fuel and electricity prices, the Finance Ministry continues to see upside risks from higher oil prices, fuel pass-through, food prices (reflecting potential El Niño disruptions to agricultural production along with fertiliser supply risks) and a potential reversal in the livestock cycle that would not only lead to higher inflation in the coming months, but could also have some lingering impact through 2027."
"The government's assumption of a moderate growth recovery in 2027 appears optimistic. With fiscal support likely to fade materially after the election, agriculture facing greater weather-related risks, and households burdened by elevated debt-servicing costs, we see growth slowing more sharply (SGe: 1.5%) than the government expects in 2027."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Federal Reserve (Fed) Governor Michael Barr said on Wednesday that the central bank will likely need to raise interest rates further to ensure a timely return to the 2% inflation target.
Fed’s Barr flags need for more hikes as inflation risks rise
Fed’s Barr delivered a distinctly hawkish message, with an FXS Speechtracker score of 8/10, above the 7/10 historical average and signaling a stronger tightening bias relative to the established baseline. The assertion that “further rate hikes [are] likely needed” and that risks to achieving 2% inflation have increased, while labor market risks have receded, underscores a clear prioritization of inflation control over employment concerns. The admission that the Fed was “out of position” and needed to “recalibrate” policy, combined with comments that inflation is not clearly trending toward target amid strong growth and a solid labor market, reinforces expectations for additional policy tightening and supports the Dollar.
The FXS Fed Sentiment Index rose by 0.42 points to 148.81, firmly in hawkish territory and consistent with the elevated FXS Speechtracker score. This move signals a meaningful hawkish shift in perceived Fed policy stance, likely to underpin Dollar strength against lower-yielding currencies and keep rate-sensitive assets on the defensive.
Market reaction
The US Dollar (USD) Index preserves its bullish momentum following these comments and trades at its highest level since late July above 101.00, rising 0.5% on the day.
Key takeaways
"Risks to achieving 2% inflation have increased, risks to labor market have receded."
"Going into recent policy meeting, Fed needed to recalibrate monetary policy to reflect risks."
"Fed was out of position, made an adjustment in the right direction."
"Inflation is not clearly trending toward target in a timely way; economic growth is strong, labor market is solid."
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.
- AUD/USD falls more than 1% on Wednesday, weighed down by a stronger US Dollar.
- US private-sector activity accelerates sharply in September, while Australian activity data disappoints.
- Strong US economic data reinforces expectations of another Federal Reserve interest rate hike.
AUD/USD tumbles 1.07% on Wednesday and trades around 0.7040 at the time of writing, pressured by a combination of a stronger US Dollar (USD) and disappointing activity data from Australia.
The Australian Dollar (AUD) started losing ground following the release of preliminary S&P Global Purchasing Managers Index (PMI) data for September earlier in the day. Australia's Composite PMI fell to 50.8 from 52.7 in August, remaining only slightly above the 50 threshold level separating expansion from contraction.
The details of the report show a contraction in manufacturing activity and a slowdown in the services sector. The weaker figures appear to temper expectations regarding the Reserve Bank of Australia's (RBA) tightening path, with the Australian central bank expected to raise its policy rate by 25 basis points next week.
Selling pressure on AUD/USD intensified following the release of significantly stronger US economic data. The United States (US) S&P Global Composite PMI rose to 58.4 in September from 56 in August, pointing to a marked acceleration in private-sector activity.
The US Manufacturing PMI climbed to 57, well above the 53.5 forecast, while the Services PMI rose to 58.7 compared with expectations of 56. Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, noted that US business activity is expanding at its fastest pace in more than five years.
The release provided another boost to the US Dollar. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, gains 0.53% and trades around 101.05 after reaching a fresh two-month high.
The robust data also strengthens expectations that the Federal Reserve (Fed) still has room to raise interest rates further. The US central bank increased its policy rate by 25 basis points last week, bringing the target range to 3.75%-4%, while its latest projections point to at least one additional rate hike this year.
According to the CME FedWatch tool, markets now see around a 68% chance of another rate hike in October, up from around 55% a day earlier. US Treasury yields also remain elevated, with the ten-year yield hovering around 5.06%, providing additional support to the US Dollar against the Australian Dollar.
The combination of robust US activity, elevated Treasury yields and softer Australian economic data therefore keeps AUD/USD under significant pressure on Wednesday.
AUD/USD technical analysis
In the four-hour chart, AUD/USD trades at 0.7039, keeping a bearish near-term tone as it holds beneath both the 100-period simple moving average (SMA) at 0.7157 and the 200-period SMA at 0.7137. The pair has slipped back toward the lower end of the recent range, while the Relative Strength Index (14) at 26 suggests oversold conditions that may slow the downside but do not yet negate the prevailing pressure.
On the downside, immediate support is seen at the nearby horizontal level at 0.7020, ahead of a deeper floor at 0.6965. On the topside, initial resistance emerges at 0.7075, with the 200-period SMA at 0.7137 and the horizontal barrier at 0.7140 forming a dense cap, followed by the 100-period SMA at 0.7157, which would need to be reclaimed to ease the current bearish bias.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
TD Securities’ Ryan McKay and Bart Melek note West Texas Intermediate (WTI) Crude prices are holding relatively strong despite intense headline risk and elevated speculative positions, with CTAs (Commodity Trading Advisors) adding back length rather than cutting exposure. They highlight a double-edged energy market where either higher refiner runs re-tighten Crude or increased flows cap the rally, leaving refined product prices to rise until demand destruction emerges.
CTAs add length despite headline noise
"Crude is prone to headlines amid elevated spec positions."
"The elevated flows through the Strait point to a loss of Iranian leverage, which suggests they could be more open to making a deal than previously, but it also increases the probability of escalation in an attempt to reassert control."
"We remain skeptical of any deal headlines until there is actually something concrete, but note as spec positioning becomes more elevated, the more prone the market is to the daily headline flow."
"We continue to see the current state of the energy market as a double-edged sword, as either increased refiner runs ease product market tightness but re-tighten crude, or the crude rally succumbs to increased flows without increased refiner uptake, leaving product markets to continue higher until demand destruction is found."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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