Forex News
Euro (EUR) is under mild downward pressure and could edge lower and test 1.1600; a clear break below this level is unlikely. In the longer run, the advance in EUR from late last month has ended; EUR is likely to trade in a range between 1.1580 and 1.1685, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.
EUR is likely to trade in a range between 1.1580 and 1.1685
24-HOUR VIEW: "Two days ago, EUR closed slightly lower by 0.05% at 1.1636. Yesterday, we pointed out that 'the price action did not result in any increase in either downward or upward momentum'. We expected EUR to 'trade between 1.1615 and 1.1665'. We were not wrong, even though EUR traded within a narrower range than expected (1.1614/1.1657), closing slightly lower at 1.1625 (-0.09%). This time around, there has been a slight increase in downward momentum. Today, EUR could edge lower and test 1.1600. Given the mild downward momentum, a clear break below this level is unlikely. The major support at 1.1580 is also unlikely to come under threat. Resistance is at 1.1640; a breach of 1.1660 would indicate that the current mild downward pressure has eased."
1-3 WEEKS VIEW: "We have held a positive EUR stance since late last month. In our most recent narrative from two days ago (08 Dec, spot at 1.1645), we indicated that 'upward momentum is starting to slow, and if EUR breaks below 1.1615 (‘strong support’ level), it would mean that the advance in EUR has come to an end'. EUR dipped to 1.1615 two days ago, and to 1.1614 yesterday. While our ‘strong support’ level has not been clearly breached yet, upward momentum has faded. From here, we expect EUR to trade in a range, most likely between 1.1580 and 1.1685."
European Central Bank (ECB) policymaker and French central bank governor, Francois Villeroy, said during European trading hours on Wednesday that the wise thing is to hold interest rates steady at their current level.
Market reaction
The impact of ECB Villeroy’s comments appears to be insignificant on Euro (EUR) as investors are also anticipating the Eurozone central bank to maintain a neutral stance on interest rates in the near term. As of writing, the EUR/USD trades 0.12% higher to near 1.1640.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
- The Japanese Yen attracts some buyers and snaps a three-day losing streak against the USD.
- Bets for an imminent BoJ rate hike next week and the cautious market mood benefit the JPY.
- Dovish Fed expectations weigh on the USD and USD/JPY ahead of the key central bank event.
The Japanese Yen (JPY) remains on the front foot against a broadly weaker US Dollar (USD) through the early European session on Wednesday, though it lacks bullish conviction. Japan’s Corporate Goods Price Index exceeded expectations and reaffirmed bets for an imminent rate hike by the Bank of Japan (BoJ). This, along with the cautious market mood, assists the safe-haven JPY to recover slightly from a two-week low, touched against its American counterpart on Tuesday.
However, concerns about expansionary fiscal measures in Japan and growth worries hold back the JPY bulls from placing fresh bets. Investors also seem reluctant and opt to wait for the outcome of a two-day FOMC meeting later today for more cues about the future rate-cut path. In the meantime, bets for more interest rate cuts by the Fed keep the US Dollar (USD) depressed near its lowest level since late October and might continue to act as a headwind for the USD/JPY pair.
Japanese Yen struggles to capitalize on modest intraday move up despite hawkish BoJ bets
- Data published by the Bank of Japan on Wednesday showed that the Corporate Goods Price Index rose 2.7% YoY in October, down slightly from 2.8% in the previous month. The data, although it was in line with consensus estimates, indicated that inflation in Japan remains well above the historic levels.
- Moreover, BoJ Governor Kazuo Ueda reiterated on Tuesday that the likelihood of the central bank's baseline economic and price outlook materialising had been gradually increasing. This backs the case for further BoJ policy normalization and offers some support to the Japanese Yen during the Asian session.
- Ueda added that the BoJ plans to ramp up government bond buying if long-term interest rates rise sharply. In fact, the yield on the benchmark 10-year Japanese government bond touched an 18-year high this week on the back of Japanese Prime Minister Sanae Takaichi's big spending plans to boost sluggish growth.
- Japan's revised Gross Domestic Product report released this week revealed that the economy shrank 0.6% in the third quarter compared with initial estimate of 0.4%. On a yearly basis, the economy contracted by 2.3%, or its fasted pace since Q3 2023, vs a fall of a 2.0% expected and 1.8% reported originally.
- Nevertheless, traders are still pricing in over a 75% chance that the BoJ will raise interest rates at its upcoming policy meeting on December 18-19. This marks a significant divergence in comparison to expectations for further policy easing by the US Federal Reserve and benefits the lower-yielding JPY.
- The US central bank is expected to lower borrowing costs by 25 basis points at the end of a two-day policy meeting later today. Hence, traders will scrutinize updated economic projections and Fed Chair Jerome Powell's comments during the post-meeting presser for more cues about the future rate-cut path.
- The outlook will play a key role in influencing the near-term US Dollar price dynamics and provide some meaningful impetus to the USD/JPY pair. The market attention will then shift to the BoJ policy meeting next week, which should help determine the next leg of a directional move for the currency pair.
USD/JPY bullish bias seems intact; overnight breakout through 155.30 confluence remains in play
The overnight breakout through the 155.30 confluence – comprising the 100-hour Simple Moving Average (SMA) and the top end of a short-term descending trend-channel – was seen as a key trigger for the USD/JPY bulls. Furthermore, oscillators on hourly and daily charts are holding in positive territory and back the case for a further near-term appreciating move. Some follow-through buying beyond the 157.00 round figure will reaffirm the constructive outlook and lift spot prices to the 157.45 intermediate hurdle en route to the 158.00 neighborhood, or a multi-month peak, touched in November.
On the flip side, any further slide towards the 156.00 mark could be seen as a buying opportunity. This, in turn, should limit the downside for the USD/JPY pair near the 155.35-155.30 confluence resistance breakpoint, now turned support. However, some follow-through selling, leading to a subsequent weakness below the 155.00 psychological mark, might negate the positive outlook and shift the near-term bias in favor of bearish traders.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.Next release: Wed Dec 10, 2025 19:00
Frequency: Irregular
Consensus: 3.75%
Previous: 4%
Source: Federal Reserve
European Central Bank (ECB) Governing Council (GC) member and Lithuanian central-bank chief, Gediminas Simkus, said in an interview in Vilnius during the European trading session on Wednesday that there is no need of monetary policy adjustments currently as inflationary pressures is close to the central bank’s 2% target.
Additional remarks
No need to change rates with inflation at target.
Data suggests inflation and GDP risks are fairly balanced.
I feel December rate decision won't be difficult.
Market reaction
ECB Simkus’s comments are almost similar to what other policymakers have guided lately. Therefore, the impact of his comments appears to be insignificant on the Euro (EUR). At the press time, the EUR/USD trades 0.12% higher to near 1.1640 amid slight weakness in the US Dollar (USD) ahead of the Federal Reserve’s (Fed) monetary policy.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
In its latest review report on the Chinese economy published on Wednesday, the International Monetary Fund (IMF) raised the dragon nation’s economic growth for this year and the next.
Key highlights
China's low inflation relative to trading partners has led to real exchange rate depreciation.
China's key policy priority is to transition to a consumption-led growth model.
China should transition away from an over reliance on exports and investment with greater urgency.
Raises China’s 2026 economic growth forecast to 4.5% from 4.2%.
Raises China’s 2025 economic growth forecast to 5.0% from 4.8%.
Upgrade attributed to macroeconomic stimulus, lower-than expected tariffs on Chinese goods.
Advises balance sheet cleanup in the general government, property and financial sectors.
Advises more urgent and forceful expansionary macroeconomic policies, reforms to reduce elevated household savings.
Warns imbalances in China’s economy remain significant, urges shift to consumption-led model.
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.
West Texas Intermediate (WTI) Oil price advances on Wednesday, early in the European session. WTI trades at $58.28 per barrel, up from Tuesday’s close at $58.21.
Brent Oil Exchange Rate (Brent crude) is also up, advancing from the $61.88 price posted on Tuesday, and trading at $61.95.
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.
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