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According to a Gulf source, Oman presented a proposal for a joint regional mechanism to Iran to manage the Strait of Hormuz, a vital passage for almost 20% of the global energy supply, with voluntary fees, Reuters report.
Additional remarks
Omani proposal has regional backing.
Proposal is based on strait of Malacca, where those who use Strait voluntarily contribute to fund navigation, environmental protection, search and rescue, gulf source says
Iran would not exercise sole control of Strait of Hormuz under the proposal.
Market reaction
The WTI Oil price faces slight selling pressure after the news release. At press time, the WTI Oil price trades 1.1% lower to near $80.30.
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/GBP holds gains around 0.8550, with bulls testing three-week highs.
- The Euro is drawing support from lower Oil prices and expectations of further ECB tightening.
- An uncertain BoE monetary policy and concerns about the UK's public finances are weighing on the Pound.
The Euro (EUR) consolidated gains, just below three-week highs against the British Pound (GBP) on Tuesday, trading sideways at the mid-range of the 0.8550s at the time of writing. The risk-off mood is weighing on Euro rallies, but GBP bulls are also subdued amid concerns about the UK government’s fiscal policy and caution ahead of the Bank of England’s (BoE) monetary policy meeting, due later this week.
A pause in hostilities between the US and Iran and the ensuing decline in Oil prices is underpinning the common currency, which is also drawing some support from the hawkish stance of last week’s European Central Bank (ECB) monetary policy.
The ECB left interest rates on hold, following a 25-basis-point hike in June, but signalled a further rate hike in September, as high energy prices keep pushing inflationary pressures higher.
BoE seen tolerating 3% inflation as risks stay below second-round threshold
In the UK, the focus this week shifts to the BoE, which is widely expected to leave its benchmark Bank Rate unchanged at 3.75%. Investors will look at the number of hawkish dissenters within the committee, and Governor Bailey's comments at the press conference to confirm market expectations that the bank will hike rates in the last quarter of the year.
Economists at ING are sceptical about that posibility, though, as the Bank of England’s updated projections are set to show inflation running “fairly close to 3% in the second half of this year and into early next,” a level they argue remains comfortably within the Bank’s tolerance. In this context, their base case is that "the Bank stays on hold through 2026,” with policy easing pushed well into the next cycle. ING says it “currently project[s] two rate cuts from the spring of 2027,” but emphasises that this path is “contingent on there being no material fiscal stimulus at the Autumn Budget.”
Beyond that, the Pound has been on the back foot with investors wary about the financing for the new Prime Minister Andy Burnham’s spending pledges. Burnham announced caps on transport fares and electricity bills, triggering market concerns about further strains on public finances, a very sensitive issue in the UK after Liz Truss's fiasco in 2022.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Commerzbank strategist Charlie Lay, notes Brent Oil tumbled 8.7% to USD 88.36, reversing much of last week’s surge as US–Iran tensions eased and markets priced in de-escalation. Lay stress that shipping through the Strait of Hormuz remains negligible, so the move mainly reflects expectations rather than an actual restoration of global Oil and LNG flows.
Oil drop driven by de-escalation hopes
"The main theme overnight was the sharp decline in oil prices as the pause in US-Iran hostilities extended into a third day."
"Brent crude plunged 8.7% to USD88.36, the largest one-day decline in more than three months, reversing much of last week's 9.9% surge."
"The Strait accounts for around one-fifth of global oil and LNG supplies before the conflict."
"This suggests that the sharp decline in oil prices largely reflects expectations of de-escalation rather than an actual restoration of energy flows."
"The sharp fall in oil prices has eased some of the immediate pressure on the Fed."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/USD slides to the monthly low near 1.1362 amid caution ahead of the Fed’s policy.
- Investors await German and Eurozone preliminary HICP data for July.
- ECB’s Kazimir stresses the need for at least one interest rate hike amid high inflationary pressures.
The Euro (EUR) falls to its monthly low at around 1.1362 against the US Dollar (USD) during the early European trading session on Tuesday. The major currency pair weakens as the US Dollar extends gains amid caution ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday.
At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades marginally higher, closer to its monthly high of around 101.59.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.24% | 0.34% | 0.05% | 0.22% | 0.48% | 0.66% | 0.37% | |
| EUR | -0.24% | 0.08% | -0.19% | -0.02% | 0.25% | 0.42% | 0.13% | |
| GBP | -0.34% | -0.08% | -0.39% | -0.07% | 0.17% | 0.33% | 0.04% | |
| JPY | -0.05% | 0.19% | 0.39% | 0.16% | 0.43% | 0.61% | 0.23% | |
| CAD | -0.22% | 0.02% | 0.07% | -0.16% | 0.24% | 0.44% | 0.15% | |
| AUD | -0.48% | -0.25% | -0.17% | -0.43% | -0.24% | 0.17% | -0.12% | |
| NZD | -0.66% | -0.42% | -0.33% | -0.61% | -0.44% | -0.17% | -0.29% | |
| CHF | -0.37% | -0.13% | -0.04% | -0.23% | -0.15% | 0.12% | 0.29% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
In the policy meeting, the Fed is highly expected to leave interest rates unchanged in the range of 3.50%-3.75%. The CME FedWatch tool shows a 62% chance that the Fed will maintain the status quo.
Investors will pay close attention to the Fed’s monetary policy statement and Chairman Kevin Warsh’s press conference to get fresh cues regarding inflation and the economic outlook. The Fed is unlikely to deliver any remarks regarding the monetary policy outlook, as Warsh said in its last policy press conference that “so-called forward guidance is not well-suited in the current policy juncture”.
The CME FedWatch tool shows that the odds of the Fed delivering an interest rate hike in the next policy meeting in September are 80.8%.
On the Eurozone front, investors await the German and Eurozone preliminary Harmonized Index of Consumer Prices (HICP) data for July, which will be released on Thursday and Friday, respectively.
Investors will closely track the inflation data as it is expected to significantly influence European Central Bank (ECB) interest rate expectations. On Monday, ECB Governing Council member and Governor of the National Bank of Slovakia (NBS), Peter Kazimir, said that at least one interest rate hike will be needed to contain elevated inflationary pressures.
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.
- AUD/USD meets with a fresh supply as geopolitical risks remain supportive of a bullish USD undertone.
- Bulls shrug off RBA Governor Bullock’s comments as the focus remains on the FOMC policy meeting.
- The mixed technical setup warrants some caution before placing aggressive directional bets on the pair.
The AUD/USD pair attracts some follow-through selling following the previous day's failure to find acceptance above the 0.7000 psychological mark and weakens to the 0.6970 area during the Asian session on Tuesday. Spot prices move little in reaction to Reserve Bank of Australia (RBA) Governor Michele Bullock’s comments and remain confined in a familiar range held over the past two weeks or so.
The US Dollar (USD) sticks to its bullish undertone as the optimism over a potential US-Iran diplomacy to end a five-month-old conflict fades after Saudi Arabia, Jordan and Iraq reported drone attacks on Monday. This keeps geopolitical risk premium in play and acts as a tailwind for the safe-haven Greenback, exerting some downward pressure on the AUD/USD pair. Traders, however, might refrain from placing aggressive bets ahead of the crucial two-day FOMC policy meeting, starting later today.
The recent repeated failures to break through the 38.2% Fibonacci retracement level of the May-June downfall suggest that the recovery from the 200-day Simple Moving Average (SMA) has run out of steam. That said, the Moving Average Convergence Divergence (MACD) histogram remains marginally positive while the MACD line stays above the signal line, hinting that bullish momentum persists even as the neutral Relative Strength Index (RSI) suggests only modest directional conviction.
Hence, it will be prudent to wait for some follow-through selling below the 23.6% Fibo. level before placing fresh bearish bets on the AUD/USD pair and positioning for a retest of the 200-day SMA at 0.6904. This is followed by the 0.6868 Fibonacci anchor, which reinforces a deeper structural floor should a corrective pullback unfold. On the topside, initial resistance is aligned with the 38.2% Fibo. retracement at 0.7024 ahead of the 50% retracement at 0.7073 and then 0.7121 at the 61.8% Fibo. level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
AUD/USD daily chart
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.05% | 0.01% | 0.02% | 0.02% | 0.36% | 0.18% | 0.00% | |
| EUR | -0.05% | -0.03% | -0.06% | -0.06% | 0.32% | 0.15% | -0.03% | |
| GBP | -0.01% | 0.03% | 0.00% | 0.02% | 0.37% | 0.19% | 0.03% | |
| JPY | -0.02% | 0.06% | 0.00% | -0.00% | 0.34% | 0.17% | 0.02% | |
| CAD | -0.02% | 0.06% | -0.02% | 0.00% | 0.36% | 0.16% | 0.02% | |
| AUD | -0.36% | -0.32% | -0.37% | -0.34% | -0.36% | -0.16% | -0.34% | |
| NZD | -0.18% | -0.15% | -0.19% | -0.17% | -0.16% | 0.16% | -0.15% | |
| CHF | -0.01% | 0.03% | -0.03% | -0.02% | -0.02% | 0.34% | 0.15% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
- EUR/JPY could find primary resistance around the rising wedge top at 186.90.
- The 14-day Relative Strength Index of 57.46 indicates moderate bullish momentum.
- The primary support lies at the nine-day EMA of 186.01.
EUR/JPY holds ground after two days of losses, trading around 186.20 during the Asian hours on Tuesday. The currency cross is holding a bullish near-term bias as it trades above both the nine-period and 50-period Exponential Moving Averages (EMAs), keeping the broader uptrend supported.
The 14-day Relative Strength Index (RSI) at 57.46 leans to the bullish side without yet signaling overbought conditions, suggesting buyers still retain control while upside momentum remains moderate. However, the daily chart technical analysis shows that the EUR/JPY cross is remaining within a rising wedge, indicating a strong bearish reversal risk.
The EUR/JPY cross could rise toward the upper boundary of the rising wedge around 186.90. Further advances could support the currency cross to target the all-time high of 187.95, which was recorded on April 17.
On the downside, the initial support lies at the nine-day EMA of 186.01, followed by the lower boundary of the rising wedge around 185.50 and the 50-day EMA at 185.33. A break below this confluence support zone could cause a bearish emergence and put downward pressure on the EUR/JPY cross to navigate the region around the five-month low of 181.87, recorded on March 16, and the seven-month low of 180.81.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro Price Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | -0.01% | 0.00% | -0.00% | 0.33% | 0.16% | -0.00% | |
| EUR | -0.03% | -0.04% | -0.02% | -0.05% | 0.29% | 0.14% | -0.03% | |
| GBP | 0.00% | 0.04% | 0.02% | 0.04% | 0.36% | 0.19% | 0.03% | |
| JPY | 0.00% | 0.02% | -0.02% | -0.01% | 0.32% | 0.16% | 0.01% | |
| CAD | 0.00% | 0.05% | -0.04% | 0.00% | 0.34% | 0.15% | 0.02% | |
| AUD | -0.33% | -0.29% | -0.36% | -0.32% | -0.34% | -0.14% | -0.33% | |
| NZD | -0.16% | -0.14% | -0.19% | -0.16% | -0.15% | 0.14% | -0.14% | |
| CHF | 0.00% | 0.03% | -0.03% | -0.01% | -0.02% | 0.33% | 0.14% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
- NZD/USD struggles to capitalize on a modest Asian session rise amid a bullish USD undertone.
- Geopolitical uncertainties continue to underpin the safe-haven buck and weigh on spot prices.
- Traders, however, seem hesitant and move to the sidelines ahead of the crucial FOMC meeting.
The NZD/USD pair turns lower for the second consecutive day following a modest Asian session uptick to the 0.5785 region on Tuesday. Spot prices currently trade around the 0.5770-0.5765 area, just above last week's swing low, as the US Dollar (USD) retains its bullish undertone amid geopolitical uncertainties.
The US paused its bombing campaign against Iran following roughly two weeks of strikes. Moreover, US President Donald Trump said on Monday the US was having good talks with Iran and that there was a chance of a resolution. This raised hopes of pulling the US and Iran back to the negotiating table, though the optimism fades rather quickly after Saudi Arabia, Jordan and Iraq reported drone attacks. Moreover, Trump warned that US strikes would resume if the negotiations failed to deliver, helping the safe-haven USD preserve its recent strong gains back closer to the monthly high, which continues to weigh on the NZD/USD pair.
Traders, however, seem hesitant to place aggressive bets ahead of the highly anticipated two-day FOMC policy meeting, starting later today. The US Federal Reserve (Fed) will announce its decision on Wednesday and is expected to leave rates unchanged. Hence, the focus will be on the accompanying policy statement and the post-meeting press conference. Investors will look for cues about the Fed's future policy path, which will influence the Greenback and drive the NZD/USD pair. In the meantime, firming expectations that the Reserve Bank of New Zealand (RBNZ) will deliver another rate hike in September could support the New Zealand Dollar (NZD).
Strategists at Brown Brothers Harriman argue that “above target inflation and a more favorable domestic growth outlook argue for additional RBNZ rate hikes which is NZD supportive.” They note that at its 8 July meeting, the RBNZ lifted the Official Cash Rate by 25bp to 2.50% and signalled that “further OCR increases appear likely at upcoming meetings.” Reflecting this hawkish bias, BBH highlight that “the swaps curve price in 60bps hikes by year-end and a total of 100bps of tightening over the next twelve months to 3.50% - near the top of the RBNZ estimated neutral range (2.20%-4.10%).”
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.
- US Dollar Index remained flat amid a rare level of uncertainty heading into a Fed decision.
- Traders expect the Federal Reserve to hold interest rates steady this week, with possible hikes delayed to September.
- Donald Trump warned military strikes against Iran could resume if diplomatic negotiations collapse.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is losing ground after three days of gains and trading around 101.50 during the Asian session on Tuesday.
The Greenback moves little amid market caution ahead of the Federal Reserve's policy decision on Wednesday. According to the CME FedWatch Tool, markets are pricing in nearly a 38% chance of a rate hike in July, an unusually high level of uncertainty so close to a meeting. Citadel Securities expects the Fed to deliver a rate increase to solidify Chairman Kevin Warsh’s inflation-fighting credibility following his repeated promises to restore price stability. Looking further ahead, the probability of at least a 25-basis-point hike in September currently sits at approximately 81.4%.
President Donald Trump stated that the US is engaged in "good talks" with Iran to resolve the Middle East conflict. While Washington suspended its 13-night strike campaign over the weekend, leading to three consecutive days without attacks. Tehran’s foreign ministry countered that no direct negotiations with the US are taking place, noting its only active dialogue is with Oman regarding the future of the Strait. Even so, the diplomatic developments helped push oil prices down, easing broader inflation and monetary policy concerns.
Washington suspended its 13-night strike campaign over the weekend, leading to three consecutive days without attacks. Tehran’s foreign ministry countered that no direct negotiations with the US are taking place, noting its only active dialogue is with Oman regarding the future of the Strait.
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.
Gold prices fell in India on Tuesday, according to data compiled by FXStreet.
The price for Gold stood at 12,450.33 Indian Rupees (INR) per gram, down compared with the INR 12,547.03 it cost on Monday.
The price for Gold decreased to INR 145,212.10 per tola from INR 146,346.10 per tola a day earlier.
Unit measure | Gold Price in INR |
|---|---|
1 Gram | 12,450.33 |
10 Grams | 124,498.00 |
Tola | 145,212.10 |
Troy Ounce | 387,248.80 |
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.
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.
(An automation tool was used in creating this post.)
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