Forex News
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann maintain a positive 1–3 week outlook for GBP/USD, with 1.3700 still in sight as long as the pair holds above 1.3605. While the near-term tone has softened and spot has slipped below the bank’s expected 1.3630–1.3665 intraday range, the broader upside scenario remains valid unless strong support at 1.3605 gives way.
1.3700 remains in focus while 1.3605 holds
"24-HOUR VIEW: Following Monday’s price action, we noted yesterday that “there has been no shift in either downward or upward momentum,” and we held the view that GBP “is likely to continue to trade in a range between 1.3615 and 1.3660.” GBP then traded within a narrower range than expected (1.3623/1.3655) before closing modestly higher at 1.3650 (+0.15%). While further range-trading appears likely today, the firmer underlying tone suggests GBP is likely to trade in a higher range of 1.3630/1.3665."
"1-3 WEEKS VIEW: We turned positive on GBP last Monday (17 Aug, spot at 1.3540). On Friday (21 Aug, spot at 1.3640), we indicated that GBP “could continue to rise to 1.3700.” There is no change in our view. On the downside, if GBP breaks below 1.3605 (‘strong support’ level previously at 1.3585), it will mean that 1.3700 is out of reach."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/JPY declines to near 159.00 amid hawkish BoJ expectations.
- Investors keenly await the US PCE Inflation data for July.
- The US core PCE Price Index is expected to have remained steady at 3.3% YoY.
The Japanese Yen (JPY) trades higher against the US Dollar (USD) on Wednesday, with USD/JPY dropping 0.1% to near 159.00. The Asia-Pacific currency gains amid firm expectations that the Bank of Japan (BoJ) will hike policy rates by 25 basis points (bps) to 1.25% in the September meeting.
Strategists at Scotiabank note that domestic data have offered little fresh direction, with “fundamental releases…limited” even as “media are reporting of high-profile adjustments to BoJ forecasts as major banks shift their tightening calls to September.” They add that while markets have begun to reprice the near-term policy path, the “greater risk will center around the central bank’s tone as market participants look beyond the September 18 meeting,” suggesting that guidance on the trajectory of normalization may prove more market-moving than the decision itself.
Earlier in the day, the August 17-24 survey conducted by Reuters showed that 57% of economists expected the BoJ to raise its interest rates by 25 bps to 1.25% in September. This is a sharp turnaround from a July poll when just 5% expected an interest rate hike move
Meanwhile, the US Dollar trades lower ahead of the United States (US) Personal Consumption Expenditure Price Index (PCE) data for July, which will be published at 12:30 GMT.
Inflation outlook steady as Wells Fargo sees only modest easing in PCE
Economists at Wells Fargo do not anticipate any major surprise on the inflation front in the July data. Drawing on the latest CPI and PPI reports, they note that these releases "point to a 0.1% gain in the PCE deflator in July, nudging the year-over-year rate down to 3.6%." At the same time, Wells Fargo expects "core PCE inflation" to "rise 0.2% on the month, leaving the annual rate at 3.3%," reinforcing the view that price pressures are easing only gradually rather than falling sharply.
USD/JPY Technical Analysis
In the daily chart, USD/JPY trades at 159.08, holding a bearish near-term bias as spot remains capped beneath the 20-day exponential moving average (EMA) at 159.46. The pair has retreated from recent highs and now sits under this short-term trend gauge, suggesting topside pressure, while the Relative Strength Index (RSI) around 44 leans slightly negative but is not oversold.
On the topside, immediate resistance is located at the 20-day EMA at 159.46, and a daily close above this level would be needed to ease the current downside bias and allow a recovery toward higher levels. With no nearby technical supports derived from the provided dataset, the pair appears vulnerable as long as it trades below 159.46, leaving price action driven by whether sellers can extend the decline or buyers manage to reclaim the EMA barrier.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
Deutsche Bank notes that Nvidia’s earnings have become a major macro catalyst, although the impact of positive surprises has faded in recent quarters. Ahead of the latest results, a rebound in Nvidia and semiconductor stocks helped lift the S&P 500 and Nasdaq, while European equities were also mostly firmer. Asian markets are broadly higher as lower oil prices and bond yields support risk sentiment, with the KOSPI leading gains, while Australian equities underperform after inflation came in above expectations.
US, Asian and European indices firm
"As we said at the start of the week, in the past few years Nvidia’s earnings have often been a big macro event, with reactions on par with US jobs reports and CPI prints. But in the most recent quarters, the positive earnings surprises haven’t been as big as those in 2023-24, and after each of the last four earnings reports, Nvidia’s share price actually fell the next day."
"Ahead of the release, Nvidia (+2.19%) and the Philly Semiconductor Index (+1.44%) recovered yesterday. With the AI trade seeing more volatility over the summer, the Philly Semiconductor index is down -20.8% from its June peak, though it’s down only -1.9% from its level at the time of Nvidia’s last results on May 20 and is still up +63.6% YTD."
"The boost in AI sentiment helped the S&P 500 (+0.32%) and the Nasdaq (+0.66%) advance yesterday even as most S&P constituents fell on the day. US equity futures are little changed this morning."
"Asian equity markets are mostly advancing this morning supported by lower oil prices and bond yields. Across the region, the KOSPI (+1.97%) is leading gains. The Nikkei (+0.76%), CSI 300 (+1.03%), Hang Seng (+0.82%) and Shanghai Composite (+0.72%) are also clearly higher with tech stocks rising ahead of Nvidia’s results. The S&P/ASX 200 (-0.15%) is bucking the regional trend after Australia’s inflation overshot estimates."
"European equities were also mostly stronger yesterday, with the Stoxx 600 (+0.35%), DAX (+0.61%) and the FTSE 100 (+0.29%) moving higher, though the CAC (-0.16%) fell back."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
OCBC Bank strategists Sim Moh Siong and Christopher Wong highlight that lower energy prices have helped pull US and European yields down, supporting a more benign macro backdrop without stoking USD debasement fears. Markets are watching US core Personal Consumption Expenditures (PCE) Price Index and Chair Warsh’s Jackson Hole remarks, as the Federal Reserve’s (Fed) reaction function and commitment to the 2% inflation target could influence USD support and volatility.
Core PCE and Jackson Hole watched
"Lower energy prices helped pull US and European bond yields lower."
"This reinforces the view that a more benign macro backdrop, rather than interventions such as the Treasury’s surprise buyback announcement, can support lower yields across the curve without sparking concerns over USD debasement that increases USD volatility."
"Today's key event risk is US core PCE inflation. While the data is unlikely to alter the broader narrative of sticky inflation remaining modestly above target, it could keep hawkish Fed risks alive even if policymakers are expected to remain on hold in September."
"Questions around the Fed’s reaction function, and growing concerns that it may be placing less emphasis on inflation control, have heightened market focus on Chair Warsh’s remarks at Jackson Hole."
"The USD could find support if Warsh and other Fed officials push back against debasement concerns and reaffirm their commitment to returning inflation to the Fed’s 2% target."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Volkmar Baur at Commerzbank notes that the Reserve Bank of Australia (RBA) is in wait-and-see mode after three rate hikes, assessing how inflation and the labor market evolve. July Consumer Price Index (CPI) eased to 3.5% but missed expectations, with trimmed-mean inflation stuck at 3.6%. He expects a hawkish tone at the September meeting but still doubts another rate hike is likely.
Stubborn CPI and RBA stance
"In the minutes of the most recent monetary policy meeting released yesterday, it became clear that the Reserve Bank of Australia intends to take a wait-and-see approach for now to consider its next move. After three interest rate hikes at the beginning of the year, the bank sees itself in a good position and wants to first assess how inflation and the labor market continue to develop."
"Although the annual inflation rate fell to 3.5% in July from 3.8% in June, the median consensus forecast, according to Bloomberg, had anticipated a decline to 3.3%. This was likely due primarily to the fact that the energy component did not come in as low as expected."
"Looking ahead, falling real estate prices are likely to weigh on the housing component of inflation. At the moment, however, there is no sign of this in the current figures."
"Admittedly, the RBA’s next meeting isn’t until September 29. Another labor market report will be released by then, and even though the CPI figures for August won’t be published until a day later, the RBA will likely get a preview during the meeting."
"For now, however, it appears the RBA will need to strike a hawkish tone again next month to signal its readiness. We still do not believe, however, that another rate hike is likely."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/CAD returns to the top of the weekly range, above 1.3860 after bouncing from 1.3825 lows.
- Lower Oil prices and renewed US-Canada trade tensions are weighing on the Loonie.
- US Dollar rallies remain subdued ahead of the US PCE Prices Index release and the Jackson Hole Symposium.
The Canadian Dollar (CAD) reverses earlier gains against the US Dollar (USD) on Wednesday, weighed by a recent pullback in oil prices and the escalation of the trade war with the US. The USD/CAD is testing the top of the weekly trading range, at 1.3867, after bouncing from 1.3825 lows on Tuesday, with all eyes on the release of the US Personal Consumption Expenditures (PCE) Price Index due later on the day.
Trade tensions between the US and Canada are simmering again, after Canadian Finance Minister Francois-Philippe Champagne announced new tariffs of up to 50% on a wide range of US products in retaliation for US levies, following a failure in the negotiations to reach a trade deal last week. US President Donald Trump responded by threatening a new round of tariffs on Canadian cars, trucks, auto parts and steel.
Beyond that, Oil, Canada’s main export, keeps trading lower, which is adding pressure on the Loonie. The barrel of Brent Crude changes hands at $85.70 at the time of writing, nearly 8% below last Friday’s highs above $93.00. News reporting that Iran and Oman are holding talks to reopen the Strait of Hormuz is weighing on Crude prices, although the key waterway remains practically closed after six months of conflict.
US PCE inflation and Jackson Hole to set the US Dollar's direction
Investors, on the other hand, remain reluctant to place large directional bets on the US Dollar, ahead of the release of July's PCE Price Index data and the second quarter's Gross Domestic Product (GDP) figures. The market expects the Core PCE to have remained growing at a steady 3.3% yearly rate, while the economy is seen expanding at a 1.5% annualized rate, below the first quarter's 2.1%.
The highlight of the week, however, will be the Jackson Hole Symposium, where the Fed Chairman, Kevin Warsh, is expected to provide further insight on the bank's monetary policy plans. Analysts at Standard Chartered argue that Warsh must “restore confidence that the Fed will do what it takes to lower inflation,” and persuade investors that “a Fed that does less and relies more on the private sector is not a risk to macroeconomic stability.”
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
ING analysts Warren Patterson and Ewa Manthey note that Oil prices are under renewed downward pressure, with ICE Brent breaking below $90/bbl as talks involving Iran, Oman and Pakistan on the Strait of Hormuz and the Middle East war progress. They highlight fragile Hormuz flows, question US flow estimates, and point to tighter US product markets despite rising crude inventories.
Brent slides as Hormuz risks evolve
"Oil prices continue to retreat, with ICE Brent settling 3.89% lower yesterday and breaking below $90/bbl. This downward pressure continued in early morning Asia trading today. The catalyst appears to be positive signals from Persian Gulf talks."
"However, any agreement between these two parties does not mean we will see normalisation in oil flows through the key chokepoint. We would likely need to see the US lift its blockade on Iranian ports and ease sanctions on Iran before we see any move towards normalisation."
"The US claims that an average of 8-9m b/d of oil is flowing through the Strait of Hormuz, which may be achievable over short time periods. However, over a longer time frame, this number seems aggressive. Several ship-tracking estimates are coming in much lower, ranging from 2m b/d to around 6m b/d."
"Overnight API inventory data show US crude oil inventories rose by 4.2m barrels over the last week. However, the products market tightened further, with gasoline and distillate inventories falling by 3.2m barrels and 500k barrels, respectively."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/JPY declines to near 185.45 as hawkish BoJ expectations strengthen the Japanese Yen.
- Both the ECB and the BoJ are expected to raise interest rates next week.
- Japan's Economy Minister Kiuchi said that he expects consumer prices to gradually rise amid the Middle East situation.
The Euro (EUR) trades 0.22% lower at around 185.45 against the Japanese Yen (JPY) during the early European trading session on Wednesday. The cross faces selling pressure as the Japanese Yen (JPY) outperforms its peers due to firm expectations that the Bank of Japan (BoJ) will raise interest rates at the September policy meeting.
Japanese Yen Price Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.10% | 0.14% | -0.08% | 0.16% | -0.29% | 0.43% | 0.26% | |
| EUR | -0.10% | 0.04% | -0.17% | 0.06% | -0.37% | 0.34% | 0.17% | |
| GBP | -0.14% | -0.04% | -0.20% | 0.02% | -0.41% | 0.31% | 0.13% | |
| JPY | 0.08% | 0.17% | 0.20% | 0.23% | -0.21% | 0.52% | 0.34% | |
| CAD | -0.16% | -0.06% | -0.02% | -0.23% | -0.44% | 0.29% | 0.10% | |
| AUD | 0.29% | 0.37% | 0.41% | 0.21% | 0.44% | 0.73% | 0.55% | |
| NZD | -0.43% | -0.34% | -0.31% | -0.52% | -0.29% | -0.73% | -0.18% | |
| CHF | -0.26% | -0.17% | -0.13% | -0.34% | -0.10% | -0.55% | 0.18% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
According to the August 17-24 survey in a Reuters poll, 57% of economists expected the Bank of Japan (BoJ) to raise its interest rates by 25 basis points (bps) to 1.25% in September. This is a sharp turnaround from a July poll when just 5% expected an interest rate hike.
Former BoJ board member Seiji Adachi also argued that the central bank will "probably raise its benchmark rate as early as September, followed by another potential increase in January," according to a note released by Commerzbank. The note also revealed that Adachi’s remarks have reinforced market expectations of a gradual tightening path, underscoring investor assumptions that any BoJ policy normalization will proceed cautiously rather than abruptly.
Hawkish BoJ prospects are backed by upside inflation risks. Earlier in the day, Japan's Economy Minister Minoru Kiuchi said that he expects consumer prices to gradually rise amid the Middle East situation.
Meanwhile, the European Central Bank (ECB) is also expected to raise its policy rates next month to counter upside inflation risks.
Strategists at Deutsche Bank highlight a Reuters report, which indicated that "ECB policymakers are ready to hike rates in September but that they have little appetite to signal further tightening after that." According to the bank, this messaging "appears in line with our economists’ view, who think a September hike could be effectively a done deal but that further tightening would require evidence of second-round inflationary effects which have been absent so far." The combination of a likely near-term move and a higher bar for subsequent action is seen as tempering expectations for an extended ECB tightening cycle.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann report EUR/USD broke out of its recent tight range, closing slightly higher near 1.1675 as tentative upside momentum emerges. They maintain a constructive short-term and medium-term view, with room for gains toward 1.1725 and longer-term technical targets at 1.1800 and 1.1850, provided the Euro (EUR) holds above clearly defined support levels.
Tentative momentum supports higher levels
"24-HOUR VIEW: Two days ago, EUR traded between 1.1655 and 1.1687 and closed modestly lower by 0.15% at 1.1662. Yesterday, we indicated that “the price action provides no fresh clues, and further range-trading appears likely, expected to be between 1.1650 and 1.1685.” Our view of range-trading was wrong. EUR dipped to 1.1650, rose to 1.1679 before settling at 1.1674 (+0.10%). Upward momentum is starting to build, albeit tentatively. Today, there is a chance for EUR to test 1.1695. The next resistance at 1.1710 is unlikely to come under threat. Support is at 1.1665, followed by 1.1655."
"1-3 WEEKS VIEW: We have been holding a positive EUR view since early last week (as annotated in the chart below). In our most recent narrative from last Thursday (20 Aug, spot at 1.1675), we highlighted that “there is room for further upside in EUR toward 1.1725.” Although EUR has tested 1.1710 twice, it has not been able to make significant headway on the upside. That said, we will continue to hold the same view as long as EUR holds above 1.1640 (‘strong support’ level was at 1.1630 yesterday)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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