Forex News
According to a report from Axios, the United States (US), Iran, and Oman are closing in on an interim agreement to reopen the Strait of Hormuz, with the U.S. aiming for a Wednesday announcement, sources said. The report also stated that the deal under discussion sets up a 60-day temporary arrangement between Oman and Iran in the Hormuz Strait, a critical chokepoint to almost 20% of global energy supply, which could be extended.
Investors would be keen to know whether Iran has been allowed to execute a toll-based system near the Hormuz. Such a scenario would dampen freedom of transport through the chokepoint that migh force ships to choose a different route.
Market reaction
The WTI Oil price has faced selling pressure after the news release. At press time, the WTI Oil price trades a little over 1% down at around $73.60.
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.
Japanese Chief Cabinet Secretary Minoru Kihara said on Wednesday, “specific monetary policy means are up to the Bank of Japan (BoJ) to decide.”
Additional comments
No comment on foreign officials' comments when asked about US Treasury Secretary Scott Bessent's comment on the Yen
Expect the BoJ to conduct appropriate monetary policy to sustainably and stably hit its price target, while working closely with the government.
No comment when asked about a report that PM Takaichi asked BoJ Governor Ueda to buy Japanese government bonds (JGB).
Govt and BoJ are communicating closely on various levels about economic and financial trends.
No comment on bond yields as they are set by the market based on various factors.
Market reaction
The Japanese Yen (JPY) is gaining traction following these comments, dragging USD/JPY 0.22% lower on the day at 157.38, as of writing.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- US Dollar Index falls as safe-haven demand fades amid growing diplomacy to reopen the Strait of Hormuz.
- Rebounding 10-year US Treasury yields could limit the Greenback's downside amid cooling inflation risks.
- Fed's Schmid called current policy "not tight," warning that high inflation and AI-related investment could drive future price pressures.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is extending its losses for the second successive day and trading around 99.90 during the Asian session on Wednesday. The Greenback may continue to lose ground as safe-haven demand recedes amid growing diplomatic momentum surrounding a potential agreement to reopen the Strait of Hormuz.
Qatari officials announced on Tuesday that an interim proposal had been drafted, with both Washington and Tehran signaling tangible progress toward restoring access to the critical maritime transit route. This diplomatic breakthrough follows US President Donald Trump’s decision to suspend planned military strikes against Iran, opting to give negotiations room to work while maintaining his demand for the immediate reopening of the waterway.
However, the US Dollar could find minor support from a recovery in the benchmark 10-year US Treasury yield after it dipped toward 4.61% on Tuesday. That initial decline in yields was driven by falling energy prices, which helped cool inflation fears and tempered expectations of a hawkish response from the Federal Reserve (Fed).
Schmid flags AI-driven inflation risks, keeping Dollar bulls alert despite sentiment pullback
Fed’s Schmid delivered a modestly more hawkish message, with a 7.3/10 FXS Speechtracker score slightly above the 7/10 historical average, stressing that current policy is “not tight” and that inflation remains “too high” and “worrisome.” The emphasis on AI-related investment as a fresh inflation driver, the warning that recent disinflation and lower energy costs may be temporary, and the call for tighter monetary policy to secure the 2% target collectively underscore a bias toward further restraint even as growth and the labor market appear resilient and roughly balanced. By reaffirming the PCE gauge as the preferred inflation metric and cautioning against downplaying supply-shock-driven price pressures, the speech leans hawkish for the Dollar despite acknowledging recent progress on inflation.
The FXS Fed Sentiment Index slipped by 0.96 points to 145.80, signaling a slight moderation in perceived hawkishness relative to the prior reading. However, with the index still well above the 100 neutral line, the Fed remains firmly in hawkish territory despite the pullback, aligning with Schmid’s message that policy may need to tighten further even as the FXS Speechtracker score edges only marginally above the established baseline.
- GBP/USD falls as the US Dollar gains support from a rebound in 10-year US Treasury yields.
- Easing tensions in the Strait of Hormuz reduces safe-haven demand following diplomatic progress between the US and Iran.
- Markets pared 2026 interest rate hike bets as the Bank of England signaled no rush to tighten monetary policy.
GBP/USD edges lower after registering modest gains in the previous day, trading around 1.3450 during the Asian hours on Wednesday. The currency pair came under selling pressure as the US Dollar (USD) gained momentum, bolstered by a rebound in the benchmark 10-year US Treasury yield, which had dipped toward 4.61% on Tuesday. That initial slide in yields was driven by falling energy prices, which helped cool inflation fears and tempered expectations of a hawkish response from the Federal Reserve (Fed).
However, the Greenback may face further challenges due to easing safe-haven demand amid building diplomatic momentum around a potential agreement to reopen the Strait of Hormuz. Qatari officials announced on Tuesday that an interim proposal had been drafted, with both Washington and Tehran signaling tangible progress toward restoring access to the critical maritime transit route. This diplomatic breakthrough follows US President Donald Trump’s decision to suspend planned military strikes against Iran, choosing instead to give negotiations space while maintaining his call for the immediate reopening of the waterway.
Sterling edges higher in quiet trade as UK Gilts lag peers
Strategists at Scotiabank observe that Sterling is "modestly firmer on Tuesday" but emphasize that trading remains constrained, with "no UK data reports this morning to drive volatility." They add that "UK Gilts are underperforming European bonds somewhat" even as "EURGBP is largely stable," underscoring the generally subdued tone in UK markets.
Last week's Bank of England (BoE) meeting reinforced expectations that policymakers are in no rush to tighten monetary policy, leading markets to dial back expectations for interest rate hikes in 2026. This dovish pivot could dampen investor demand for the British Pound (GBP), pushing the currency lower against major peers as market participants priced in lower rate expectations.
Although the BoE voted 6-3 to hold rates steady, with three members favoring a hike against expectations for a 7-2 split, Governor Andrew Bailey signaled that disinflation remains on track. Furthermore, some policymakers noted that rate cuts could be reconsidered if Middle East tensions continue to dissipate.
However, strategists at Scotiabank describe the outlook for the Pound as “neutral/bullish,” noting that Sterling “continues to chop around the 100- and 200-day moving averages (both close to 1.34) as the flat, broad range trade in place over the past few months continues to play out.” This leaves GBP/USD consolidating near these longer-term technical markers, with price action still contained within the established range.
- EUR/USD loses ground to around 1.1530 in Wednesday’s Asian session.
- Iran rejected the US claim of an open Strait of Hormuz.
- US JOLTS Job Openings declined to 7.35 million in June, weaker than expected.
The EUR/USD pair trades with mild losses near 1.1530 during the Asian trading hours on Wednesday. Uncertainty surrounding US-Iran talks weighs on riskier assets such as the Euro (EUR) against the US Dollar (USD). The US ADP Employment data and ISM Services Purchasing Managers Index (PMI) report are due later on Wednesday. All eyes will be on the US July jobs release on Friday.
The Fars news agency reported that Iran on Tuesday rejected US Treasury Secretary Scott Bessent's and US President Donald Trump's claim that the Strait of Hormuz will open tomorrow under a new deal.
An Iranian official insisted that its ongoing discussions with Oman are not being held with US participation and are aimed at establishing an "intermediate corridor" that will halt both the current Iran-controlled northern and US-backed southern routes. Ongoing tensions in the Middle East continue to boost safe-haven flows, supporting the Greenback and creating a headwind for the major pair.
The US Bureau of Labor Statistics revealed on Tuesday that US JOLTS Job Openings stood at 7.359 million in June. This figure followed the 7.537 million openings seen in May and came in below the market expectation of 7.4 million.
Traders will closely monitor the US July employment data on Friday, which could offer more clues about the health of the labour market and the US interest rate path. In case of weaker-than-expected outcomes, this could undermine the USD against the EUR in the near term.
Euro holds steady as EUR consolidates around the 1.15 area
Analysts at Scotiabank note that the Euro is trading quietly, with the “EUR … little changed on the session” amid a lack of fresh catalysts. With “no major data reports from the Eurozone area on the session,” they judge that spot “appears to be content to consolidate recent gains through the 1.15 area,” reinforcing the sense of a market pausing after its latest advance.
Technical Analysis:
In the daily chart, EUR/USD holds above the Bollinger Bands 20-period simple moving average, but remains capped by a nearby resistance cluster formed by the upper band and the 100-day simple moving average, keeping the broader tone neutral to mildly topside-limited. The Relative Strength Index (14) at about 61 leans into positive territory, hinting that buyers retain some control, yet the proximity of these overhead barriers suggests that upside follow-through may struggle unless this band–moving average cap is decisively cleared.
On the topside, initial resistance is located at the Bollinger upper band near 1.1550, followed by the 100-day simple moving average around 1.1570, a break above which would open the way for a more constructive recovery phase. On the downside, immediate support stands at the Bollinger 20-period middle band near 1.1440, with further protection emerging at the lower band around 1.1330; a sustained drop through these latter levels would undermine the current consolidation and expose the pair to a deeper bearish correction.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the 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.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro 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 then its currency will gain in value 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.
- AUD/USD enters a bullish consolidation phase on Wednesday near its highest level since June 17.
- Mixed signals over the US-Iran peace deal revive demand for the safe-haven USD and cap the pair.
- China’s dismal Services PMI fails to impress bulls or provide any meaningful impetus to the Aussie.
The AUD/USD pair struggles to break through the 100-day Simple Moving Average (SMA) pivotal barrier near mid-0.7000s and consolidates near its highest level since June 17, touched during the Asian session on Wednesday. Spot prices move little following the release of China's Services PMI, though the supportive fundamental backdrop backs the case for further near-term appreciation.
Iran rejects US Treasury Secretary Scott Bessent's and President Donald Trump's claim that the Strait of Hormuz will open under the new deal. This keeps geopolitical risk premium in play, which helps revive demand for the safe-haven US Dollar (USD) and acts as a headwind for the AUD/USD pair. Investors, however, remain hopeful about a diplomatic resolution to end a five-month-old US-Iran war. This, along with receding US Federal Reserve (Fed) interest rate-hike bets, might hold back USD bulls from placing aggressive bets and support the currency pair.
The latest optimism over a potential US-Iran agreement dragged crude oil prices to a nearly four-week low, which eases inflation fears. This, in turn, prompted traders to scale back their expectations for a further policy tightening by the US central bank, which should keep a lid on any meaningful USD appreciation. The upside for the AUD/USD pair, however, remains capped on the back of dismal China’s RatingDog Services PMI, which declined to 50.4 in July from 54.1 in the previous month and pointed to a moderation in service sector activity.
Moving ahead, traders now look forward to the US economic docket – featuring the release of the ADP report on private-sector employment and ISM Services PMI. This, along with speeches from influential FOMC members and further developments surrounding the Middle East crisis, will drive the USD demand and provide some impetus to the AUD/USD pair later during the North American session. The focus, however, will remain on the closely-watched US monthly employment details – popularly known as the Nonfarm Payrolls (NFP) report on Friday.
Economic Indicator
RatingDog Services PMI
The RatingDog Services Purchasing Managers Index (PMI), released on a monthly basis by Caixin Insight Group and S&P Global, is a leading indicator gauging business activity in China’s services sector. The data is derived from surveys of senior executives at both private-sector and state-owned companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the Renminbi (CNY). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for CNY.
Read more.Last release: Wed Aug 05, 2026 01:45
Frequency: Monthly
Actual: 50.4
Consensus: 53.7
Previous: 54.1
Source: IHS Markit
Iran rejects US Treasury Secretary Scott Bessent's and US President Donald Trump's claim that the Strait of Hormuz will open tomorrow under a new deal, Fars news agency reported on Tuesday.
Tehran insisted that its ongoing negotiations with Oman are not being held with US participation and aimed at establishing an "intermediate corridor" that will halt both the current Iran-controlled northern and US-backed southern routes.
An Iranian official said, "Trump has violated his commitments, and Iran is moving forward with its plan to establish arrangements in the Strait independently of US threats, and it will succeed," adding, "Iran does not shape its interests and priorities based on schedule or demands of Trump."
Earlier Tuesday, US Secretary of State Marco Rubio said there has been progress made in discussions with Iran and Oman on getting more ships through the Strait of Hormuz but no final deal has been achieved, per the Guardian. “There’s been progress made in those talks, but not finality yet. We’re hoping that will happen very shortly,” said Rubio.
Furthermore, US Treasury Secretary Scott Bessent stated early Tuesday that Washington could reach a deal with Tehran by tomorrow to reopen the critical waterway.
Qatar’s foreign ministry said that efforts to resolve the US-Iran conflict are “in very progressive stages,” but that there are no direct talks between the two sides.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 0.31% on the day at $74.60.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
China's Services Purchasing Managers' Index (PMI) declined to 50.4 in July from 54.1 in June, the latest data published by RatingDog showed on Wednesday. This figure came in weaker than the market expectations of 53.7.
Market rection to China’s RatingDog Services PMI
At the time of writing, the AUD/USD pair is down 0.05% on the day at 0.7047.
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.
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