Forex News
- Silver price recovers to around $51.00 in Monday’s Asian session.
- The release of the US September Nonfarm Payrolls will be in the spotlight on Thursday.
- The hawkish Fed’s comments might cap the upside for the Silver price.
Silver price (XAG/USD) trades in positive territory near $51.00 during the Asian trading hours on Monday. The white metal edges higher amid uncertainty following the end of the US government's shutdown. Federal Reserve officials are set to speak later on Monday, including John Williams, Philip Jefferson, Neel Kashkari and Christopher Waller.
Markets are bracing for a flood of delayed economic reports that could signal a slowing US economy. The US Nonfarm Payrolls (NFP) will take center stage later on Thursday. This report could offer clarity to the Fed rate outlook in December. Any signs of weakness in the US labor market could drag the US Dollar (USD) lower and underpin the USD-denominated commodity price.
"I think the risk is definitely skewed to a weaker payrolls print, and that would just reignite market expectations about a December FOMC rate cut and send the U.S. dollar down,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia (CBA).
On the other hand, hawkish remarks from Fed policymakers ahead of a deluge of US economic data spooked traders and could weigh on the white metal. Kansas City Fed President Jeffery Schmid said on Friday that monetary policy should lean against demand growth, adding that current Fed policy is “modestly restrictive,” which he believes is appropriate.
Markets are now pricing in nearly a 40% possibility of a 25 basis points (bps) rate cut in the Fed’s December meeting, down from over 60% earlier this month, according to the CME FedWatch tool.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- US Dollar Index gains ground amid declining odds of a Fed rate cut in December.
- CME FedWatch Tool indicates pricing in a 46% chance of a 25-basis-point Fed rate cut in December.
- Traders await the September Nonfarm Payrolls report, which is scheduled for release on Thursday.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is extending its gains for the second successive session and trading around 99.50 during the Asian hours on Monday.
The US yields on the 2- and 10-year Treasury notes have slipped to 3.60% and 4.14%, respectively, as investors temper expectations for an imminent Federal Reserve rate cut. The CME FedWatch Tool suggests that financial markets are now pricing in a 46% chance that the Fed will cut its benchmark overnight borrowing rate by 25 basis points (bps) at its December meeting, down from 67% probability that markets priced a week ago.
Kansas City Fed President Jeffery Schmid said on Friday that monetary policy should “lean against demand growth,” adding that current Fed policy is “modestly restrictive,” which he believes is appropriate. Moreover, St. Louis Fed President Alberto Musalem said Thursday that rates are now closer to neutral than restrictive and the US economy remains resilient. Musalem stressed the need for caution, noting there is limited room to ease without risking overly accommodative policy.
Traders are preparing for a wave of delayed United States (US) economic data after the government’s reopening, looking for clearer signals on Federal Reserve (Fed) policy. The highly anticipated September Nonfarm Payrolls report is scheduled for release on November 20, with markets also awaiting a revised timeline for other key indicators. However, US National Economic Council Director Kevin Hassett cautioned that some October data may “never materialize,” as several agencies were unable to gather information during the shutdown.
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.
- USD/CAD gains ground as the commodity-linked Canadian Dollar weakens on lower crude Oil prices.
- WTI price slips after Russia’s Novorossiysk port has resumed Oil loading operations following a two-day halt.
- CME FedWatch Tool indicates pricing in a 46% chance of a 25-basis-point Fed rate cut in December.
USD/CAD edges higher after registering modest losses in the previous session, trading around 1.4030 during the Asian hours on Monday. The pair advances as the commodity-linked Canadian Dollar (CAD) struggles amid lower crude Oil prices.
West Texas Intermediate (WTI) Oil price retreats after posting more than 2% gains in the previous session, trading around $59.30 per barrel at the time of writing. Crude Oil prices depreciate amid looming oversupply concerns.
Russia’s Novorossiysk port has resumed oil loading operations after a two-day shutdown triggered by a Ukrainian drone strike. Meanwhile, the IEA has warned that the global oil market could face a substantial surplus next year, potentially around 4 million bpd, as both OPEC and non-OPEC producers increase output amid weakening demand growth.
Traders expect the Bank of Canada (BoE) to hold steady on interest rates through the end of 2026 at a minimum, but that could change if economic conditions deteriorate further. The BoC Consumer Price Index (CPI) data for October is scheduled to be released later in the day.
The USD/CAD pair also holds gains as the US Dollar (USD) gains amid cautious remarks by US Federal Reserve (Fed) officials. Kansas City Fed President Jeffery Schmid said on Friday that monetary policy should “lean against demand growth,” adding that current Fed policy is “modestly restrictive,” which he believes is appropriate.
The CME FedWatch Tool suggests that financial markets are now pricing in a 46% chance that the Fed will cut its benchmark overnight borrowing rate by 25 basis points (bps) at its December meeting, down from the 67% probability that markets priced a week ago.
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.
- WTI price tumbles to $59.35 in Monday’s Asian session.
- Novorossiysk port resumes oil trade after Ukrainian attack.
- Markets brace for a flood of delayed economic reports that could point to a slowing US economy.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $59.35 during the Asian trading hours on Monday. The WTI attracts some sellers following signs that activity had resumed at the key Russian port of Novorossiysk on the Black Sea. Traders await the release of the American Petroleum Institute (API) weekly crude oil stock report later on Tuesday.
Russia's Novorossiysk port resumed oil loadings on Sunday after a Ukrainian strike last week led to some damage and a suspension of operations for two days. Russian crude oil shipments via Novorossiysk's Sheskharis terminal totalled 3.22 million tonnes, or 761,000 barrels a day, in October, according to industry sources. A total of 1.794 million tonnes of oil products were exported through Novorossiysk in October, the sources said. The resumption of operations eases concerns about a disrupted oil supply and weighs on the WTI price.
The end of the US government shutdown and the restoration of federal workers' pay were expected to boost economic activity and demand for oil in the world's largest crude consumer. However, traders are concerned that the resumption of US economic data will show job market weakness and a potential slowdown. This could prompt the Federal Reserve (Fed) to reduce interest rates in December. Lower interest rates generally weaken the US Dollar (USD) as it makes oil cheaper for foreign buyers, boosting global demand and lifting WTI prices.
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.
On Monday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 7.0816 compared to Friday's fix of 7.0825 and 7.0956 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
- GBP/USD softens to around 1.3155 in Monday’s early Asian session.
- Weaker UK economic data has prompted the BoE to deliver another rate cut in December.
- Analysts believe that the resumption of US economic data will show job market weakness and a potential slowdown.
The GBP/USD pair declines to near 1.3155 during the early Asian session on Monday. The Pound Sterling (GBP) softens against the US Dollar (USD) amid concerns about the UK's fiscal debt and weak economic data from the UK. Bank of England (BoE) External Member Catherine Mann is set to speak later on Monday.
The pound loses ground after a report that UK Prime Minister Keir Starmer and Finance Minister Rachel Reeves have dropped the plan to raise income tax rates, in a dramatic turn ahead of the budget on November 26.
Additionally, the recent UK economic data, including cooling wage growth and weaker Gross Domestic Product (GDP) data, have prompted further economic concerns and fueled bets on a December rate cut from the BoE. This, in turn, could weigh on the GBP in the near term. Bets for a 0.25 percentage point cut have surged to near 80% probability, according to Reuters.
On the other hand, traders brace for a backlog of US data following the government's reopening, which they expect will likely point to a weakening economy. This might drag the Greenback lower and create the tailwind for the major pair.
Financial markets are now pricing in nearly a 54% chance that the US central bank will cut its benchmark overnight borrowing rate by 25 basis points (bps) at its December meeting, down from a 62.9% probability that markets priced in earlier last week, according to the CME FedWatch Tool.
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.
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