Forex News
- The Pound Sterling shows strength near 1.3650 against the US Dollar after the announcement of the Israel-Iran ceasefire.
- Fed’s Powell states that the central bank still needs time to assess the impact of tariffs on inflation.
- BoE’s Bailey expresses concerns over easing labor market strength.
The Pound Sterling (GBP) trades firmly near a fresh three-year high around 1.3650 against the US Dollar (USD) during European trading hours on Wednesday. The GBP/USD pair strengthens as the US Dollar continues to underperform its peers, as its safe-haven demand has diminished significantly after the announcement of a ceasefire between Israel and Iran on Tuesday.
During the European trading session, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, struggles to hold the weekly low around 98.00.
On Tuesday, United States (US) President Donald Trump announced that a truce between Israel and Iran has become effective and urged them not to violate it. “The ceasefire is now in effect. Please do not violate it!" Trump wrote in a post on Truth Social.
Meanwhile, the support for maintaining interest rates at their current levels by Federal Reserve (Fed) Chair Jerome Powell in his semi-annual testimony before the US House Financial Services Committee on Tuesday has failed to uplift the US Dollar.
“I don’t think we need to be in any rush as long as economy is strong, and the uncertainty is high surrounding the still-unresolved tariff debate,” Powell said, Reuters reported. He guided that the central bank will closely monitor the “impact of tariffs on inflation during June and July” and expressed confidence that “interest rate cuts would come sooner if the central bank sees the tariff-driven inflation not as strong as expected."
Daily digest market movers: Pound Sterling stabilizes while BoE’s Bailey warns of potential labor market risks
- The Pound Sterling seems broadly stable against its major peers on Wednesday, even as Bank of England (BoE) Governor Andrew Bailey warned of downside risks to the United Kingdom’s (UK) labor market and reiterated a gradual downward interest rate path in his testimony before the Lords Economic Affairs Committee on Tuesday.
- “We [BoE] are starting to see labour market softening, and wage settlements are likely to come off," Bailey said. He added that the increase in employers’ contribution to social security schemes seems to be “affecting labour market”.
- Last week, Andrew Bailey also stated in the monetary policy announcement that the central bank will closely monitor upside inflation risks and downside labor market risks after leaving interest rates unchanged at 4.25%, with a 6-3 majority vote.
- Meanwhile, data from the latest employment surveys has also shown a slowdown in job vacancies. The recruitment platform Indeed showed that job vacancies were down 5% in mid-June compared to their level at the end of March, Reuters reported.
- This week, the GBP/USD pair will be influenced by the US Personal Consumption Expenditures Price Index (PCE) data for May, which will be released on Friday. The Fed’s preferred inflation gauge is expected to show that price pressures grew at a fast pace year-over-year. The core PCE inflation data – which excludes volatile food and energy prices – is estimated to have accelerated to 2.6% YoY from 2.5% in April.
Technical Analysis: Pound Sterling stays above 20-day EMA
The Pound Sterling clings to gains near a fresh three-year high around 1.3650 against the US Dollar on Wednesday. The near-term trend of the GBP/USD pair remains bullish as the 20-day Exponential Moving Average (EMA) slopes higher around 1.3513.
The 14-day Relative Strength Index (RSI) rebounds above 60.00. A fresh bullish momentum would emerge if the RSI holds above that level.
Looking down, Monday's low at 1.3370 will act as a key support zone. On the upside, the January 13, 2022, high near 1.3750 will act as the key barrier.
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.
- WTI Oil price trades cautiously near the two-week low around $64.00 after the Israel-Iran truce.
- The truce between Israel and Iran eases risk of the closure of Strait of Hormuz.
- Fed’s Powell supported to keep interest rates at their current levels amid uncertainty surrounding the Trump’s tariff policy.
West Texas Intermediate (WTI), futures on NYMEX, appears vulnerable near the two-week low around $64.00. The Oil price seems to witness more downside as the announcement of a truce between Israel and Iran has eased global supply risks.
On Tuesday, United States (US) President Donald Trump announced a ceasefire between Israel and Iran and urged them not to violate. Following the ceasefire, Israeli Prime Minister Benjamin Netanyahu warned its defence forces will respond forcefully if Iran violates the truce.
Apparently, the Israel-Iran truce eased fears of the closure of Strait of Hormuz, a passage from which almost a quarter of global Oil is supplied. The Oil price on the NYMEX rallied to near the $76 mark on Monday after Iran threatened to close the Strait of Hormuz.
Another headwind for the Oil price is comments from Federal Reserve (Fed) Chair Jerome Powell in his semi-annual testimony before the United States (US) House Financial Services Committee on Tuesday, which signaled that he might not join other officials for supporting an interest rate cut in the July policy meeting.
“We [Fed] are well positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance," Powell said. He guided that the central bank will closely monitor the impact of tariffs imposed by US President Donald Trump on inflation through the June and July data. Powell expressed confidence that interest rate cuts would come sooner if the central bank finds that the tariff-drive inflation is not strong enough.
Theoretically, Fed’s stance of higher-for-longer interest rates bode poorly for the Oil price.
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.
- The Indian Rupee gains further to near 85.80 against the US Dollar amid a positive market mood.
- Oil prices are likely to fall further if Israel and Iran keep to the truce.
- Fed’s Powell reiterates that the central bank needs more clarity on tariffs before reducing interest rates.
The Indian Rupee (INR) extends winning streak against the US Dollar (USD) for fourth trading day on Wednesday, posts a fresh weekly high around 85.80 during the European session. The USD/INR pair slides further as the Indian currency strengthens on expectations that the Oil price could decline further, following confidence that both Israel and Iran will not violate the ceasefire agreement.
During the Asian trading session, the West Texas Intermediate (WTI) Oil price seems fragile near an almost two-week low around $64.00.
Lower Oil price bodes well for currencies from nations that rely heavily on Oil imports to fulfil their energy needs, such as the Indian Rupee.
On Tuesday, United States (US) President Donald Trump stated in a post on Truth.Social that a truce between Israel and Iran has become effective and urged them not to violate. “The ceasefire is now in effect. Please do not violate it!" Trump wrote.
Meanwhile, the Indian equity market has extended their gains on lower Oil prices and improving investors’ risk appetite amid easing geopolitical tensions in the Middle East. Nifty50 opens almost 100 points higher around 25,150, and Sensex30 jumps 0.83% above 82,400. On Tuesday, Foreign Institutional Investors (FIIs) sold equity worth Rs. 5,266.01 crores.
USD/INR weakens even as Fed Powell reiterates need to hold interest rates steady
- The further downside move in the USD/INR pair is also driven by weakness in the US Dollar as easing geopolitical tensions have forced traders to pare bullish bets in safe-haven assets. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, appears fragile near the weekly low around 98.00.
- The US currency struggles to gain ground even though Federal Reserve (Fed) Chair Jerome Powell has signaled in the semi-annual testimony before the US House Financial Services Committee on Tuesday that he will not endorse interest rate cuts in the July policy meeting.
- Powell stated the central bank needs more time to “assess the impact of still-unresolved tariff rates on inflation and growth”. He guided that the “impact of the new trade policy will be reflected in the June and July data”.
- Jerome Powell didn’t rule out the scenario that the impact of new international policies could be “one-time” on inflation. He stated that the central bank will “bring interest rates down sooner if officials find price pressures well contained”.
- Contrary to Jerome Powell’s ‘wait-and-see’ approach, Fed officials: Vice Chair Michelle Bowman, Governor Christopher Waller, and Chicago Fed President Austan Goolsbee have expressed confidence that the impact of tariffs on inflation will be limited and have warned of growing downside risks to the labor market. Fed officials Waller and Bowman also expressed the need to reduce interest rates as soon as July to avoid further cracks in the job market.
- Going forward, investors will focus on New Home Sales data for May, which will be published at 14:00 GMT. Economists expect households to have bought 0.7 million homes, slightly lower than 0.743 million in April. Investors will closely monitor the housing data as the latest studies showed that households postponed new home demand due to higher mortgage rates and uncertainty over Trump’s tariff policy.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | INR | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.06% | -0.03% | 0.28% | 0.15% | -0.09% | -0.03% | -0.02% | |
| EUR | -0.06% | -0.07% | 0.24% | 0.07% | -0.18% | -0.15% | -0.08% | |
| GBP | 0.03% | 0.07% | 0.28% | 0.17% | -0.08% | 0.00% | 0.02% | |
| JPY | -0.28% | -0.24% | -0.28% | -0.18% | -0.35% | -0.34% | -0.26% | |
| CAD | -0.15% | -0.07% | -0.17% | 0.18% | -0.17% | -0.22% | -0.14% | |
| AUD | 0.09% | 0.18% | 0.08% | 0.35% | 0.17% | -0.07% | 0.10% | |
| INR | 0.03% | 0.15% | 0.00% | 0.34% | 0.22% | 0.07% | 0.09% | |
| CHF | 0.02% | 0.08% | -0.02% | 0.26% | 0.14% | -0.10% | -0.09% |
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).
Technical Analysis: USD/INR slides to near 85.80
The USD/INR pair skids below the 20-day Exponential Moving Average (EMA), which trades around 86.00, suggesting that the near-term trend has become uncertain.
The 14-day Relative Strength Index (RSI) slides vertically below 50.00 after remaining above 60.00 in past few trading days, indicating a strong bearish reversal.
Looking down, the June 12 high at 85.70 will act as key support for the major. On the upside, the June 24 high of 86.60 will be a critical hurdle for the pair.
- The Japanese Yen weakens slightly amid receding safe-haven demand.
- Expectations that the BoJ will hike rates again should limit JPY losses.
- The USD hangs near a one-week low and might cap the USD/JPY pair.
The Japanese Yen (JPY) remains on the back foot against its American counterpart, with the USD/JPY pair climbing back closer to mid-145.00s during the early European session on Wednesday. The optimism over the Israel-Iran ceasefire optimism remains supportive of a positive risk tone and acts as a headwind for traditional safe-haven assets. Moreover, the Summary of Opinions from the Bank of Japan's (BoJ) June meeting showed that some policymakers called for keeping interest rates steady for the time being due to uncertainty over the impact of US tariffs on Japan's economy. This, in turn, prompts some selling around the JPY.
Investors, however, seem convinced that the BoJ will hike interest rates further amid signs of broadening inflationary pressures in Japan. The bets were reaffirmed by Japan’s Services Producer Price Index (PPI), which rose for the third straight month and remained above the 3% YoY rate in May. This could act as a tailwind for the JPY. Adding to this, expectations that the Federal Reserve (Fed) would lower borrowing costs further keep the US Dollar (USD) bulls on the defensive and might contribute to capping the USD/JPY pair.
Japanese Yen bulls seem reluctant amid positive risk tone; not ready to give up amid BoJ rate hike bets
- The Bank of Japan published the Summary of Opinions from the June monetary policy meeting earlier this Wednesday, which revealed that several board members warned of the expected hit to Japan's fragile economy from sweeping US tariffs. Some policymakers said that consumer inflation was moving at higher-than-expected levels, partly due to surging prices of the staple rice.
- In fact, data released last week showed that Japan's annual National Consumer Price Index (CPI) rose by 3.5% YoY in May and remained above the BoJ's 2% target. Further details revealed that the National core CPI – excluding volatile fresh food prices – shot to the highest level since January 2023, while a core gauge that excludes both fresh food and energy prices climbed 3.3% YoY in May.
- Adding to this, Japan's Services Producer Price Index, released earlier this Wednesday, increased 3.3% YoY in May, slightly lower than the previous month's upwardly revised reading of 3.4%. The Services PPI is a key gauge of domestic inflation pressures and back-to-back readings above the 3% mark keep alive market expectations for further interest rate hikes by the central bank.
- Moreover, BoJ board member Naoki Tamura said on Wednesday that inflation rose more than expected back in May and he fog surrounding US tariffs is clearing somewhat, though it is difficult to predict the outlook. Tamura added that the Japanese central bank may need to act decisively if upside price risks heighten further.
- Meanwhile, Federal Reserve Chair Jerome Powell, in his prepared remarks for the Semiannual Monetary Policy Report to Congress, said that the central bank expects inflation to start rising soon and is in no rush to ease borrowing costs. Powell's remarks come after his colleagues recently suggested a rate cut at the July policy meeting, though it does little to impress the US Dollar bulls.
- The Israel-Iran ceasefire came into effect on Tuesday and appeared to hold for now, despite an Israeli attack on Tehran and an Iranian missile strike. Both Iran and Israel have claimed victory in the war and warned they were ready to renew hostilities if the other attacks. This keeps geopolitical risks in play and benefits the safe-haven Japanese Yen amid the divergent BoJ-Fed expectations.
USD/JPY could extend the intraday positive move once the 145.30 static barrier is cleared decisively
From a technical perspective, the overnight decline below the 145.35-145.25 resistance-turned-support and acceptance below the 200-hour Simple Moving Average (SMA) was seen as a key trigger for the USD/JPY bears. Moreover, oscillators on the daily chart have just started gaining negative traction and validate the near-term negative outlook for the currency pair. Some follow-through selling below mid-144.00s, or the overnight trough, should pave the way for a slide towards the 144.00 round figure en route to the 143.70-143.65 region before spot prices aim to test sub-143.00 levels.
On the flip side, any attempted recovery might now attract fresh sellers near the 145.00 psychological mark and remain capped near the 145.25-145.35 static barrier. A sustained strength beyond the latter might trigger a short-covering rally and allow the USD/JPY pair to reclaim the 146.00 mark. The momentum could extend further, though it runs the risk of fizzling out quickly near the 146.65-146.70 region. The latter should act as a pivotal point, which if cleared would negate the negative outlook and shift the near-term bias back in favor of bullish traders.
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 Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.27% | -1.63% | -0.97% | -0.17% | -1.04% | -1.25% | -1.42% | |
| EUR | 1.27% | -0.39% | 0.35% | 1.12% | 0.19% | 0.03% | -0.19% | |
| GBP | 1.63% | 0.39% | 0.77% | 1.52% | 0.59% | 0.42% | 0.18% | |
| JPY | 0.97% | -0.35% | -0.77% | 0.78% | -0.11% | -0.22% | -0.55% | |
| CAD | 0.17% | -1.12% | -1.52% | -0.78% | -0.83% | -1.08% | -1.31% | |
| AUD | 1.04% | -0.19% | -0.59% | 0.11% | 0.83% | -0.19% | -0.39% | |
| NZD | 1.25% | -0.03% | -0.42% | 0.22% | 1.08% | 0.19% | -0.23% | |
| CHF | 1.42% | 0.19% | -0.18% | 0.55% | 1.31% | 0.39% | 0.23% |
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).
- AUD/JPY gathers strength to near 94.30 in Wednesday’s early European session, up 0.33% on the day.
- Receding safe-haven demand continues to weigh on the Japanese Yen.
- Australia’s monthly CPI rose by 2.1% YoY in May, softer than expected.
The AUD/JPY pair attracts some buyers to around 94.30 during the early European session on Wednesday. The Japanese Yen (JPY) softens against the Euro (EUR) due to growing optimism that a ceasefire between Israel and Iran will hold after it was touted by US President Donald Trump.
The Israel-Iran ceasefire went into force on Tuesday and seems to be holding for the time being, despite an Israeli attack on Tehran and an Iranian missile strike. The de-escalation of tensions in the Middle East could undermine the JPY and create a tailwind for the cross in the near term.
However, Israeli Prime Minister Benjamin Netanyahu warned that Israel “will strike again” if Iran “thinks of rebuilding” its nuclear program. Any signs of renewed escalation could boost the safe-haven flows and benefit the JPY.
Data released by the Australian Bureau of Statistics (ABS) on Wednesday showed that the country’s monthly Consumer Price Index (CPI) rose by 2.1% YoY in May versus 2.4% prior. This figure came in softer than the expectation of 2.3% growth in the reported period.
Softer Australian CPI inflation and weaker Gross Domestic Product (GDP) reports reinforce expectations of the Reserve Bank of Australia’s (RBA) rate cut in July. This, in turn, might drag the Aussie lower against the JPY. Financial markets have priced in nearly an 80% chance of a 25 basis points (bps) rate cut by the RBA in the July meeting.
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.
- Gold price edges higher as Fed rate cut bets keep the USD bulls on the defensive.
- Doubts over the durability of the Israel-Iran ceasefire also support the commodity.
- Traders look forward to this week’s important US macro data for a fresh impetus.
Gold price (XAU/USD) sticks to modest intraday gains heading into the European session on Wednesday and for now, seems to have snapped a two-day losing streak to sub-$3,300 levels, or over a two-week low touched the previous day. Federal Reserve (Fed) Chair Jerome Powell maintained his wait-and-see rate policy, though he said that lower inflation and weaker labor hiring could lead to an earlier rate cut. This keeps the door open for a potential rate reduction as soon as next month, which, in turn, is seen undermining the US Dollar (USD) and supporting the non-yielding yellow metal.
Meanwhile, an Israeli attack on Tehran and an Iranian missile strike following the ceasefire announcement on Tuesday raised doubts over the durability of the truce. This keeps the geopolitical risk premium in play and turns out to be another factor acting as a tailwind for the Gold price. However, a generally positive tone around the equity markets is holding back the XAU/USD bulls from placing fresh bets. This, in turn, makes it prudent to wait for strong follow-through buying before positioning for any further gains ahead of key US macro releases scheduled during the latter half of the week.
Daily Digest Market Movers: Gold price retains positive bias as Fed rate cut bets undermine the USD
- Federal Reserve Chair Jerome Powell, in his prepared remarks for the Semiannual Monetary Policy Report to Congress, said that inflation could start rising soon on the back of higher tariffs and that the central bank was in no rush to ease borrowing costs. Powell added that many paths are possible for monetary policy and that lower inflation and weaker labor hiring could lead to an earlier rate cut.
- Traders now seem to have fully priced in at least 50 basis points of Fed rate reductions by year-end and also see a roughly 20% probability of a rate cut at the July meeting. The US Dollar (USD) languishes near a one-week low touched on Tuesday on the back of dovish Fed expectations and supports the non-yielding Gold price on Wednesday following the previous day's slide to over a two-week low.
- US President Donald Trump criticized both Israel and Iran for breaching a complete ceasefire deal shortly after announcing it. Moreover, media reports stated that recent US airstrikes on Iran’s nuclear facilities likely did not destroy the core components, but merely delayed Tehran’s program by a few months. Trump, however, reiterated that Iran’s nuclear sites were completely destroyed.
- Nevertheless, the ceasefire between Israel and Iran appears to be holding for now, with both sides claiming victory in the war and warning they were ready to renew hostilities if the other attacks. This keeps the geopolitical risk premium in play and should continue to offer support to the safe-haven Gold price ahead of important US macro releases scheduled during the latter half of the week.
- The final Q1 GDP print, along with Durable Goods Orders and the usual Weekly Initial Jobless Claims data, will be published on Thursday. The focus, however, will remain glued to the US Personal Consumption Expenditures (PCE) Price Index on Friday, which will play a key role in influencing market expectations about the Fed's rate-cut path. This, in turn, will drive the USD and the XAU/USD pair.
Gold price seems vulnerable while below ascending channel support breakpoint near $3,370 area
From a technical perspective, the overnight downfall confirmed a breakdown through a short-term ascending channel and favored bearish traders. Moreover, oscillators on daily/4-hour charts have started gaining negative traction and suggest that the path of least resistance for the Gold price is to the downside. Hence, any subsequent move up could be seen as a selling opportunity and remain capped near the trend-channel support breakpoint, around the $3,368-3,370 region. A sustained strength beyond, however, could allow the commodity to reclaim the $3,400 round figure.
On the flip side, bearish traders might now await acceptance below the $3,300 mark before placing fresh bets and positioning for a fall toward the $3,245 region. The downward trajectory could extend further and eventually drag the Gold price to the $3,210-$3,200 horizontal support en route to the $3,175 area.
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.
West Texas Intermediate (WTI) Oil price advances on Wednesday, early in the European session. WTI trades at $65.09 per barrel, up from Tuesday’s close at $64.72.
Brent Oil Exchange Rate (Brent crude) is also up, advancing from the $66.87 price posted on Tuesday, and trading at $67.23.
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.
Forex Market News
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