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Market Trading News and Research from 21 November 2024
Speaking at a conference in Tokyo on Thursday, European Central Bank (ECB) policymaker Francois Villeroy de Galhau said that “the balance of risks on growth and inflation is shifting to the downside.”
Additional comments
Victory against inflation is in sight in Europe.
Inflation could be sustainably at 2% in early 2025.
Trump tariffs not expected to significantly alter inflation outlook in Europe.
Should continue to reduce degree of monetary policy restriction.
Pace of reduction must be determined by agile pragmatism.
We must maintain full optionality for upcoming meetings.
- EUR/GBP may depreciate as a recent UK inflation report has strengthened the BoE’s caution regarding rate cuts.
- ECB member Yannis Stournaras remarked that the Eurozone is nearing a sustainable attainment of its 2% inflation target.
- The Euro may face challenges as traders expect the ECB to deliver a 25 basis point rate cut in December.
EUR/GBP appreciates after two days of losses, trading around 0.8340 during the Asian hours on Thursday. However, the upside of the EUR/GBP cross could be limited as Wednesday’s stronger-than-anticipated UK inflation report has bolstered the Bank of England's (BoE) cautious approach toward future interest rate reductions.
UK CPI inflation surged to 2.3% year-over-year in October, marking a six-month high, up from 1.7% in September and beating forecasts of 2.2%. The monthly CPI increased by 0.6% after remaining unchanged in September. Meanwhile, Core CPI, which excludes the more volatile food and energy prices, climbed to 3.3% over the same period, outpacing market predictions of 3.1%.
Additionally, Services inflation rose to 5%, up from 4.9% in the previous report. If price pressures continue to build, traders may reconsider expectations for interest rate cuts at the BoE's December policy meeting.
On Wednesday, European Central Bank (ECB) Governing Council member Yannis Stournaras stated that the Eurozone is close to sustainably achieving its 2% inflation target. Stournaras emphasized the responsibility of policymakers to ensure they do not fall short of this goal, according to Bloomberg.
Meanwhile, the EU Financial Stability Review noted that escalating geopolitical tensions and policy uncertainties are intensifying sovereign vulnerabilities while growing global trade disputes heighten the risk of economic shocks.
Since June, the ECB has implemented three rate cuts as inflation edges closer to the 2% target. However, growth forecasts have been revised downward twice. Markets widely expect a 25 basis point rate cut next month, with a smaller probability of a more substantial reduction.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
FX option expiries for Nov 21 NY cut at 10:00 Eastern Time via DTCC can be found below.
EUR/USD: EUR amounts
- 1.0470 1.1b
- 1.0500 2.8b
- 1.0515 1.9b
- 1.0540 907m
- 1.0550 1.4b
- 1.0600 1.8b
- 1.0610 813m
- 1.0650 1.7b
- 1.0690 2.3b
- 1.0695 960m
- 1.0700 2.8b
USD/JPY: USD amounts
- 154.80 793m
- 155.00 993m
- 156.00 997m
USD/CHF: USD amounts
- 0.8485 530m
- 0.8625 856m
AUD/USD: AUD amounts
- 0.6450 2b
- 0.6500 592m
- 0.6640 560m
- 0.6700 916m
USD/CAD: USD amounts
- 1.4000 616m
- 1.4025 825m
- 1.4175 1.1b
NZD/USD: NZD amounts
- 0.5875 528m
- 0.6030 466m
Bank of Japan (BoJ) Governor Kazuo Ueda doesn’t touch upon monetary policy and economic outlook during his scheduled appearance on Thursday.
Key quotes
Financial industry is set to undergo even more transformation with the recent rise of generative AI.
To ensure a future that reaps the full benefits of technology, it is essential to build on the insights gained from the expertise and trial-and-error of financial professionals.
We have seen how technology has diversified financial intermediation.
A regulatory and supervisory framework that adapts to technological advancements is also essential.
As AI continues to spread globally, the Bank of Japan closely follows regulatory responses across jurisdictions.
Technological advancements bring new risks to financial stability.
As financial services grow more diverse and complex, the channels of risk transmission have become less transparent, and current financial regulations may not be fully equipped to manage new types of financial services.
This environment underscores the need for operational resilience, including robust management of cybersecurity and third-party risks.
Market reaction
USD/JPY holds its position above 155.00, at the time of writing, still down 0.22% on the day.
- AUD/JPY edges lower to around 101.05 in Thursday’s early European session.
- Further consolidation cannot be ruled out as the RSI emerges in the neutral zone.
- The first upside barrier emerges at 101.80; the key support level is seen at 100.00.
The AUD/JPY cross trades in a narrow range near 101.05 during the early European session on Thursday. Traders will monitor the speeches from the Bank of Japan (BoJ) Governor Kazuo Ueda and the Reserve Bank of Australia (RBA) Governor Michele Bullock later on Thursday, which might offer some insights on inflation and rate hike expectations.
According to the daily chart, the cross remains above the key 100-day Exponential Moving Average (EMA), suggesting the support level is likely to hold rather than break in the near term. However, further consolidation cannot be ruled out as the 14-day Relative Strength Index (RSI) hovers around the midline, indicating the neutral momentum of the cross.
The upper boundary of the Bollinger Band near 101.80 acts as an immediate resistance level for AUD/JPY. Extended gains above this level could see a rally to 102.40, the high of November 7. The additional upside filter to watch is 103.36, the low of July 23.
On the flip side, the key support level is seen at the 100.00 psychological level. A breach of this level could pave the way to 99.42, the low of November 15. Further north, the next downside target emerges at 98.03, the low of September 27.
AUD/JPY 4-hour chart
RBI FAQs
The role of the Reserve Bank of India (RBI), in its own words, is "..to maintain price stability while keeping in mind the objective of growth.” This involves maintaining the inflation rate at a stable 4% level primarily using the tool of interest rates. The RBI also maintains the exchange rate at a level that will not cause excess volatility and problems for exporters and importers, since India’s economy is heavily reliant on foreign trade, especially Oil.
The RBI formally meets at six bi-monthly meetings a year to discuss its monetary policy and, if necessary, adjust interest rates. When inflation is too high (above its 4% target), the RBI will normally raise interest rates to deter borrowing and spending, which can support the Rupee (INR). If inflation falls too far below target, the RBI might cut rates to encourage more lending, which can be negative for INR.
Due to the importance of trade to the economy, the Reserve Bank of India (RBI) actively intervenes in FX markets to maintain the exchange rate within a limited range. It does this to ensure Indian importers and exporters are not exposed to unnecessary currency risk during periods of FX volatility. The RBI buys and sells Rupees in the spot market at key levels, and uses derivatives to hedge its positions.
- USD/CHF meets with a fresh supply on Thursday, though the downside seems limited.
- Expectations for a less dovish Fed and elevated US bond yields could support the USD.
- The risk-on mood could undermine the safe-haven CHF and lend support to the major.
The USD/CHF pair struggles to capitalize on the previous day's recovery from the vicinity of the 0.8800 mark or a one-week low and attracts fresh sellers during the Asian session on Thursday. Spot prices currently trade around the 0.8825 region, down just over 0.2% for the day, though any meaningful downside seems elusive in the wake of a bullish US Dollar (USD) sentiment.
Investors now seem convinced that US President-elect Donald Trump's expansionary policies will likely boost inflation and limit the scope for the Federal Reserve (Fed) to ease its monetary policy aggressively. Moreover, Fed policymakers' recent cautious remarks on further policy easing remain supportive of rising US Treasury bond yields. This, in turn, assists the USD Index (DXY), which tracks the Greenback against a basket of currencies, to hold steady near the year-to-date touched last week and should act as a tailwind for the USD/CHF pair.
Meanwhile, the initial market reaction to Russian President Vladimir Putin's approval to change the country's nuclear doctrine turned out to be short-lived as comments from Russian and US officials eased concerns about the onset of a nuclear war. This remains supportive of a generally positive tone across the global equity markets and undermines demand for the safe-haven Swiss Franc (CHF). The prevalent risk-on mood might further contribute to limiting the downside for the USD/CHF pair and warrants some caution for aggressive bearish traders.
Market participants now look forward to the US economic docket – featuring the release of the usual Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data. This, along with the speeches from a slew of influential FOMC members, will drive the US bond yields and the USD. Apart from this, geopolitical developments should produce short-term trading opportunities around the USD/CHF pair. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the upside.
US Dollar PRICE This month
The table below shows the percentage change of US Dollar (USD) against listed major currencies this month. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 3.16% | 1.94% | 1.98% | 0.24% | 1.03% | 1.68% | 2.25% | |
| EUR | -3.16% | -1.19% | -1.13% | -2.83% | -2.07% | -1.41% | -0.89% | |
| GBP | -1.94% | 1.19% | 0.06% | -1.66% | -0.89% | -0.23% | 0.27% | |
| JPY | -1.98% | 1.13% | -0.06% | -1.71% | -0.95% | -0.29% | 0.25% | |
| CAD | -0.24% | 2.83% | 1.66% | 1.71% | 0.78% | 1.45% | 1.96% | |
| AUD | -1.03% | 2.07% | 0.89% | 0.95% | -0.78% | 0.67% | 1.17% | |
| NZD | -1.68% | 1.41% | 0.23% | 0.29% | -1.45% | -0.67% | 0.50% | |
| CHF | -2.25% | 0.89% | -0.27% | -0.25% | -1.96% | -1.17% | -0.50% |
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).
- EUR/USD may depreciate due to safe-haven flows amid the escalated Russia-Ukraine conflict.
- ECB member Yannis Stournaras remarked that the Eurozone is nearing a sustainable attainment of its 2% inflation target.
- The US Dollar appreciated due to cautious remarks from Fed officials.
EUR/USD appreciates slightly after registering losses in the previous session, trading around 1.0550 during the Asian hours on Thursday. However, the upside of the pair could be restrained due to safe-haven flows amid rising geopolitical conflict between Russia and Ukraine.
Reuters reported that Ukraine launched a volley of British Storm Shadow cruise missiles into Russia on Wednesday, marking the latest deployment of Western weaponry against Russian targets. Moscow has stated that the use of Western weapons to strike Russian territory far from the border would significantly escalate the conflict.
European Central Bank (ECB) Governing Council member Yannis Stournaras stated on Wednesday that the Eurozone is close to sustainably achieving its 2% inflation target. Stournaras emphasized the responsibility of policymakers to ensure they do not fall short of this goal, according to Bloomberg.
Meanwhile, the EU Financial Stability Review noted that escalating geopolitical tensions and policy uncertainties are intensifying sovereign vulnerabilities while growing global trade disputes heighten the risk of economic shocks.
Since June, the ECB has implemented three rate cuts as inflation edges closer to the 2% target. However, growth forecasts have been revised downward twice. Markets widely expect a 25-basis-point rate cut next month, with a smaller probability of a more substantial reduction.
The US Dollar (USD) gained support from cautious remarks by Federal Reserve (Fed) officials. Boston Fed President Susan Collins stated on Wednesday that while more interest rate cuts are necessary, policymakers should proceed cautiously to avoid moving too quickly or too slowly, according to Bloomberg.
Meanwhile, Fed Governor Michelle Bowman highlighted that inflation remains elevated over the past few months and stressed the need for the Fed to proceed cautiously with rate cuts.
Euro FAQs
The Euro is the currency for the 19 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.
Gold prices rose in India on Thursday, according to data compiled by FXStreet.
The price for Gold stood at 7,214.82 Indian Rupees (INR) per gram, up compared with the INR 7,190.72 it cost on Wednesday.
The price for Gold increased to INR 84,152.27 per tola from INR 83,871.11 per tola a day earlier.
| Unit measure | Gold Price in INR |
|---|---|
| 1 Gram | 7,214.82 |
| 10 Grams | 72,148.23 |
| Tola | 84,152.27 |
| Troy Ounce | 224,406.20 |
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
(An automation tool was used in creating this post.)
Four Chinese government advisers advocated for a 2025 growth target of around 5%, similar to this year, Reuters reported on Thursday.
One Chinese government adviser pressed for a growth target of 'above 4%' while another recommended a 4.5%-5% range.
They said “a higher budget deficit could mitigate the impact of expected US tariffs.”
"It's entirely possible to offset the impact of Trump’s tariffs on China’s exports by further expanding domestic demand," said Yu Yongding, one of the advisers and a government economist who advocates for a roughly 5% goal.
"We should adopt stronger fiscal policy next year," said Yu, adding the budget deficit "should definitely exceed" this year's planned level of 3% of gross domestic product (GDP).
- EUR/JPY once again faces rejection near the 200-period SMA on the 4-hour chart.
- A combination of factors underpins the JPY and exerts some pressure on the cross.
- Bears might still wait for a break below the 163.00 mark before placing fresh bets.
The EUR/JPY cross meets with a fresh supply following the previous day's good two-way price swings and trades around the mid-163.00s during the Asian session on Thursday, down 0.20% for the day.
Against the backdrop of intervention fears and geopolitical uncertainties, hopes that Bank of Japan (BoJ) Governor Kazuo Ueda might signal another interest rate hike as early as next month underpin the safe-haven Japanese Yen (JPY). This, in turn, is seen as a key factor exerting some pressure on the EUR/JPY cross. That said, an uptick in the shared currency, bolstered by subdued US Dollar (USD) price action, limits losses for the currency pair.
From a technical perspective, the recent repeated failures near the 200-period Simple Moving Average (SMA) on the 4-hour chart favor bearish traders. Moreover, oscillators on the daily chart have just started gaining negative traction and suggest that the path of least resistance for the EUR/JPY cross is to the downside. That said, any further slide might continue to find support ahead of the 163.00 mark and the 162.50-162.40 horizontal zone.
Some follow-through selling might expose the weekly trough, around the 161.50-161.45 region, or the lowest level since October 4 touched on Tuesday, with some intermediate support near the 162.00 round figure. The downward trajectory could extend further and drag the EUR/JPY cross to the 161.00 round figure en route to intermediate support near the 160.55 area and the 160.00 psychological mark.
On the flip side, the 164.00 mark now seems to act as an immediate hurdle ahead of the 200-period SMA, currently pegged near the 164.70 region. A convincing breakout through the said barrier, leading to a subsequent move beyond the 165.00 psychological mark, will be seen as a key trigger for bullish traders. The EUR/JPY cross might then accelerate the positive momentum towards the 165.40 area and then aim to reclaim the 166.00 round figure.
EUR/JPY 4-hour chart
Economic Indicator
BoJ Governor Ueda speech
Kazuo Ueda is the Governor of the Bank of Japan, he replaced Haruhiko Kuroda on April 2023. Before being appointed, Ueda was an economics professor at the University of Tokyo and held a PhD from the Massachusetts Institute of Technology. Mr. Ueda is the first academic economist to run the bank in post-war Japan, breaking with the tradition that the governor is drawn from the BoJ or finance ministry.
Read more.Next release: Thu Nov 21, 2024 05:10
Frequency: Irregular
Consensus: -
Previous: -
Source: Bank of Japan
- GBP/USD holds thin gains as the US Dollar corrects downwards despite cautious Fed officials.
- The upside of the pair could be restrained due to safe-haven flows amid the escalated Russia-Ukraine war.
- A hotter UK inflation report has bolstered the BoE caution toward future interest rate reductions.
GBP/USD edges higher to near 1.2650 during the Asian trading hours on Thursday. This downside could be attributed to the softer US Dollar (USD). The US Dollar Index (DXY), which measures the value of the USD against its six major peers, holds ground near 106.50 at the time of writing.
However, the downside risk for the US Dollar may be constrained due to the cautious remarks from Federal Reserve (Fed) officials. Boston Fed President Susan Collins stated on Wednesday that while more interest rate cuts are necessary, policymakers should proceed cautiously to avoid moving too quickly or too slowly, according to Bloomberg.
Meanwhile, Fed Governor Michelle Bowman highlighted that inflation remains elevated over the past few months and stressed the need for the Fed to proceed cautiously with rate cuts.
A Reuters poll indicated that nearly 90% of economists (94 out of 106) anticipate a 25bps cut in December, lowering the fed funds rate to 4.25%-4.50%. Economists predict shallower rate cuts in 2025 due to the risk of higher inflation from President-elect Trump's policies. The fed funds rate is forecasted to be 3.50%-3.75% by the end of 2025, which is 50bps higher than last month’s projection.
The upside potential for the GBP/USD pair seems restrained due to safe-haven flows amid the escalated Russia-Ukraine conflict. On Wednesday, Ukraine launched a volley of British Storm Shadow cruise missiles into Russia, marking the latest deployment of Western weaponry against Russian targets. This follows Ukraine's use of US ATACMS missiles the previous day.
On Wednesday, a stronger-than-anticipated UK inflation report bolstered the Bank of England's (BoE) cautious approach toward future interest rate reductions. UK CPI inflation surged to 2.3% year-over-year in October, marking a six-month high, up from 1.7% in September and beating forecasts of 2.2%. Meanwhile, Core CPI, which excludes the more volatile food and energy prices, climbed to 3.3% over the same period, outpacing market predictions of 3.1%.
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.
- Gold price attracts buyers for the fourth consecutive day and climbs to over a one-week high.
- Geopolitical risks stemming from the Russia-Ukraine conflict benefit the safe-haven XAU/USD.
- Elevated US bond yields underpin the US Dollar and might cap the non-yielding yellow metal.
Gold price (XAU/USD) prolongs its weekly uptrend for the fourth straight day and climbs to the $2,660 area, or a fresh one-and-half-week high during the Asian session on Thursday. Mounting geopolitical uncertainties, fueled by escalating Russia-Ukraine tensions, continue to drive haven flows towards traditional safe-haven assets and assist the precious metal to recover further from a two-month low touched last week. Bullion, which is considered a hedge against inflation, further seems to benefit from expectations that US President-elect Donald Trump's proposed tariffs could spur inflationary pressures.
That said, high inflation could limit the scope of the Federal Reserve (Fed) to ease monetary policy. Furthermore, worries that Trump's debt-funded tax cuts would lead to larger budget deficits remain supportive of elevated US Treasury bond yields. This, in turn, assists the US Dollar (USD) to hold steady just below the year-to-date (YTD) peak touched last week and might act as a headwind for the non-yielding Gold price. Apart from this, the prevalent risk-on mood – as depicted by a generally positive tone around the equity markets – warrants caution before placing aggressive bullish bets around the XAU/USD.
Gold price continues to attract haven flows amid worsening Russia-Ukraine tensions
- Geopolitical tensions intensified after Russian President Vladimir Putin lowered the threshold for nuclear strikes and underpinned the safe-haven Gold price for the fourth straight day on Thursday.
- Investors seem convinced that US President-elect Donald Trump's proposed expansionary policies could accelerate inflation and force the Federal Reserve to slow the pace of its rate-cutting cycle.
- Moreover, a slew of influential Fed officials recently cautioned on further policy easing, which remains supportive of elevated US Treasury bond yields and keeps the US Dollar near the YTD high.
- Lisa Cook, a member of the Federal Reserve Board of Governors, noted on Wednesday that the central bank might get forced into a pause on interest rate cuts if inflation progress slows down.
- Separately, Fed Governor Michelle Bowman said that the progress on inflation appears to have stalled and that the US central bank should pursue a cautious approach to monetary policy.
- Meanwhile, Boston Fed President Susan Collins said that more interest rate cuts are needed, but policymakers should proceed carefully to avoid moving too quickly or too slowly.
- According to the CME Group's FedWatch Tool, traders are currently pricing in just over a 50% chance that the Fed will lower borrowing costs at its December monetary policy meeting.
- The yield on the benchmark 10-year US government advanced by the most in a week on Wednesday, which, along with a positive risk tone, might cap the safe-haven precious metal.
- Thursday's US economic docket features the usual Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data later during the North American session.
- Investors will also scrutinize speeches from Fed policymakers for cues about the future rate-cut path, which will drive the USD and provide some impetus to the non-yielding XAU/USD.
Gold price bulls might now wait for a sustained move beyond the $2,660 immediate hurdle
From a technical perspective, the intraday move-up faces some resistance near the 50% retracement level of the recent pullback from the all-time peak touched in October. The said barrier is pegged near the $2,660 area, above which the Gold price could accelerate the momentum towards the $2,670-2,672 congestion zone. Some follow-through buying could allow the XAU/USD to aim at reclaiming the $2,700 round figure.
On the flip side, the $2,635-2,634 area, or the 38.2% Fibonacci retracement level, now seems to protect the immediate downside ahead of the $2,622-2,620 region and the $2,600 round figure. A convincing break below the latter could make the Gold price vulnerable and expose the 100-day Simple Moving Average (SMA), around the $2,557 region, with some intermediate support near the $2,570 zone. This is followed by last week’s swing low, around the $2,537-2,536 area, which if broken decisively will be seen as a fresh trigger for bearish traders and set the stage for deeper losses.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- The Indian Rupee extends its downside in Thursday’s Asian session.
- Rising geopolitical tensions, Trump trades, and sustained portfolio outflows weigh on the INR.
- Traders brace for the US data and Fedspeak later on Thursday.
The Indian Rupee (INR) extends its decline on Thursday. The heightened geopolitical tensions and market reactions due to Donald Trump’s victory in the US presidential elections drag the local currency lower. Additionally, continuous foreign portfolio outflows might continue to undermine the INR in the near term.
Nonetheless, the Reserve Bank of India (RBI) is likely to intervene in the foreign exchange to mitigate further depreciation of the local currency, with state-run banks offering USD in the market. Later on Thursday, traders will monitor the US weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index, Existing Home Sales, and the CB Leading Index, which are due later on Thursday. Also, the Federal Reserve’s (Fed) Beth Hammack and Austan Goolsbee are scheduled to speak.
Indian Rupee weakens amid sustained portfolio outflows and geopolitical risks
- India's economic growth is expected to pick up in the current quarter after a slowdown in July-September, the RBI said in its monthly bulletin on Wednesday.
- The Indian central bank projected third-quarter Gross Domestic Product (GDP) growth at 7.6%, faster than an estimated 6.7% in the second quarter.
- Indian Rupee fell by 7.8% during FY23 and by 1.4% in FY24. It has depreciated by 1.5% so far in FY25, according to the RBI.
- Federal Reserve Board of Governors member Michelle Bowman said on Wednesday that inflation is still elevated and moving sideways in the last few months and the US central bank should pursue a cautious approach to monetary policy.
- Futures traders are now pricing in a 54% chance that the Fed will cut rates by a quarter point, down from around 80% last week, according to data from the CME FedWatch Tool.
USD/INR’s broader trend remains constructive
The Indian Rupee softens on the day. The USD/INR pair keeps the bullish vibe as the price holds above the ascending channel throwback support on the daily time frame. The 14-day Relative Strength Index (RSI) is located above the midline around 66.70, suggesting that the further upside looks favorable.
The all-time high of 84.45 appears to be a tough nut to crack for the bulls. A decisive break above this level could still take the pair up to the 85.00 psychological level.
On the other hand, sustained bearish momentum below the resistance-turned-support level at 84.35 could pave the way to the 84.00-83.90 zone, representing the round mark and the 100-day EMA.
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
- Silver prices have appreciated following Ukraine's launch of British Storm Shadow cruise missiles into Russia.
- Moscow has warned that using Western weapons to strike Russian territory far from the border would significantly escalate the conflict.
- Silver prices could face challenges due to a bleak outlook for the metal's industrial use.
Silver price (XAG/USD) retraces its recent losses from the previous session, trading around $31.00 during the Asian hours on Thursday. The rise in precious metal prices is attributed to safe-haven flows amid escalating tensions in the Russia-Ukraine war.
On Wednesday, Ukraine launched a volley of British Storm Shadow cruise missiles into Russia, marking the latest deployment of Western weaponry against Russian targets. This follows Ukraine's use of US ATACMS missiles the previous day.
According to a Reuters report, video footage posted by Russian war correspondents on Telegram showed black smoke rising in a residential area of the Kursk region, which borders northeastern Ukraine.
At least 14 large explosions were heard, most preceded by the sharp whistle of what sounded like incoming missiles. Moscow has stated that the use of Western weapons to strike Russian territory far from the border would significantly escalate the conflict.
However, Silver prices have been under pressure due to a bleak outlook for the metal's industrial use. On Wednesday, the People's Bank of China (PBoC) Monetary Policy Committee (MPC) decided to keep the benchmark interest rate at 3.1% for November. Higher interest rates in China, a major global manufacturing hub for electronics, solar panels, and automotive components, are expected to dampen industrial demand for Silver.
Furthermore, market expectations indicate that the incoming Donald Trump administration will spur inflation, which could slow down the Federal Reserve’s rate cut trajectory, thus exerting downward pressure on non-interest-bearing assets like Silver.
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.
| Raw materials | Closed | Change, % |
|---|---|---|
| Silver | 30.832 | -1.22 |
| Gold | 2649.27 | 0.64 |
| Palladium | 1022.02 | -1.49 |
- The Japanese Yen strengthens against the USD, though it lacks bullish conviction amid BoJ uncertainty.
- The upbeat market mood and elevated US bond yield might contribute to capping the lower-yielding JPY.
- Traders look at Thursday's US macro data and the Fed speaks ahead of Japan’s National CPI on Friday.
The Japanese Yen (JPY) edges higher against its American counterpart during the Asian session on Thursday and drags the USD/JPY pair away from the weekly top touched the previous day. Any meaningful JPY appreciation, however, seems elusive in the wake of the uncertainty tied to the Bank of Japan’s (BoJ) pace and the timing of further interest rate hikes. Adding to this, a generally positive risk tone should contribute to capping gains for the safe-haven JPY.
Meanwhile, expectations that the Federal Reserve (Fed) may slow its path of rate cuts, amid concerns that US President-elect Trump's proposed policies could reignite inflation, remain supportive of elevated US Treasury bond yields. This assists the US Dollar (USD) to stand firm near the year-to-date peak and should limit losses for the USD/JPY pair. Traders might also opt to wait for the release of Japan's National Core Consumer Price Index (CPI) on Friday.
Japanese Yen might struggle to gain any meaningful traction amid a bearish fundamental backdrop
- Bank of Japan Governor Kazuo Ueda earlier this week left markets guessing as to how soon and at what pace could the central bank tighten its monetary policy.
- Investors are pricing in an even chance of a 25-basis-point rate hike and an on-hold decision at the final BoJ policy meeting of this year on December 18-19.
- According to mediate reports, the economic package proposed by Japanese Economic Revitalisation Minister Akazawa is expected to be around ¥21.9 trillion.
- Comments from Russian and US officials eased market concerns about the onset of a nuclear war, denting demand for traditional safe-haven currencies.
- US President-elect Donald Trump's proposed policies could potentially stoke inflation and slow the path of interest rate cuts from the Federal Reserve.
- Furthermore, Fed policymakers' cautious remarks on further policy easing remain supportive of rising US Treasury bond yields and a bullish US Dollar.
- Fed Governors member Lisa Cook noted on Wednesday that the central bank might get forced into a pause on interest rate cuts if inflation progress slows down.
- Separately, Fed Governor Michelle Bowman said that the progress on inflation appears to have stalled and that the central bank should pursue a cautious approach.
- Boston Fed President Susan Collins said that more rate cuts are needed, but policymakers should proceed carefully to avoid moving too quickly or too slowly.
- Traders now look to BoJ Governor Kazuo Ueda's appearance for some impetus ahead of speeches from a slew of influential FOMC members later this Thursday.
- Meanwhile, the US economic docket features the release of Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index and Existing Home Sales data.
- The focus, however, remains on Japan's National Core Consumer Price Index (CPI), which will be among the factors that the BOJ will scrutinize at its next meeting.
USD/JPY technical setup supports prospects for the emergence of dip-buying at lower levels
From a technical perspective, the USD/JPY pair has been showing some resilience below the 100-period Simple Moving Average (SMA) on the 4-hour chart. Moreover, oscillators on the daily chart are holding comfortably in positive territory, suggesting that any subsequent slide might still be seen as a buying opportunity near the 154.65-154.60 region. This should help limit the downside near the 154.00 mark (200-period SMA). The said support should act as a key pivotal point, which if broken might expose the weekly swing low, around the 153.25 area.
On the flip side, the Asian session peak, around the 155.40 area, now seems to act as an immediate hurdle, above which the USD/JPY pair could make a fresh attempt to reclaim the 156.00 mark. Some follow-through buying could lift spot prices towards retesting the multi-month top, around the 156.75 region touched last Friday.
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.
- The Australian Dollar rises as the RBA intends to maintain a restrictive monetary policy.
- The RBA Meeting Minutes indicated that the board remains vigilant about the potential for further inflation.
- The US Dollar may appreciate due to cautious remarks from Fed officials.
The Australian Dollar (AUD) retraces its recent losses on Thursday, buoyed by a hawkish outlook from the Reserve Bank of Australia (RBA) concerning interest rates. Despite this, the AUD/USD pair could still face downward pressure as the US Dollar (USD) might strengthen due to safe-haven flows amid the escalating Russia-Ukraine conflict.
The Reserve Bank of Australia's November Meeting Minutes indicated that the central bank’s board remains vigilant about the potential for further inflation, stressing the importance of maintaining a restrictive monetary policy. Although board members noted no "immediate need" to alter the cash rate, they kept options open for future adjustments, emphasizing that all possibilities remain on the table.
The downside risk for the US Dollar may be constrained due to the cautious remarks from Federal Reserve (Fed) officials. Additionally, market expectations suggest that the incoming Donald Trump administration will spur inflation, thereby slowing the rate cut trajectory from the Fed, lending support to the Greenback.
Traders will be closely monitoring the US weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index, and Existing Home Sales, all of which are scheduled for release later on Thursday.
Daily Digest Market Movers: Australian Dollar recovers recent losses amid hawkish RBA
- Federal Reserve Bank of Boston President Susan Collins stated on Wednesday that while more interest-rate cuts are necessary, policymakers should proceed cautiously to avoid moving too quickly or too slowly, according to Bloomberg.
- On Wednesday, Fed Governor Michelle Bowman highlighted that inflation remains elevated over the past few months, and stressed the need for the Fed to proceed cautiously with rate cuts.
- Australian Treasurer Jim Chalmers stated that "tumbling iron ore prices and a softening labor market have impacted government revenue." following his Ministerial Statement on the economy on Wednesday. Chalmers outlined Australia's tough fiscal outlook, citing the weakening of China, a key trading partner, and the slowdown in the job market as contributing factors.
- Kansas City Fed President Jeffrey Schmid stated on Tuesday that he expects both inflation and employment to move closer to the Fed's targets. Schmid explained that rate cuts signal the Fed's confidence in inflation trending toward its 2% goal. He also noted that while large fiscal deficits won't necessarily drive inflation, the Fed may need to counteract potential pressures with higher interest rates.
- According to a Reuters report late Tuesday, Ukraine deployed US-supplied ATACMS missiles to strike Russian territory for the first time, signaling a significant escalation on the 1,000th day of the conflict. However, market concerns eased slightly after Russian Foreign Minister Sergei Lavrov stated that the government would "do everything possible" to prevent the outbreak of nuclear war.
- On Tuesday, an official from China’s National Development and Reform Commission (NDRC) stated that the country has "ample policy room and tools to support economic recovery." The official expressed confidence in China's economic trajectory, anticipating the recovery momentum will persist through November and December. Any change in the Chinese economy could impact the Australian markets as both nations are close trade partners.
- Fed Chair Jerome Powell downplayed the likelihood of imminent rate cuts, highlighting the economy's resilience, robust labor market, and persistent inflationary pressures. Powell remarked, "The economy is not sending any signals that we need to hurry to lower rates."
- Chicago Fed President Austan Goolsbee stated on Friday that markets often overreact to changes in interest rates. Goolsbee emphasized the importance of the Fed adopting a cautious, gradual approach in moving toward the neutral rate.
- Boston Fed President Susan Collins tempered expectations for continued rate cuts in the near term while maintaining market confidence in a potential rate reduction in December. Collins stated, "I don't see a big urgency to lower rates, but I want to preserve a healthy economy."
Technical Analysis: Australian Dollar remains above 0.6500 near nine-day EMA
The AUD/USD pair trades near 0.6510 on Thursday. Technical analysis of the daily chart indicates a continued decline within a descending channel pattern, signaling a bearish outlook. The 14-day Relative Strength Index (RSI) is below 50, further supporting the prevailing bearish sentiment.
For support, the AUD/USD pair may approach the lower boundary of the descending channel at 0.6370, followed by its yearly low of 0.6348, recorded on August 5.
On the upside, the AUD/USD pair tests the nine-day EMA at 0.6519, followed by the 14-day EMA at 0.6536. Surpassing these levels could weaken the bearish bias and set the stage for a rally toward the four-week high of 0.6687.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.09% | -0.08% | -0.29% | -0.08% | -0.23% | -0.15% | -0.16% | |
| EUR | 0.09% | 0.00% | -0.16% | 0.04% | -0.13% | -0.07% | -0.07% | |
| GBP | 0.08% | -0.01% | -0.16% | -0.01% | -0.15% | -0.07% | -0.08% | |
| JPY | 0.29% | 0.16% | 0.16% | 0.20% | 0.06% | 0.10% | 0.12% | |
| CAD | 0.08% | -0.04% | 0.00% | -0.20% | -0.13% | -0.06% | -0.08% | |
| AUD | 0.23% | 0.13% | 0.15% | -0.06% | 0.13% | 0.07% | 0.06% | |
| NZD | 0.15% | 0.07% | 0.07% | -0.10% | 0.06% | -0.07% | -0.01% | |
| CHF | 0.16% | 0.07% | 0.08% | -0.12% | 0.08% | -0.06% | 0.00% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
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.
- WTI price holds steady near $68.95 in Thursday’s Asian session.
- US crude stocks rose by more than expected last week, according to the EIA.
- The conflict between Russia-Ukraine and concern around future oil supply disruptions might help limit the WTI’s losses.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.95 on Thursday. The WTI price trades flat as small US crude oil inventories built last week offset the escalating war between major oil producers Russia and Ukraine.
The Energy Information Administration's (EIA) weekly report showed crude stocks rose last week, which weighs on the black gold price. Crude oil stockpiles in the United States for the week ending November 15 increased by 0.545 million barrels, compared to a rise of 2.089 million barrels in the previous week. The market consensus estimated that stocks would increase by 0.400 million barrels.
Weak Chinese demand contributes to the WTI’s downside as China is the world's largest crude importer. Data released earlier this week showed that China's crude oil demand fell -5.4% YoY in October. Chinese demand growth is set to reach just 140,000 bpd this year, a tenth of the 1.4 million bpd demand growth of 2023, according to the IEA.
On the other hand, the worries about the intensifying war between major oil producers Russia and Ukraine, and subsequent concern around potential oil supply disruption might boost the WTI price. On Tuesday, Russia’s defense ministry said that Ukraine hit a facility in the Bryansk region with six ATACAMS missiles. In response, Russian President Vladimir Putin lowered the threshold for a possible nuclear strike.
"These risks to supply are definitely keeping the support here and offsetting to a degree concerns around the global demand outlook," said John Kilduff, partner at Again Capital in New York.
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 People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Thursday at 7.1934, as compared to the previous day's fix of 7.1935 and 7.2482 Reuters estimates.
The European Central Bank (ECB) Governing Council member Yannis Stournaras said on Wednesday that the Eurozone is on the cusp of sustainably reaching 2% inflation, putting the onus on officials to avoid undershooting that goal, per Bloomberg.
Key quotes
“Inflation is now more likely to converge sustainably to the target sooner than earlier expectations — by the beginning of 2025 instead of the last quarter, as was anticipated in the most recent ECB projections.”
“Our policy focus may have to increasingly take account of economic conditions so that we don’t undershoot our inflation objective.”
“Although we have not had any indications of a hard landing, the markets are extremely sensitive to disappointing growth readings.”
“If negative surprises for growth come in and we fail to unwind our restrictive monetary-policy stance at the appropriate pace, unnecessary market turbulence could be induced, negatively impacting economic and financial stability.”
“The September reading of inflation at 1.7 percent should be viewed as both a success and a wake-up call.”
“A policy-rate path that remains too restrictive for too long could induce an undershooting of our inflation target over the medium term and impede growth. Should that occur, we would risk damaging our credibility.”
“An escalation in trade tensions between major economies through tariffs and retaliation could create chaos in international trade and weigh on confidence and economic activity at the global level.”
Market reaction
At the time of writing, EUR/USD is trading 0.04% higher on the day to trade at 1.0545.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger 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.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
| Index | Change, points | Closed | Change, % |
|---|---|---|---|
| NIKKEI 225 | -62.09 | 38352.34 | -0.16 |
| Hang Seng | 41.34 | 19705.01 | 0.21 |
| KOSPI | 10.34 | 2482.29 | 0.42 |
| ASX 200 | -47.7 | 8326.3 | -0.57 |
| DAX | -55.53 | 19004.78 | -0.29 |
| CAC 40 | -31.19 | 7198.45 | -0.43 |
| Dow Jones | 139.53 | 43408.47 | 0.32 |
| S&P 500 | 0.13 | 5917.11 | 0 |
| NASDAQ Composite | -21.33 | 18966.14 | -0.11 |
Federal Reserve Bank of Boston President Susan Collins said on Wednesday that more interest-rate cuts are needed, but policymakers should proceed carefully to avoid moving too quickly or too slowly, per Bloomberg.
Key quotes
Some additional rate cuts are needed as the policy is still restrictive.
Doesn’t want to cut rates too quickly.
Overly slow rate cuts could hurt the labor market.
The final destination of rate cuts is unclear.
Monetary policy is well positioned for the economic outlook.
Monetary policy is not on a preset course.
Fed policy decisions to be done meeting-by-meeting.
Any further slowdown in the job market is undesirable.
Risks to the outlook are roughly in balance.
The labor market is healthy, with inflation moving back to 2%.
Strong productivity means wage gains not inflationary.
The economy is in a good place.
Progress to 2% inflation could be uneven.
Balance sheet policy most useful in unusual conditions.
Market reaction
The US Dollar Index (DXY) is trading 0.04% lower on the day at 106.60, as of writing.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- EUR/USD gave back nearly half of a percent on Wednesday.
- A muted release calendar to bolster the Euro in the midweek.
- Fiber traders waiting for Friday’s PMI business activity prints.
EUR/USD bulls frayed at their ends during the midweek hump session, giving back nearly half of a percent and keeping Fiber price action hamstrung just north of the 1.0500 major handle. Thursday is a quiet showing on the economic calendar for both the Euro and the Greenback, leaving markets to sit and twiddle their thumbs until Friday’s Purchasing Managers Index (PMI) figures get released at the tail-end of the trading week.
European Central Bank (ECB) President Christine Lagarde will be making an appearance on Friday at the 34th annual European Banking Conference in Frankfurt. The ECB head is expected to hit familiar notes while discussing the state of EU monetary policy and how it impacts the banking sector, though traders will be keeping an ear out for any tidbits about the possible direction the ECB is leaning as it pertains to rate cuts in the near term.
European HCOB Purchasing Managers Index (PMI) survey results will drop on markets while ECB President Lagarde is delivering prepared notes. Pan-EU business activity survey figures are expected to hold flat in November, with the Composite PMI headliner forecast to print at a steady 50.0
The key data print this week will be S&P Purchasing Managers Index (PMI) survey results, which are due on Friday. Markets are anticipating a slight increase in Manufacturing PMI figures, expected to rise to 48.8 from the previous 48.5, while the Services component is expected to rise by a similar amount, to 55.3 from 55.0.
EUR/USD price forecast
EUR/USD is trapped near its lowest bids in over a year after tapping a 54-week low last Wednesday. A near-term bullish recovery sputtered out almost as quickly as it began, with bidders running into the much near 1.0600 and failing to capture higher ground.
Fiber is down around 6% from September’s peaks above 1.1200, and the Euro’s technical picture has changed significantly in a short amount of time. EUR/USD is still trapped on the south end of the 50-day Exponential Moving Average (EMA), which is accelerating into the low side and poised to pass through 1.0800 in short order.
EUR/USD daily chart
Euro FAQs
The Euro is the currency for the 19 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.
| Pare | Closed | Change, % |
|---|---|---|
| AUDUSD | 0.65057 | -0.31 |
| EURJPY | 163.867 | 0.08 |
| EURUSD | 1.05425 | -0.45 |
| GBPJPY | 196.662 | 0.34 |
| GBPUSD | 1.26527 | -0.18 |
| NZDUSD | 0.58757 | -0.53 |
| USDCAD | 1.39757 | 0.14 |
| USDCHF | 0.88407 | 0.34 |
| USDJPY | 155.43 | 0.51 |
- USD/CAD softens to near 1.3970 in Thursday’s early Asian session.
- Futures traders dialed back their expectations of a Fed rate cut at the December meeting.
- Lower crude oil prices undermine the commodity-linked Loonie.
The USD/CAD pair trades on a softer note around 1.3970 amid the modest decline in the Greenback during the early Asian session on Thursday. Traders will keep an eye on the US weekly Initial Jobless Claims, the Philadelphia Fed Manufacturing Index, Existing Home Sales, and the CB Leading Index, which are due later on Thursday. Also, the Federal Reserve’s (Fed) Hammack and Goolsbee are due to speak.
The recent strong US economic data, sticky inflation and Donald Trump's victory in the US presidential election have underpinned the US Dollar (USD) against the Loonie for the time being. Markets expect that Donald Trump’s administration will reignite inflation and slow the path of rate cuts from the Fed.
Additionally, the cautious tone from the Fed officials might cap the downside for the USD. On Wednesday, Fed governor Michelle Bowman emphasized that inflation still elevated in the last few months and the Fed needed to be cautious on rate cuts.
Futures traders have dialed back their expectations of a rate reduction at the December Fed meeting, according to data from the CME FedWatch Tool. They are now pricing in around 54% possibility that the Fed will cut rates by a quarter point, down from around 80% last week.
On the Loonie front, the fall in crude oil prices weighs on the commodity-linked Canadian Dollar (CAD). Nonetheless, the lower expectation that the Bank of Canada (BoC) will cut a deeper-than-usual interest rate in December might help limit the CAD’s losses. The markets are now pricing in nearly a 26% chance of a 50 basis point (bps) rate cut by the BoC next month, down from 37% before the CPI data release.
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.
FOREIGN EXCHANGE MARKET NEWS
CURRENCY MARKET DEFINITION
The concept of currency market has several definitions:
- Currency market is the sphere of economic relations that are manifested in the purchase and sale of currency values (foreign currency, securities in foreign currency), as well as operations related to the investment of capital in foreign currency;
- Currency market is a financial center where currency purchase and sale transactions based on supply and demand for them are concentrated;
- Curency market is a whole of authorized banks, investment companies, brokerages, exchanges, and foreign banks that perform foreign exchange operations.
- Currency market is a whole of communications systems that link banks in different countries that conduct international currency transactions.
Simply put, currency market is the market where currency transactions are made, that is, the currency of one country is exchanged for the currency of another country at a certain exchange rate. The exchange rate is the relative price of currencies of two countries or the currency of one country expressed in another country's monetary units.
Currency market is part of the global financial market, where many operations related to the global movement of capital take place.
TYPES OF MARKETS. RUSSIAN AND INTERNATIONAL CURRENCY MARKETS
There are international and domestic currency markets.
Domestic currency market — is a market within a single country.
The international currency market — is a global market that covers currency markets of all countries in the world. It does not have a specific site where trading is carried out. All operations within it are carried out through a system of cable and satellite channels that link the world's regional currency markets. Regional markets today include the Asian (with centers in Tokyo, Hong Kong, Singapore, and Melbourne), the European (London, Frankfurt am Main, and Zurich), and the American (New York, Chicago, and Los Angeles) markets.
Currency trading on the international currency market is carried out on the basis of market exchange rates, which are set on the basis of supply and demand in the market and under the influence of various macroeconomic data. Forex is the international currency market.
Currency markets can also be divided into exchange and over-the-counter markets. Exchange currency market is an organized market where trading is carried out through an exchange—a special company that sets trading rules and provides all the conditions for organizing trading under these rules.
Over-the-counter currency market — is a market where there are no certain trading rules, and purchase and sale operations are not linked to a specific place of trade, as opposed to the case of an exchange.
As a rule, an over-the-counter currency market is organized by special companies that provide services for the purchase and sale of currencies, which may or may not be members of the currency exchange. Trading operations in this market are now carried out mainly via the Internet.
The over-the-counter currency market is much larger than the exchange market in terms of trading volume. The Forex international over-the-counter currency market is considered the most liquid in the world. It operates around the clock in all financial centers of the world (from New York to Tokyo).
CURRENCY MARKET FUNCTIONS
Currency market— is the most important platform for ensuring the normal course of all global economic processes.
The main macroeconomic functions of the currency market are:
- creating conditions for the subjects of foreign exchange relations to make timely international current and capital payments and thereby promoting the development of foreign trade;
- providing conditions and mechanisms for the implementation of monetary and economic policy of the state;
- diversifying foreign exchange reserves;
- forming the exchange rate under the influence of supply and demand;
NEWS IMPACT
Various currencies are the main trading tool in the currency market. Exchange rates are formed under the influence of supply and demand in the market.
In addition to that, currency rates are influenced by many fundamental factors related to the global economic situation, events in national economies, and political decisions.
News about these factors can be found in various sources:
- Reports showing a country´s level of economic development.
The more stable an economy is developing, the more stable its currency is. Accordingly, it is possible to predict how the currency will behave in the near future, based on statistical data published in official sources of countries with a certain regularity.
This data includes:
- GDP
- unemployment;
- return on equity;
- consumer price index;
- industrial price index;
- propensity to consume;
- salaries outside of the agricultural sector;
- residential construction, etc.
Interest rate level, set by national authorities regulating credit policy, is an equally important indicator. In the European Union, this is ECB–the European Central Bank, in the US, this is the Federal Reserve System, in Japan—the Bank of Japan, in the UK—the Bank of England, in Switzerland—the Swiss national Bank, etc.
The interest rate level is determined at meetings of the national central bank. Then, the decision on the rate is published in official sources. If the central bank of a country reduces the interest rate, the money supply in the country increases, and the national currency depreciates against other world currencies. If the interest rate increases, the national currency will strengthen.
- Speeches of country leaders, leading economists and analysts.
A speech or even a separate statement by a country's leader can reverse a trend. Speeches on these topics may change the currency exchange rate:
- analysis of the situation on the currency market;
- changes in monetary or economic policy;
- adoption of a budget policy;
- forecasts of the economic situation, etc.
All this news is published in various sources. Major international news is more or less easy to find in Russian, but news related to the domestic economic policy and the economy of foreign countries is much less common in the Russian press. Mostly, such news is published by the national media and in the language of the country where the news is published.
It is very difficult for one person to follow all the news at once, and they are likely to miss some important event that can turn the whole situation on the market upside down. Guided by our main principle—to create the best trading conditions for our customers—we try to select the most important news from all over the world and publish them on our website.
The TeleTRADE Department of Analytics monitors news on most national and international news sources on a daily basis and identifies those that can potentially affect exchange rates. These are the main news items that are included in our news feed.
In addition, all our clients have free access to the Dow Jones news feed. This is a joint project of Dow Jones Newswires, the world's largest news agency, and the leading Russian news agency Prime-TASS. The news feed is created specifically for currency traders and those who are interested in getting information about the world's currency markets.
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