EUR/USD shed close to 0.2% on Tuesday, chalking in a third straight declining trading day and testing down into the 1.0500 handle as the Euro’s near-term bullish recovery fizzles out. Fiber is backsliding into a cautious stance ahead of a key US Consumer Price Index (CPI) inflation print due on Wednesday, with another rate call from the European Central Bank (ECB) just around the corner on Thursday.
Wednesday’s CPI inflation print, which serves as one of the last key data releases before the Federal Reserve’s (Fed) last policy meeting in 2024. Signs that progress on inflation has stalled could kill hopes for a third consecutive rate cut on December 18. At the current cut, Wednesday’s US CPI inflation for November is expected to rise slightly to 2.7% YoY from the previous 2.6%, while core annualized CPI is forecast to hold steady at 3.3%.
According to the CME’s FedWatch Tool, rate traders are pricing on 85% odds of one last quarter-point rate cut for the year.
The ECB’s latest rate call is set for Thursday, and the rate meeting is widely expected to deliver another quarter-point cut to investors. The ECB’s Main Refinancing Operations Rate is forecast to get trimmed to 3.15% from 3.4%, while the ECB Rate on Deposit Facility is anticipated to decline to a flat 3.0% from 3.25%.
The EUR/USD daily chart highlights the continuation of a bearish medium-term trend, as the pair remains comfortably below the 50-day EMA at 1.0696 and the 200-day EMA at 1.0826. After the sharp sell-off in November, which saw the pair plunge to a multi-month low near 1.0450, EUR/USD has been consolidating in a tight range. Recent attempts to reclaim the 1.0600 handle have faltered, underscoring the strength of the prevailing bearish sentiment. The broader downtrend remains intact, with lower highs and lower lows defining price action since late October.
The most recent candle closed with a bearish tone at 1.0531, marking a decline of 0.18% on the day. Despite a brief attempt to push higher during the session, the pair failed to sustain momentum above 1.0560, resulting in a long upper wick and signaling selling pressure. Key support at 1.0500 is now back in focus, with a break below this level likely to expose the November low of 1.0450. Conversely, immediate resistance resides at 1.0600, with the descending 50-day EMA adding to the challenge for bulls.
The MACD histogram remains slightly positive but is flattening, indicating fading bullish momentum from the recent rebound. Furthermore, the MACD line is below the signal line, suggesting bearish control persists. To shift sentiment, bulls need a clear break above 1.0600, which could spark a recovery toward 1.0700. However, failure to hold above 1.0500 would likely confirm the bearish trend, paving the way for an extension toward 1.0400 in the coming sessions.
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day, according to data from the Bank of International Settlements. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
GBP/USD found some room on the high side on Tuesday, gaining almost 0.2% and inching back toward the 1.2800 handle, grasping for the key price level that has flummoxed bullish momentum in recent days. Cable traders are buckling up for the wait to Wednesday’s US Consumer Price Index (CPI) inflation update.
GBP-centric data is limited this week, with the UK showing strictly mid-tier economic releases on the calendar, leaving Cable to singularly face this Wednesday’s CPI inflation print, which serves as one of the last key data releases before the Federal Reserve’s (Fed) last policy meeting in 2024. Signs that progress on inflation has stalled could kill hopes for a third consecutive rate cut on December 18. At the current cut, Wednesday’s US CPI inflation for November is expected to rise slightly to 2.7% YoY from the previous 2.6%, while core annualized CPI is forecast to hold steady at 3.3%.
According to the CME’s FedWatch Tool, rate traders are pricing on 85% odds of one last quarter-point rate cut for the year.
GBP/USD is battling near-term chart churn near the 1.2800 handle, with the pair suspending in a dead zone just south of the 200-day Exponential Moving Average (EMA) near 1.2830. Price action has made a slow, trudging recovery after bottoming out near 1.2500 in late November, but bullish momentum is running into trouble and another leg lower could be chalked into the chart if the 200-day EMA stops being a target and becomes a hard technical barrier.
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.
The USD/CAD pair extends the rally to near 1.4180 during the early Asian session on Wednesday, bolstered by the firmer US dollar (USD) broadly. The release of crucial US November Consumer Price Index (CPI) data and the Bank of Canada (BoC) interest rate decision will be in the spotlight later on Wednesday.
The headline US CPI inflation is expected to rise to 2.7% YoY in November from 2.6% in October. The core CPI is estimated to show an increase of 3.3% YoY during the same period. The reading will be the last major inflation data point before the Federal Reserve's (Fed) final policy meeting of the year.
Any signs that progress has stalled could well undercut the chances of a rate cut, lifting the Greenback. The markets are now pricing in nearly an 80% chance of a quarter-point Fed reduction in the December meeting, according to the CME FedWatch tool.
On the Loonie front, the BoC is widely expected to lower its benchmark interest rate by 50 basis points (bps), currently sitting at 3.75%, in a fifth consecutive decision on Wednesday. Money markets raised bets of an oversized step to 80% after Friday’s November employment report showed a larger-than-expected jump in the unemployment rate to 6.8% in November. Nathan Janzen, assistant chief economist at RBC, emphasized a divergence in the policy rates between the BoC and Fed as the prevailing headwind for the Canadian Dollar (CAD).
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.
Silver price climbed some 0.19% on Tuesday yet failed to clear the $32.00 hurdle after hitting a three-week high of $32.27 at the beginning of the week. At the time of writing, XAG/USD trades at $31.89 as Wednesday’s Asian Pacific session commences.
Mounting speculation about a potential Federal Reserve interest rate cut next week is driving market sentiment. The release of US inflation data on Wednesday is expected to provide clearer insights into the Fed’s monetary policy trajectory.
After briefly climbing above $32.00, XAG/USD retreated and is now consolidating within the $31.75–$32.00 range, with the 50-day Simple Moving Average (SMA) at $31.75 serving as key support.
The price action suggests the formation of a "double bottom" chart pattern, which remains just short of its minimum target of $33.50. A decisive break above the $32.00 resistance level could strengthen bullish momentum, paving the way toward $33.00 and ultimately the "double bottom" target.
On the other hand, if XAG/USD falls below the 50-day SMA, sellers may gain control, potentially driving prices toward the low $31.00 range. A further decline past this level could bring the 100-day SMA at $30.47 into focus.
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.
The NZD/USD pair faced renewed selling pressure on Tuesday, dropping by 1.14% to 0.5800 after a failed attempt to reclaim the 20-day Simple Moving Average (SMA). The rejection at this key resistance level highlights the pair's inability to reverse its bearish trend, pushing it to fresh lows not seen since November 2023.
Technical indicators reinforce the bearish sentiment. The Relative Strength Index (RSI) has declined sharply to 39, remaining in negative territory and signaling intensifying selling pressure. Similarly, the Moving Average Convergence Divergence (MACD) histogram prints decreasing green bars, suggesting weakening bullish momentum and a lack of recovery signals.
With the pair now trading near the critical 0.5800 psychological support level, the downside risks remain elevated. A break below this level could pave the way for further declines, potentially targeting the 0.5770-0.5750 range. On the upside, the 20-day SMA at 0.5890 remains the key barrier, with a decisive break above it needed to shift the outlook back to neutral or bullish.
The NZD/JPY pair continued its downward trajectory on Tuesday, retreating to 88.10 amid ongoing bearish pressure. This decline builds on the pair's recent breakout from a clear sideways trading range between 90.00 and 92.00, signaling a shift in sentiment toward sustained selling.
Technical indicators confirm the bearish outlook. The Relative Strength Index (RSI) has declined sharply to 39, remaining in negative territory and reflecting intensifying downward momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator shows flat red bars, suggesting a pause in momentum as the pair consolidates recent losses.
For any recovery, NZD/JPY would need to reclaim the 88.50 level as a first step, followed by a test of the psychological 89.00 barrier. On the downside, the pair remains vulnerable to further declines, with immediate targets at 87.50 and potentially extending to the 85.00-86.00 support zone if bearish momentum persists.
The EUR/AUD soared to a new two-day peak on Tuesday after the Reserve Bank of Australia (RBA) kept rates unchanged yet adopted a dovish stance, as they noted inflation is beginning to ease towards its 3% goal. At the time of writing, the cross-pair trades at 1.6497, gains over 0.67%.
The pair began the week lower, but the RBA’s decision pushed the EUR/AUD pair toward a two-day high of 1.6540. Nevertheless, traders pared some of those gains, as the European Central Bank (ECB) is expected to lower rates at the December 12 meeting.
Momentum remains slightly bullish, yet the Relative Strength Index (RSI) suggests that sellers have the upper hand in the short term.
The EUR/AUD first support would be the 1.6450 area, followed by the 1.6400 psychological mark. On further weakness, the next support would be the 100-day Simple Moving Average (SMA) at 1.6382, followed by the 200-day SMA at 1.6364. A breach of the latter will expose 1.6300.
Conversely, if buyers clear 1.6500, immediate resistance would be 1.6540, followed by 1.6561, the December 6 peak.
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | 0.00% | -0.01% | 0.02% | 0.00% | -0.00% | -0.04% | 0.01% | |
EUR | -0.00% | -0.02% | 0.03% | -0.00% | -0.01% | -0.05% | 0.00% | |
GBP | 0.01% | 0.02% | 0.02% | 0.02% | 0.00% | -0.03% | 0.02% | |
JPY | -0.02% | -0.03% | -0.02% | -0.01% | -0.02% | -0.06% | -0.01% | |
CAD | -0.00% | 0.00% | -0.02% | 0.01% | -0.01% | -0.04% | 0.00% | |
AUD | 0.00% | 0.01% | -0.01% | 0.02% | 0.00% | -0.04% | 0.04% | |
NZD | 0.04% | 0.05% | 0.03% | 0.06% | 0.04% | 0.04% | 0.06% | |
CHF | -0.01% | -0.01% | -0.02% | 0.00% | -0.01% | -0.04% | -0.06% |
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 Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
The AUD/USD pair fell sharply below 0.6400 on Tuesday, declining by 0.82% to 0.6395 after the Reserve Bank of Australia (RBA) delivered less hawkish interest rate guidance. RBA Governor Michele Bullock expressed confidence that inflation risks had eased but not disappeared. She noted that the decision to cut interest rates in the upcoming February meeting would be data-dependent, but she was confident that wages and demand were slowing.
Investors are now waiting for US inflation data and Australian employment data, both of which could influence the Aussie’s direction in the coming days. Meanwhile, the market remains under selling pressure as expectations grow for a less dovish RBA. Analysts at ANZ and Westpac predict that the RBA could start reducing interest rates by May 2025.
The Relative Strength Index (RSI) sits at 36 for the Aussie pair, still in the negative area and declining sharply, signaling ongoing selling pressure. The Moving Average Convergence Divergence (MACD) histogram also prints decreasing green bars, suggesting that the bearish momentum is likely to persist.
Immediate support is found at the recent low of 0.6350, while resistance lies near 0.6440. The market will remain volatile, and upcoming data releases, such as the RBA's policy decision and US CPI, could provide significant direction for the pair in the coming days.
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.
Gold climbed during the North American session on Tuesday with buyers eyeing the $2,700 mark for the first time since November 25. One of the drivers of the rise in the price of the yellow metal is the expectation that the Federal Reserve (Fed) will cut rates at the December meeting. At the time of writing, the XAU/USD trades at $2,694, up by 1.32%.
US economic data revealed during the day hinted that small businesses had grown optimistic about the economy, according to a survey by the National Federation of Independent Business. Nevertheless, traders are focused on the release of US inflation figures on the consumer and the producer sides on Wednesday and Thursday, respectively.
Investors seem convinced that the Fed will cut interest rates at the December 17-18 meeting. CME FedWatch Tool data hints that the futures market priced in an 86% chance that Fed Chair Jerome Powell and company will lower the fed funds rate by 25 basis points (bps).
In addition, XAU/USD prices surged on speculation that China’s central bank resumed purchases of the non-yielding metal. Meanwhile, geopolitics played a significant role after Bashar Al-Assad was ousted in Syria.
This week, the US economic docket will feature the Consumer Price Index (CPI), the Producer Price Index (PPI) and Initial Jobless Claims data.
Gold’s uptrend resumed on Tuesday, extending its gains past the 50-day Simple Moving Average (SMA) at $2,685, as well as opening the door to challenge the $2,700 figure. The Relative Strength Index (RSI) remains bullish, hinting that buyers are gaining control.
Therefore, XAU/USD’s first resistance would be $2,700, followed by the record high of $2,790.
Conversely, if Bullion drops below the 50-day SMA, the next support would be the $2,650 figure. On further weakness, the next stop would be $2,600, followed by the confluence of an upsloping support trendline and the 100-day Simple Moving Average (SMA) in the $2,580 to $2,590 area. This then comes ahead of the November 14 daily low and intermediate support at $2,536.
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 Canadian Dollar (CAD) swooned on Tuesday, dipping closer toward the 1.4200 handle against the Greenback before meagerly recovering its stance on the day. Investors are broadly cashing out of the Loonie as the Bank of Canada (BoC) is poised to widen the CAD’s interest rate differential against the US Dollar even further.
The Canadian economy is in a sore spot right now, and the BoC is set to tip back into the pool and find another 50 bps rate cut this week. The Canadian Unemployment Rate hit multi-year highs recently, giving the Canadian central bank and BoC Governor Tiff Macklem all of the ammunition they need to case further rate cuts in order to bolster the Canadian housing market. As Canada’s largest industry, the selling and buying of residential property holds a death grip on Canadian policymaking as an outsized contributor to national growth figures.
The Canadian Dollar (CAD) came within touch range of 1.4200 against the US Dollar, slumping to a 56-month low and bolstering the USD/CAD chart to its highest bids in nearly five years. Structural CAD weakness has pushed USD/CAD into the top end of a long-term sideways grind that has trapped the pair for nearly a decade. The pair is on pace to close in the green for a fourth consecutive month.
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.
The Greenback added to recent gains amid rising yields and intense caution ahead of the release of the US inflation figures gauged by the CPI on Wednesday.
The US Dollar Index (DXY) advanced for the third consecutive day, extending the move past the 106.00 barrier prior to the release of crucial US CPI data on Wednesday. The US Inflation Rate would be the salient event in the FX galaxy, seconded by the weekly MBA Mortgage Applications as well as the EIA’s weekly report on US crude oil inventories.
EUR/USD added to weekly losses and briefly breached the 1.0500 support to reach new four-day lows. Next on tap in the euro docket will be the ECB gathering on December 12.
GBP/USD maintained its bullish bias, adding to Monday’s advance and revisiting the 1.2780 zone. The RICS House Price Balance comes next across the Channel on December 12.
USD/JPY’s upside impulse picked up extra pace and reclaimed the area beyond the 152.00 barrier, challenging at the same time the key 200-day SMA. Japan’s Producer Prices, the Reuters Tankan Index and the BSI Large Manufacturing index will be published.
AUD/USD remained well on the defensive below the 0.6400 support as investors assessed the dovish tilt at the RBA’s meeting. All the attention will be on the release of the Australian labour market report on December 12.
Prices of WTI extended the auspicious start to the week and advanced above the $69.00 mark per barrel as traders continued to digest fresh stimulus in China and potential supply concerns in Europe.
Prices of Gold rose further and printed new two-week highs just below the key $2,700 mark per troy ounce ahead of US CPI data. Silver prices added to Monday’s strong advance, remaining close to the $32.00 mark per ounce.
The US Dollar Index (DXY) holds steady around the 106.00 mark as markets recalibrate following robust Nonfarm Payrolls (NFP) data last week. While a December rate cut by the Federal Reserve (Fed) remains widely anticipated, attention now shifts to November Consumer Price Index (CPI) data due Wednesday. Analysts expect annual headline inflation to rise to 2.7% from October's 2.6%, while the core CPI is likely to remain unchanged at 3.3%.
Despite some profit-taking after recent rallies, the Greenback remains buoyed by strong US economic fundamentals, with solid growth and sentiment indicators offering continued support.
The DXY hovers near 106.00, with technical indicators offering mixed signals. The Relative Strength Index (RSI) points slightly upward but remains in negative territory, suggesting limited bullish momentum. The Moving Average Convergence Divergence (MACD) indicator shows smaller red histogram bars, signaling reduced bearish pressure.
The index is approaching the 20-day Simple Moving Average (SMA), a pivotal level for short-term direction. Resistance levels are noted at 106.50 and 107.00, while support remains strong between 105.50 and 106.00. Traders await Wednesday’s CPI release, which could trigger heightened volatility depending on the inflation outcome.
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from the Bank for International Settlements. Following the Second World War, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold until the Bretton Woods Agreement in 1971, when the Gold Standard went away.
The Dow Jones Industrial Average (DJIA) flat-lined on Tuesday, testing briefly into the low end below 44,200 before rebounding into the day’s opening prices near 44,400. Equities are stuck in the mud as investors await the latest print of US Consumer Price Index (CPI) inflation, slated for Wednesday.
Investors will be keeping a close eye on Wednesday’s CPI inflation print which serves as one of the last key data releases before the Federal Reserve’s (Fed) last policy meeting in 2024. Signs that progress on inflation has stalled could kill hopes for a third consecutive rate cut on December 18.
China’s recently-announced policy pivot represents the Asian giant’s first step toward a looser monetary policy stance since the early 2010s. Investors broadly reacted positively to the news that China would be injecting much-needed cash directly into the global markets. However, bullish momentum on the news has faded as traders now grapple with the reality that China’s commitments to monetary policy adjustment remain shadowy. To top it off, the conditions that would require a pivot from a decade-plus-long policy stance are less than ideal for investment conditions.
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Next release: Wed Dec 11, 2024 13:30
Frequency: Monthly
Consensus: 2.7%
Previous: 2.6%
Source: US Bureau of Labor Statistics
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
A tepid Tuesday market session sees action on the Dow Jones split roughly even between gainers and losers for the day. Merck & Co (MRK) shed 2.5% to fall below $102 per share, while Boeing (BA) rebounded an additional 4.5% and climbed above $164 per share as investors continue to re-bid the battered aerospace manufacturer. Boeing has been besieged by issues of late, including strikes, lawsuits, manufacturing errors, and the worst of all, missed earnings calls. But investors are taking heart after the plane maker announced it would revive its investor appeal by axing ten percent of its global workforce despite a multi-year backlog of customer orders continuing to pile up.
The Dow Jones has quietly closed lower for three straight trading days when nobody was looking, dragging intraday price action down below 44,400 after testing record highs above 45,000 just last week. Despite the near-term pulldown, prices remain firmly entrenched on the high end, with bids floating well north of the 50-day Exponential Moving Average (EMA) near 43,437.
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
The Mexican Peso erased its earlier gains and dropped to a four-day low before recovering some ground against the Greenback on Tuesday after Consumer Confidence figures in Mexico deteriorated, while US Treasury bond yields rose. The USD/MXN trades at 20.23, virtually unchanged.
Mexico’s National Statistics Agency revealed that Consumer Confidence hit its lowest level since August 2024, with nine of the ten subcomponents diminishing, according to the national survey.
The latest inflation report on Monday keeps traders optimistic that the Bank of Mexico (Banxico) will lower interest rates at the December 19 meeting. The November Consumer Price Index dipped in headline and core figures, opening the door for expansionary policies by the central bank.
Banxico’s Governor, Victoria Rodriguez Ceja, remained dovish. In her last interview with Reuters, she said that given the progress of disinflation, the central bank could continue lowering borrowing costs.
In November, the US National Federation of Independent Business reported a surge in small business optimism.
Earlier, the USD/MXN climbed, underpinned by the jump in US Treasury bond yields. The US 10-year Treasury yield rose three basis points to 4.24%, a tailwind for the Greenback.
The US Dollar Index (DXY), which tracks the performance of the buck’s value against a basket of six currencies, soars 0.40% to 106.59.
This week, Mexico’s economic docket will feature Industrial Production data. In the US, the Consumer Price Index (CPI), the Producer Price Index, and Initial Jobless Claims data will also entice traders.
The USD/MXN consolidates at around the 20.10-20.30 area for the fourth consecutive day, slightly above immediate support seen at the 50-day Simple Moving Average (SMA) at 20.00. The Relative Strength Index (RSI) depicts momentum shifted to the downside in the near term, which could pave the way for further downside.
In that outcome, if USD/MXN drops below 20.00, the next support would be the 100-day SMA at 19.61 before testing the psychological 19.50 mark, ahead of the 19.00 figure.
Conversely, if USD/MXN soars above the December 6 high of 20.28, that could pave the way to challenge 20.50, ahead of the year-to-date peak at 20.82, followed by the 21.00 mark.
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
The EUR/USD pair extended its losses on Tuesday, retreating to 1.0525 and slipping slightly below the 20-day Simple Moving Average (SMA). This development undermines the pair's short-term constructive outlook, raising concerns about further downside risks if the 20-day SMA is definitively breached.
Technical indicators point to a deteriorating momentum. The Relative Strength Index (RSI) has declined sharply to 40, signaling increased selling pressure and remaining firmly in the negative territory. Similarly, the Moving Average Convergence Divergence (MACD) histogram shows decreasing green bars, indicating fading bullish traction and reinforcing a bearish bias.
On the downside, the loss of the 20-day SMA around 1.0550 exposes the pair to further declines, with the next support levels at 1.0500 and 1.0480. For any recovery, EUR/USD must first regain the 20-day SMA and then break above the 1.0600 resistance level to revive the bullish case and shift momentum back in favor of the bulls.
The Pound Sterling tumbled after failing to clear the 1.2800 figure for the third consecutive day, trading at 1.2720, down over 0.17% daily. Cable erased its earlier minuscule gains amid a session characterized by US Dollar strength, with the US Dollar Index (DXY) up over 0.19%, at 106.36.
The GBP/USD consolidates as it recovers from falling to multi-month lows at around 1.2480s. On its way north, the pair cleared the 1.2600 figure and November 29 peak of 1.2749 before aiming toward the December 6 high at 1.2811. The failure to extend its gains past the 200-day Simple Moving Average (SMA) of 1.2820 opened the door for a pullback to current spot prices.
On the other hand, sellers are moving in, as shown by the Relative Strength Index (RSI) punching below its neutral line, indicating that they’re gathering steam. If GBP/USD drops below 1.2700, the pair could slide towards 1.2600 before challenging the November 22 swing low of 1.2486.
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the New Zealand Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | 0.46% | 0.17% | 0.55% | 0.15% | 1.03% | 1.15% | 0.44% | |
EUR | -0.46% | -0.28% | 0.08% | -0.32% | 0.57% | 0.69% | -0.01% | |
GBP | -0.17% | 0.28% | 0.33% | -0.03% | 0.85% | 0.97% | 0.27% | |
JPY | -0.55% | -0.08% | -0.33% | -0.39% | 0.50% | 0.60% | -0.09% | |
CAD | -0.15% | 0.32% | 0.03% | 0.39% | 0.89% | 1.01% | 0.31% | |
AUD | -1.03% | -0.57% | -0.85% | -0.50% | -0.89% | 0.12% | -0.58% | |
NZD | -1.15% | -0.69% | -0.97% | -0.60% | -1.01% | -0.12% | -0.69% | |
CHF | -0.44% | 0.01% | -0.27% | 0.09% | -0.31% | 0.58% | 0.69% |
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The NZD/USD pair plunges to near 0.5820 in Tuesday’s North American session. The Kiwi pair faces intense selling pressure as antipodean currencies weaken amid uncertainty ahead of China’s closed-door annual economic conference to be held on Dec 11-12.
China’s Politburo is expected to announce big-bank economic stimulus to boost domestic consumption and stabilize their beaten-down real estate sector, a scenario that will boost trading activities with the New Zealand (NZD) and strengthen the New Zealand Dollar’s (NZD) appeal, being one of the leading trading partners of China.
Domestically, the Kiwi dollar remains under pressure as market expectations for the Reserve Bank of New Zealand (RBNZ) to cut interest rates again by 50 basis points (bps) at the first meeting of 2025 in February. RBNZ dovish bets fuelled further after comments from NZ Prime Minister Christopher Luxon emphasized on lowering inflation and interest rates to stimulate the economy.
Meanwhile, a further recovery in the US Dollar (USD) has also weighed on the Kiwi pair. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises to near 106.40. The Greenback gains even though market expectations that the Federal Reserve (Fed) will cut interest rates by 25 basis points (bps) to 4.25%-4.50% remain firm.
Going forward, investors will focus on the United States (US) Consumer Price Index (CPI) data for November that could influence Fed dovish bets, which will be published on Wednesday.
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
The Euro fell from 1.0600 on Monday and tumbled over 80 pips against the Greenback on Tuesday after Germany revealed that inflation remains steady. Meanwhile, the NFIB Business Optimism Index in the US surged to its highest level since June 2021. The EUR/USD trades at 1.0519.
The National Federation of Independent Business (NFIB) revealed that small businesses grew optimistic about the economy, with the index coming at 101.7, exceeding forecasts of 95.3 and 93.7 in October. Market participants mainly ignored the data, as the EUR/USD slipped below 1.0550 as traders await the European Central Bank (ECB) monetary policy on December 12.
In the meantime, EUR/USD traders are eyeing the release of the Consumer Price Index (CPI) in the US ahead of the ECB’s decision. Lagarde and Co. are widely expected to lower borrowing costs; the odds stand at a 100% chance, with the swaps market expecting 28 basis points (bps) of easing.
Data-wise, Germany revealed the Harmonized Index of Consumer Prices (HICP), which came steadily at 2.4% YoY in headline figures as expected. The month-over-month figures remained at -0.7%, unchanged and as foreseen by analysts, an indication that inflation continues to edge lower.
The EUR/USD has a neutral downward bias after registering lower lows for the last two days, indicating that bears remain reluctant to give bulls any chance of recovery. Momentum, as measured by the Relative Strength Index (RSI), confirms that thesis, as the RSI edges lower yet is shy of clearing the latest trough.
If EUR/USD clears 1.0500, the next support would be the December 2 low of 1.0460, followed by the yearly low of 1.0331. On the other hand, if buyers drive spot prices above 1.0600, this will clear the path for a recovery, but bulls must clear 1.0700 before challenging the 50-day Simple Moving Average (SMA) at 1.0727.
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | 0.21% | -0.09% | 0.32% | -0.07% | 0.69% | 0.84% | 0.11% | |
EUR | -0.21% | -0.29% | 0.08% | -0.29% | 0.47% | 0.63% | -0.09% | |
GBP | 0.09% | 0.29% | 0.35% | 0.00% | 0.77% | 0.92% | 0.19% | |
JPY | -0.32% | -0.08% | -0.35% | -0.37% | 0.39% | 0.53% | -0.18% | |
CAD | 0.07% | 0.29% | -0.01% | 0.37% | 0.76% | 0.92% | 0.19% | |
AUD | -0.69% | -0.47% | -0.77% | -0.39% | -0.76% | 0.15% | -0.56% | |
NZD | -0.84% | -0.63% | -0.92% | -0.53% | -0.92% | -0.15% | -0.72% | |
CHF | -0.11% | 0.09% | -0.19% | 0.18% | -0.19% | 0.56% | 0.72% |
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 Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
The Euro resumed its broader bearish trend on Tuesday, breaking below November’s low at 0.8260 to reach its lowest prices in more than two years. A dismal risk mood and hopes of further ECB monetary easing this week are hammering the Euro across the board.
Earlier today, German CPI revealed that price inflation contracted 0.7% in November, highlighting the weak momentum of the Eurozone’s main economy and increasing pressure on the ECB to lower borrowing costs.
The bank is widely expected to cut rates by 25 basis points on Thursday. Investors, however, will be eager to know whether the weak economic outlook and the political uncertainty in Germany and France have altered the bank’s usual neutral forward guidance..
The UK, on the contrary, is showing a more resilient outlook, with the heavy-spending Labour budget expected to stir inflationary pressures. This will likely limit the BoE’s leeway to cut rates in 2025, which is giving a competitive advantage to the GBP.
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
The Pound Sterling (GBP) is a moderate outperformer on the session, holding fairly comfortably in the mid-1.27s versus the USD, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“The BoE’s slow-moving policy adjustment process is driving spreads wider in the GBP’s favour against the EUR, with the cross trading at its lowest since 2022 after breaking out of a 1-month consolidation range which formed around 0.83. The GBP retains a somewhat positive technical undertone against the USD on the intraday chart, with Cable holding a sideways consolidation range around the 1.2750 area.”
“But the 200-day MA (1.2822) remains a block on gains and the USD retains a fair degree of residual bull momentum on the daily and weekly charts which will limit the pound’s ability to strengthen for now at least. EUR/GBP is bearish.”
“The cross has broken out on the downside of its recent consolidation range, trend strength oscillators are aligned bearishly across short-, medium– and long-term studies and there is nothing in the way of a test of major support at 0.82. The cross has not traded below this point since Brexit. A push below here would be very significant from a technical point of view I believe.”
China imported significantly more crude oil in November for the first time in a while. As reported by the Chinese customs authority, imports amounted to 48.5 million tons or 11.8 million barrels per day, Commerzbank’s commodity analyst Carsten Fritsch notes.
“This was a good 14% up on the previous year and the highest volume in a month since August 2023. For the first time since April, imports were higher than in the same month of the previous year. As tanker data had already indicated this, the surprise was limited. However, it is doubtful that this is a sign of stronger domestic demand.”
“Rather, refineries are likely to have used the low price level in November to build up stocks. In addition, new crude oil processing capacities were put into operation. However, crude oil imports are likely to be lower again in the coming months due to weak domestic demand.”
“Despite the increase in November, crude oil imports after eleven months are still 1.9% below the level in the same period last year, meaning that an annual decline is likely to be recorded for the third time in the last four years. This is further confirmation that China is no longer the main driver of global oil demand.”
The Euro (EUR) is softer, slipping back to the low 1.05s after failing to hold gains through the low 1.06s late last week, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“A 1/4-point cut is fully priced in for Thursday’s ECB policy decision and while the EUR may drift a little further ahead of the meeting, spot is trading close to fair value (1.0549) this morning, suggesting that there may be little scope for significant losses in the short run unless the ECB springs a dovish surprise and eases policy more aggressively than markets are positioned for.”
“The EUR’s failed attempt to push through technical resistance around 1.06 suggests a period of softer trading ahead. Spot losses through 1.0540 imply some scope for additional weakness in the short run at least. EUR support is 1.0470/75. Resistance is 1.0540/50.”
Saudi Arabia reduced its official selling prices (OSP) for customers in Asia to a four-year low in January, Commerzbank’s commodity analyst Barbara Lambrecht notes.
“Next month, they will only have to pay a premium of 90 US cents per barrel for Arab Light compared to the Oman/Dubai benchmark. This is a significant drop compared to $1.70 in December and the lowest since January 2021. At the beginning of this year, the price premium was $3.5, at the middle of the year $2.9 and in November $2.2.”
“In our opinion, the significant price reduction is an indication of subdued demand in Asia, which purchases around 80% of Saudi Arabian oil. The OSPs for customers in Europe were also reduced significantly, which can be explained by the weak economy. In contrast, they remained unchanged for customers in the US as demand there is comparatively robust.”
“The weakness in demand in Asia is likely to have been a key reason why OPEC+ last week postponed the increase in oil production planned for January by a further three months until April. Saudi Arabia's price cut therefore comes as no great surprise. If there is no revival in demand, the most recent postponement of the production increase by OPEC+ is unlikely to be the last.”
The Canadian Dollar (CAD) is little changed overnight after slipping in late trade yesterday after PM Trudeau said Canada would retaliate in the event of new tariffs being imposed on Canadian exports under President-elect Trump’s administration, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“Ottawa was still looking at how to respond, he said. An aggravated trade relationship with the US is not what Canada needs or wants but it has little choice but to respond to new tariffs. During the first Trump term, Canada stuck tariffs on products from Republican-controlled districts to put optimal pressure on the White House. Similar tactics may be deployed in the future. Swaps are pricing in around 47bps of easing for the BoC tomorrow.”
“The USD edged slightly higher to trade briefly around 1.4195 in overnight trade before easing back modestly. The CAD’s broader undertone remains weak but short term price action does indicate a minor bear reversal (outside range) formed around the USD’s minor new cycle high earlier.”
“Scope for CAD gains is likely limited, however, as broader trend dynamics remain USD-bullish. USD/CAD support should be firm in the 1.4125/35 range.”
Oil prices rose significantly at the start of the week, making up for Friday's losses, Commerzbank’s commodity analyst Barbara Lambrecht notes.
“Prices were driven up by news from China, which led to a brightening of demand prospects. In addition, there is new uncertainty in the Middle East after the Assad regime in Syria, which has been ruling for decades, was toppled at the weekend and it is still unclear who will fill the resulting power vacuum.”
“This obviously also brings back memories of the fall of the long-term rulers in Iraq in 2003 and Libya in 2011, whereupon both countries plunged into chaos. In contrast to these two countries, Syria is not a significant oil producer, but due to its geographical location in the Middle East it is of great importance for the stability of the region.”
“A higher risk premium on the oil price is therefore justified. On a positive note, Iran could lose influence in the region due to the loss of its ally Assad.”
Silver price (XAG/USD) trades in a tight range near $32.00 in Tuesday’s North American session. The white metal consolidates as investors await the outcome of China’s closed-door annual central economic conference to be held on Dec 11-12, according to Bloomberg, and the release of the United States (US) Consumer Price Index (CPI), which will be published on Wednesday.
Ahead of China’s conference, Politburo has already shown intentions of providing a strong stimulus to boost consumption and stabilize reality and stock markets. “Will implement more proactive fiscal policy and moderately loose monetary policy,” members of China’s Politburo said on Monday.
Meanwhile, the uncertainty ahead of the release of the US inflation data will also keep the Silver price on the sidelines. Economists expect the annual core CPI -which excludes volatile food and energy prices – to rise steadily by 3.3%. The annual headline CPI is estimated to have grown by 2.7%, faster than the former reading of 2.6%.
The inflation data will influence market expectations for the Federal Reserve (Fed) interest rate action in the policy meeting on December 18. There is an 86% chance that the Fed will reduce interest rates by 25 basis points (bps) to 4.25%-4.50%, according to the CME FedWatch tool.
On the geopolitical front, Israel’s attack on Syria to destroy its military infrastructure in an attempt to prevent Syrian rebels from attacking Israel in the future has escalated tension in the Middle East. Historically, heightened geopolitical tensions improve the safe-haven demand of the Silver price.
Silver price trades inside Monday’s trading range around $32.00. The white metal rallied on Monday to near $32.30 after breaking above the three-day resistance of $31.30. The asset climbs above the 20- and 50-day Exponential Moving Averages (EMAs) near $31.15 and $31.20, respectively, suggesting a strong uptrend.
The 14-day Relative Strength Index (RSI) approaches 60.00. A bullish momentum would trigger a decisive break above the same.
Looking down, the upward-sloping trendline around $29.50, which is plotted from the February 29 low of $22.30 on a daily timeframe, would act as key support for the Silver price. On the upside, the horizontal resistance plotted from the May 21 high of $32.50 would be the barrier.
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.
The US Dollar (USD) is narrowly mixed to a little firmer against the majors in quiet trade. It’s another very light session for data, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“Markets have little incentive to move significantly ahead of tomorrow’s major event risk in North America—US CPI data and the BoC policy decision. The GBP and MXN are grinding out small gains on the USD so far on the session while the AUD has given up yesterday’s China stimulus-driven bump to slide more than 0.6%, pulling the NZD lower with it.”
“The RBA policy meeting overnight concluded with no change in the policy rate, as expected, but policymakers indicated that they are gaining confidence in the inflation outlook which prompted markets to boost expectations that a rate cut could, finally, emerge in February. Global stock trends look a little soft again after yesterday’s US market losses when the Santa rally appeared to stumble a bit. The S&P 500 is up more than 30% this year so a correction ought not surprise.”
“The charts suggest that the stock rally may be starting to look a bit stretched and might be losing momentum. Soft stocks may have given the USD a bit of a lift in European trade but the roots of the dollar gains seen in the past few days really lie in the strong rebound seen around Friday’s jobs data. In contrast to the ‘seasonal’ soft trend in the USD that we often see in December, near-term risks appear geared towards a bit more strength in the DXY towards 106.75. Support is 106.00/05.”
The Gold price rose to as high as $2,675 per troy ounce yesterday, Commerzbank’s commodity analyst Carsten Fritsch notes.
“Furthermore, it was announced over the weekend that the Chinese central bank (PBoC) bought Gold again in November for the first time after a break of six months. According to a PBoC publication, its Gold holdings rose to 72.96 million ounces by the end of November, compared with 72.80 million ounces at the end of October. The increase in Gold reserves in November corresponds to purchases of 5 tons of Gold.”
“Compared with previous monthly purchase volumes of up to 30 tons, this is a small amount. More important, however, is the signal that the PBoC has started buying Gold again after having paused for six months. The purchases may have been in response to Donald Trump's election victory, which threatens China with the introduction of punitive tariffs of 60%.”
“In addition, the Gold price had fallen significantly in November after rising to a record level, which may also have stimulated buying interest. The lower Gold price also meant that the PBoC's Gold reserves were worth less in USD terms at the end of November than at the end of October, despite the purchases. It will now be important that Gold purchases continue in the coming months, i.e. that the purchases in November do not remain a flash in the pan.”
The US Dollar is trading higher for the second consecutive day on Tuesday. The sourer market sentiment and the rebound in US Treasury yields are supporting the safe-haven USD and weighing on the Yen.
Beyond that, investors are growing increasingly wary of placing large US Dollar bets, awaiting Wednesday’s US Consumer Prices Index reading.
US inflation is expected to confirm that the last mile is the toughest one to run. Consumer prices are expected to have ticked up to a 2.7% yearly rate in November from 2.6% in October, with the core inflation steady at 3.3%, well above the 2% Fed target for price stability.
These figures do not change expectations of a Fed cut next week but they will send a signal towards a more cautious approach to monetary easing in 2025. More so if we take into account the inflationary policies that Trump’s cabinet is expected to implement.
The adverse risk sentiment has triggered some recovery on US Treasury yields, with the benchmark 10-year yield crawling to 4.23% from 4.13% on Monday, and increasing the gap with the JGB. This has added bearish pressure on the Yen.
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 Mexican Peso (MXN) is drifting lower from the key 20.00 area weighed by a stronger US Dollar (USD). A somewhat sourer market sentiment on Tuesday is supporting the safe-haven Greenback, while the MXN is still weighed by the weak Mexican inflation data seen on Monday.
The US Dollar is picking up across the board as investors' focus shifts to the US Consumer Prices Index (CPI) release, due on Wednesday. The market consensus hints toward a sticky inflation reading, which endorses the view of a shallow Federal Reserve’s (Fed) easing cycle in 2025.
In Mexico, the soft consumer inflation data has countered the hawkish comments from Banxico Deputy Governor Espinosa, boosting hopes that the bank will cut rates by 25 basis points again next week.
The USD/MXN has found support at the 20.00 support area to pare previous losses, although it remains capped below the December 6 high at 20.27 so far.
Technical indicators are mixed, with the 4-hour Relative Strength Index (RSI) still in bearish territory below the 50 level. From a broader perspective, the bearish trend remains intact, with the double top at 20.80 suggesting the possibility of a deeper correction.
Immediate resistance is at the mentioned December 6 high at 20.27, ahead of the December 2 high at 20.60 and November’s peak at 20.80. On the downside, the 20.00 psychological level is the neckline of the mentioned double top ahead of November’s low, at 19.75.
(This story was corrected on December 10 at 11:55 GMT to say, in the technical analysis section, that the December 6 high was at 20.27, not 2.27.)
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | 0.20% | -0.08% | 0.33% | -0.04% | 0.64% | 0.72% | 0.12% | |
EUR | -0.20% | -0.27% | 0.10% | -0.24% | 0.44% | 0.52% | -0.07% | |
GBP | 0.08% | 0.27% | 0.37% | 0.04% | 0.72% | 0.79% | 0.20% | |
JPY | -0.33% | -0.10% | -0.37% | -0.34% | 0.33% | 0.40% | -0.18% | |
CAD | 0.04% | 0.24% | -0.04% | 0.34% | 0.67% | 0.76% | 0.16% | |
AUD | -0.64% | -0.44% | -0.72% | -0.33% | -0.67% | 0.08% | -0.51% | |
NZD | -0.72% | -0.52% | -0.79% | -0.40% | -0.76% | -0.08% | -0.59% | |
CHF | -0.12% | 0.07% | -0.20% | 0.18% | -0.16% | 0.51% | 0.59% |
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).
This morning, the Reserve Bank of Australia (RBA) left the key interest rate unchanged at 4.35 per cent in its last monetary policy meeting of the year. However, the tone surrounding this decision was noticeably more dovish, causing the AUD to weaken significantly in the initial reaction, Commerzbank’s FX analyst Volkmar Baur notes.
“Two points stood out for FX traders. Firstly, the RBA had to admit that economic growth in Q3 was weaker than expected. The economic development is therefore weaker than expected, which argues in favour of a looser monetary policy. Furthermore, and this point is even more important, the wording around inflation was changed.”
“It now states that the RBA is more confident that inflation will move sustainably towards the middle of the RBA's target range (2-3%). In November, the RBA still stated that this is exactly what had to happen in order to start loosening monetary policy. There is still a long time to go before their next meeting in mid-February. Two labour market reports and the inflation figures for the fourth quarter will be published in the meantime.”
“The market will therefore be watching these data very closely in the coming weeks to gauge what to expect in February. We expect the RBA to cut interest rates in February. The market's assessment of the probability of such a move is currently a little higher than it was yesterday, at around 64% this morning. A full pricing-in over the next few weeks would weigh further on the AUD.”
Upcoming CEWC likely to set a pro-growth tone and lay out stimulus plan, echoing the Politburo. Shift to an ‘appropriately loose’ monetary policy stance increases the chance of positive surprises. That said, diminishing policy room and financial stability concerns may constrain size of stimulus. We expect fiscal policy to do the heavy lifting, with increasing emphasis on boosting consumption, Standard Chartered’s economists Carol Liao and Shuang Ding note.
“The Politburo meeting on 9 December sent strong policy easing signals, raising market hopes of a ‘big-bang’ stimulus package. The shift in the monetary policy stance from ‘prudent’ to ‘appropriately loose’ and the introduction of ‘extraordinary counter-cyclical adjustment’ beat expectations, suggesting that the government may set an ambitious 2025 growth target (likely around 5%). In addition, the meeting pledged to implement more proactive fiscal policy, stabilise the housing and stock markets, and boost domestic demand 'from every aspect.' Markets have reacted positively.”
“We think the strong tone of the Politburo is part of the authorities’ efforts to use forward guidance to revive market sentiment. While upside surprises are possible from monetary easing and broader-based stimulus, we keep our 2025 growth forecast at 4.5% given diminishing macro policy room, the ongoing property-market correction and rising external headwinds.”
“We expect the Central Economic Work Conference (CEWC), likely to be held later this week, to provide more details on what the Politburo called ‘extraordinary counter-cyclical adjustment’. We think this may include a large increase in government bond issuance, supported by regular PBoC purchases of central government bonds from the market. The new stimulus package is likely to be more focused on boosting consumption, a departure from the old stimulus model that relied heavily on investment. Monetary easing could provide positive surprises, but we do not think it will be comparable to the 2009 stimulus given diminishing policy room and concerns about financial stability.”
The AUD/USD pair plunges below the key support of 0.6400 in Tuesday’s European session. The Aussie pair weakens as Reserve Bank of Australia (RBA) Governor Michele Bullock delivered a less-hawkish interest rate guidance after leaving its key Official Cash Rate (OCR) unchanged at 4.35% for the ninth meeting in a row.
Michele Bullock remained slightly confident about inflation returning to the bank’s target of 2%. “Upside inflation risks had eased but not gone away,” Bullock said. When asked about whether the RBA will cut interest rates in the February meeting, Bullock said that the decision would be data-dependent but was confident that wages and demand are slowing.
Before the RBA’s policy decision, analysts at ANZ and Westpac predicted the RBA to start reducing interest rates from May 2025.
This week, investors should brace for more volatility in the Australian Dollar (AUD) as the domestic employment data is scheduled to be released on Thursday.
Meanwhile, the US Dollar (USD) rises ahead of the United States (US) Consumer Price Index (CPI) data for November, which will be released on Wednesday. The inflation data will influence market speculation for the Federal Reserve’s (Fed) interest rate action in the policy meeting on December 18.
There is an almost 86% chance that the Fed will reduce interest rates by 25 basis points (bps) to 4.25%-4.50%, according to the CME FedWatch tool.
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.
Gold (XAU/USD) maintains a mild bullish tone on Tuesday. The tone shift by China’s Politburo, vowing further economic stimulus to support growth, and the resumption of Gold purchases by the People’s Bank of China (PBoC) are acting as a tailwind for the precious metal.
Other sources of support for Gold are the safe-haven flows triggered by the uncertainty in the Middle East, after the fall of Bacher El Asad’s regime in Syria, and the political deadlocks in France and Germany
Finally, growing bets that the Federal Reserve (Fed) will cut rates next week keep US yields close to multi-week lows, and provide additional support to the yieldless metal.
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | 0.16% | -0.11% | 0.23% | 0.00% | 0.58% | 0.62% | 0.09% | |
EUR | -0.16% | -0.26% | 0.03% | -0.16% | 0.42% | 0.46% | -0.07% | |
GBP | 0.11% | 0.26% | 0.29% | 0.10% | 0.69% | 0.72% | 0.18% | |
JPY | -0.23% | -0.03% | -0.29% | -0.20% | 0.38% | 0.41% | -0.11% | |
CAD | -0.01% | 0.16% | -0.10% | 0.20% | 0.57% | 0.61% | 0.09% | |
AUD | -0.58% | -0.42% | -0.69% | -0.38% | -0.57% | 0.03% | -0.49% | |
NZD | -0.62% | -0.46% | -0.72% | -0.41% | -0.61% | -0.03% | -0.52% | |
CHF | -0.09% | 0.07% | -0.18% | 0.11% | -0.09% | 0.49% | 0.52% |
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)
Gold rally is losing steam, with the US Dollar coming up on Tuesday but it remains steady above the top of the last two week’s trading range, at $2,660.
Above here, the next target would be the $2,690 intra-day level, and the November 24 high, at $2,720. A bearish reaction below the mentioned $2,660 would bring the December 9 low, at $2630 back into focus, ahead of the channel bottom (November 26 and December 5 lows), at $2,605.
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.
The USD/CAD pair posts a fresh four-year high near the round-level resistance of 1.4200 in Tuesday’s European session. The Loonie pair strengthens as the US Dollar (USD) rises ahead of the United States (US) Consumer Price Index (CPI) data for November, which will be published on Wednesday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, refreshes a two-day high at 106.35.
The inflation data is expected to influence market expectations for the Federal Reserve’s (Fed) likely interest rate action in the policy meeting on December 18. The Fed is highly anticipated to cut its key borrowing rates by 25 basis points (bps) to 4.25%-4.50% next week, according to the CME FedWatch tool.
Economists expect the annual headline inflation to have accelerated to 2.7% from the October reading of 2.6%. In the same period, the core CPI – which excludes volatile food and energy prices – is expected to have risen steadily by 3.3%. Month-on-month headline and core CPI are estimated to have grown steadily by 0.2% and 0.3%, respectively.
Signs of cooling price pressures would accelerate Fed dovish bets for policy meeting next week. On the contrary, hot inflationary pressures would weaken them.
Meanwhile, the outlook of the Canadian Dollar (CAD) remains weak as investors expect the Bank of Canada (BoC) to cut interest rates again by 50 basis points (bps) to 3.25% in the monetary policy meeting on Wednesday.
Significantly lower Unemployment Rate and price pressures remaining contained within bank’s target of 2% have led to dovish BoC bets.
The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.
Read more.Next release: Wed Dec 11, 2024 14:45
Frequency: Irregular
Consensus: 3.25%
Previous: 3.75%
Source: Bank of Canada
Trump’s policies will likely incur costs, including for the US; this raises questions about their longevity. Trade wars, anti-immigration policies and a rejection of multilateralism will be high on the agenda. Other countries and regions are bracing for the new reality, with varying levels of adaptability, Standard Chartered’s Senior Economist Philippe Dauba-Pantanacce notes.
“Who will win the argument between ideology and pragmatism? Trump’s chosen appointees and advisers are firm believers in protectionism, anti-immigration policies, and maximum pressure against Iran; it appears that the team is being assembled with a view to fully implementing Trump’s agenda. But his political instincts could ultimately be obstructed by the economic costs of his maximalist campaign promises – particularly higher inflation.”
“That could become a political liability ahead of the 2026 midterm elections; the party that controls the White House tends to lose midterms. Ideologues are likely to be willing to accept the initial costs of their policy choices for the sake of longer-term outcomes. But political cycles are shorter-term in nature, and pragmatists could be willing to make a course correction if economic costs become impossible to ignore. Those costs could potentially include higher inflation, pressure on economic sectors struggling with the reduction of immigrant workers, or a stock-market correction.”
“While execution is uncertain, some core tenets of Trump’s worldview are unlikely to change. On the foreign policy front, he has decisively rejected multilateralism and is likely to take an adversarial approach to – or refuse to participate in – multilateral agreements, compromises and institutions. This has implications for global climate policy, the UN, Bretton Woods institutions, and US relations with the EU. US foreign policy will likely return to a focus on bilateral discussions, where the US enjoys the most leverage given its size and influence. This does not mean that no deals will be agreed, however. We look at the various regions to see what Trump 2.0 could mean for the rest of the world.”
US Dollar (USD) is under mild downward pressure; it could edge lower to 7.2540. The major support at 7.2400 is unlikely to be tested. In the longer run, current price movements are likely part of range trading, probably between 7.2400 and 7.2900, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “While we noted ‘a slight increase in momentum’ yesterday, we were of the view that ‘this is likely to lead to a higher trading range of 7.2650/7.2900 instead of a sustained rise.’ USD then rose to 7.2927 before dropping sharply 7.2575. This time around, there has been a slight increase in downward momentum. Today, USD is likely to edge lower to 7.2540. The major support at 7.2400 is unlikely to be tested. Resistance is at 7.2760; a breach of 7.2830 would indicate that the current mild downward pressure has eased.”
1-3 WEEKS VIEW: “There is not much to add to our update from last Friday (06 Dec, spot at 7.2660). As previously indicated, ‘the current price movements are likely part of range trading, probably between 7.2400 and 7.2900.’ Note that while USD rose to 7.2927 yesterday, it pulled back quickly to close lower at 7.2685.”
Euro (EUR) traded little changed, was last seen at 1.0532 levels. This week, EUR may continue to see more volatility because of the political risks in Germany and the upcoming ECB meeting on Thursday, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“Daily momentum is mild bullish but rise in RSI slowed. Price pattern shows a classic formation of an inverted head & shoulders pattern, which is typically associated with a bullish reversal. Neckline comes in at 1.0610/20 levels. Break-out puts 1.0670 (38.2% fibo) within reach before next resistance comes in at 1.0750/75 levels (50 DMA, 50% fibo). Support at 1.0460 levels.”
“On Wednesday, German Chancellor Scholz is expected to call for a vote of confidence and the Bundestag will vote next Monday on 16 Dec. To survive the vote, Scholz would need to receive the support of an absolute majority of 367 votes. But in the event, he fails, then Germany is likely to make way for elections on 23 Feb 2025. Far right AfD is calling for Germany to leave the European Union, the EUR and Paris climate deal as the party prepares for early elections in Feb-2025. The concern here is the explicit language to quit EU unlike its manifesto ahead of the European parliament elections previously in Jun-2024.”
“On Thursday, ECB meeting takes centre stage. Markets have already reduced bets for 50bp cut and is now pricing just a 25bp cut. OIS-implied has also priced in back-to-back cuts for 1H next year, taking rates to below 2% in Jun 2025, or even 1.75% in July. This may have been overdone. While political risks in Europe may still weigh on EUR, but we had also flagged that many EUR negatives, such as slowing growth momentum, political fallout, aggressive ECB cut expectations, etc. are already in the price. We still do not rule out the risk of EUR short squeeze in the short term.”
Further US Dollar (USD) strength appears likely; any advance is unlikely to breach the major resistance at 152.00. In the longer run, USD weakness appears to have stabilised; it is likely to trade in a range of 148.65/152.00 for now, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “Our view for USD to consolidate in a range of 149.15/150.55 yesterday was incorrect. Instead of consolidating in a range, USD soared to a high of 151.34, closing on a strong note at 151.19 (+0.77%). While further USD strength appears likely, any advance is unlikely to breach the major resistance at 152.00. On the downside, support levels are at 150.90 and 150.50.”
1-3 WEEKS VIEW: “Last Thursday (05 Dec, spot at 150.35), we highlighted that the recent USD weakness ‘appears to have stabilised.’ We also highlighted that ‘the current price movements are likely the early stages of a range trading phase, probably between 148.65 and 152.00.’ There is no change in our view.”
Silver prices (XAG/USD) rose on Tuesday, according to FXStreet data. Silver trades at $31.83 per troy ounce, up 0.12% from the $31.79 it cost on Monday.
Silver prices have increased by 33.76% since the beginning of the year.
Unit measure | Silver Price Today in USD |
---|---|
Troy Ounce | 31.83 |
1 Gram | 1.02 |
The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 83.70 on Tuesday, up from 83.61 on Monday.
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.
(An automation tool was used in creating this post.)
USD/JPY traded higher this week after PM Ishiba told parliament that the government is not considering revising a long-standing agreement between BoJ and the government as Japan has not escaped deflation yet. He also added that BoJ’s monetary policy doesn’t aim to move FX. USD/JPY rose to a high of 151.55, and the pair was last seen at 151.61 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“Bearish momentum on daily chart intact but shows signs of fading but rise in RSI slowed. Bias remains to sell rallies. Resistance at 152 levels (200 DMA) and 152.70/80 levels (21 DMA, 23.6% fibo). Support at 150.20 (38.2% fibo), 148.70 levels (100 DMA) and 148.20 (38.2% fibo retracement of September low to November high).”
“In terms of data releases, there is a few to keep a look out for this week, including PPI on Wed and Tankan survey on Fri before BoJ MPC (19 December). But largely, we are looking for BoJ to carry on with policy normalization with a hike next week and into 2025. Recent uptick in base pay supports the view about positive development in labor market, alongside still elevated services inflation, better 3Q GDP and expectations for 5-6% wage increases for 2025.”
“The risk is a slowdown in pace of respective policy normalization, especially if Fed slows pace on return of US exceptionalism. Then USD/JPY moves may even face intermittent upward pressure.”
Instead of continuing to rise, New Zealand Dollar (NZD) is more likely to trade between 0.5825 and 0.5890. In the longer run, the likelihood of NZD declining to 0.5770 has diminished, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “After NZD dropped sharply to 0.5824 last Friday, we stated yesterday that ‘there is scope for NZD to continue to weaken.’ However, we pointed out that ‘given the oversold conditions, any decline is unlikely to reach last month’s low, near 0.5795 (there is another support at 0.5810).’ NZD subsequently dropped to 0.5805 before staging a surprisingly sharp advance to 0.5888. The rapid rise appears to be overdone, and instead of continuing to rise, NZD is more likely to trade between 0.5825 and 0.5890 today.”
1-3 WEEKS VIEW: “Yesterday (09 Dec), when NZD was at 0.5835, we indicated that it ‘is likely to trade with a downward bias toward 0.5795.’ We pointed out, ‘the likelihood of it reach 0.5770 is not high for now.’ NZD subsequently dropped to 0.5805 before rebounding strongly to 0.5888. Although our ‘strong resistance’ at 0.5890 has not been breached yet, the slowing momentum suggests the likelihood of NZD declining to 0.5770 has diminished.”
US Dollar (USD) traded a subdued range overnight in absence of key catalyst. Fedspeaks go into blackout so that puts the focus on data before FOMC next Thursday (19 December). DXY was last at 106.35, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“This week, we have CPI on Wednesday and PPI on Thursday. A 25bp cut is more or less a done deal for December meeting unless US CPI unexpectedly surprises a lot to the upside. We would be keen to see the dot plot guidance for 2025. Fed fund futures are implying about 3 cuts for 2025, slightly less than the previous dot plot of 4 cuts that was penciled in for 2025.”
“Daily momentum is mild bearish while RSI is flat. Head and shoulders pattern appears to have formed with DXY testing the neckline (which was respected last Friday). This is typically a bearish setup. A decisive break below neckline should see bears gather momentum.”
“Support at 105 levels (38.2% fibo retracement of Sep low to November high), 104.60 (50 DMA) and 104.10 (200 DMA, 50% fibo). Resistance at 106.70 (second shoulder).”
The NZD/USD pair struggles to capitalize on the previous day's bounce from the vicinity of the 0.5800 mark or a near two-week low and attracts fresh sellers on Tuesday. Spot prices retain intraday bearish bias through the first half of the European session and currently trade around the 0.5825-0.5820 region, within striking distance of a one-year trough touched in November.
The New Zealand Dollar (NZD) continues to be undermined by expectations for a more aggressive policy easing by the Reserve Bank of New Zealand (RBNZ). Adding to this, disappointing readings on China's exports and imports added to worries about a fragile recovery in the world's second-largest economy, which further undermined demand for antipodean currencies, including the Kiwi. This, along with a modest US Dollar (USD) uptick, exerts additional pressure on the NZD/USD pair.
In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, looks to build on the post-NFP bounce from a nearly one-month low amid bets that the Federal Reserve (Fed) will adopt a cautious stance on cutting interest rates. Moreover, the worsening Russia-Ukraine war and persistent geopolitical tensions in the Middle East drive some haven flows towards the buck. This, along with concerns about US President-elect Donald Trump's tariffs, weighs on the NZD/USD pair.
The aforementioned fundamental backdrop suggests that the path of least resistance for spot prices remains to the downside, though traders might await the release of the US consumer inflation figures on Wednesday. The crucial US Consumer Price Index (CPI) report will be looked for cues about the interest rate outlook in the US and guide Fed policymakers on their decision later this month. This, in turn, will influence the USD price dynamics and provide a fresh impetus to the NZD/USD pair.
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
EUR/USD slides to near 1.0530 in Tuesday’s European session as investors turn cautious ahead of the European Central Bank (ECB) monetary policy meeting, which will be announced on Thursday. Traders have priced in a 25-basis points (bps) reduction in the Deposit Facility Rate to 3%. This would be the third interest rate cut decision by the ECB in a row.
Market experts assume that a slew of factors, including Donald Trump’s victory in the United States (US) Presidential elections, political turmoil in France and Germany, and a sharp slowdown in the Eurozone business activity compelled financial market participants to factor in an interest rate reduction in the policy meeting on Thursday.
The fallout of the government in France and instability in Germany and France could have a direct impact on the Eurozone economic growth, which will weigh on price pressures, as these two are the largest economies of the trading bloc. The impact of Trump’s tariffs on Eurozone inflation when he reaches the White House is still uncertain.
ECB policymakers are divided over whether the impact of Trump tariffs will be inflationary or deflationary on the Eurozone economy. A handful of ECB policymakers assume that Trump’s tariffs will weaken the Euro (EUR) against the USD significantly, a scenario that will make imports costlier for individuals and boost price pressures. On the contrary, a few officials forecast risks of inflation undershooting the bank’s target as higher tariffs will dampen the Eurozone’s export sector.
EUR/USD wobbles above the psychological figure of 1.0500. The outlook of the major currency pair remains bearish as the 20-day EMA near 1.0573 acts as key resistance for the Euro (EUR) bulls.
The 14-day Relative Strength Index (RSI) rebounded after conditions turned oversold and climbed above 40.00, suggesting that the bearish momentum has faded. However, the broader bearish trend for the pair doesn’t seem to be over yet.
Looking down, the November 22 low of 1.0330 will be a key support. On the flip side, the 50-day EMA near 1.0700 will be the key barrier for the Euro bulls.
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day, according to data from the Bank of International Settlements. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
Australian Dollar (AUD) is likely to trade in a range between 0.6400 and 0.6480. In the longer run, current price movements are likely part of a consolidation phase, expected to be in a range of 0.6375/0.6500, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “Following AUD sharp decline to 0.6373 last Friday, we pointed out yesterday that ‘the sharp drop appears to be excessive.’ However, we were of the view that ‘there is scope for AUD to retest last Friday’s low near 0.6375 before a stabilisation can be expected.’ AUD then dipped to 0.6380 before rebounding strongly to a high of 0.6471. It then eased off to close at 0.6441 (+0.80%). This time around, the sharp rebound appears to be excessive, and AUD is unlikely to rise much further. Today, AUD is more likely to trade in a range, probably between 0.6400 and 0.6480.”
1-3 WEEKS VIEW: “We turned negative in AUD late last week. After AUD plummeted to 0.6373, we indicated yesterday (09 Dec, spot at 0.6400) that “the risk for AUD remains on the downside, likely towards the year-to-date low, near 0.6350.” We did anticipate the sharp bounce that broke above our ‘strong resistance’ level at 0.6450 (high has been 0.6471). In other words, the decline fell short than expected. The current price movements are likely part of a consolidation phase, expected to be in a range of 0.6375/0.6500.”
Inflation numbers from Hungary this morning should show an increase from 3.2% to 3.8% YoY, slightly above market expectations, and in line with the National Bank of Hungary (NBH) forecast, ING’s FX analyst Frantisek Taborsky notes.
“Although at first glance inflation developments in Hungary look favourable for the central bank, we think they will be of little relevance for next week's meeting. Nevertheless, Hungarian inflation remains the only downside surprise within the CEE region. Still, EUR/HUF has the main attention.”
“Friday's rating outlook upgrade from negative to stable from Fitch brought visible relief to the HUF yesterday and we believe the currency has put the worst behind it. Positioning seems already strongly on the short side at the moment, while Hungarian government bonds have seen new inflows in recent days. Moreover, December is seasonally positive for EUR/USD and CEE currencies, which could provide some relief after two months of stress in the HUF market.”
“Although in the medium term we believe EUR/HUF will grind further higher towards 420, tactically by year-end short positions could see some profit-taking. At the same time, the market is pricing in little NBH easing in the coming years following the sell-off in November with two to three 25bp rate cuts, which is significantly less than we forecast. Thus, yesterday's signs of calm in the HUF market could indicate a broader rally in HUF assets into year-end with attractive valuations.
Pound Sterling (GBP) is expected to trade in a 1.2710/1.2790 range. In the longer run, there has been a strong surge in momentum; GBP may rise to 1.2850, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “We indicated yesterday that GBP ‘appears to have entered a consolidation and is likely to trade between 1.2705 and 1.2770.’ GBP traded in a wider and higher range than expected (1.2718/1.2799) before closing largely unchanged at 1.2752 (+0.09%). The price action provides no fresh clues, and we expect GBP to trade in a 1.2710/1.2790 range today.”
1-3 WEEKS VIEW: “Last Friday (06 Dec, spot at 1.2760), we indicated ‘there has been a strong surge in momentum,’ and it ‘may rise to 1.2850.’ Aside from a brief rise to 1.2811, GBP has not been able to make much headway on the downside. However, we will continue to hold the same view, provided that 1.2685 (no change in ‘strong support’ from last Friday) is not breached.”
Germany's final inflation numbers brought no change to the headline number published previously with November unchanged at 2.2% year-on-year. EUR/USD bounced down after touching 1.060 yesterday with a close at 1.055, indicating some willingness to go lower after some positioning adjustment in recent days, ING’s FX analyst Chris Turner notes.
“Industrial production in Italy is also unlikely to make much difference to ECB pricing for Thursday's meeting. Here, a 25bp rate cut seems a done deal for the market, although our economist believes the press conference may open up the discussion for more cuts later, implying a dovish outcome for EUR.”
“In the headlines today we could see the results of the two-day Eurogroup meeting of finance ministers. Otherwise, it should be a quiet day similar to yesterday with the focus on Thursday's ECB meeting. Still, given some rebound in US rates while the EUR side remains muted, we saw some widening of the rate differential yesterday after more than a week of tightening spreads, indicating some reversal in EUR/USD.”
“The pair bounced down after touching 1.060 yesterday with a close at 1.055, indicating some willingness to go lower after some positioning adjustment in recent days. However, for more action here we will have to wait for Thursday's ECB meeting, which should show the next direction.”
GBP/JPY extends its gains for the second successive session, trading around 193.10 during the European hours on Tuesday. The recent upward movement in the GBP/JPY cross is likely driven by a weaker Japanese Yen (JPY), stemming from mixed expectations regarding a potential Bank of Japan (BoJ) rate hike in December.
BoJ Governor Kazuo Ueda recently indicated that the timing for the next rate hike is nearing, bolstered by strong underlying inflation data in Japan. This has fueled speculation about a possible rate hike during the BoJ’s December 18–19 policy meeting.
However, conflicting media reports suggest the BoJ might forgo a rate hike this month. Adding to the uncertainty, dovish BoJ board member Toyoaki Nakamura has cautioned against premature rate increases, further weighing on the Japanese Yen.
The Pound Sterling (GBP) gains ground against its major peers as investors become increasingly confident that the Bank of England (BoE) will maintain its current interest rates at 4.75% in the monetary policy meeting on December 19.
Most BoE officials are anticipated to vote for an unchanged interest rate, as UK headline inflation has risen again after briefly falling below the bank's 2% target. The BoE had previously forecasted a rebound in inflation after it temporarily aligned with the desired range.
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
USD/CNH continued to drift lower, thanks to recent news from politburo about ramping up support and also taking cues from daily fixing guidance. Policymakers continue to manage the daily fix, setting it below 7.20 and at times, even lower, when USD was even trading stronger. USD/CNH was last at 7.2519 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“Fixing pattern suggests that PBoC is doing whatever it takes to not only restraint the RMB from over-weakening but also to guide its bias and direction. Tariff may hurt RMB when it happens but that may be a story for 2025 after Trump inauguration. In the interim, we would keep a look out for the China’s CEWC meeting on 11-12 December.”
“Expectations are building up for stimulus support after politburo vowed to stabilise property and stock markets. Officials also pledged to ramp up ‘extraordinary counter-cyclical policy adjustment’ to support the economy and it also announced that it will embrace a “moderately loose” strategy for monetary policy in 2025. Follow-up policy action is crucial, and bear in mind markets are impatient. We caution that any delay in concrete policy action may setup a case for disappointment (again).”
“For now, we remain cautiously hopeful. And that would imply some support for Asian FX, including CNH, KRW, TWD, SGD and MYR. Daily momentum turned bearish while RSI fell. Risks are skewed to the downside. Support at 7.2340 (23.6% fibo retracement of Sep low to Dec high), 7.2040 9200 DMA), 7.18 levels (38.2% fibo, 50 DMA). Resistance at 7.27 levels.”
Further sideways trading in Euro (EUR) seems likely, probably between 1.0525 and 1.0585. In the longer run, EUR has to break and remain above 1.0610 before further advance to 1.0650 is likely, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “After EUR rose to 1.0629 last Friday, and then pulled back, we indicated yesterday that ‘upward pressure appears to have eased.’ We were of the view that EUR ‘may trade sideways between 1.0530 and 1.0590.’ Our view was not wrong, even though EUR traded in a slightly wider range of 1.0531/1.0594, closing at 1.0552 (-0.15%). Further sideways trading seems likely today, probably between 1.0525 and 1.0585.”
1-3 WEEKS VIEW: “Our update from last Friday (06 Dec, spot at 1.0585) remains valid. As indicated previously, EUR ‘has to break and remain above 1.0610 before further advance to 1.0650 is likely.’ On the downside, should EUR break below 1.0500 (no change in ‘strong support’ level), it would mean that the likelihood of EUR breaking clearly above 1.0610 has faded. Looking ahead, the next level to watch above 1.0610 is 1.0650.”
As expected, the Reserve Bank of Australia (RBA) decided to leave its cash rate target unchanged at a 13-year high of 4.35%. It has now been more than a year since the RBA’s last rate move, the 13th increase in a series that began in May 2022. It also kept the interest rate paid on Exchange Settlement balances unchanged at 4.25%, UOB Group’s Economist Lee Sue Ann notes.
“The Reserve Bank of Australia (RBA) kept rates at a 13-year high of 4.35% earlier today (10 December), as expected. The Board acknowledged that it is gaining some confidence that inflationary pressures are declining in line with these recent forecasts, although risks remain.”
“The RBA had opted not to raise rates as high as other central banks during the 2022-23 tightening cycle in an effort to safeguard the labor market, which remains a bright spot. However, that has led to inflation lingering more persistently in Australia.”
“Employment figures due later this week (12 December) are predicted to show the unemployment rate edging higher to 4.2% in November. As for inflation, the release of 4Q24 inflation data is not till 29 January, just ahead of the RBA's first policy meeting next year on 18 February. For now, we do not expect the RBA to cut rates until 1Q25 at the earliest.”
Silver price (XAG/USD) retreats from $32.00 per troy ounce during the European session on Tuesday. However, the price of the grey metal received support from news of potential economic stimulus from China.
Chinese policymakers, through the Politburo, outlined plans for a “moderately loose” monetary policy and a “more proactive” fiscal stimulus for the coming year. This marks a shift from the cautious approach of the past decade and has boosted the demand outlook for metals in the world’s largest consumer of raw materials.
Chinese President Xi Jinping stated on Tuesday, "China has full confidence in achieving this year's economic target." He emphasized that China will continue to serve as the largest engine of global economic growth and asserted that there would be no winners in tariff wars, trade wars, or tech wars.
Silver prices also benefited from growing expectations that the US Federal Reserve (Fed) will cut interest rates again this month. Traders are now pricing in nearly an 89.5% chance of Fed rate reductions by 25 basis points on December 18, according to the CME FedWatch Tool.
However, the strengthening of the US Dollar (USD) is making dollar-denominated Silver less affordable for buyers with foreign currencies, dampening its demand. Trades adopt caution ahead of the US Consumer Price Index (CPI) data scheduled to be released on Wednesday.
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.
The US Dollar (USD) got a little softer against most currencies on Monday after Chinese policymakers said they would boost consumption ‘forcefully’, ING’s FX analyst Chris Turner notes.
“USD was a little softer against most currencies on Monday after Chinese policymakers said they would boost consumption ‘forcefully’. This will be music to the ears of President-elect Donald Trump who is seeking to reverse China’s $300bn trade surplus with the US.”
“The news particularly helped China-centric currency pairs such as the Australian dollar and the South African rand. Expectations of some more detailed Chinese policy measures on Wednesday and Thursday this week can probably prove slightly supportive for the Rest of World currencies.”
“For today, the US data calendar is light and the focus should be on some slightly better small business optimism embodied in the NFIB index. We doubt investors will want to chase the DXY too much lower ahead of tomorrow’s US CPI number and would expect support at 105.40/60 to hold on a closing basis.”
The Pound Sterling (GBP) consolidates in a tight range near 1.2750 against the US Dollar (USD) in Tuesday’s European session. The GBP/USD pair trades sideways as investors focus on the United States (US) Consumer Price Index (CPI) data for November, which will be published on Wednesday.
Economists expect the annual headline inflation to have accelerated to 2.7% from the October reading of 2.6%. In the same period, the core CPI – which excludes volatile food and energy prices – is expected to have risen steadily by 3.3%. The month-on-month headline and core CPI are estimated to have grown steadily by 0.2% and 0.3%, respectively.
Unless there is a dramatic deviation from what’s expected, the impact of the inflation data shouldn’t significantly change market expectations for the Federal Reserve’s (Fed) likely interest rate action in the policy meeting on December 18. Recent commentaries from a string of Fed officials have indicated that they are confident about inflation remaining on a sustainable path towards the bank’s target of 2%.
However, Fed Governor Michelle Bowman, a well-known hawk, said on Friday that the central bank should “proceed cautiously and gradually in lowering the policy rate, as inflation remains elevated.”
There is an almost 90% chance that the Fed will reduce interest rates by 25 basis points (bps) to 4.25%-4.50%, according to the CME FedWatch tool.
In Tuesday’s session, investors will focus on the Q3 Unit Labor Costs data, which will be published at 13:30 GMT. The economic data will indicate the total cost borne by employers for employing the labor force. The Unit Labor Cost data is estimated to have grown steadily by 1.9% compared to the previous quarter.
The Pound Sterling strives to reclaim the key resistance of 1.2800 against the US Dollar. The GBP/USD pair holds the 20-day Exponential Moving Average (EMA) around 1.2720.
The 14-day Relative Strength Index (RSI) oscillates in the 40.00-60.00 range, suggesting a sideways trend.
Looking down, the pair is expected to find a cushion near the upward-sloping trendline around 1.2500, which is plotted from the October 2023 low near 1.2035. On the upside, the 200-day EMA around 1.2830 will act as key resistance.
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.
Here is what you need to know on Tuesday, December 10:
The Australian Dollar (AUD) stays under selling pressure early Tuesday following the Reserve Bank of Australia's (RBA) monetary policy announcements. The European economic docket will not offer any high-impact data releases. Later in the day, third-quarter Unit Labor Costs and Nonfarm Productivity data from the US will be watched closely by market participants.
The RBA left the Official Cash Rate (OCR) unchanged at 4.35% after its December policy meeting, as expected. "The board is gaining some confidence that inflationary pressures are declining in line with these recent forecasts, but risks remain," the RBA noted in its policy statement. In the post-meeting press conference, RBA Governor Michele Bullock said that they discussed that upside inflation risks had eased but not gone away. AUD/USD came under bearish pressure and was last seen trading near 0.6400, losing more than 0.5% on the day.
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Swiss Franc.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.09% | -0.06% | 0.02% | 0.00% | 0.63% | 0.53% | -0.12% | |
EUR | 0.09% | 0.04% | 0.08% | 0.08% | 0.72% | 0.63% | -0.03% | |
GBP | 0.06% | -0.04% | 0.04% | 0.07% | 0.68% | 0.59% | -0.07% | |
JPY | -0.02% | -0.08% | -0.04% | 0.02% | 0.65% | 0.54% | -0.11% | |
CAD | -0.00% | -0.08% | -0.07% | -0.02% | 0.63% | 0.54% | -0.11% | |
AUD | -0.63% | -0.72% | -0.68% | -0.65% | -0.63% | -0.10% | -0.74% | |
NZD | -0.53% | -0.63% | -0.59% | -0.54% | -0.54% | 0.10% | -0.65% | |
CHF | 0.12% | 0.03% | 0.07% | 0.11% | 0.11% | 0.74% | 0.65% |
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).
The data from China showed on Tuesday that the trade surplus widened to $97.44 billion in November from $95.27 billion in October. On a yearly basis, Exports rose by 6.7%, while Imports declined by 3.9%. "China has full confidence in achieving this year's economic target," Chinese President Xi Jinping said on Tuesday.
Following a bearish start to the week, the US Dollar (USD) Index edged higher in the American trading hours on Monday and closed in positive territory, supported by the cautious market mood. The USD Index holds steady slightly above 106.00 in the European morning on Tuesday. In the meantime, the benchmark 10-year US Treasury bond yield continues to fluctuate below 4.2%, while US stock index futures trade flat.
EUR/USD registered small daily losses on Monday. The pair holds steady above 1.0550 to begin the European session on Tuesday. The data from Germany confirmed that the Consumer Price Index rose 2.2% on a yearly basis in November.
After rising toward 1.2800, GBP/USD lost its traction and closed virtually unchanged on Monday. The pair stays in a consolidation phase at around 1.2750 early Tuesday.
USD/JPY gathered bullish momentum and gained nearly 0.8% on Monday. The pair moves sideways above 151.00 in the European morning.
Gold turned north on Chinese stimulus hopes and rose about 1% on Monday. XAU/USD continues to push higher early Tuesday and was last seen trading near $2,670.
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
The EUR/GBP cross trades with mild gains around 0.8280 during the early European session on Tuesday. However, the upside for the cross might be limited as the rising bets that the Bank of England (BoE) will stick to a gradual script for rate cuts provide some support to the Pound Sterling (GBP) against the Euro (EUR).
The BoE policymaker Swati Dhingra warned that high interest rates are bearing down on the economy by curbing consumer spending and business investment. Dhingra added that she is in favor of “gradual” interest rate reductions and that the long-term neutral interest rate is likely to be in the range of 2.5% to 3.5%.
The expectation that the UK central bank cuts interest rates more gradually compared with other major central banks could lift the GBP. Markets expect the BOE to leave rates unchanged at 4.75% at its December meeting but expect rates to be cut by a further 75 basis points (bps) in total next year.
On the Euro front, markets expect the European Central Bank (ECB) to lower its key deposit rate by a quarter percentage point to 3% on Thursday. Investors then expect five more 25 bps rate cuts next year that will bring down the deposit rate to 1.75%, according to the LSEG. The ECB President Lagarde’s press conference and the updated macroeconomic projections will be closely watched. The ECB is expected to lower its inflation and real GDP growth predictions, which might result in a downward adjustment to ECB easing expectations, weighing on the shared currency.
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.
The USD/CHF pair softens to around 0.8770 during the early European session on Tuesday. The uptick of the Swiss Franc (CHF) is bolstered by further turmoil in the Middle East, which boosts the safe-haven flows. The release of the US November Consumer Price Index (CPI) data and the Swiss National Bank (SNB) interest rate decision will be the highlights for this week.
Turbulence in the Middle East increased over the weekend as Syrian President Bashar al-Assad and his family fled to Moscow and were granted political asylum, ending 50 years of a brutal dictatorship. The downfall of Bashar al-Assad's regime could lead to a conflict involving regional countries, lifting the safe-haven currency like the CHF against the Greenback. “The government’s collapse in Syria could see haven demand flowing in,” said ANZ Group Holdings analysts.
The SNB is expected to cut its key policy rate by 25 basis points (bps) at its December meeting on Thursday. According to a Reuters poll, over 85% of economists estimated the Swiss central bank would cut its main rate by 25 bps to 0.75% on Thursday. Christian Schulz, the deputy chief European economist at Citi, expected the SNB to downgrade its short-term forecasts again, adding, "The SNB's guidance will likely remain dovish”. This, in turn, might undermine the CHF and act as a tailwind for USD/CHF.
On the other hand, traders raised their bets for another US Federal Reserve (Fed) rate cut in the December meeting after the US employment report on Friday. Data released on Friday showed that US job growth rose in November, but a rise in the unemployment rate to 4.2% pointed to an easing labor market that should allow the Fed to cut interest rates again this month. Traders will keep an eye on the US inflation report on Wednesday for fresh impetus.
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
Chinese President Xi Jinping said on Tuesday, “China has full confidence in achieving this year's economic target.”
China is to continue to play the role of the largest engine of global economic growth.
There will be no winners in tariff wars, trade wars, tech wars.
AUD/USD keeps losses following these comments, losing 0.64% on the day to trade near 0.6395.
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.
EUR/JPY maintains its position around 159.50 during Tuesday's Asian session. This upward movement in the EUR/JPY cross is likely due to a weaker Japanese Yen (JPY), driven by uncertain expectations about a potential Bank of Japan (BoJ) rate hike in December.
BoJ Governor Kazuo Ueda recently signaled that the timing for the next rate hike is approaching. Combined with data showing strong underlying inflation in Japan, this has increased speculation of a rate hike at the BoJ's policy meeting on December 18-19.
However, some media reports suggest the BoJ may opt to skip a rate hike this month. Additionally, dovish BoJ board member Toyoaki Nakamura emphasized the need for caution in raising rates, adding further uncertainty and weighing on the Japanese Yen.
In the Eurozone, markets are nearly fully pricing in a 25 basis point (bps) cut to the European Central Bank's (ECB) Deposit Facility Rate, bringing it to 3% on Thursday. Several ECB officials have expressed concerns about the risk of inflation falling short of the bank’s target, driven by a weak economic outlook. The ECB has already reduced the deposit rate by 75 bps this year, and Thursday’s anticipated cut would mark the third consecutive reduction.
Market participants expect the Eurozone economy to underperform due to political uncertainty in Germany and France, the largest economies in the bloc. Additionally, concerns are growing about the potential impact on the export sector, particularly with the uncertainty surrounding US President Donald Trump’s administration and its policies once he takes office.
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
The USD/CAD pair touches a fresh high since April 2020 during the Asian session on Tuesday, though it lacks follow-through buying and remains below the 1.4200 round-figure mark. The near-term fundamental backdrop, meanwhile, seems tilted in favor of bullish traders and suggests that the path of least resistance for spot prices remains to the upside.
The Canadian Dollar (CAD) continues to be weighed down by bets for a larger interest rate cut by the Bank of Canada (BoC) on Wednesday, bolstered by a jump in the domestic unemployment rate in November. Apart from this, a modest downtick in Crude Oil prices undermines the commodity-linked Loonie and acts as a tailwind for the USD/CAD pair, though the lack of follow-through US Dollar (USD) buying caps the upside.
The US Nonfarm Payrolls (NFP) report released on Friday reaffirmed bets that the Federal Reserve (Fed) will cut interest rates in December. This, in turn, keeps the US Treasury bond yields depressed near October lows and caps the post-NFP USD recovery from a nearly one-month through. However, expectations for a less dovish Fed should help limit any meaningful USD losses and offer some support to the USD/CAD pair.
Traders, meanwhile, might refrain from placing aggressive directional bets ahead of the key US macro data and the central bank event risk. The US Consumer Price Index (CPI) report is due for release on Wednesday and should offer cues about the Fed's rate-cut path, which will drive the USD demand. Adding to this, the BoC policy decision, also on Wednesday, will determine the next leg of a directional move for the USD/CAD pair.
The Bank of Canada (BoC) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoC believes inflation will be above target (hawkish), it will raise interest rates in order to bring it down. This is bullish for the CAD since higher interest rates attract greater inflows of foreign capital. Likewise, if the BoC sees inflation falling below target (dovish) it will lower interest rates in order to give the Canadian economy a boost in the hope inflation will rise back up. This is bearish for CAD since it detracts from foreign capital flowing into the country.
Read more.Next release: Wed Dec 11, 2024 14:45
Frequency: Irregular
Consensus: 3.25%
Previous: 3.75%
Source: Bank of Canada
The EUR/USD pair trades in positive territory around 1.0560 during the early European session on Tuesday. However, the upside for the major pair seems limited amid the rising bets for additional reductions by the European Central Bank (ECB) on Thursday.
The ECB is widely expected to announce a 25-basis point (bps) rate cut at its December meeting on Thursday, though an unusual 50 bps reduction remains possible. Market players will monitor ECB President Christine Lagarde’s press conference after the monetary policy meeting as it might offer some hints about future policy direction and the potential timeline for additional rate cuts.
Technically, EUR/USD keeps the bearish vibe on the daily chart as the major pair remains capped below the key 100-day Exponential Moving Average (EMA). Additionally, the downward momentum is supported by the 14-day Relative Strength Index (RSI), which is located below the midline around 45.20, indicating that the path to the least resistance level is to the upside.
The initial support level for the major pair emerges at 1.0480, the low of December 3. Any follow-through selling below the mentioned level could expose the lower limit of the Bollinger Band at 1.0445. Extended losses could push prices lower toward 1.0332, the low of November 22.
On the upside, the first upside barrier is seen near the upper boundary of the Bollinger Band at 1.0623. Sustained bullish momentum could see a rally to 1.0787, the 100-day EMA. Further north, the next hurdle to watch is the 1.0800 psychological level.
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day, according to data from the Bank of International Settlements. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
Reserve Bank of Australia (RBA) Governor Michele Bullock is speaking at the press conference, following the announcement of the December monetary policy decision on Tuesday.
Bullock is responding to questions from the media as part of a new reporting format for the central bank starting this year.
The RBA maintained the benchmark interest rate at 4.35% for the ninth straight meeting earlier this Tuesday but signalled a dovish pivot.
Need to think carefully on policy.
Recent data have been mixed with some softening.
Discussed upside inflation risks had eased but not gone away.
Need to see more progress on underlying inflation.
Some inflation pressures remain.
Some data has been a bit softer, but inflation elevated.
Level of demand is still too high.
Change in wording of statement is deliberate.
Board has noted that data has been softer.
Have little bit more confidence on inflation.
Board feels the economy is pretty much in line with forecasts.
Do not need two or more quarterly inflation prints for change.
Will be watching all data including employment.
Did not discuss interest rate cut.
Did not discuss raising rates either.
Cannot say when will be confident on inflation.
But board has taken notice of softer data.
Do not want to endorse market reaction, but not surprised by reaction.
Do not know if we will cut rates in February.
Will have to watch data, wages and demand are slowing.
If inflation does not decline, then we have another problem.
Developing story, please refresh the page for updates.
AUD/USD is holding losses near 0.6400 on the above comments, down 0.54% on the day, as of writing.
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.
GBP/USD remains stable for the second consecutive day, trading around 1.2750 during the Asian session on Tuesday. The risk-sensitive pair could face challenges as the US Dollar (USD) continues to gain ground due to market caution ahead of the US Consumer Price Index (CPI) data scheduled to be released on Wednesday.
The Federal Reserve Bank of New York highlighted in its latest consumer survey summary that US consumers are navigating uncertain economic expectations. The survey indicated a sharp improvement in consumers' outlook on their financial situations and the federal government’s fiscal condition, alongside a significant shift in expectations regarding debt affordability and credit conditions.
US November NFP data from Friday showed a robust 227,000 gain, well above expectations, and stable Average Hourly Earnings growth at 0.4% MoM. Traders are now pricing in nearly an 85.8% chance of Fed rate reductions by 25 basis points on December 18, according to the CME FedWatch Tool.
The Pound Sterling (GBP) hovers near four-week highs as investors await key economic data and upcoming central bank meetings. Data due next Friday is expected to show the UK economy rebounding in October, alongside signs of recovery in the manufacturing sector. The Bank of England (BoE) is widely anticipated to keep interest rates unchanged at its December 19 meeting.
On Monday, BoE Deputy Governor for Markets and Banking, Sir Dave Ramsden, emphasized the need for the central bank to remain “vigilant” amid heightened uncertainty surrounding the UK’s economic outlook.
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 prices rose in India on Tuesday, according to data compiled by FXStreet.
The price for Gold stood at 7,290.05 Indian Rupees (INR) per gram, up compared with the INR 7,251.86 it cost on Monday.
The price for Gold increased to INR 85,030.08 per tola from INR 84,584.24 per tola a day earlier.
Unit measure | Gold Price in INR |
---|---|
1 Gram | 7,290.05 |
10 Grams | 72,900.54 |
Tola | 85,030.08 |
Troy Ounce | 226,746.20 |
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 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.)
Gold price (XAU/USD) attracts some dip-buyers during the Asian session on Tuesday and moves back closer to a two-week top touched the previous day. Geopolitical tensions continue to bolster safe-haven demand, which, along with the resumption of buying by China’s central bank for the first time in seven months, acts as a tailwind for the precious metal. Furthermore, concerns about US President-elect Donald Trump's tariff plans and their effects on the global economic outlook turn out to be another factor that benefits the bullion.
Meanwhile, Friday's US Nonfarm Payrolls (NFP) report reaffirmed bets that the Federal Reserve (Fed) will cut interest rates in December, which contributed to the recent downfall in the US Treasury bond yields. This, along with expectations that Trump's policies will boost inflation, offers support to Gold price, which is considered as a hedge against inflation. However, a modest US Dollar (USD) strength, bolstered by bets for a less dovish Fed, might cap the XAU/USD ahead of the US consumer inflation figures on Wednesday.
From a technical perspective, the overnight breakout through and daily close above the $2,650 barrier could be seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart have just started gaining positive traction and support prospects for a further appreciating move for the Gold price. Hence, some follow-through strength towards reclaiming the $2,700 mark, en route to the $2,720-2,722 supply zone, looks like a distinct possibility.
On the flip side, the $2,650 resistance breakpoint, which coincides with the 200-period Exponential Moving Average (EMA) on the 4-hour chart, should now act as an immediate strong support. A convincing break below might expose the next relevant support near the $2,625-2,620 area before the Gold price eventually drops to the $2,600 mark. A subsequent break below the 100-day SMA, currently around the $2,590-2,585 region, will set the stage for deeper losses and drag the XAU/USD to the November swing low, around the $2,537-2,536 zone.
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.
FX option expiries for Dec 10 NY cut at 10:00 Eastern Time via DTCC can be found below.
EUR/USD: EUR amounts
GBP/USD: GBP amounts
USD/JPY: USD amounts
USD/CHF: USD amounts
AUD/USD: AUD amounts
USD/CAD: USD amounts
NZD/USD: NZD amounts
NZD/USD retraces its recent gains, trading around 0.5830 during Asian hours on Tuesday. The New Zealand Dollar (NZD) remains subdued following China’s Trade Balance data for November. However, buyers of the Kiwi dollar welcomed the decision from New Zealand's top trading partner, China, to implement a more proactive fiscal policy and moderately loose monetary policy next year.
China's Trade Balance (CNY) expanded to CNY 692.8 billion in November, up from CNY 679.1 billion in the previous month. Exports grew by 1.5% year-over-year in November, compared to the 11.2% rise in October. Meanwhile, imports increased by 1.2% YoY, recovering from the 3.7% decline recorded earlier.
The New Zealand Dollar remains under pressure as Prime Minister Christopher Luxon reaffirms his commitment to lowering inflation and interest rates to bolster the economy. This suggests the possibility of significant rate cuts early next year.
Additionally, the NZD/USD pair depreciates as the US Dollar (USD) extends its winning streak for the third successive day as traders adopt caution ahead of the US Consumer Price Index (CPI) data release on Wednesday. Traders are now pricing in nearly an 85.8% chance of Fed rate reductions by 25 basis points on December 18, according to the CME FedWatch Tool.
On Monday, the Federal Reserve Bank of New York highlighted in its consumer survey summary that US consumers are navigating uncertain economic expectations. The survey indicated a sharp improvement in consumers' outlook on their financial situations and the federal government’s fiscal condition, alongside a significant shift in expectations regarding debt affordability and credit conditions.
The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the weakest against the Euro.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.06% | 0.00% | -0.08% | 0.08% | 0.68% | 0.55% | -0.10% | |
EUR | 0.06% | 0.07% | -0.05% | 0.13% | 0.74% | 0.66% | -0.04% | |
GBP | -0.00% | -0.07% | -0.13% | 0.06% | 0.67% | 0.55% | -0.11% | |
JPY | 0.08% | 0.05% | 0.13% | 0.18% | 0.78% | 0.65% | 0.00% | |
CAD | -0.08% | -0.13% | -0.06% | -0.18% | 0.61% | 0.49% | -0.16% | |
AUD | -0.68% | -0.74% | -0.67% | -0.78% | -0.61% | -0.13% | -0.77% | |
NZD | -0.55% | -0.66% | -0.55% | -0.65% | -0.49% | 0.13% | -0.65% | |
CHF | 0.10% | 0.04% | 0.11% | -0.00% | 0.16% | 0.77% | 0.65% |
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 New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).
The AUD/JPY cross weakens to near 96.55 during the Asian trading hours on Tuesday. The Australian Dollar (AUD) edges lower after the Reserve Bank of Australia (RBA) interest rate decision as the tone in the statement has turned slightly dovish.
The RBA kept the Official Cash Rate (OCR) on hold at 4.35% following the conclusion of its December policy meeting. The decision came in line with market expectations. The RBA made no changes to its policy settings for the ninth consecutive meeting. The Aussie attracts some sellers following the RBA interest rate decision.
According to the RBA Monetary Policy Statement, the board members are gaining some confidence that inflationary pressures are declining in line with these recent forecasts, but risks remain. The policymaker further stated that the outlook remains uncertain and broad and will continue to rely upon the data and the evolving assessment of risks to guide its decisions.
The uncertainty over the timing for the Bank of Japan (BoJ) to raise interest rates again weighs on the Japanese yen (JPY) against the shared currency. BoJ Governor Kazuo Ueda indicated a willingness to hike interest rates again if the BOJ grows more confident that inflation would remain around 2% due to rising wages and robust domestic demand. Traders have priced in nearly a 28% chance of a BOJ rate hike this month, down from around 66% at the end of last month.
Nonetheless, the rising geopolitical tensions in the Middle East, particularly after the downfall of Syrian President Bashar al-Assad, could boost the safe-haven currency like the JPY. On Monday, the rebel group that toppled Syria's President Bashar Al-Assad agreed to hand power to Mohammed Al Bashir to form a transitional administration. Investors will closely watch the development surrounding geopolitical risks in this region as the collapse of the Syrian leader regime could lead to a conflict involving regional countries.
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.
The AUD/NZD cross attracts fresh sellers following an Asian session uptick to the 1.1000 psychological mark and drops to a fresh daily low after the Reserve Bank of Australia (RBA) announced its policy decision. Spot prices currently trade around mid-1.0900s, within striking distance of over a two-month low touched on Monday, though manage to hold above the very important 200-day Simple Moving Average (SMA) pivotal support.
The Australian central bank, as was widely expected, decided to maintain the status quo for the ninth straight meeting and left the Official Cash Rate (OCR) unchanged at 4.35% following its December policy meeting. In the accompanying statement, the RBA noted that the board is gaining some confidence that inflationary pressures are declining in line with their forecasts. This reaffirms bets for an early rate cut and turns out to be a key factor exerting pressure on the Australian Dollar (AUD) and the AUD/NZD cross.
Meanwhile, government data released earlier this Tuesday showed that China’s Trade Balance unexpectedly grew to $97.44 billion in November from $95.27 billion in the prior month. This, however, was offset by the disappointing readings on exports and imports, which pointed to still sluggish overseas and local demand. Apart from this, worries about US President-elect Donald Trump's impending tariffs further dent demand for the China-proxy Aussie and contribute to the AUD/NZD pair's intraday slide.
That said, bets for aggressive policy easing by the Reserve Bank of New Zealand (RBNZ) might hold back traders from placing aggressive bullish bets around the New Zealand Dollar (NZD) and help limit losses for the AUD/NZD cross. This, in turn, makes it prudent to wait for some follow-through selling below a technically significant 200-day SMA before positioning for an extension of the recent decline witnessed over the past two weeks or so. Traders now look to the post-meeting presser for a fresh impetus.
The Reserve Bank of Australia (RBA) announces its interest rate decision at the end of its eight scheduled meetings per year. If the RBA is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Australian Dollar (AUD). Likewise, if the RBA has a dovish view on the Australian economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for AUD.
Read more.Last release: Tue Dec 10, 2024 03:30
Frequency: Irregular
Actual: 4.35%
Consensus: 4.35%
Previous: 4.35%
Source: Reserve Bank of Australia
China's Trade Balance for November, in Chinese Yuan (CNY) terms, came in at CNY692.8 billion, widening from the previous figure of CNY679.1 billion.
Exports rose by 1.5% YoY in November vs. 11.2% in October. The country’s imports increased by 1.2% YoY in the same period vs. -3.7% registered previously.
In US Dollar (USD) terms, China’s trade surplus expanded in November.
Trade Balance came in at +97.44B versus +95B expected and +95.27B previous.
Exports (YoY): 6.7% vs. 8.5% expected and 12.7% previous.
Imports (YoY): -3.9% vs. 0.3% expected and -2.3% last.
China January-November CNY-denominated Exports +6.7% YoY.
China January-November CNY-denominated Imports +2.4% YoY.
China November Trade Surplus with the US was $34.9B vs. $33.50B in October.
AUD/USD remains pressured toward 0.6400 after China’s trade data. The pair is losing 0.35% on the day heading into the RBA policy decision.
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.
Silver price (XAG/USD) extends its gains for the second day, trading around $32.00 per troy ounce during the Asian hours on Tuesday. The daily chart analysis indicates a bullish bias, with the pair moving upwards within an ascending channel pattern. Additionally, the 14-day Relative Strength Index (RSI) remains above the 50 mark, further supporting the bullish sentiment.
The XAG/USD pair continues to trade above the nine- and 14-day Exponential Moving Averages (EMA), reinforcing a bullish outlook and signaling to strengthen short-term price momentum. This points to increasing buying interest and raises the likelihood of further price appreciation.
In terms of the upside, the Silver price finds a primary barrier around the upper boundary of the ascending channel at the $32.60 level. A break above this level could reinforce the bullish bias and support the XAG/USD pair to approach its November high at $33.13.
On the downside, the primary support appears at the nine-day EMA at $31.28, followed by the 14-day EMA at $31.17. The lower boundary of the ascending channel at $31.00 level could act as a major support.
A break below the descending channel could weaken the bullish bias and put downward pressure on the price of precious metal to test a “throwback support” at the psychological level of $30.00.
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 | 31.797 | 2.55 |
Gold | 2659.49 | 0.63 |
Palladium | 974.37 | 1.48 |
The Japanese Yen (JPY) loses ground against its American counterpart for the second consecutive day on Tuesday and lifts the USD/JPY pair to over a one-week high, above mid-151.00s during the Asian session on Tuesday. The uncertainty over how soon the Bank of Japan (BoJ) could raise interest rates again keeps the JPY bulls on the defensive. Furthermore, the overnight bounce in the US Treasury bond yields from October lows undermines the lower-yielding JPY. Apart from this, the post-NFP US Dollar (USD) recovery from a nearly one-month trough, bolstered by expectations for a less dovish Federal Reserve (Fed), acts as a tailwind for the currency pair.
That said, a softer risk tone, concerns that US President-elect Donald Trump's tariff plans could trigger a second wave of global trade wars and geopolitical tensions help limit deeper losses for the safe-haven JPY. Traders might also refrain from placing aggressive bullish bets around the USD/JPY pair and opt to wait for the release of the latest US consumer inflation figures, due on Wednesday. The crucial US Consumer Price Index (CPI) report will be looked upon for fresh cues about the Fed's rate-cut path. This, in turn, will drive the USD demand and provide some meaningful impetus to the currency pair ahead of the key central bank event risks next week.
From a technical perspective, any subsequent move up is more likely to confront stiff resistance and remain capped near the 151.75-152.00 confluence. The said area comprises the 38.2% Fibonacci retracement level of the recent pullback from a multi-month high touched in November and the very important 200-day Simple Moving Average (SMA). Given that oscillators on the daily chart have recovered from negative territory, a sustained move beyond the 152.00 mark should pave the way for additional gains towards the 152.70-152.75 region, or the 50% retracement level. This is followed by the 153.00 round figure, above which the USD/JPY pair could extend the momentum towards the 61.8% Fibo. level, around the 153.70 area.
On the flip side, weakness below the 151.00 mark now seems to find decent support near the 150.60 region, or the 23.6% Fibo. level resistance breakpoint. The next relevant support is pegged near the 150.00 psychological mark, below which the USD/JPY pair could weaken to the 149.50-149.45 region en route to the 149.00 mark and the monthly low, around the 148.65 area touched last week. The latter coincides with the 100-day SMA and a convincing break below will be seen as a fresh trigger for bearish traders, and set the stage for a further near-term depreciating move.
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 (AUD) edges lower ahead of the RBA Interest Rate Decision scheduled on Tuesday. The Reserve Bank of Australia (RBA) is expected to hold the Official Cash Rate (OCR) steady at 4.35% following its final policy meeting this year.
RBA Governor Michele Bullock said earlier that inflation is unlikely to "sustainably" return to the central bank's target range before 2026. She also stated that Australia’s core inflation remains “too high” to contemplate interest rate cuts soon.
Traders will likely observe the RBA Governor Michele Bullock’s comments to gauge the central bank’s monetary policy outlook. Elevated core and services inflation and relatively tight labor market conditions in Australia are the primary reasons behind the RBA’s cautious stance.
The US Dollar (USD) extends its winning streak for the third successive day as traders adopt caution ahead of the US Consumer Price Index (CPI) data release on Wednesday. Traders are now pricing in nearly an 85.8% chance of Fed rate reductions by 25 basis points on December 18, according to the CME FedWatch Tool.
AUD/USD trades near 0.6420 on Tuesday, with bearish momentum gaining strength according to technical analysis. The pair remains confined within a descending channel, and the 14-day Relative Strength Index (RSI) remains below 50, indicating sustained negative sentiment.
On the downside, the AUD/USD pair has dropped below its five-month low of 0.6434, recorded on November 26. If this level is decisively broken, it could open the path toward the yearly low of 0.6348, last seen on August 5. Further support lies near the descending channel’s lower boundary, around 0.6225.
Immediate resistance for the AUD/USD pair is located at the nine-day Exponential Moving Average (EMA) at 0.6449, followed by the 14-day EMA at 0.6465, which aligns closely with the upper boundary of the descending channel. A decisive breakout above these levels could pave the way for a potential rally toward the five-week high of 0.6687.
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the Euro.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.05% | 0.00% | 0.03% | 0.03% | 0.19% | 0.28% | -0.04% | |
EUR | 0.05% | 0.06% | 0.05% | 0.07% | 0.24% | 0.34% | 0.00% | |
GBP | -0.00% | -0.06% | -0.02% | 0.02% | 0.18% | 0.27% | -0.05% | |
JPY | -0.03% | -0.05% | 0.02% | 0.01% | 0.18% | 0.26% | -0.05% | |
CAD | -0.03% | -0.07% | -0.02% | -0.01% | 0.16% | 0.26% | -0.07% | |
AUD | -0.19% | -0.24% | -0.18% | -0.18% | -0.16% | 0.09% | -0.22% | |
NZD | -0.28% | -0.34% | -0.27% | -0.26% | -0.26% | -0.09% | -0.32% | |
CHF | 0.04% | -0.01% | 0.05% | 0.05% | 0.07% | 0.22% | 0.32% |
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).
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.
The Indian Rupee (INR) holds steady on Tuesday after reaching an all-time low in the previous session. The local currency remains vulnerable due to a decline in its Asian peers, the outflow of foreign money, and persistent strength in the US Dollar (USD) from importers and foreign banks. However, the foreign exchange intervention by the Reserve Bank of India (RBI) might prevent the INR from further depreciation.
Looking ahead, the US Consumer Price Index (CPI) for November will be in the spotlight on Wednesday. This report could serve as the one remaining potential stumbling block to a third successive rate cut from the Federal Reserve (Fed). On the Indian docket, the CPI inflation data will be published on Thursday.
The Indian Rupee trades on a flat note on the day. The constructive outlook of the USD/INR pair remains in play, with the price holding above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. Nonetheless, the 14-day Relative Strength Index (RSI) stands above the midline near 71.60, indicating the overbought RSI condition. This suggests that further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation.
The all-time high of 84.86 acts as an immediate resistance level for USD/INR. Consistent trading above this level could pave the way to the 85.00 psychological level, en route to 85.50.
On the other hand, bearish candlesticks below the resistance-turned-support of 84.61 may draw in enough selling pressure to drag the pair to 84.22, the low of November 25. The next contention level to watch is 84.06, the 100-day EMA.
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.
The rebel group that toppled Syria's President Bashar Al-Assad agreed to hand power to Mohammed Al Bashir to form a transitional administration, per Bloomberg.
Al Bashir will set up a government to handle the transition period and "avoid slipping into chaos," according to the report, which did not provide any other information. The move to task him came after a meeting between HTS commander Ahmed Al-Sharaa, and current Prime Minister Ghazi al-Jalali, according to Arabiya TV, Al Bashir,
At the time of press, the XAU/USD pair was up 0.28% on the day at $2,665.
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.
The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Tuesday at 7.1896, as compared to the previous day's fix of 7.1870 and 7.2806 Reuters estimates.
South Korea’s finance ministry, Choi Sang-mok, said on Tuesday that the recent volatility in the country's financial and foreign exchange markets is "excessive" given the nation's strong economic fundamentals.
"Although volatility in the financial and foreign exchange markets has increased, it appears somewhat excessive compared to the robust fundamentals and external stability of our economy,” said the finance minister.
South Korea's top economic policymaker further stated that he will respond with market stabilising measures.
At the time of writing, the USD/KRW pair is trading 0.12% higher on the day to trade at 1427.51.
Index | Change, points | Closed | Change, % |
---|---|---|---|
NIKKEI 225 | 69.33 | 39160.5 | 0.18 |
Hang Seng | 548.24 | 20414.09 | 2.76 |
KOSPI | -67.58 | 2360.58 | -2.78 |
ASX 200 | 2.1 | 8423 | 0.02 |
DAX | -38.65 | 20345.96 | -0.19 |
CAC 40 | 53.26 | 7480.14 | 0.72 |
Dow Jones | -240.59 | 44401.93 | -0.54 |
S&P 500 | -37.42 | 6052.85 | -0.61 |
NASDAQ Composite | -123.08 | 19736.69 | -0.62 |
Pare | Closed | Change, % |
---|---|---|
AUDUSD | 0.644 | 0.82 |
EURJPY | 159.571 | 0.87 |
EURUSD | 1.05535 | -0.04 |
GBPJPY | 192.793 | 1 |
GBPUSD | 1.27511 | 0.11 |
NZDUSD | 0.58638 | 0.51 |
USDCAD | 1.41705 | 0.12 |
USDCHF | 0.87861 | 0.07 |
USDJPY | 151.19 | 0.83 |
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $67.90 on Tuesday. The WTI price recovers amid the rising geopolitical tensions in the Middle East after the downfall of Syrian President Bashar al-Assad.
Over the weekend, Syrian President Bashar al-Assad and his family fled to Moscow and were granted political asylum, ending 50 years of a brutal dictatorship. The downfall of the Syrian leader regime could lead to a conflict involving regional countries, lifting the WTI price.
Tomomichi Akuta of Mitsubishi UFJ Research noted that these geopolitical risks are bolstering crude prices but warned that Saudi Arabia’s recent price cuts and extended OPEC+ output constraints underscore weak demand fundamentals, especially from China.
Additionally, the black gold might be supported by the rising expectations that China will announce further stimulus measures and will unveil its first “moderately loose” monetary policy shift since 2010. "The easing of monetary policy stance in China is likely the driver of the oil price rebounding, supporting risk sentiment," said UBS analyst Giovanni Staunovo.
On the other hand, the Federal Reserve (Fed) is likely to deliver another interest rate cut on December 18. Still, the US economic data will force the Fed's outlook on interest rates to tilt more hawkish. This, in turn, might support the Greenback and weigh on the USD-denominated Canadian Dollar (CAD).
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.
EUR/USD trimmed its stance slightly on Monday, easing back away from the 1.0600 handle after facing a technical rejection from the key level last week. Euro traders are buckling down for a long wait to Thursday’s rate call from the European Central Bank (ECB), with Greenback bidders awaiting a fresh round of US Consumer Price Index (CPI) inflation updates due on Wednesday.
The front half of the trading week is a sedate showing for the Euro as ECB rate cut clouds gather in the distance. The pan-EU Sentix Investor Confidence survey for December fell to a 13-month low of -17.5, keeping Euro bulls at bay. The ECB is broadly expected to reduce both its Main Refinancing Operations Rate and Rate on Deposit Facility by 25 bps each on Thursday.
The Federal Reserve (Fed) Bank of New York released its latest summary of consumer survey results during Monday’s American market session, noting that US consumers are riding a tricky line with their economic expectations. According to the NY Fed, US consumers expect a suddenly-improved financial situation for themselves and the federal government, with respondents reporting a sea change in their expectations to afford debt and credit conditions following the re-election of former US President Donald Trump. The same pool of respondents also sharply reduced their expectations for future government borrowing levels.
Further complicating the matter for US consumers, the NY Fed’s survey revealed that the same body of surveyed consumers also raised their expectations of future inflation again, with the average respondent expecting inflation to reaccelerate to 3.0% by next November.
US session traders will be looking ahead to a fresh print of US Consumer Price Index (CPI) inflation slated for Wednesday, with a thin docket on the offering for the early week. US CPI inflation is expected to tick up again on an annualized basis in November. Median market forecasts expect Wednesday’s US CPI inflation to rise to 2.7% YoY compared to October’s 2.6%.
The EUR/USD daily chart depicts a bearish medium-term trend as the pair remains firmly below its 50-day EMA at 1.0703 and 200-day EMA at 1.0828. Following the sharp drop in mid-November that led to a multi-month low near 1.0450, the pair has entered a consolidation phase. Resistance at 1.0600–1.0650, which aligns with prior swing lows and the descending 50-day EMA, has capped recent upside attempts. On the downside, 1.0450 stands as a critical support level, guarding against a deeper decline.
The most recent candle reflects indecision, closing near 1.0554 after testing both lower and upper levels within a narrow range. The inability to sustain gains above the 1.0600 psychological level underscores persistent selling pressure. A bearish bias remains intact unless the pair clears the 50-day EMA, which would open the door to retesting the 1.0700 zone. Conversely, a break below the 1.0500 mark could accelerate downside momentum, paving the way for a revisit of the 1.0450 support and potentially lower.
The MACD indicator has started to turn slightly positive, as the histogram trends upward, suggesting that bearish momentum is fading. However, the MACD line remains below the signal line, indicating that the overall trend has yet to shift convincingly. A breakout above 1.0600 with increasing bullish momentum would be a critical development for buyers, while failure to do so keeps the pair vulnerable to further downside, aligning with the broader bearish trend.
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day, according to data from the Bank of International Settlements. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% of all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
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