EUR/USD backslid a fifth straight trading day on Thursday, falling another one-fifth of one percent and declining further away from 1.0500. Fiber eased lower for for a fifth consecutive trading day after the European Central Bank (ECB) trimmed interest rates by another 25 bps, with broader market sentiment keeping one foot firmly in the Greenback for the day.
The ECB lowered its main reference rates by another quarter-point, trimming market support for the battered Euro. Friday will be a notably quiet note on the data docket, forcing traders to sit and wait until next week’s Purchasing Managers Index (PMI).
US PPI inflation bucked to 0.4% in November, while October’s print was retroactively adjusted to 0.3% from 0.2% MoM. Markets were expecting a print no higher than 0.2% MoM. Core PPI inflation accelerated to 3.4% on an annualized basis, over and above the expected uptick to 3.2% from the previous 3.1% YoY.
Investor sentiment froze in its tracks on Thursday post-PPI inflation print, however market expectations for the Fed’s December 18 rate call have hardened around the 25 bps mark. According to the CME’s FedWatch Tool, rate traders are now pricing in over 98% odds of a quarter-point rate cut when the Federal Open Market Committee (FOMC) convenes in December 18.
The EUR/USD daily chart highlights a persistent bearish trend, with the pair trading below both the 50-day EMA at 1.0679 and the 200-day EMA at 1.0819. This alignment of moving averages points to sustained downside pressure, as sellers have maintained control since the sharp breakdown in early November. The MACD indicator remains in bearish territory, with its signal line hovering below zero, further validating the downward momentum.
The latest candlestick—a small-bodied red candle—underscores the lack of bullish conviction as the pair hovers near the 1.0470 region. This area serves as immediate support, but a clear break lower could expose the year-to-date low around 1.0400. On the upside, resistance is capped by the 1.0500 psychological level, with the 50-day EMA providing a stronger barrier. The overall structure suggests that any recovery attempts are likely to be short-lived unless the pair can reclaim the 1.0600 handle. For now, the bears remain in control, with a clear focus on the downside.
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 lost its grip on Thursday, easing back below the 1.2700 handle and shedding over half of a percent in the pair’s worst showing in weeks. US Producer Price Index (PPI) inflation rose faster than expected in November, and US weekly Initial Jobless Claims also rose faster than forecasts.
US PPI inflation bucked to 0.4% in November, while October’s print was retroactively adjusted to 0.3% from 0.2% MoM. Markets were expecting a print no higher than 0.2% MoM. Core PPI inflation accelerated to 3.4% on an annualized basis, over and above the expected uptick to 3.2% from the previous 3.1% YoY. US Initial Jobless Claims for the week ended December 6 also rose to a nine-week high of 242K, further bucking investor risk appetite and missing forecasts of 220K.
Investor sentiment froze in its tracks on Thursday post-PPI inflation print, however market expectations for the Fed’s December 18 rate call have hardened around the 25 bps mark. According to the CME’s FedWatch Tool, rate traders are now pricing in over 98% odds of a quarter-point rate cut when the Federal Open Market Committee (FOMC) convenes in December 18.
Friday brings a limited data docket on either side of the Atlantic, leaving Cable traders to focus on Purchasing Managers Index (PMI) figures due early next week for both the US and UK.
The GBP/USD daily chart reveals a clear transition from a prior bullish phase into a more bearish outlook, as the price has recently breached key technical levels. The 50-day Exponential Moving Average (EMA), currently at 1.2819, has been acting as dynamic resistance since mid-November, while the 200-day EMA at 1.2825 reflects a broader bearish bias. The pair's rejection at the 50-day EMA earlier this week underscores persistent selling pressure. Additionally, the downward slope of the Moving Average Convergence Divergence (MACD) histogram and a bearish crossover signal suggest that bearish momentum is intensifying.
The most recent candlestick, a large bearish candle, has decisively closed below 1.2700, signaling that the bears remain in control. This movement invalidates the recovery attempts from late November and positions the pair for further downside. Immediate support is seen near 1.2600, a psychological level, while a breach below this level could expose the August lows near 1.2550. Conversely, should buyers reclaim the 1.2700 handle, the 50-day EMA will remain the primary resistance level to watch, serving as a gauge for a potential shift in sentiment. Until then, the path of least resistance remains to the downside.
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.
Canada is considering export taxes on major commodities it exports to the US, including uranium, oil and potash, if President-elect Donald Trump imposes the broad tariffs he pledged, per Bloomberg.
Retaliatory tariffs on U.S.-made goods and export controls on certain Canadian products are most likely, with export levies also on the table as a last resort. The Bloomberg report cited officials familiar with discussions inside Prime Minister Justin Trudeau's government.
At the time of writing, USD/CAD was down 0.02% on the day at 1.4223.
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 USD/CAD pair posts modest gains to near 1.4215 during the early Asian session on Friday. The uptick of the pair is bolstered by the firmer US Dollar (USD) broadly after the hotter-than-expected US Producer Price Index (PPI) inflation report.
Data released by the US Bureau of Labor Statistics on Thursday showed that the PPI for final demand in the US rose 3.0% YoY in November. This reading followed the 2.6% increase seen in October and came in above the market consensus of 2.6%. Meanwhile, the annual core PPI climbed 3.4% YoY in the same period, beating the estimated 3.2%. On a monthly basis, the PPI and the core PPI increased 0.4% and 0.2%, respectively. The Greenback gains traction in an immediate reaction to the PPI inflation data.
Despite the stubborn inflation in the US, markets widely expect the Federal Reserve (Fed) to lower its key overnight borrowing rate next week. According to the CME FedWatch Tool, Fed funds futures trading data reflects a nearly 95% likelihood that the US central bank will cut the rates by a quarter point.
On the other hand, analysts from TD Economics said that both the US and Canadian economies will navigate through policy uncertainties. Analysts added that even a 10% blanket tariff on Canada would likely cause extended economic stagnation over 2 years. The concerns about Trump tariff threats might exert some selling pressure on the Canadian Dollar (CAD) and create a tailwind for the pair. Meanwhile, the recovery in crude oil prices could help limit the CAD’s losses as Canada is the largest oil exporter to the US.
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 EUR/AUD trims some of its earlier losses on Thursday as the European Central Bank lowered interest rates. Initially, the cross plunged to a daily low of 1.6361, but it made a U-turn as buyers bought the dip, toward current exchange rates. At the time of wiring, the pair trades at 1.6449, down 0.15%.
The EUR/AUD seesawed after Aussie jobs data and the ECB’s monetary policy meeting, however it remained consolidated at around the1.6350-1.6480 range.
Momentum remains buliish as depicted by the Relative Strength Index (RSI), but sellers are looming after the cross-pair printed back-to-back bearish days.
If EUR/AUD extends its gains past 1.6500, the next resistance would be December 11 swing high at 1.6575. If surpassed, the next stop would be October 30 daily high at 1.6599.
On the other hand, sellers must take out the 1.6400 mark to extend the downtrend towards the confluence of the 100 and 200-day SMAs at 1.6375/59, followed by the 50-day SMA at 1.6281.
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% | -0.06% | -0.03% | -0.04% | -0.07% | -1.77% | -0.03% | |
EUR | 0.00% | -0.03% | 0.03% | -0.01% | -0.05% | -0.06% | 0.02% | |
GBP | 0.06% | 0.03% | 0.04% | 0.01% | -0.05% | -0.05% | 0.05% | |
JPY | 0.03% | -0.03% | -0.04% | -0.02% | -0.05% | -0.09% | 0.03% | |
CAD | 0.04% | 0.00% | -0.01% | 0.02% | -0.05% | -0.07% | 0.05% | |
AUD | 0.07% | 0.05% | 0.05% | 0.05% | 0.05% | -0.01% | 0.10% | |
NZD | 1.77% | 0.06% | 0.05% | 0.09% | 0.07% | 0.01% | 0.11% | |
CHF | 0.03% | -0.02% | -0.05% | -0.03% | -0.05% | -0.10% | -0.11% |
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).
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 Canadian Dollar (CAD) was unable to keep itself afloat on Thursday, ultimately declining another 0.4% against the safe haven Greenback. Markets hesitated after US Producer Price Index (PPI) inflation figures accelerated higher than expected, keeping risk appetite underbid and pushing the Loonie to fresh multi-year lows.
The Bank of Canada’s (BoC) latest rate cut earlier this week has sucked any bullish momentum out of CAD markets, leaving the Loonie to waffle into its lowest prices in 56 months. The Canadian Dollar is now a stone’s throw away from prices not seen since March of 2020.
The Canadian Dollar has given a fresh bearish push, bolstering the USD/CAD chart to fresh multi-year highs north of 1.4200. USD/CAD is now on pace to close higher for a fourth consecutive month, and the pair has risen a little over 6% bottom-to-top since September’s bottom bids near 1.3420.
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.
US PPI inflation figures ticked higher in November, causing investors to tighten their stance slightly and keep the safe haven Greenback bid into the high side, though overall market mood remains on-balance.
Here’s what you need to know heading into Friday, December 13:
The US Dollar Index (DXY) extended into further gains on Thursday, climbing back into the 107.00 handle on broad-market investor caution after US Producer Price Index (PPI) inflation figures came in higher than expected, sparking near-term concerns that inflation could resurge in the US economy. US data is limited on Friday, and investors will likely continue to wind down their exposure ahead of the holiday season.
EUR/USD extended into a fifth consecutive down day, losing grip of the 1.0500 level and shedding yet another quarter of a percent after the European Central Bank (ECB) slashed interest rates in-line with market expectations. German Trade Balance figures for October are due on Friday, along with pan-EU Industrial Production figures for October. Both numbers are mid-tier at best, and are unlikely to move the needle in either direction.
GBP/USD tumbled back below 1.2700 on Thursday despite a thin economic data docket on the UK side. Cable traders may be giving up in the near term as GBP/USD continues to struggle with chart paper on the low side of the 200-day Exponential Moving Average (EMA) near 1.2825. No meaningful data on the GBP side is expected on Friday.
USD/JPY has coiled around its own 200-day EMA near 151.00, and a near-term bullish rebound from the key technical level has the Dollar-Yen pairing holding steady on Thursday near 152.60 despite the US’ uptick in producer-level inflation. Japan’s Tankan Large Manufacturing figures are due early Friday and are expected to decline slightly.
The Producer Price Index ex Food & energy released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Those volatile products such as food and energy are excluded in order to capture an accurate calculation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).
Read more.Last release: Thu Dec 12, 2024 13:30
Frequency: Monthly
Actual: 3.4%
Consensus: 3.2%
Previous: 3.1%
Source: US Bureau of Labor Statistics
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
The Mexican Peso weakens after posting back-to-back bullish days, dropping over 0.44% against the Greenback as mixed US economic data and a holiday in Mexico keep trading conditions thin. The USD/MXN trades at 20.20 after bouncing off around weekly lows of 20.09.
US factory gate inflation increased in November, according to the US Bureau of Labor Statistics. The Producer Price Index (PPI) rose to its highest level since June, according to monthly figures. At the same time, the Department of Labor reported that Americans filing for unemployment benefits had increased.
Even though inflation reaccelerated, market players seem confident that the Federal Reserve (Fed) will cut interest rates at next week’s meeting. Odds that the Fed will lower rates by 25 basis points are now at 99%, according to the fed fund rate futures market.
Mexico’s economic docket revealed that Industrial Production plummeted in October, in monthly and annual figures.
On Wednesday, the Bank of Mexico (Banxico) remained confident in the country’s financial system despite the “notable weakness” experienced by Latin America’s second-largest economy. In the biannual report, Banxico recognized the robust institutions for the system’s stability, adding that capital and liquidity levels are above regulation minimums.
Aside from this, Banxico is expected to continue its easing cycle following Monday’s inflation report. November’s Consumer Price Index (CPI) opened the door for further easing. Analysts at JP Morgan noted that Banxico might lower rates by 50 basis points (bps), as inflation data shows that prices are edging lower faster than expected.
The economic docket for the remaining week is empty in Mexico. In the US, it will feature Import and Export Prices.
The USD/MXN bounces off weekly lows as the exotic pair consolidated below the 20.10 area for the last four days. However, demand for US Dollar weighed on the Peso and lifted the pair back to the 20.20 mark.
Momentum remains tilted to the downside as depicted by the Relative Strength Index (RSI). But sellers must push the USD/MXN below 20.00, which will clear the path for lower exchange rates.
In that outcome, the USD/MXN next support would be the 100-day Simple Moving Average (SMA) at 19.68, ahead of 19.50. On further weakness, the pair could test the October 4 swing low of 19.10, ahead of 19.00.
Conversely, if buyers keep USD/MXN above 20.20, the next resistance would be 20.50. A breach of the latter will expose the December 2 daily high of 20.59, followed by the year-to-date (YTD) peak of 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 US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, rose toward 106.70 after Christine Lagarde, President of the European Central Bank (ECB), confirmed talks of a possible 50 bps interest rate cut. Lagarde’s comments followed the ECB cutting its benchmark rate by 25 bps, the fourth time it has lowered rates this year.
Traders favored the Greenback over the Euro following the ECB rate decision, causing the DXY to surge above 106.50.
In addition, US Producer Price Index (PPI) data showed inflation jetting above expectations, which may slow the Federal Reserve’s (Fed) turn toward loose monetary policy next year.
The US Dollar Index has halted its recent decline and regained some of its lost ground on Thursday. The DXY index has managed to stay above the 106.00 level despite mixed sentiment data and speculation about the Fed slowing down its rate hiking cycle.
The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicators also suggest that the index is resilient and could continue to move higher.
The DXY faces resistance at 106.50 -107.00. If it recovers this area, it might retest the 108.00 area.
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) held steady on Thursday, drifting into the 44,000 major price handle as investors balked at the latest US Producer Price Index (PPI) inflation figures. This week’s overall US inflation data package has given traders cause for pause, but not enough to fundamentally shift expectations for December’s Federal Reserve (Fed) rate cut.
US PPI inflation bucked to 0.4% in November, while October’s print was retroactively adjusted to 0.3% from 0.2% MoM. Markets were expecting a print no higher than 0.2% MoM. Core PPI inflation accelerated to 3.4% on an annualized basis, over and above the expected uptick to 3.2% from the previous 3.1% YoY.
Investor sentiment froze in its tracks on Thursday post-PPI inflation print, however market expectations for the Fed’s December 18 rate call have hardened around the 25 bps mark. According to the CME’s FedWatch Tool, rate traders are now pricing in over 98% odds of a quarter-point rate cut when the Federal Open Market Committee (FOMC) convenes in December 18.
The Dow Jones was roughly on-balance during Thursday’s US market session, with winners equally mixed. Coca-cola (KO) found some room to move higher, climbing 1.45% to land somewhere near $63.50 per share after Deutsche Bank upgraded its stance to bullish on the soft drink manufacturer. Unitedhealth Group (UNH) continued to backslide, falling over 1.75% and approaching $524 per share after video surfaced of the company’s current CEO defending the healthcare company’s claim denial practices, which was filmed the day after Brian Thompson’s assassination. Brian Thompson was the CEO of Unitedhealth’s insurance subsidiary responsible for one of the highest claims denial rates in the US.
Elsewhere in equities, Boeing shares climbed again after the airline manufacturer officially resumed production of its 737 Max project.
The Dow Jones continues to grind lower in the runup to the December market slowdown. Price action has turned tepid, sending bids drifting back toward the 50-day Exponential Moving Average (EMA) near 43,480. With a lack of key bullish momentum, the DJIA is poised to close slightly lower for a sixth consecutive trading day.
Despite bulls appearing to run out of gas in the near term, the long-term trend remains decidedly bullish. The major equity index may be down 2% in December, but that takes only a small bite out of November’s stellar 7.6% return, and the Dow Jones remains up nearly 17% YTD in 2024.
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.
Gold prices snapped a four-day streak of gains on Thursday, tumbling more than 1% as investors digested mixed economic data from the United States. A softer than expected jobs report, but higher prices on the producer’s side, kept traders from pushing Bullion prices higher. The XAU/USD trades at $2,684.
The Producer Price Index (PPI) exceeded forecasts, hinting that the disinflation process might be stalling. Along with that, the US Bureau of Labor Statistics revealed the labor market is cooling as the number of Americans filing for unemployment benefits was above estimates.
Bullion prices dropped on speculation that traders booked profits ahead of the Federal Reserve’s (Fed) monetary policy decision next week.
There’s growing certainty that the Fed will lower borrowing costs by 25 basis points at the December 17-18 meeting. The swaps market shows odds of 98% that the fed funds rate will be cut to the 4.25%-4.50% range.
Source: Prime Market Terminal
A timid jump in the US 10-year Treasury bond yield of one-and-a-half basis points to 4.289% weighed on the golden metal.
Earlier the European Central Bank (ECB) lowered interest rates for a third straight meeting, hinted that further easing is coming as inflation edges down toward the 2% goal.
Ahead this week, the US economic docket remains absent with traders bracing for next week’s Fed meeting.
Gold price rally pauses as the non-yielding metal retraces to the 50-day Simple Moving Average (SMA) at around $2,670. Despite this, momentum remains bullish as portrayed by the Relative Strength Index (RSI). Over the short term though, sellers are in charge.
If XAU/USD slides beneath the 50-day SMA, look for a drop toward $2,650, ahead of the $2,600 mark. On the other hand, if buyers conquer the $2,700 resistance level, the next supply zone tested would be the November 25 peak of $2,721, before challenging the record high of $2,790.
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 EUR/USD pair extended its downside on Thursday, slipping to 1.0500 and further distancing itself from the 20-day Simple Moving Average (SMA). This sustained loss of key technical support underscores the bearish outlook, with the pair struggling to find any signs of recovery.
Technical indicators remain aligned with the bearish trend. The Relative Strength Index (RSI) is flat at 40, firmly in the negative territory, reflecting ongoing selling pressure and the lack of bullish momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram continues to show decreasing green bars, signaling a persistent fade in bullish traction.
With the pair trading below the 20-day SMA near 1.0530, the downside risks remain prominent. Immediate support lies at the psychological level of 1.0500, followed by the 1.0480 area. To negate the bearish bias, EUR/USD would need to reclaim the 20-day SMA and break above 1.0600 to reinstate a constructive outlook and revive bullish momentum.
The Australian Dollar recovers some ground on Thursday against the Greenback, following the release of US jobs data. The US Bureau of Labor Statistics (BLS) revealed that the labor market is weakening further, suggesting that the Federal Reserve may continue to ease policy. the AUD/USD trades at 0.6392, up by 0.36%.
The BLS revealed that Initial Jobless Claims for the week ending December 7 jumped to a two-month high of 242K, exceeding estimates of 220K, according to Bloomberg. At the same time, the Producer Price Index (PPI) for November revealed by the same government agency showed that headline inflation in the producer side rose by 3% YoY, up from 2.4%, above forecasts of 2.6%, while Core PPI increased by 3.4% YoY, exceeding projections of 3.2%, up from 3.1%.
After the data, the American currency failing to gain traction. The US Dollar Index (DXY), which tracks the performance of the buck against other six currencies, remains firm at 106.79, up 15%.
During the Asian session, Australian Employment figures for November, crushed estimates of 25K, coming at 35.6K, while the Unemployment Rate, ticked lower from 4.1% to 3.9%, beneath forecasts of 4.2%.
The swaps market trimmed odds for a February rate cut to 50%, down from 70% ahead of the data. Nevertheless, the RBA adopted a mor dovish stance, saying “the Board is gaining some confidence that inflation is moving sustainably towards target.”
The AUD/USD rose sharply and print a daily high of 0.6429 following Aussie’s data, but it has trimmed its gains, as strong US PPI figures, hint that the Federal Reserve would adopt a cautious approach on reducing interest rates.
Momentum turned slightly bullish in the near-term, but overall, the trend Is tilted to the downside as the Relative Strength Index (RSI) is bearish.
If AUD/USD buyers reclaim 0.6400, the next resistance would be the 0.6500 mark. A breach of the latter will expose the 50-day Simple Moving Average (SMA) of 0.6568.
Conversely, if sellers stepped in and drag prices below the December 11 daily close of 0.6336, the pair might drop to 0.6300, before aiming toward October 23, 2023 swing low of 0.6270.
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.
Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to lower the benchmark interest rate by 25 basis points at the December policy meeting and responds to questions from the press.
"I don't think about market pricing of rate hikes."
"We have not discussed neutral rate level in this meeting."
"Protectionism is inflationary in the short term."
"PEPP flexibility has not been used since July 2023."
"US tariffs not incorporated into ECB projections."
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%).
Silver price (XAG/USD) gives up its entire gains and declines to near $31.50 in the North American session on Thursday. The white metal declines after posting a fresh two-week high around $32.20. The asset faces pressure after the conclusion of China’s two-day economic work conference. a high-level meeting that sets economic priorities for next year.
Top leaders of China didn’t provide specific details on the likely size of the stimulus package and the pace of monetary policy easing. However, officials said that they will increase the issuance of ultra-long special treasury bonds and local government special notes next year, which are important sources for infrastructure investment and other public spending, Bloomberg reported.
Investors await more details on the stimulus package to forecast the demand for Silver, given its application in various industries such as solar panels and mining, etc.
Meanwhile, hotter-than-expected United States (US) Producer Price Index (PPI) data for November has also weighed on the Silver price. As measured by the PPI, annual headline and core producer inflation accelerated to 3% and 3.4%, respectively. The impact of the hit US PPI data appears to be negligible on Federal Reserve (Fed) interest rate projections for the policy meeting on December 18 but could boost expectations that the central bank will pause the policy-easing spell in January.
After the US PPI data release, the US Dollar Index (DXY) recovered intraday losses and rises to near 106.80 and weighed on the Silver price.
Silver price retreats after failing to revisit the horizontal resistance plotted from the May 21 high of $32.50. The near-term appeal of the Silver price remains firm until it stays above the 20-day Exponential Moving Average (EMA), which trades around $31.25.
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 is around $29.50, which is plotted from the February 29 low of $22.30 on a daily timeframe
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.
Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to lower the benchmark interest rate by 25 basis points at the December policy meeting and responds to questions from the press.
"No victory yet against inflation."
"There were some discussion about a 50 bps cut."
"Reaching goal has moved a little forward in 2025."
"Wages gradually in 2025 reaching growth rate compatible with target."
"Observing decline in profit margins."
"Productivity is more promising."
"Risk to inflation is now two-sided."
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.
Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to lower the benchmark interest rate by 25 basis points at the December policy meeting and responds to questions from the press.
"Underlying inflation is in line with sustained return to target."
"Profits to partially offset higher labour cost."
"Expecting inflation to fluctuate near current level in near term."
"Most measures of inflation expectations at around 2%."
"Risks to growth are tilted to downside."
"Trade friction could weigh on growth."
"Wages, profits, geopolitics are among upside risks to inflation."
"Downside risks to inflation include low confidence, geopolitical stress, low investment."
"Macroprudential policy remains the first line of defense against the build-up of financial vulnerabilities."
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%).
Christine Lagarde, President of the European Central Bank (ECB), explains the ECB's decision to lower the benchmark interest rate by 25 basis points at the December policy meeting and responds to questions from the press.
"Growth is losing momentum, firms are holding back investment."
"Exports are weak."
"Labour market is resilient."
"Surveys point to fewer jobs being created."
"Economy should strengthen."
"Recovery is slower than expected."
"Exports should support recovery if trade tensions don't escalate."
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 Producer Price Index (PPI) for final demand in the US rose 3% on a yearly basis in November, the data published by the US Bureau of Labor Statistics showed on Thursday. This reading followed the 2.6% increase recorded in October and came in above the market expectation of 2.6%.
The annual core PPI rose 3.4% in the same period, surpassing analysts' estimate of 3.2%. On a monthly basis, the PPI and the core PPI rose 0.4% and 0.2%, respectively.
The US Dollar Index clings to modest daily gains above 106.50 following the November producer inflation data.
The Euro weakens against the Japanese Yen during the North American session after the European Central Bank (ECB) cut interest rates. At the time of writing, the EUR/JPY trades volatile within the 159.00-159.80 range.
The ECB lowered their three key interest rates by 25 bps, leaving the deposit rate at 3%. The monetary policy statement mentioned that the central bank is determined to drive inflation to its 2% goal, adding they’re not pre-committed toa particular rate path.
ECB officials added that the disinflation is “well on track” and despite evolving, inflation remains high.
In its meeting, the ECB updated its forecasts for inflation and economic growth. The Harmonised Index of Consumer Prices (HICP) for 2024 is expected to end at 2.4%, down from 2.5%. For 2025 and 2026, HICP is foreseen to end at 2.1% and 1.9%, respectively.
Core HICP is projected to finish the year at 2.9%, unchanged compared to the previous forecast, and for 2025 and 2026 is foreseen to dip to 2.3% and 1.9%, respectively.
The Gross Domestic Product is foreseen at 0.7% I n2024, at 1.1% in 2025 and 1.4% in 2026.
Following the monetary statement release, traders focus shifts to ECB’s President Christine Lagarde press conference at around 13:45 GMT.
The EUR/JPY extended its losses below 160.00, with traders eyeing a re-test of the December 11 low of 158.64. On further weakness, the cross-pair could dive towards the Tenkan-Sen at 158.45, before sliding to 158.00.
Conversely, if buyers push the exchange rate above 160.00, this could pave the way to test the Kijun-Sen at 161.07.
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.
There were 242,000 initial jobless claims in the week ending December 7, the weekly data published by the US Department of Labor (DOL) showed on Thursday. This print followed the previous week's print of 225,000 (revised from 224,000) and came in worse than the market expectation of 220,000.
Further details of the publication revealed that the advance seasonally adjusted insured unemployment rate was 1.2% and the 4-week moving average stood at 224,250, an increase of 5,750 from the previous week's revised average.
"The advance number for seasonally adjusted insured unemployment during the week ending November 30 was 1,886,000, an increase of 15,000 from the previous week's unrevised level of 1,871,000." the DOL further noted in its publication.
The US Dollar Index retreated from daily highs after this data and was last seen posting modest daily gains at 106.70.
The Euro remains depressed near two-year lows at 0.8220 following a widely expected 25 bps rate cut by the ECB. The pair has accelerated its downtrend this week and is approaching an eight-year low, at 0.8200.
European Central Bank eased its benchmark interest rate to 3% from 3.25% as widely expected. In a few minutes, President Lagarde will meet the press where she will be asked about the timing of the next rate cut.
The grim outlook of the Eurozone economy, coupled with the political uncertainty in the Regiou’s two main economies is adding pressure on the central bank to ease borrowing costs, even with inflation above target.
In the UK, the economy is showing more resilient, and the heavy spending budget released by the Labour cabinet is expected to stir inflationary prices. That will likely force the BoE to approach monetary easing more cautiously.
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Swiss Franc.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | 0.12% | 0.19% | -0.21% | 0.08% | -0.30% | -0.02% | 0.58% | |
EUR | -0.12% | 0.07% | -0.32% | -0.04% | -0.42% | -0.13% | 0.47% | |
GBP | -0.19% | -0.07% | -0.39% | -0.10% | -0.48% | -0.20% | 0.40% | |
JPY | 0.21% | 0.32% | 0.39% | 0.29% | -0.10% | 0.16% | 0.79% | |
CAD | -0.08% | 0.04% | 0.10% | -0.29% | -0.37% | -0.09% | 0.50% | |
AUD | 0.30% | 0.42% | 0.48% | 0.10% | 0.37% | 0.29% | 0.88% | |
NZD | 0.02% | 0.13% | 0.20% | -0.16% | 0.09% | -0.29% | 0.60% | |
CHF | -0.58% | -0.47% | -0.40% | -0.79% | -0.50% | -0.88% | -0.60% |
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 RICS House Price Index rose to 25 in November, up from 16 in October. The index sits at its strongest level in two years, reflecting a steady improvement in the UK housing market since last year’s trough, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“The Pound Sterling (GBP) is trading at a small loss to the USD on the session, allowing a minor rebound in EURGBP, but Cable is essentially range-trading and the broader trend in EUR/GBP remains strongly negative.”
“Cable continues to hold in a flat trading range around the 1.2750 point. Support is 1.2710/15. Resistance is 1.2800/10. Short term trend momentum is weakening, suggesting that the range trade may extend a little longer.”
“EUR/GBP has developed a minor gain from this week’s low near 0.8225. Rebounds towards 0.8260/65 resistance are likely to attract sellers.”
The Canadian Dollar (CAD) is steady. The BoC duly cut the policy rate 50bps yesterday and signaled that the pace of policy easing would moderate, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“Aggressive rate cuts over the past few months leave the Overnight Target Rate at 3.25%, right on the upper range of the 2.25-3.25% zone the Bank has indicated as the nominal neutral rate band. Rates are still expected to ease but swaps are pricing in just 50bps of cuts over H1 2025. Assuming a 25bps cut from the Fed next week, the policy spread looks likely to stabilize around the 125bps point now.”
“That may see some (limited) backtracking in term spreads that have widened significantly on the Fed/BoC policy divergence and could give the CAD a temporary toe-hold against the USD. We expect the policy gap will narrow significantly through 2026, which should eventually feed through to term spreads and the forward discount—but perhaps not just yet. Regardless, tariff/trade threats remain a significant risk for the CAD and it’s too soon to anticipate a sustained turnaround in the weak CAD trend.”
“Estimated spot fair value sits at 1.4109 currently. CAD has stopped falling against the USD over the past two sessions but there are scant signs from the charts that a major CAD recovery is looming. Short-term trend momentum has moderated but remains bullishly oriented for the USD. Longer run signals are firmly USD bullish. Intraday USD support sits at 1.4095/00, with a drop back to the 1.40 area perhaps developing below there. Resistance remains 1.42.”
The US Dollar (USD) is mixed versus its major peers, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
USD mixed versus majors as markets digest inflation data
“The DXY is showing a minor gain on the session, due to losses in the CHF after the SNB cut its policy rate a larger -than-expected 50bps, and a minor dip in the GBP. Note Brazil’s central bank raised the Selic rate hike a larger-than-expected 100bps (to 12.25%) late yesterday. Most other majors are steady to slightly firmer, however, with the AUD leading gains following a stronger than expected jobs report earlier (a 35.6k gain in jobs, led by full-time work, and a fall in the unemployment rate to 3.9% - against expectations of a rise to 4.2%). Short rates rose modestly and swaps have reduced the odds of a February RBA rate cut to a 50/50 shot.”
“US inflation data yesterday matched expectations but that was perhaps the limit of the good news. Core and underlying trend measures of inflation picked up and while these gains were modest, they do support the impression that the process of disinflation in the US has stalled. Markets added another couple of bps to anticipated easing at next week’s FOMC, effectively fully pricing in a 1/4-point cut and added marginally to easing expectations in 2025 but more hawkish-minded Fed policymakers will be taking note of core price trends and a cut next week may be accompanied by a more cautious-looking statement on the potential for rate cuts in 2025.”
“PPI data today may reflect moderate M/M gains but the consensus still expects a pickup in prices over the year. The BoJ’s Tankan survey for Q4 is released this evening and is expected to reflect steady, but relatively firm, business confidence into year-end. Rising business optimism supports the outlook for gradual BoJ tightening ahead.”
The ECB is expected to cut its policy rate 25bps to 3.00% this morning. No surprise—a 1/4-point ease is fully priced in, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“Swaps reflect the market’s anticipation that rates have a lot further to fall in the Eurozone—around 125bps of additional cuts are reflected in the curve over the next 12 months or so. That might be a bit too much but it seems unlikely that President Lagarde will shift to a more cautious policy bias at this point.”
“ECB monetary policy may run a fair bit softer relative to its peers in 2025, setting the EUR up to underperform in the medium term.”
“The EUR is little changed on the session. Spot remains within its recent range but has lost ground on the week and a net decline through Friday will emphasize the negative technical impact of last week’s failure to hold gains above 1.06. Short-term support sits at 1.0460/80, ahead of a drop to 1.0400/20. Resistance is 1.0540/50.”
The NZD/USD pair gives up its intraday gains and returns below the round-level figure of 0.5800 in Thursday’s early North American session. The Kiwi pair falls back as the US Dollar (USD) reverses losses even though traders have priced in the Federal Reserve (Fed) to cut interest rates by 25 basis points (bps) to 4.25%-4.50% after the two-day monetary policy meeting on Wednesday.
The Kiwi pair has been battered badly for more than two months and is wobbling near the two-year low. The asset has faced an intense sell-off as the outlook of the New Zealand Dollar (NZD) has weakened, given that the Reserve Bank of New Zealand (RBNZ) has reduced its Official Cash Rate (OCR) aggressively by 125 basis points (bps) to 4.25% in three policy meetings.
The RBNZ was compelled to follow an aggressive policy-easing cycle due to slowing inflationary pressures, weakening labor demand, and poor business activity.
Meanwhile, the US Dollar performs strongly across the board on expectations that policies of higher import tariffs and lower income taxes by President-elect Donald Trump will be inflationary for the United States (US) economy.
NZD/USD daily chart shows a Bullish Divergence formation, which suggests a slowdown in the selling momentum that results in a reversal move. While the asset has formed a lower low formation on a daily timeframe, the 14-day Relative Strength Index (RSI) has made higher lows. The formation needs confirmation to set off a bullish reversal.
A decisive break above the November 29 high of 0.5930 could confirm a reversal setup and push it higher to the November 15 high of 0.5970 and the psychological resistance of 0.6000.
However, the chances of a bullish divergence confirmation are weak due to unsupportive NZ fundamentals, which could take the Kiwi pair lower to the November 2022 low of 0.5740 and the round-level support of 0.5700 if it breaks below the two-year low of 0.5770.
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.
Crude Oil trades higher for a fourth consecutive day on Thursday, jumping to $70, after a 2.5% price increase on Wednesday. The surge came after the weekly report from the Energy Information Administration (EIA) revealed that US stockpiles at Cushing plunged to just 22.9 million barrels, the lowest level since 2007. Meanwhile, Oil traders largely ignored the latest forecasts from OPEC, which downwardly revised global Oil demand by 210,000 barrels per day. .
The US Dollar Index (DXY) – which measures the performance of the US Dollar (USD) against a basket of currencies – is trading softer with the focus shifting towards Europe. The European Central Bank (ECB) will make its last policy decision for 2024, with the most likely scenario being another interest-rate cut amidst controlled inflation and a contraction of economic activity in the region. In the US, Wednesday’s Consumer Price Index (CPI) data appeared to be enough for traders to raise bets on a rate cut for the Federal Reserve meeting next week.
At the time of writing, Crude Oil (WTI) trades at $69.93 and Brent Crude at $73.30.
Crude Oil price popped higher as volumes start to diminish going into the year-end. Such a spike can happen when markets like the commodity sector are starting to see thinner volumes being traded. Should another leg higher take place this Thursday, the $71.50 level and beyond can not be ruled out before Christmas.
The 55-day Simple Moving Average (SMA) at $70.04 is being tested and needs to see a hold and daily close above it in order to become support. Further up, $71.46 and the 100-day SMA at $71.19 will act as thick resistance. In case Oil traders can plough through that level, $75.27 is up next as a pivotal level.
On the downside, it is too early to see if that 55-day SMA will act as support at $70.04. That means that $67.12 – a level that held the price in May and June 2023 – is still the first solid support nearby. In case that breaks, the 2024 year-to-date low emerges at $64.75 followed by $64.38, the low from 2023.
US WTI Crude Oil: Daily Chart
Brent Crude Oil is a type of Crude Oil found in the North Sea that is used as a benchmark for international Oil prices. It is considered ‘light’ and ‘sweet’ because of its high gravity and low sulfur content, making it easier to refine into gasoline and other high-value products. Brent Crude Oil serves as a reference price for approximately two-thirds of the world's internationally traded Oil supplies. Its popularity rests on its availability and stability: the North Sea region has well-established infrastructure for Oil production and transportation, ensuring a reliable and consistent supply.
Like all assets supply and demand are the key drivers of Brent Crude 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 Brent 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 Brent Crude 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 Brent Crude Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
The US Dollar (USD) softens slightly on Thursday, with the DXY US Dollar Index trading around 106.50, ahead of the last European Central Bank (ECB) meeting for 2024. All eyes will be on President Christine Lagarde as traders will want to see how the ECB will address the recent downturn in economic activity in the Eurozone. Although a 25 basis points interest-rate cut looks to be a near certainty, estimates for a 50 basis point rate cut and even no rate cut at all are on the table as well.
In the US, the economic calendar is rather light. The weekly Jobless Claims will probably soak up the latter part of the attention, whereas the Producer Price Index (PPI) report is not expected to create much waves. The most inflationary elements were already analyzed on Wednesday with the Consumer Price Index (CPI) report, and traders quickly positioned themselves to lock in a rate cut from the Fed next week. According to the CME FedWatch Tool, the chances of such a decision are currently at almost 99%.
The US Dollar Index (DXY) is further defining a bandwidth that could hold until next year given the limited amount of data points left. The US Consumer Price Index (CPI) release did not really move the needle, with the DXY staying between 105.50 and 107.00.
The US Dollar bulls failed on Wednesday to close above 106.52 (April 16 high), a level that on previous occasions has also been a hard barrier to get through.. Next up is the 107.00 round level and 107.35 (October 3, 2023, high). Further up, the high of November 22 at 108.7 emerges.
Looking down, the pivotal level at 105.53 (April 11 high) comes into play before heading into the 104-region. Should the DXY fall all the way towards 104.00, the 200-day Simple Moving Average at 104.14 should catch any falling knife formation.
US Dollar Index: Daily Chart
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 US Dollar recovery loses steam with bulls halted at 152.90.
Dovish comments from BoJ officials and strong US data are supporting the pair.
The immediate bias remains positive, with bears capped above 152.00.
The US Dollar has snapped a three-day positive trend on Thursday. The pair is trading with moderate losses with the market focusing on US Producer Prices and and Jobless Claims figures, due later today.
From a wider perspective, however, the pair maintains its immediate bullish trend. The dovish comments from BoJ policymakers suggesting that there is no rush to hike interest rates cast doubts on the outcome of next week’s monetary policy decision and will likely keep the Yen on its back foot.
The higher US Treasury yields, with the 10-year yield hitting 4.3% - from 4.12% last week is another source of support for the Greenback. US inflation accelerated in November at its fastest pace in seven months, which is forcing investors to dial back hopes of monetary easing for 2025.
The focus today is on November’s PPI and last week’s Jobless Claims figures. Price pressures are expected to have also increased at factory gates with unemployment claims declining. This would endorse the view of a resilient US economy, increasing support for the Greenback
The 4-hour USD/JPY chart shows the pair correcting higher, with bulls capped so far at the 50% Fibonacci retracement level of November’s sell-off.
The immediate bias remains positive, with price action standing above the 100-period SMA, which meets the price right below 152.00. the key support for the upside trend is at 150.90. Resistances are at 152.85 and 153.60
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Swiss Franc.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.01% | 0.14% | -0.17% | -0.00% | -0.41% | -0.07% | 0.38% | |
EUR | 0.00% | 0.15% | -0.18% | 0.00% | -0.40% | -0.07% | 0.39% | |
GBP | -0.14% | -0.15% | -0.29% | -0.15% | -0.55% | -0.22% | 0.20% | |
JPY | 0.17% | 0.18% | 0.29% | 0.17% | -0.24% | 0.06% | 0.52% | |
CAD | 0.00% | -0.00% | 0.15% | -0.17% | -0.40% | -0.07% | 0.35% | |
AUD | 0.41% | 0.40% | 0.55% | 0.24% | 0.40% | 0.34% | 0.78% | |
NZD | 0.07% | 0.07% | 0.22% | -0.06% | 0.07% | -0.34% | 0.42% | |
CHF | -0.38% | -0.39% | -0.20% | -0.52% | -0.35% | -0.78% | -0.42% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
The Australian Dollar accelerated its rebound from year-to-date lows following stronger-than-expected Australian employment data seen earlier today. The pair, however, has met resistance at 0.6430. which keeps the broader negative trend intact.
Australian employment showed a net increase of 36.6K in November, well above the 25K forecasted by the market and also above the downwardly revised 12.1K in October.
The Unemployment Rate has posted another positive surprise, with a decline to 3.9%, the lowest level since March against market expectations of an increase to 4.2%. The jobless rate had remained steady at 4.1% since last summer.
These figures have offset the impact of Tuesday’s dovish-tilted RBA monetary policy statement but, so far, are showing insufficient to counter the pair’s bearish trend.
The US Dollar Index, which measures the Greenback against the six most traded currencies, remains steady near two-week highs, supported by higher US yields.
US consumer inflation accelerated in November at its fastest rate in seven months. Later today, US Producer Prices Index and Jobless Claims data are expected to endorse the US exceptionalism rhetoric.
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
Expect weak growth in 2025, a high risk of recession, and the ECB forced into accommodative policy. It is possible that a more benign tariff outcome or resilient European consumers mitigate downside risks. A more forceful policy reaction is also possible, either via fiscal, trade or institutional channels, Standard Chartered’s Economist Christopher Graham notes.
“We have written extensively over the past few months on the structural economic issues facing Europe, as well as the trade and foreign policy risks presented by the incoming US administration. We think it is worth at least considering the optimistic angle. There is significant doubt over Trump’s approach to tariffs, how countries will be impacted, and whether Europe’s efforts to negotiate carve-outs are successful, so there is a pathway to a more benign tariff outcome. It is also possible that the European consumer is more resilient next year as rates fall and the labour market remains tight.”
“But how Europe responds to its economic problems also matters. ‘Forged in crises’, references the belief of Jean Monnet, one of the EU founding fathers, that European integration would be propelled by periodic crises. We have seen European institutions become stronger in the aftermath of previous economic challenges; next year’s headwinds – an emerging tariff war, or changes to US security guarantees in the region – could catalyse similar progress. And there is plenty that policy makers could pursue on this front, from completion of banking and capital markets unions to addressing Europe’s competitiveness issues.”
“However, we think the political will to push forward in these areas is currently lacking; we also recognise that the inexorable shift towards ‘more Europe’ that has emerged from previous crises has been met by growing support for populist parties, something that could offer a countervailing force to further European integration now. Where progress seems more likely is on the fiscal front. We do not think another suspension of the fiscal rules is realistic, but greater flexibility being applied to those rules is possible, alongside potential agreement to increase common borrowing.”
The Mexican Peso (MXN) trades practically flat against the US Dollar (USD) on Thursday, with the key 20.00 support area holding the Greenback ahead of the US Producer Price Index (PPI) and Weekly Jobless Claims data. The Peso picked up on Wednesday after the US Consumer Prices Index (CPI) figures cemented hopes of a Federal Rerserve’s (Fed) rate cut next week.
The USD is drawing some support from higher US Treasury yields, which have rallied for the last three days with investors paring back hopes of monetary easing for 2025. The strong US macroeconomic data and the outlook of higher inflationary pressures from Donald Trump’s policies are likely to limit the US central bank’s leeway to lower borrowing costs.
In Mexico, softer-than-expected Consumer Prices Index data, coupled with a deteriorated Consumer Confidence index, has bolstered the case for a 25 bps cut by the Bank of Mexico next week.
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.04% | 0.02% | -0.18% | -0.13% | -0.53% | -0.23% | 0.27% | |
EUR | 0.04% | 0.06% | -0.14% | -0.09% | -0.49% | -0.19% | 0.30% | |
GBP | -0.02% | -0.06% | -0.19% | -0.15% | -0.55% | -0.25% | 0.24% | |
JPY | 0.18% | 0.14% | 0.19% | 0.03% | -0.35% | -0.08% | 0.44% | |
CAD | 0.13% | 0.09% | 0.15% | -0.03% | -0.39% | -0.09% | 0.40% | |
AUD | 0.53% | 0.49% | 0.55% | 0.35% | 0.39% | 0.30% | 0.79% | |
NZD | 0.23% | 0.19% | 0.25% | 0.08% | 0.09% | -0.30% | 0.49% | |
CHF | -0.27% | -0.30% | -0.24% | -0.44% | -0.40% | -0.79% | -0.49% |
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).
The USD/MXN pair remains steady above the 20.00 support area, with the December 5 high at the 20.30 area capping upside attempts. The pair is trading practically flat, awaiting US data.
The short-term bias remains bearish as a double top at 20.80 suggests the possibility of a deeper correction. The 20.00 psychological level is a key support. Below here the target is November’s low at 19.75.
On the upside, the December 5 high at 20.30 is holding upside attempts ahead of the December 2 high at 20.60 and November’s peak at around 20.80.
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.
EUR/CHF decline has stalled after achieving graphical level of 0.9250/0.9210 representing lows of December 2023 and August 2024, Societe Generale’s team of FX analysts note.
“Daily MACD has started posting positive divergence denoting receding downward momentum. A brief rebound can’t be ruled out but multi-month descending trend line at 0.9370 could be an important hurdle. Inability to cross this resistance could denote risk of further decline.”
“In case the pair establishes below 0.9250/0.9210, the phase of correction could deepen towards next projections of 0.9160 and 0.9125.”
Gold (XAU/USD) is hesitating below a one-month high at $2,720 on Thursday’s European session following a sharp rally over the last three days. The rebound on US Treasury yields, with the benchmark 10-year yield more than 15 pips above last week’s lows, is weighing on the precious metal’s rally.
However, downside attempts remain limited, with investors nearly fully pricing a 25 basis points (bps) interest-rate cut by the Federal Reserve (Fed) next week. The hot US Consumer Price Index (CPI) report did not scratch investors’ hopes of further monetary easing, although the outlook of a shallower easing cycle in 2025 underpins the US Dollar (USD).
Gold’s rally has lost some steam, with US Treasury yields bouncing up and the US Dollar appreciating on the back of strong US inflation data. However, the broader trend remains positive, with bearish attempts contained above $2,700.
On the upside, the November 24 high at $2,720 emerges as the first resistance. The next upside target is the November 4, 5 and 6 highs at around $2,750.
On the downside, previous resistance at around $2,700 (December 10 high) is acting now as support ahead of the $2,675 intra-day level and the December 9 low at $2,630.
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.
Silver price (XAG/USD) refreshes an almost five-week high at around $32.30 in Thursday’s European session. The white metal strengthens as traders have fully priced in the Federal Reserve (Fed) to cut interest rates again by 25 basis points (bps) to 4.25%-4.50% in the policy meeting announcement on Wednesday, a scenario that is favorable for non-yielding assets, such as Silver, as it reduces their opportunity costs.
Fed dovish bets escalated after the release of the United States (US) Consumer Price Index (CPI) report for November, which showed that rental prices rose at a moderate pace. Annual headline and core CPI – which excludes volatile food and energy prices – rose by 2.7% and 3.3%, respectively, in line with expectations.
The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, ticks lower to near 106.50. 10-year US Treasury yields advance to near 4.30%.
Going forward, investors will focus on the outcome of China’s two-day economic work conference, a high-level meeting of China’s top leadership that will show the economic agenda for 2025. The administration is expected to release a mammoth stimulus package to boost domestic consumption and stabilize the realty sector.
The demand for Silver as a metal would strengthen if the Chinese government released a robust economic package, given its application in various industries such as solar energy, electric vehicles, and mining.
Silver price refreshes monthly higher near $32.30 after breaking above the two-day resistance of $32.00. A bull cross, represented by 20- and 50-day Exponential Moving Averages (EMAs), suggests a fresh bullish trend.
The 14-day Relative Strength Index (RSI) approaches 60.00. Should the bullish momentum trigger if the RSI breaks above 60.00
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.
Brazil's central bank, BCB, aggressively hiked rates by 100bp to 12.25% last night and promised two further hikes of a similar magnitude, ING’s FX analyst Chris Turner notes.
“The phrase 'getting ahead of the curve' seems appropriate here as the BCB delivers a forceful signal that the rise in inflation expectations will not be tolerated. In addition, BCB announced a $4bn FX auction today to provide liquidity to the spot market. This aggressive move could carry USD/BRL back to 5.80/85 today.”
“However, this aggressive rate hike is entirely down to the loose fiscal policy of the Lula administration and the damage it has done to the exchange rate. Unless some credible fiscal consolidation package is announced, the BRL will stay vulnerable.”
“Our position is that fiscal consolidation will be difficult in the run-up to the 2026 Presidential election, and combined with the new US administration's trade war on China – and the threat of secondary sanctions on Brazil – USD/BRL will probably head up to the 6.25 area.”
USD/CNH rose yesterday after a Reuters report said that China’s top leaders and policymakers are considering allowing the RMB to weaken in 2025 as they brace for tariffs. But the pair fell today after daily USD/CNY fix continue to be set below 7.20. USD/CNH was last at 7.2668 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“We expect policymakers to continue using the fix to manage RMB expectations for now until tariff hits (if any). In the interim, we would keep a look out for the China’s CEWC meeting which wraps up today. 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. 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). An unwinding of politburo optimism may weigh further on other Asian FX such as KRW, SGD and MYR.”
Daily momentum is bearish while RSI fell. Risks remain skewed to the downside. Support at 7.26 (21 DMA), 7.2340 (23.6% fibo retracement of Sep low to Dec high) and 7.2040 (200 DMA). Resistance at 7.27, 7.2940 levels.
The region switched to muted mode with a quiet calendar in the second half of the week, ING’s FX analyst Frantisek Taborsky notes.
“The market seems to be waiting for the ECB decision and even the lower EUR/USD didn't change much on the CEE currencies yesterday. The Czech National Bank blackout period starts today and potentially we may still see some headlines. However, in the last few days, the board has been very active but overall the message is clear.”
“A December pause in the cutting cycle will be on the table and from the tone of the interviews we would say that is the primary scenario for most of the board. A pause in December and February is the baseline of our economists. Board members mention the February forecast as a possibility for additional rate cuts if January inflation is kept in check. While December seems like a done deal, February is open depending on the numbers in the meantime.”
“Today's CEE trading will depend heavily on the ECB's tone. Given the strong levels and rally in PLN and CZK over the past two weeks, we see risk on the downside coming from the possible dovish tone of the ECB. Both currencies have been showing resistance to further strength for the last three days and any signs of weakness on the European side in the ECB comments could lead to profit-taking in our view.”
USD/SGD firmed, tracking the move up in USD/CNH. Pair was last at 1.3435, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“Mild bearish momentum on daily chart intact while RSI fell. Consolidation likely with slight bias to the downside. Support at 1.3340 (200 DMA, 23.6% fibo), 1.33, 1.3240 (32.8% fibo retracement of Sep low to Nov high). Resistance at 1.3460, 1.3490 levels.”
“Pair should continue to take directional cues from USD and CNY moves in absence of key data. Next set of SG data is NODX (17 Dec) and CPI (23 Dec). S$NEER was last at 1.08% above model-implied mid.”
US Dollar (USD) could trade in a range, most likely between 7.2500 and 7.2900. In the longer run, current price movements are likely part of range trading, probably between 7.2400 and 7.2900, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “We detected a ‘slight increase in momentum’ yesterday. We held the view that USD ‘could test the 7.2400 level before a more sustained rebound is likely.’ USD subsequently dropped to 7.2425 before staging a surprising strong rise, reaching a high of 7.2928. It then pulled back to close at 7.2807 (+0.27%). The price action provides no clarity. Today, USD could trade in a range, most likely between 7.2500 and 7.2900.”
1-3 WEEKS VIEW: “Our most recent narrative was from last Friday (06 Dec, spot at 7.2660), wherein ‘the current price movements are likely part of range trading, probably between 7.2400 and 7.2900.’ USD fell to 7.2420 two days ago. Yesterday, it rose slightly above 7.2900 (high of 7.2928). There has been no increase in either downward or upward momentum, and we continue to expect USD to trade between 7.2400 and 7.2900.”
USD/JPY rose sharply, in response to news that BoJ officials see little cost to waiting before raising rates. Pair was last seen at 152.20 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“Bearish momentum on daily chart shows signs of fading but rise in RSI slowed. We reiterated a compression of moving averages, with 21, 50, 200 DMAs converging. This typically precedes a directional break-out trade. Resistance at 152.50/70 levels (21 DMA, 23.6% fibo), 154.70 levels. Support at 152 (50, 200 DMAs), 150.20 (38.2% fibo retracement of Sep low to Nov high).”
“Tomorrow brings Tankan survey before BoJ MPC (19 Dec). 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 labour market, alongside still elevated services inflation, better 3Q GDP and expectations for 5- 6% wage increases for 2025.”
“That said, the risk is a slowdown in Fed and/or BoJ’s pace of policy normalisation would affect USD/JPY’s moves.”
Outlook for US Dollar (USD) is mixed; it could trade in a range, probably staying within yesterday’s range of 151.00/152.79. In the longer run, tentative buildup in momentum suggests USD could grind higher towards 153.30, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “Two days ago, USD soared to 152.17. Yesterday, we stated that ‘while the rapid rise appears to be excessive, there is scope for USD to test 152.45 before the risk of a pullback increases.’ The ensuing price movements did not develop as we expected as USD swung between 151.00 and 152.79, closing at 152.45 (+0.33%). The choppy price action has resulted in a mixed outlook. Today, USD could trade in range, probably staying within yesterday’s range of 151.00/152.79.”
1-3 WEEKS VIEW: “We indicated yesterday (11 Dec, spot at 151.80) that USD ‘must break and hold above 152.45 before further advances can be expected.’ USD then rose to a high of 152.79, pulling back to close at 152.45. While we would prefer a stronger daily close, the price action suggests that USD could grind higher towards 153.30. On the downside, if USD breaks below 151.75 (‘strong support’ level was at 151.45 yesterday), it would indicate that the current tentative buildup in upward momentum has faded.”
A 25bp cut is likely a done deal. OIS-implied has priced in back-to-back cuts for 1H next year, taking rates to below 2% in Jun 2025, or even 1.7% in July. The aggressive dovish pricing reflects a recession-driven rate cut cycle rather than a policy normalisation. Last at 1.0513 levels, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“Nevertheless, we would pay closer attention to Lagarde’s press conference for clues on how policymakers assess growth outlook to be. On German politics, Chancellor Scholz has called for a vote of confidence yesterday 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. Political risks in Europe, risk of dovish ECB and renewed weakness in RMB may continue to weigh on EUR, until we get some clarity. EUR fell, dragged by RMB’s decline yesterday.”
“Daily momentum is mild bullish but RSI fell. Consolidation likely. Broader 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. Decisive break out puts next resistance at 1.0670 (38.2% fibo), 1.0710 (50 DMA). Support at 1.0460 levels.
The Pound Sterling (GBP) consolidates against its major peers on Thursday, but the British currency remains firm against its major counterparts due to expectations that the Bank of England (BoE) will follow a more gradual policy-easing cycle compared with other central banks in Europe and North America.
Inflation in the United Kingdom (UK) services sector remains high, allowing the BoE to remain in a slow lane towards interest rate cuts. BoE Monetary Policy Committee (MPC) external member Megan Greene warned in her latest commentary that she suspects the BoE’s inflation target “by the end of our forecast period, which is three years.”
Signs of more government expenditure and higher employer costs in Labour’s first budget have also escalated uncertainty over the inflation outlook. UK employers are expected to pass on the impact of higher employers’ contribution to National Insurance to consumers.
Market expectations that the BoE will cut interest rates at a moderate pace have also kept the Pound Sterling strong against the US Dollar this year, unlike other European currencies such as the Euro (EUR) and the Swiss Franc (CHF), which are down 4.9% and 5.5%, respectively.
For the BoE policy meeting announcement on December 19, traders see the central bank leaving interest rates unchanged at 4.75%, but price in three interest rate cuts in 2025.
On the economic data front, investors await the monthly Gross Domestic Product (GDP) and the factory data for October, which will be released on Friday, to get cues about the current status of the UK’s economic health.
The Pound Sterling consolidates in a tight range around 1.2750 against the US Dollar for almost a week. The GBP/USD pair holds slightly above 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.
New Zealand Dollar (NZD) could retest the 0.5765 before a more sustained recovery can be expected. In the longer run, NZD may decline below 0.5770, but it remains to be seen if it can maintain a foothold below this level, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “While we expected NZD to ‘decline further’ yesterday, we indicated that ‘deeply oversold conditions suggest NZD may not be able to break clearly below the major support at 0.5770.’ NZD fell more than expected to 0.5763 before recovering to close at 0.5784 (-0.29%). While there has been no further increase in momentum, NZD could retest the 0.5765 level before a more sustained recovery can be expected. The next support at 0.5740 is not expected to come into view. On the upside, should NZD break above 0.5815, it would mean that the current downward pressure has faded.”
1-3 WEEKS VIEW: “We indicated yesterday (11 Dec, spot at 0.5800) that NZD ‘may decline below 0.5770.’ However, we pointed out, ‘it remains to be seen if it can maintain a foothold below this level.’ NZD subsequently dropped to 0.5763 before recovering. There has been no further increase in momentum. For NZD to decline further, it must hold below 0.5770. The likelihood of this happening will remain intact provided that 0.5845 (‘strong resistance’ level was at 0.5865 yesterday) is not beached. Looking ahead, the next level to monitor below 0.5770 is 0.5740.”
In its monthly oil market report published on Thursday, the International Energy Agency (IEA) raised 2025 global oil demand growth forecast to 1.1 million barrels per day (bpd) from 990,000 bpd.
2024 world oil demand growth forecast seen at 840k bpd versus the previous forecast of 920k bpd.
Sees comfortable oil supply in 2025.
Predicts a 1.4 million barrels per day oversupply by 2025 if OPEC+ increases production.
Reports preliminary data showing global oil reserves increased in November.
OPEC+ delay in supply cuts significantly reduces 2025 oil surplus.
Reports OECD industry stockpiles decreased by 30.9 million barrels in October.
Non-OPEC+ supply to increase by almost 1.5 million barrels per day in 2024-2025.
Global oil supply to increase by 630,000 barrels per day in 2024 and 1.9 million in 2025.
China's oil demand to increase by 140k barrels per day in 2024 and 220k barrels per day in 2025.
Current balances indicate a 950k bpd supply overhang in 2025 if OPEC+ starts unwinding voluntary cuts by the end of March 2025.
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.
Silver prices (XAG/USD) rose on Thursday, according to FXStreet data. Silver trades at $32.19 per troy ounce, up 0.98% from the $31.88 it cost on Wednesday.
Silver prices have increased by 35.30% since the beginning of the year.
Unit measure | Silver Price Today in USD |
---|---|
Troy Ounce | 32.19 |
1 Gram | 1.04 |
The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 84.33 on Thursday, down from 85.23 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.
(An automation tool was used in creating this post.)
The market has firmed up its view that the ECB will cut by 25bp today. There are chances of a 50bp cut, and there could be some downward revision to growth and perhaps even inflation forecasts today, ING’s FX analyst Chris Turner notes.
“In focus will be whether the ECB reduces these inflation forecasts which in September were set at 2.5%, 2.2% and 1.9% for 24, 25 and 26 respectively. For example, dropping the 2025 forecast closer to 2.0% could potentially lay the path for an accelerated easing cycle.”
“Market pricing of the ECB already sees rates being cut into accommodative (sub-2%) territory next summer. That pricing could drift even lower. Overall we remain bearish on EUR/USD and don't see the case for the ECB to aggressively push back against current market pricing.”
“However, there is quite a large FX option expiry around 1.0550 today and we cannot rule out EUR/USD having to consolidate around here or trading 1.0550 at the 16CET option expiry today if Christine Lagarde has not sufficiently fed the euro bears.”
EUR/CHF gains ground following the SNB Monetary Policy Assessment, trading around 0.9340 during the European hours on Thursday. The EUR/CHF cross appreciates as the Swiss Franc (CHF) faces challenges as the Swiss National Bank (SNB) unexpectedly cuts its benchmark Sight Deposit Rate by 50 basis points (bps), lowering it from 1.00% to 0.50%. This decision caught markets off guard, as consensus had anticipated a smaller 25 bps reduction to 0.75% for the quarter ending in December.
In its Monetary Policy Assessment, the Swiss National Bank emphasized its readiness to intervene in the foreign exchange market when necessary. The SNB reaffirmed its commitment to closely monitoring economic developments and stated that it would adjust its monetary policy as needed to ensure inflation remains within the range consistent with medium-term price stability.
SNB Chairman Martin Schlegel addressed the surprise rate cut during the post-policy meeting press conference, explaining the rationale behind the decision. Schlegel emphasized that rate cuts remain the primary tool for monetary easing if further adjustments are required. He also noted that the current monetary easing aims to counteract reduced inflationary pressures. Additionally, he reaffirmed the SNB's readiness to intervene in foreign exchange markets when necessary.
In the Eurozone, the European Central Bank (ECB) is set to announce its interest rate decision following the December monetary policy meeting later on Thursday. Markets widely anticipate a 25 basis point rate cut, reducing the Main Refinancing Operations Rate to 3.15% from 3.40% and the Deposit Facility Rate to 3.00% from 3.25%.
Traders will closely monitor ECB President Christine Lagarde's press conference following the policy decision, where she is expected to present a prepared statement on monetary policy and address questions from the media.
The Swiss National Bank (SNB) announces its interest rate decision after each of the Bank’s four scheduled annual meetings, one per quarter. Generally, if the SNB is hawkish about the inflation outlook of the economy and raises interest rates, it is bullish for the Swiss Franc (CHF). Likewise, if the SNB has a dovish view on the economy and keeps interest rates unchanged, or cuts them, it is usually bearish for CHF.
Read more.Last release: Thu Dec 12, 2024 08:30
Frequency: Irregular
Actual: 0.5%
Consensus: 0.75%
Previous: 1%
Source: Swiss National Bank
Australian Dollar (AUD) is likely to trade in a range between 0.6355 and 0.6415. In the longer run, AUD has to break and remain below 0.6350 before further decline can be expected, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “Following AUD’s sharp decline to 0.6366 on Tuesday, we pointed out yesterday (Wednesday) that it ‘could weaken further.’ We also pointed out that ‘given the deeply oversold conditions, it remains to be seen if AUD can break below 0.6350.’ Although AUD broke below 0.6350, it rebounded from a low of 0.6337, closing at 0.6369, slightly lower by 0.14%. The rebound in oversold conditions and slowing momentum suggests that AUD is likely to trade in a range today, probably between 0.6355 and 0.6415.”
1-3 WEEKS VIEW: “Yesterday (11 Dec), when AUD was at 0.6380, we highlighted that “while downward momentum is beginning to build again, it is not enough to signal a sustained decline.” We also highlighted that AUD ‘has to break and remain below the significant support at 0.6350 before further weakness can be expected.’ The condition for a sustained decline was not met, as AUD rebounded from 0.6337 to close at 0.6369. That said, there is still a chance for AUD to break clearly below 0.6350 as long as 0.6435 (‘strong resistance’ level was at 0.6445 yesterday) is not breached.”
Swiss National Bank (SNB) Vice Chairman Antoine Martin is speaking at the post-policy meeting press conference, explaining the reason behind the surprise rate cut move.
Uncertainty about global economic outlook has increased.
Geopolitical tensions could lead to weaker global economic development.
Political uncertainty in Europe has risen.
Future course of US economic policy is uncertain.
Meanwhile, SNB governing board member Petra Tschudin noted that “Swiss economic growth should pick up slightly next year thanks to monetary easing.”
“Developments abroad are the main risk to swiss economy,” Tschudin added.
USD/CHF was last seen trading 0.50% higher on the day at 0.8885, with traders digesting the SNB’s surprise 50 basis points (bps) rate cut to 0.50%.
The US Dollar (USD) remains well supported this December as trading partners move to cut interest rates quite quickly. For today, all eyes will be on Europe, but in the US we'll focus on the November PPI reading, ING’s FX analyst Chris Turner notes.
“Canada has now delivered back-to-back 50bp rate cuts and central banks in Europe could deliver cuts of a similar magnitude today. At the same time, a raft of source stories in Japan suggest that the Bank of Japan will not be hiking next week after all. That is helping USD/JPY up to the 153 level. And yesterday morning the dollar also got a bid from a source report that China is considering a softer renminbi.”
“Back to the US domestic story, there were no real surprises in yesterday's CPI data and the market has firmed up its view that the Fed can cut by 25bp next week. This move will be characterised as the Fed taking the opportunity to deliver less restrictive policy while it can. For today, all eyes will be on Europe, but in the US we'll focus on the November PPI reading. Any upside surprise – and what it means for next Friday's release of the core PCE deflator – could prove a minor dollar positive.”
“We see no reason to leave the safety, liquidity and high yield (one-week deposit rates at 4.55% p.a.) of the dollar and DXY risks a move towards 107 if the ECB is sufficiently dovish today.”
Swiss National Bank (SNB) Chairman Martin Schlegel is speaking at the post-policy meeting press conference, explaining the reason behind the surprise rate cut move.
Will continue to monitor inflationary pressure and will adjust monetary policy if necessary to maintain price stability.
Without today's cut, inflation forecast would have been lower.
Inflation since last rates decision has been lower than expected.
Uncertainty about future inflation path is still high.
Inflationary pressure has decreased markedly over medium term.
Development of Swiss Franc is still important factor.
With monetary easing we are countering the lower inflationary pressure.
SNB remains willing to intervene in forex markets as necessary.
Rate cuts continue to be the main instrument if monetary policy needs to be eased further.
Central bank still has room for further interest rate moves.
This step is intended to stabilise inflation between 0 and 2%.
As of writing, USD/CHF is consolidating the rebound to near 0.8900, adding 0.42% on the day.
Pound Sterling (GBP) is expected to trade in a sideways range of 1.2720/1.2785. In the longer run, momentum is beginning to slow; GBP has to break and hold above 1.2810, or the chance of a rise to 1.2850 will diminish quickly, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “Yesterday, we noted ‘a slight increase in momentum.’ We were of the view that GBP ‘may edge higher, but as momentum is not strong for now, any advance is unlikely to break above 1.2810.’ Our view did not turn out, as GBP fluctuated between 1.2716 and 1.2782, closing at 1.2751 (-0.17%). The price action did not result in any increase in either downward or upward momentum. Today, we expect GBP to trade sideways, most likely in a range of 1.2720/1.2785.”
1-3 WEEKS VIEW: “We have a held positive GBP view since early this week. After GBP traded in a range for a few days, we indicated yesterday (11 Dec, spot at 1.2775) that ‘upward momentum is beginning to slow, and GBP has to break above and hold above 1.2810 within these 1 to 2 days, or the chance of a rise to 1.2850 will diminish quickly.’ We continue to hold the same view as long as 1.2700 (no change in ‘strong support’ level) is not breached. Looking ahead, a breach of 1.2700 would indicate that GBP may trade in a range for a period.”
Market reaction was largely muted in the FX space as CPI report was in line with expectations, with headline coming in at 2.7% and core holding steady at 3.3%. DXY was last at 106.60. Head and shoulders pattern have formed but DXY has yet to break below the neckline, OCBC’s FX analysts Frances Cheung and Christopher Wong note.
“The DXY was firmer but the bullish momentum started in Asia afternoon (well before US CPI report was released) after a Reuters report said that China’s top leaders and policymakers are considering allowing the RMB to weaken in 2025 as they brace for tariffs.”
“DXY received another boost after a report says that BoJ officials see little cost to waiting before raising rates. Focus next on PPI report later tonight before FOMC next week. A 25bp cut is more or less a done deal (markets pricing 98.5% probability of a cut).”
“Bearish momentum on daily chart is fading but rise in RSI moderated. Head and shoulders pattern have formed but DXY has yet to break below the neckline. A decisive break below neckline is required for bears to gather momentum. Support at 106.20/40 levels (23.6% fibo, 21 DMA), 105 levels (38.2% fibo retracement of Sep low to Nov high, 50 DMA) and 104.10 (200 DMA, 50% fibo). Resistance at 106.80 (second shoulder), 107.20 (first shoulder).”
The USD/CHF pair surges to a fresh two-week high near 0.8900 as Swiss France (CHF) dives after the Swiss National Bank (SNB) surprisingly reduces its key borrowing rates by 50 basis points (bps) to 0.5%. This is the fourth straight interest rate cut by the SNB in a row but first larger-than-usual. The SNB was anticipated to reduce interest rates but at a slower pace of 25 bps to 0.75%.
SNB’s rate-cut expectations were based on extremely dovish remarks from SNB Chairman Martin Schlegel at an event in Zurich in late November. "I want to emphasize that lower interest rates, plus negative interest rates, are not excluded from our toolbox," Schlegel said.
Schlegel chose dovish remarks for the interest rate guidance as inflationary pressures in the Swiss economy have remained in their desired range of 0%-2% since June 2023. The Annual Swiss Consumer Price Index (CPI) decelerated to 0.6% in October.
Meanwhile, the US Dollar (USD) trades slightly lower as traders have priced in 25 bps interest rate reduction by the Federal Reserve (Fed) to 4.25%-4.50% for the policy meeting on Wednesday. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, edges lower to near 106.50.
Fed dovish bets strengthened after the release of the United States (US) Consumer Price Index (CPI) data for November, which showed a moderate growth in rental prices. Annual headline and core CPI – which strips off volatile food and energy prices – rose in line with estimates of 2.7% and 3.3%, respectively.
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.
Euro (EUR) is unlikely to weaken much further; it is more likely to trade in a 1.0475/1.0535 range. In the longer run, current price movements are likely part of a range trading phase, expected to be between 1.0465 and 1.0610, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “EUR fell to a low of 1.0498 two days ago before recovering. Yesterday, we held the view that ‘there is a chance for EUR to retest the 1.0500 level before a more sustained recovery is likely.’ However, EUR dropped more than expected to a low of 1.0478, closing at 1.0494 (-0.30%). Despite the decline, there is no clear increase in downward momentum, and EUR is unlikely to weaken much further. Today, EUR is more likely to trade in a 1.0475/1.0535 range.”
1-3 WEEKS VIEW: “We indicated yesterday (11 Dec, spot at 1.0530) that ‘the current price movements are likely part of a range trading phase, expected to be between 1.0465 and 1.0610.’ There is no change in our view.”
USD/CAD remains tepid for the second successive day, trading around 1.4150 during the European session on Thursday. From a technical perspective, the daily chart analysis shows the Loonie pair trends higher within an ascending channel pattern, suggesting a strengthening bullish bias.
The 14-day Relative Strength Index (RSI) has retreated from the near 70 mark, suggesting a potential downward correction. However, if the RSI maintains its position near the 70 level, it would strengthen the bullish sentiment.
Additionally, the USD/CAD pair remains above the nine- and 14-day Exponential Moving Averages (EMA), signaling a bullish outlook and indicating strengthening short-term price momentum. This suggests strong buying interest and the potential for further price gains.
On the upside, the USD/CAD pair may retest the region around its recent high of 1.4195, a level last seen in April 2020. A successful break above this level could strengthen the bullish bias and lead the pair to test the upper boundary of the ascending channel at a psychological level of 1.4300.
Regarding support, the USD/CAD pair could first test the nine-day EMA at the 1.4118 level, which aligns with the lower boundary of the ascending channel. The 14-day EMA at 1.4090 could also provide additional support. A break below this region could weaken the bullish sentiment and push the pair toward the psychological level of 1.4000.
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the Swiss Franc.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.13% | -0.10% | 0.05% | -0.09% | -0.59% | -0.27% | 0.47% | |
EUR | 0.13% | 0.03% | 0.10% | 0.05% | -0.46% | -0.14% | 0.60% | |
GBP | 0.10% | -0.03% | 0.10% | 0.01% | -0.49% | -0.17% | 0.57% | |
JPY | -0.05% | -0.10% | -0.10% | -0.08% | -0.57% | -0.28% | 0.49% | |
CAD | 0.09% | -0.05% | -0.01% | 0.08% | -0.49% | -0.18% | 0.55% | |
AUD | 0.59% | 0.46% | 0.49% | 0.57% | 0.49% | 0.32% | 1.06% | |
NZD | 0.27% | 0.14% | 0.17% | 0.28% | 0.18% | -0.32% | 0.74% | |
CHF | -0.47% | -0.60% | -0.57% | -0.49% | -0.55% | -1.06% | -0.74% |
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 Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
Following Thursday's quarterly monetary policy assessment, the Swiss National Bank (SNB) cut the benchmark Sight Deposit Rate by 50 basis points (bps) to 0.50% from 1.00%.
The decision surprised markets, as they expected a 25 bps rate reduction to 0.75% in the quarter to December.
Banks’ sight deposits held at the snb will be remunerated at the snb policy rate up to a certain threshold, and at 0% above this threshold.
Also remains willing to be active in the foreign exchange market as necessary.
SNB will continue to monitor the situation closely, and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
The forecast for Switzerland, as for the global economy, is subject to significant uncertainty.
Developments abroad represent the main risk.
Uncertainty about the economic outlook has increased in recent months.
The future course of economic policy in the us is still uncertain, and political uncertainty has also risen in Europe.
It cannot be ruled out that inflation could remain higher than expected in some countries.
In this environment, unemployment should continue to rise slightly, while the utilisation of production capacity is likely to decline somewhat.
Sees 2024 Swiss GDP at around 1.0% (previous forecast was for around 1.0%).
Sees 2024 inflation at 1.1% (previous forecast was for 1.2%).
Sees Q3 2027 inflation at 0.7%.
Sees 2025 inflation at 0.3% (previous forecast was for 0.6%).
Sees 2026 inflation at 0.8% (previous forecast was for 0.7%).
Sees 2025 Swiss GDP at around 1.0-1.5% (previous forecast was for around {1.5 percent).
The USD/CHF pair rebounded firmly to test 0.8900 in a knee-jerk reaction to the SNB interest rate decision before easing to 0.8875, where it now wavers. The pair is down 0.48% on the day.
The table below shows the percentage change of Swiss Franc (CHF) against listed major currencies today. Swiss Franc was the weakest against the Australian Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.18% | -0.15% | -0.14% | -0.18% | -0.62% | -0.34% | 0.29% | |
EUR | 0.18% | 0.03% | 0.03% | 0.00% | -0.43% | -0.16% | 0.47% | |
GBP | 0.15% | -0.03% | 0.02% | -0.03% | -0.47% | -0.19% | 0.44% | |
JPY | 0.14% | -0.03% | -0.02% | -0.05% | -0.48% | -0.24% | 0.43% | |
CAD | 0.18% | -0.01% | 0.03% | 0.05% | -0.44% | -0.16% | 0.47% | |
AUD | 0.62% | 0.43% | 0.47% | 0.48% | 0.44% | 0.29% | 0.91% | |
NZD | 0.34% | 0.16% | 0.19% | 0.24% | 0.16% | -0.29% | 0.64% | |
CHF | -0.29% | -0.47% | -0.44% | -0.43% | -0.47% | -0.91% | -0.64% |
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 Swiss Franc from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CHF (base)/USD (quote).
EUR/USD gains sharply around 1.0520 in Thursday’s European session ahead of the European Central Bank’s (ECB) interest rate decision, which will be announced at 13:15 GMT. The ECB is widely anticipated to cut its Deposit Facility rate by 25 basis points (bps) to 3% as Eurozone price pressures seem under control and the economy continues to deteriorate. This would be the third straight interest rate cut by the ECB in a row and the fourth of the year.
Therefore, investors will pay close attention to the interest rate guidance from ECB President Christine Lagarde at the press conference after the policy decision to be held at 13:45 GMT.
"Fundamentals fully justify the December cut and more dovish forward guidance, given the deterioration in the growth picture. Underlying inflationary pressures have eased and risks of further headwinds to growth have increased after the United States (US) election results," Annalisa Piazza at MFS Investment Management said.
Meanwhile, German Chancellor Olaf Scholz submitted a request for a no-confidence vote on December 16 to the President of the Bundestag, Bärbel Bas, a necessary precursor for holding elections on February 23, 2025, Euronews reported. German government collapsed after Scholz dismissed Finance Minister Christian Lindner, dissolving the three-party coalition.
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 1.0560 acts as key resistance for the Euro (EUR) bulls.
The 14-day Relative Strength Index (RSI) wobbles near 40.00. Should the RSI fall below this level, a bearish momentum will trigger.
Looking down, the November 22 low of 1.0330 will be a key support. On the flip side, the 50-day EMA near 1.0680 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%).
Chinese Commerce Ministry said in a statement on Thursday that “China is open to contact and communication with the Trump administration's economic and trade team.”
Commenting on Australian lobster imports, the Ministry said that “China and Australia are still in technical talks.”
AUD/USD stalls its recovery following these comments, currently trading at 0.6415, still up 0.75% on the day.
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 European Central Bank (ECB) interest rate decision will be announced following the December monetary policy meeting at 13:15 GMT on Thursday.
ECB President Christine Lagarde's press conference will follow, beginning at 13:45 GMT, where she will deliver the prepared statement on monetary policy and respond to media questions. The ECB announcements are likely to drive the Euro’s (EUR) valuation in the second half of the week.
Following the October policy meeting, the ECB announced that it lowered key rates by 25 basis points (bps). With this decision, the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility, also known as the benchmark interest rate, stood at 3.4%, 3.65% and 3.25%, respectively.
The ECB is widely expected to lower key rates by another 25 bps after the December meeting.
In the post-meeting press conference in October, President Lagarde said that the ECB policy was still restrictive and noted that they are concerned about the growth outlook. Although she refrained from clearly stating whether they would opt for another policy-easing step at the last meeting of the year, markets widely expect the ECB to lower key rates by 25 bps.
Commenting on the policy outlook, ECB policymaker Joachim Nagel noted that he would have no objections to reducing the policy rate, given that the disinflation process is proceeding largely as currently projected. On a similar note, Governing Council member Francois Villeroy de Galhau said: “There is every reason to cut on December 12th.” “Optionality should remain open on the size of the cut, depending on incoming data, economic projections and our risk assessment,” he added.
Assessing the EUR’s positioning in the Commitment of Traders report (COT), “EUR net short positions have increased for the third consecutive week, driven by an increase in short positions,” Rabobank analysts said. They added: “EUR was the worst performing G10 currency in the month of November, depreciating 2.37% against USD. EUR has suffered from deteriorating economic fundamentals and impending cuts from the ECB. We expect the ECB to cut the policy rate 25bp at the December 12th.”
At each of the European Central Bank’s (ECB) eight governing council meetings, the ECB releases a short statement explaining its monetary policy decision, in light of its goal of meeting its inflation target. The statement may influence the volatility of the Euro (EUR) and determine a short-term positive or negative trend. A hawkish view is considered bullish for EUR, whereas a dovish view is considered bearish.
Read more.Next release: Thu Dec 12, 2024 13:15
Frequency: Irregular
Consensus: -
Previous: -
Source: European Central Bank
In November, EUR/USD lost nearly 3%. In addition to the negative impact of the ECB’s dovish policy outlook on the EUR, the broad-based US Dollar (USD) strength following Donald Trump’s victory in the US presidential election weighed heavily on EUR/USD. Since the beginning of December, EUR/USD has been fluctuating in a relatively tight range, reflecting investors’ hesitancy to take large positions ahead of the ECB and the Federal Reserve’s (Fed) final meetings of 2024.
In case the ECB unexpectedly lowers key rates by 50 bps, the immediate reaction could trigger a Euro selloff and open the door for another leg lower in EUR/USD. If the ECB opts for a 25 bps cut but Lagarde voices concerns over the economic situation in the Eurozone and mentions growing downside risks to inflation, EUR/USD is likely to extend its downtrend, even if the immediate market reaction is mixed.
In this current market environment, the Euro would need a significant hawkish surprise to stage a steady recovery against the USD. If Lagarde adopts a more optimistic tone about the economic outlook and highlights the need for patience in further policy easing, EUR/USD could gain traction in the near term.
Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for EUR/USD:
“Following the modest rebound seen in December, EUR/USD’s near-term technical outlook points to a loss of bullish momentum. On the daily chart, the Relative Strength Index edges higher toward 50 and the pair manages to hold above the 20-day Simple Moving Average (SMA).”
“On the upside, the Fibonacci 38.2% retracement of the October–December downtrend aligns as the next resistance at 1.0700 before 1.0800 (Fibonacci 50% retracement) and 1.0840 (200-day SMA). In case EUR/USD flips 1.0530 (20-day SMA) into resistance, technical sellers could continue to dominate the pair’s action. In this scenario, 1.0400 (end-point of the downtrend) could be seen as the next support before 1.0260 (static 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%).
NZD/USD breaks its two days of losses after reaching a two-year low at 0.5761 on Wednesday, currently trading around 0.5820 during the early European hours on Thursday. However, the New Zealand Dollar (NZD) remains under pressure due to reports that Beijing may allow the Yuan to depreciate further next year to offset the impact of US tariffs. A weaker Yuan often negatively affects the NZD, considering New Zealand's heavy reliance on China as a key export market.
Additionally, market participants are anticipating a significant 50 basis point (bps) interest rate cut by the Reserve Bank of New Zealand (RBNZ) in its February meeting, which is contributing to the weakening of the New Zealand Dollar (NZD).
The upside of the NZD/USD pair comes as the US Dollar (USD) corrects downwards after breaking its four-day winning streak despite higher US Treasury yields. The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades around 106.40 with 2-year and 10-year yields on US Treasury bonds standing at 4.16% and 4.28%, respectively, at the time of writing.
The US Dollar encounters headwinds as the latest US CPI report appears insufficient to dissuade the Federal Reserve (Fed) from reducing interest rates in December. According to the CME FedWatch Tool, there is nearly a 99% probability of a 25 basis point rate cut on December 18. Traders now turn their attention to the US November Producer Price Index (PPI), set for release on Thursday, for new market catalysts.
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.
Here is what you need to know on Thursday, December 12:
The European Central Bank (ECB) and the Swiss National Bank (SNB) will announce monetary policy decisions following the last policy meeting of the year on Thursday. In the second half of the day, weekly Initial Jobless Claims and November Producer Price Index (PPI) data from the US will be watched closely by market participants.
The US Bureau of Labor Statistics (BLS) reported on Wednesday that annual inflation in the US, as measured by the change in the Consumer Price Index (CPI), edged higher to 2.7% in November from 2.6% in October, as anticipated. On a monthly basis, the CPI and the core CPI both rose 0.3% to match analysts' estimates. The US Dollar (USD) Index continued to edge higher after November inflation report and closed the fourth consecutive day in positive territory. Early Thursday, the USD Index holds steady at around 106.50.
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | 0.44% | -0.27% | 1.65% | -0.12% | -0.55% | 0.48% | 0.49% | |
EUR | -0.44% | -0.70% | 1.33% | -0.47% | -0.89% | 0.13% | 0.10% | |
GBP | 0.27% | 0.70% | 1.87% | 0.23% | -0.20% | 0.83% | 0.81% | |
JPY | -1.65% | -1.33% | -1.87% | -1.77% | -2.08% | -1.27% | -1.09% | |
CAD | 0.12% | 0.47% | -0.23% | 1.77% | -0.38% | 0.60% | 0.58% | |
AUD | 0.55% | 0.89% | 0.20% | 2.08% | 0.38% | 1.03% | 1.01% | |
NZD | -0.48% | -0.13% | -0.83% | 1.27% | -0.60% | -1.03% | -0.04% | |
CHF | -0.49% | -0.10% | -0.81% | 1.09% | -0.58% | -1.01% | 0.04% |
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).
During the Asian trading hours, the data from Australia showed that the Unemployment Rate declined to 3.9% in November from 4.1%. This reading came in better than the market expectation of 4.2%. In this period, Employment Change was up 35.6K, compared to the market forecast of 25K. AUD/USD gathered bullish momentum on upbeat labor market data and was last seen gaining more than 0.8% on the day above 0.6400.
The Bank of Canada (BoC) announced on Wednesday that it lowered the policy rate by 50 basis points to 3.25%, as expected. In its policy statement, however, the BoC adopted a cautious tone regarding further policy easing. The BoC dropped the language about it being reasonable to expect further rate cuts if the economy were to evolve in line with the forecasts. Instead, it said that it will evaluate the need for further rate cuts one decision at a time. USD/CAD edged lower following the BoC decision and registered small daily losses on Wednesday. Early Thursday, the pair stays on the back foot and trades below 1.4150.
USD/CHF closed marginally higher on Wednesday but lost its traction in the European morning on Thursday. At the time of press, the pair was down 0.2% on the day at 0.8825. The SNB is expected to cut the policy rate by 25 bps to 0.75%.
EUR/USD continued to push lower and posted losses for the fourth consecutive trading day on Wednesday. The pair stages a rebound early Thursday and trades comfortably above 1.0500. The ECB is forecast to lower key rates by 25 bps. Following the decision, ECB President Christine Lagarde will deliver the policy statement and respond to questions at a press conference starting at 13:45 GMT.
GBP/USD posted small losses on Wednesday but managed to find a foothold early Thursday. The pair was last seen edging higher toward 1.2800.
USD/JPY fluctuates in a tight range above 152.00 after closing in positive territory on Wednesday.
Gold extended its weekly rally and gained about 1% on Wednesday. XAU/USD stays in a consolidation phase near $2,720 in the European morning on Thursday.
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/JPY cross trades in positive territory for the fourth consecutive day around 160.35 during the early European session on Thursday. The Japanese Yen (JPY) weakens after Reuters reported on Thursday that the Bank of Japan (BoJ) is considering keeping interest rates steady at its December meeting next week. A source said, “Policymakers prefer to spend more time scrutinising overseas risks and clues on next year's wage outlook.” Later on Thursday, investors will closely monitor the European Central Bank (ECB) interest rate decision.
Technically, EUR/JPY resumes its uptrend on the 4-hour chart as the price crosses above the key 100-period Exponential Moving Average (EMA). The upward momentum is supported by the Relative Strength Index (RSI), which stands above the midline near 59.45, supporting the buyers in the near term.
The first upside barrier for the cross emerges at 160.70, the high of December 11. Sustained trading above this level could pave the way to 161.10, the upper boundary of the ascending trend channel. The next potential resistance level is seen at 162.00, representing the high of November 26 and the round figure.
On the other hand, a breach of the 160.00 psychological level could drag the cross lower to 159.10, the lower limit of the trend channel. Any follow-through selling below the mentioned level could see a drop to 158.65, the low of December 11.
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%).
FX option expiries for Dec 12 NY cut at 10:00 Eastern Time via DTCC can be found below.
EUR/USD: EUR amounts
USD/JPY: USD amounts
USD/CHF: USD amounts
AUD/USD: AUD amounts
USD/CAD: USD amounts
NZD/USD: NZD amounts
EUR/GBP: EUR amounts
Silver (XAG/USD) trades with a positive bias above the $32.00 mark during the Asian session on Thursday and remains close to over a one-month high touched earlier this week. Moreover, the technical setup suggests that the path of least resistance for the white metal remains to the upside.
This week's sustained move beyond the 200-period Simple Moving Average (SMA) on the 4-hour chart was seen as a key trigger for bullish traders. Moreover, the recent move-up witnessed over the past two weeks or so has been along an upward-sloping channel. Apart from this, positive technical indicators on daily/hourly charts validate the near-term positive outlook for the XAU/USD and support prospects for additional gains.
Hence, a subsequent move up towards retesting the monthly swing high, around the $32.55-$32.60 area, which now coincides with the top boundary of the aforementioned channel, looks like a distinct possibility. Some follow-through buying will confirm a fresh breakout and lift the XAG/USD to the next relevant hurdle near the $32.80-$32.85 region en route to the $33.00 round figure mark and the $33.20-$33.25 horizontal resistance.
On the flip side, weakness below the $32.00-$31.90 area now seems to find some support near the $31.60 horizontal zone ahead of the $31.45-$31.40 confluence. The latter comprises the 200-period SMA on the 4-hour chart and the ascending channel support, which if broken decisively might prompt aggressive selling and shift the bias in favor of bearish traders. The XAG/USD might then drop to sub-$31.00 levels en route to mid-$30.00s.
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.
USD/CHF offers its recent gains as the US Dollar (USD) corrects downwards after breaking its four-day winning streak. The USD/CHF pair trades around 0.8840 during the Asian hours on Thursday. The Greenback receives downward pressure as the recent US CPI report seems not enough to keep the Federal Reserve (Fed) from cutting rates in December.
The CME FedWatch Tool suggests nearly a 99% chance of Fed rate reductions by 25 basis points on December 18. Traders shift their focus on the US November Producer Price Index (PPI) for fresh impetus, which is due later on Thursday.
US Consumer Price Index (CPI) rose to 2.7% year-over-year in November from 2.6% in October. The headline CPI reported a 0.3% reading MoM, in line with the market consensus. Meanwhile, the core CPI, excluding volatile food and energy prices, climbed 3.3% YoY, while the core CPI increased 0.3% MoM in November, as expected.
The Swiss Franc (CHF) remains relatively stable in anticipation of the Swiss National Bank (SNB) cutting its key policy rate by 25 basis points (bps) at its meeting later in the day. This rate cut will mark the fourth consecutive reduction, as inflation remains "comfortably" within the central bank’s 0-2% target range.
However, some economists anticipate a bumper 50 basis point cut in December to boost economic growth as Swiss consumer price inflation rose to 0.7% in November, up from 0.6% in October but falling short of the projected 0.8%. Additionally, Switzerland's economy remains sluggish, with GDP growing by 0.4% quarter-on-quarter in Q3, compared to 0.6% in Q2.
The Swiss National Bank (SNB) announces its interest rate decision after each of the Bank’s four scheduled annual meetings, one per quarter. Generally, if the SNB is hawkish about the inflation outlook of the economy and raises interest rates, it is bullish for the Swiss Franc (CHF). Likewise, if the SNB has a dovish view on the economy and keeps interest rates unchanged, or cuts them, it is usually bearish for CHF.
Read more.Next release: Thu Dec 12, 2024 08:30
Frequency: Irregular
Consensus: 0.75%
Previous: 1%
Source: Swiss National Bank
Citing five sources familiar with the Bank of Japan’s (BoJ) thinking, Reuters reported on Thursday that the Japanese central bank is considering to keeping interest rates steady next week.
A source said, “policymakers prefer to spend more time scrutinising overseas risks and clues on next year's wage outlook.”
"Japan isn't in a situation where imminent rate hikes are needed," one of the sources said.
"With inflation benign, it can afford to spend time scrutinising various data," another source said, a view echoed by two more sources.
"The biggest risk for Japan's economy comes from overseas," a third source said, saying that sluggish global demand could hurt corporate profits and dampen their appetite to hike pay.
In a sign of its confidence over the economic outlook, the central bank is likely to maintain its view that consumption is "increasing moderately as a trend," they said.
USD/JPY has recovered losses on these headlines, rebounding to near 152.50. The pair hit an intraday low at 151.95 earlier in the Asian session on Thursday.
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Australian Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.12% | -0.13% | -0.08% | -0.11% | -0.68% | -0.33% | -0.05% | |
EUR | 0.12% | -0.01% | 0.05% | 0.00% | -0.56% | -0.22% | 0.06% | |
GBP | 0.13% | 0.01% | 0.08% | 0.02% | -0.55% | -0.20% | 0.07% | |
JPY | 0.08% | -0.05% | -0.08% | -0.04% | -0.61% | -0.30% | 0.01% | |
CAD | 0.11% | -0.01% | -0.02% | 0.04% | -0.56% | -0.22% | 0.05% | |
AUD | 0.68% | 0.56% | 0.55% | 0.61% | 0.56% | 0.35% | 0.63% | |
NZD | 0.33% | 0.22% | 0.20% | 0.30% | 0.22% | -0.35% | 0.28% | |
CHF | 0.05% | -0.06% | -0.07% | -0.01% | -0.05% | -0.63% | -0.28% |
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 Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
The EUR/USD pair edges higher during the Asian session on Thursday and for now, seem to have snapped a four-day losing streak to over a one-week low touched the previous day. Spot prices currently trade around the 1.0500 psychological mark, up just over 0.10% for the day, as traders keenly await the highly-anticipated European Central Bank (ECB) decision before placing fresh directional bets.
The ECB is all but certain to cut interest rates again amid concerns about the faltering Eurozone economy, though investors remain split over the possibility of a larger rate cut. Hence, the focus will remain glued to the accompanying monetary policy statement and ECB President Christine Lagarde's remarks at the post-meeting press conference. Investors will look for signals about further easing in 2025, which, in turn, will play a key role in influencing the shared currency and provide some meaningful impetus to the EUR/USD pair.
Heading into the key central bank event risk, subdued US Dollar (USD) price action is seen as a key factor lending some support to the currency pair. The near-term bias for the USD remains tilted in favor of bullish traders amid the growing conviction that US President-elect Donald Trump's policies will boost inflation and force the Federal Reserve (Fed) to pause its rate-cutting cycle. This continues to push the US Treasury bond yields higher, which is seen underpinning the USD and capping the upside for the EUR/USD pair.
Furthermore, concerns about the economic impact of Trump's tariff plans warrant some caution before confirming a near-term bottom for spot prices and positioning for any further appreciating move. Apart from the crucial ECB policy decision, traders on Thursday will take cues from the US macro data – the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims. This, along with the US bond yields and the broader risk sentiment, will drive the USD and produce short-term opportunities around the EUR/USD pair.
One of the three key interest rates set by the European Central Bank (ECB), the main refinancing operations rate is the interest rate the ECB charges to banks for one-week long loans. It is announced by the European Central Bank at its eight scheduled annual meetings. If the ECB expects inflation to rise, it will increase its interest rates to bring it back down to its 2% target. This tends to be bullish for the Euro (EUR), since it attracts more foreign capital inflows. Likewise, if the ECB sees inflation falling it may cut the main refinancing operations rate to encourage banks to borrow and lend more, in the hope of driving economic growth. This tends to weaken the Euro as it reduces its attractiveness as a place for investors to park capital.
Read more.Next release: Thu Dec 12, 2024 13:15
Frequency: Irregular
Consensus: 3.15%
Previous: 3.4%
Source: European Central Bank
GBP/USD recovers its recent losses registered in the previous session, trading around 1.2770 during the Asian hours on Thursday. The GBP/USD pair gains ground as the US Dollar (USD) corrects downwards after breaking its four-day winning streak despite higher US Treasury yields.
The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades around 106.50 with 2-year and 10-year yields on US Treasury bonds standing at 4.16% and 4.28%, respectively, at the time of writing.
The US Dollar faces some challenges as the recent US CPI report seems not enough to keep the Federal Reserve (Fed) from cutting rates in December. The CME FedWatch Tool suggests nearly a 99% chance of Fed rate reductions by 25 basis points on December 18. Traders shift their focus on the US November Producer Price Index (PPI) for fresh impetus, which is due later on Thursday.
US Consumer Price Index (CPI) rose to 2.7% year-over-year in November from 2.6% in October. The headline CPI reported a 0.3% reading MoM, in line with the market consensus. Meanwhile, the core CPI, excluding volatile food and energy prices, climbed 3.3% YoY, while the core CPI increased 0.3% MoM in November, as expected.
In the United Kingdom (UK), the RICS Housing Price Balance surged 25% in November, up from a 16% rise in October, surpassing market expectations of a 19% increase. Released by the Royal Institution of Chartered Surveyors, this survey highlights trends in UK housing prices. It reflects the strength of the UK housing market, which often serves as an indicator of the broader economy due to its sensitivity to the business cycle.
The Pound Sterling (GBP) gains ground due to rising market confidence in the Bank of England (BoE) to keep its interest rates unchanged at 4.75% in December’s monetary policy decision. BoE policymakers are anticipated to vote to keep interest rates unchanged. Traders are likely to focus on the UK’s October monthly Gross Domestic Product (GDP) data due on Friday.
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.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $69.95 on Thursday. The WTI price edges higher amid concerns over sluggish global demand growth and possible tighter sanctions on Russia and Iran.
The Biden administration on Wednesday is considering stricter sanctions on Russia’s oil trade to increase pressure on the Kremlin, just weeks before Donald Trump returns to the White House, per Bloomberg. Additionally, the European Union agreed on a new round of sanctions against Russia on Wednesday because of its ongoing war in Ukraine. This, in turn, could tighten global crude supplies and lift the WTI price.
Growing expectations of further China stimulus contribute to the WTI’s price. Chinese authorities said on Monday it would adopt an "appropriately loose" monetary policy in 2025 as Beijing tries to boost its economy with the first easing of its stance in 14 years. "This has sparked optimism in the oil market, with traders hopeful that these initiatives could drive higher oil consumption," said Li Xing Gan, financial markets strategist consultant to Exness.
A fall in US crude inventories last week might underpin the black gold price. The US Energy Information Administration (EIA) weekly report showed Crude oil stockpiles in the United States for the week ending December 6 declined by 1.425 million barrels, compared to a fall of 5.073 million barrels in the previous week. The market consensus estimated that stocks would decrease by 1.1 million barrels.
On the other hand, OPEC cut its forecasts for demand growth in 2024 and 2025 for the fifth straight month on Wednesday. "OPEC are squaring up to reality about what they are facing, the (demand growth forecast) cuts highlight that they have their hands full in terms of trying to balance this market heading into 2025," said John Kilduff, partner at Again Capital in New York.
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.
Gold prices remained broadly unchanged in India on Thursday, according to data compiled by FXStreet.
The price for Gold stood at 7,408.53 Indian Rupees (INR) per gram, broadly stable compared with the INR 7,414.59 it cost on Wednesday.
The price for Gold was broadly steady at INR 86,411.06 per tola from INR 86,481.71 per tola a day earlier.
Unit measure | Gold Price in INR |
---|---|
1 Gram | 7,408.53 |
10 Grams | 74,084.80 |
Tola | 86,411.06 |
Troy Ounce | 230,431.20 |
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) retreats sharply after touching over a one-month high, around the $2,726 area during the Asian session on Thursday and for now, seems to have snapped a three-day winning streak. Investors now seem convinced that the Federal Reserve (Fed) will adopt a cautious stance on cutting interest rates amid signs that the progress in lowering inflation toward its 2% target has virtually stalled. Expectations for a less dovish Fed continue to push the US Treasury bond yields higher, which, in turn, acts as a tailwind for the US Dollar (USD) and drives flows away from the non-yielding yellow metal.
Apart from this, a generally positive risk tone undermines demand for safe-haven assets and drags the Gold price to the $2,700 mark in the last hour. Meanwhile, the markets now seem to have fully priced in a third consecutive interest rate cut by the Fed next week. Apart from this, persistent geopolitical risks stemming from the Russia-Ukraine war and conflicts in the Middle East, along with concerns about US President-elect Donald Trump's impending trade tariffs, could limit losses for the XAU/USD. This, in turn, warrants caution before confirming that the commodity's recent breakout momentum has run out of steam.
From a technical perspective, the Relative Strength Index (RSI) on hourly charts has eased from slightly overbought conditions. Furthermore, oscillators on the daily chart have just started gaining positive traction, which, in turn, supports prospects for the emergence of some dip-buying around the Gold price. Hence, any further weakness below the $2,700 mark might continue to find some support near the overnight swing low, around the $2,675-2,674 area. Some follow-through selling, however, could pave the way for further losses towards the $2,658-2,656 confluence – comprising 50- and 200-period Simple Moving Averages (SMAs) on the 4-hour chart.
On the flip side, the Asian session high, around the $2,726 area, now seems to act as an immediate hurdle, above which the Gold price could aim to surpass the $2,735 barrier and test the $2,748-2,750 supply zone. A sustained strength beyond the latter will set the stage for a move towards challenging the all-time peak, around the $2,800 neighborhood touched in October, with some intermediate resistance near the $2,775 region.
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.
USD/CNH retraces its recent gains from the previous session, trading around 7.2660 during the Asian hours on Thursday. PBOC-affiliated Chinese financial media reported that the Yuan remains stable and balanced. The People’s Bank of China (PBOC) set the central rate for USD/CNY, the Chinese Yuan onshore, for Thursday's trading session at 7.1854, compared to the previous day's fix of 7.1843.
Unnamed experts cited by the PBOC-backed media suggest that the possibility of the US Dollar (USD) weakening is increasing, aligned with expectations of the Federal Reserve (Fed) cutting rates in December. Consequently, the Chinese Yuan is expected to continue fluctuating in both directions under market forces.
On Thursday, Chinese long-term yields fell, expanding the yield disadvantage of 10-year treasuries against US counterparts to the widest level in over 22 years. China's 10-year yield dropped to a low of 1.805%, with the spread between China and US yields expanding to nearly 250 basis points, the largest gap since June 2002.
The offshore Yuan (CNH) faced challenges following reports that top leaders and policymakers in China considered letting the currency fall in response to an expected sharp hike in US tariffs, per Reuters. The tariffs could include a universal 10% import duty and a 60% duty on Chinese goods entering the United States (US).
On Tuesday, China President Xi Jinping stated, "China has full confidence in achieving this year's economic target." Xi 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.
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 Japanese Yen (JPY) gains some positive traction during the Asian session on Thursday, with the USD/JPY pair snapping a three-day winning streak to a two-week high touched the previous day. The JPY seems to draw some support from a modest US Dollar (USD) weakness, led by firming expectations that the Federal Reserve (Fed) will cut interest rates next week. Apart from this, the intraday JPY strength lacks any obvious fundamental catalyst and is more likely to be limited amid fading hopes for another interest rate hike by the Bank of Japan (BoJ) in December.
Moreover, the recent goodish rebound in the US Treasury bond yields and the prevalent risk-on environment should contribute to capping the safe-haven JPY. That said, the JPY bears might refrain from placing aggressive bets and opt to wait for the BoJ's final policy meeting of the year next week. This, along with geopolitical risks and the uncertainty surrounding US President-elect Donald Trump's policies, could offer some support to the safe-haven JPY. Meanwhile, the mixed fundamental backdrop warrants caution before confirming that the USD/JPY pair has topped out.
From a technical perspective, the overnight breakout through the 200-day Simple Moving Average (SMA), around the 152.00 mark, was seen as a fresh trigger for bullish traders. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and are still away from being in the overbought zone, suggesting that the path of least resistance for the USD/JPY pair remains to the upside.
The subsequent move up, however, stalls near the 152.70-152.80 confluence, comprising the 200-period SMA on the 4-hour chart and the 50% retracement level of the recent pullback from the multi-month high. The said area might continue to act as an immediate hurdle, above which the USD/JPY pair could surpass the 153.00 mark and aim to test the next relevant hurdle near the 153.65 region, or the 61.8% Fibonacci retracement level.
On the flip side, weakness below the 152.00 mark might now find some support near the 151.75 area, or the 38.2% Fibo. level. Any further slide might continue to attract fresh buyers and remain limited near the 151.00 round figure. The latter should act as a key pivotal point, below which the USD/JPY pair could slide to the 150.50 intermediate support before eventually dropping to the 150.00 psychological mark.
The Indian Rupee (INR) loses ground on Thursday after hitting a record low in the previous session. A sharp decline in the Chinese Yuan and increased US Dollar (USD) from importers and foreign banks might drag the local currency lower. Furthermore, the appointment of career bureaucrat Sanjay Malhotra as the next governor of the Reserve Bank of India (RBI) prompted traders to raise their expectations on the interest rate cuts, which could exert some selling pressure on the INR.
Nonetheless, the downside for the Indian Rupee might be limited as the RBI might step in to limit further depreciation. The Indian central bank often intervenes by selling USD to prevent steep INR weakness.
Traders will keep an eye on the US November Producer Price Index (PPI) and weekly Initial Jobless Claims, which are due later on Thursday. On the Indian docket, the CPI inflation, Industrial Output and Manufacturing Output data will be released on Thursday.
The Indian Rupee softens on the day. The USD/INR pair paints a positive picture on the daily chart as the pair is well-supported above the key 100-day Exponential Moving Average (EMA). Nonetheless, the 14-day Relative Strength Index (RSI) is located above the midline near 67.70, suggesting the support level is more likely to hold than to break.
The potential resistance level emerges at 85.00, representing the ascending trend channel and the psychological level. Extended gains above this level could see a rally to 85.50.
On the other hand, the lower boundary of the trend channel at 84.70 acts as an initial support level for USD/INR. Sustained trading below the mentioned level could pave the way to 84.22, the low of November 25, followed by 84.10, 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.
USD/CAD extends its losses for the second successive day, trading around 1.4150 during the Asian session on Thursday. The USD/CAD pair continues its retreat from Wednesday's high of 1.4194, the highest level since April 2020. This downside is due to the strengthening of the Canadian Dollar (CAD) as the Bank of Canada (BoC) signaled a slower pace of future interest rate cuts following its recent decision.
On Wednesday, the Bank of Canada implemented another substantial 50 basis point rate cut, bringing the main interest rate down to 3.25%. With Canada's Unemployment Rate reaching multi-year highs, the BoC has all the necessary grounds to disregard recent inflation upticks.
Bank of Canada (BoC) Governor Tiff Macklem stated "We anticipate a more gradual approach to monetary policy if the economy evolves broadly as expected." Macklem also said that monetary policy no longer clearly needs to be in restrictive territory.
Broader market sentiment remains on balance after US CPI inflation figures matched market expectations on Wednesday. US Consumer Price Index (CPI) rose to 2.7% year-over-year in November from 2.6% in October. The headline CPI reported a 0.3% reading MoM, in line with the market consensus. Meanwhile, the core CPI, excluding volatile food and energy prices, climbed 3.3% YoY, while the core CPI increased 0.3% MoM in November, as expected.
This latest US inflation report does not seem enough to keep the Federal Reserve (Fed) from cutting rates at its December meeting next week. Traders await the release of the US November Producer Price Index (PPI) for fresh impetus, which is due later on Thursday. The CME FedWatch Tool suggests nearly a 99% chance of Fed rate reductions by 25 basis points on December 18.
The Bank of Canada (BoC), based in Ottawa, is the institution that sets interest rates and manages monetary policy for Canada. It does so at eight scheduled meetings a year and ad hoc emergency meetings that are held as required. The BoC primary mandate is to maintain price stability, which means keeping inflation at between 1-3%. Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Canadian Dollar (CAD) and vice versa. Other tools used include quantitative easing and tightening.
In extreme situations, the Bank of Canada can enact a policy tool called Quantitative Easing. QE is the process by which the BoC prints Canadian Dollars for the purpose of buying assets – usually government or corporate bonds – from financial institutions. QE usually results in a weaker CAD. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The Bank of Canada used the measure during the Great Financial Crisis of 2009-11 when credit froze after banks lost faith in each other’s ability to repay debts.
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 Bank of Canada purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the BoC stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Canadian Dollar.
Raw materials | Closed | Change, % |
---|---|---|
Silver | 31.883 | -0.12 |
Gold | 2717.35 | 0.83 |
Palladium | 980.61 | 0.99 |
The AUD/JPY cross gathers strength to around 97.40 during the Asian session on Thursday. The Aussie gains traction after the release of the Australian employment report. Traders will keep an eye on the Japanese Tankan Large Manufacturing Index for the fourth quarter (Q4), which is still later on Tuesday
Data released by the Australian Bureau of Statistics (ABS) showed on Thursday that the country’s Unemployment Rate ticked lower to 3.9% in November from 4.1% in October. This reading came in below the market consensus of 4.2%. Additionally, the Australian Employment Change arrived at 35.6K in November from 12.1K in October (revised from 15.9K).
This figure came in better than the 25.0K expected. The Australian Dollar (AUD) attracts some buyers in an immediate reaction to the upbeat employment report. This report prompts traders to lower their bets for the Reserve Bank of Australia (RBA) rate cut and boosts the Australian Dollar (AUD).
On the other hand, the uncertainty over the Bank of Japan's (BoJ) rate hike in December might cap the downside for the cross. BoJ Governor Kazuo Ueda signaled that the next rate hike is approaching, supported by solid underlying inflation data, while the dovish policymaker Toyoaki Nakamura warned last week that the Japanese central bank must move cautiously in raising rates. Meanwhile, the escalating geopolitical tension in the Middle East and global economic uncertainty could boost the safe-haven flows, benefiting the JPY.
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
The Australian Dollar (AUD) halts its two days of losses against the US Dollar (USD) on Thursday. The AUD remains stronger after the release of domestic mixed employment data. The seasonally adjusted Employment Change increased by 35,600, bringing the total number of employed people to 14,535,500 in November. This exceeded the previous reading of 12,100 and the expected figure of 25,000. Meanwhile, the Unemployment Rate fell to 3.9%, the lowest since March, lower than market estimates of 4.2%.
The AUD/USD pair faced challenges due to the broadly stronger US dollar (USD) following the release of the US inflation report on Wednesday. US Consumer Price Index (CPI) rose to 2.7% year-over-year in November from 2.6% in October. The headline CPI reported a 0.3% reading MoM, in line with the market consensus. Meanwhile, the core CPI, excluding volatile food and energy prices, climbed 3.3% YoY, while the core CPI increased 0.3% MoM in November, as expected.
However, the latest US inflation report does not seem enough to keep the Federal Reserve (Fed) from cutting rates at its December meeting next week. Traders are now pricing in nearly a 99% chance of Fed rate reductions by 25 basis points on December 18, according to the CME FedWatch Tool.
AUD/USD trades near 0.6410 on Thursday. The technical analysis of a daily chart indicates a strengthening bearish bias as the pair is confined within a descending channel pattern. Additionally, the 14-day Relative Strength Index (RSI) remains below the 50 level, indicating sustained negative momentum.
On the downside, the yearly low of 0.6348, last seen on August 5, served as immediate support in the previous session. However, a break below this level could strengthen the bearish bias and push the AUD/USD pair toward the descending channel’s lower boundary around the 0.6200 level.
The AUD/USD pair faces an initial barrier around the nine-day Exponential Moving Average (EMA) at 0.6422, followed by the descending channel’s upper boundary at 0.6440 level. A decisive breakout above this channel could pave the way for a potential rally toward the seven-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 strongest against the US Dollar.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.12% | -0.16% | -0.36% | -0.11% | -0.54% | -0.28% | -0.11% | |
EUR | 0.12% | -0.04% | -0.24% | 0.01% | -0.42% | -0.15% | 0.00% | |
GBP | 0.16% | 0.04% | -0.17% | 0.06% | -0.38% | -0.10% | 0.05% | |
JPY | 0.36% | 0.24% | 0.17% | 0.25% | -0.19% | 0.05% | 0.24% | |
CAD | 0.11% | -0.01% | -0.06% | -0.25% | -0.43% | -0.16% | -0.01% | |
AUD | 0.54% | 0.42% | 0.38% | 0.19% | 0.43% | 0.28% | 0.42% | |
NZD | 0.28% | 0.15% | 0.10% | -0.05% | 0.16% | -0.28% | 0.16% | |
CHF | 0.11% | -0.00% | -0.05% | -0.24% | 0.00% | -0.42% | -0.16% |
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 Employment Change released by the Australian Bureau of Statistics is a measure of the change in the number of employed people in Australia. The statistic is adjusted to remove the influence of seasonal trends. Generally speaking, a rise in Employment Change has positive implications for consumer spending, stimulates economic growth, and is bullish for the Australian Dollar (AUD). A low reading, on the other hand, is seen as bearish.
Read more.Last release: Thu Dec 12, 2024 00:30
Frequency: Monthly
Actual: 35.6K
Consensus: 25K
Previous: 15.9K
Source: Australian Bureau of Statistics
The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Thursday at 7.1854, as compared to the previous day's fix of 7.1843 and 7.2438 Reuters estimates.
The AUD/NZD cross builds on this week's goodish rebound from the 1.0930 area, or its lowest level since early October and gains positive traction for the fourth successive day on Thursday. The buying interest picks up pace following the release of the upbeat Australian employment details and lifts spot prices to over a two-week high, around the 1.1060 area in the last hour.
The official data released by the Australian Bureau of Statistics (ABS) showed that the Unemployment Rate dropped to 3.9% in November, beating estimates for an uptick to 4.2% from 4.1% in the previous month. Additional details revealed that the number of employed people rose more than expected, by 35.6K during the reported month on the back of a solid jump in full-time jobs. The report forces investors to temper their expectations for a February rate cut by the Reserve Bank of Australia (RBA) and boosts the Australian Dollar (AUD).
The New Zealand Dollar (NZD), on the other hand, continues with its relative underperformance on the back of bets for a more aggressive policy easing by the Reserve Bank of New Zealand (RBNZ). This provides an additional lift to the AUD/NZD cross and further contributes to the ongoing recovery move from a technically significant 200-day Simple Moving Average (SMA) support. Meanwhile, the fundamental backdrop and the recent price action suggest that the path of least resistance for spot prices remains to the upside.
The Unemployment Rate, released by the Australian Bureau of Statistics, is the number of unemployed workers divided by the total civilian labor force, expressed as a percentage. If the rate increases, it indicates a lack of expansion within the Australian labor market and a weakness within the Australian economy. A decrease in the figure is seen as bullish for the Australian Dollar (AUD), while an increase is seen as bearish.
Read more.Last release: Thu Dec 12, 2024 00:30
Frequency: Monthly
Actual: 3.9%
Consensus: 4.2%
Previous: 4.1%
Source: Australian Bureau of Statistics
The Australian Bureau of Statistics (ABS) publishes an overview of trends in the Australian labour market, with unemployment rate a closely watched indicator. It is released about 15 days after the month end and throws light on the overall economic conditions, as it is highly correlated to consumer spending and inflation. Despite the lagging nature of the indicator, it affects the Reserve Bank of Australia’s (RBA) interest rate decisions, in turn, moving the Australian dollar. Upbeat figure tends to be AUD positive.
Australia’s Unemployment Rate came in at 3.9% in November, compared with the previous figure of 4.1%, according to the official data released by the Australian Bureau of Statistics (ABS) on Thursday. The figure came in below the market consensus of 4.2%.
Furthermore, the Australian Employment Change arrived at 35.6K in November from 12.1K in October (revised from 15.9K), compared with the consensus forecast of 25.0K.
At the time of writing, the AUD/USD pair is trading 0.60% higher on the day to trade at 0.6409.
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.
Index | Change, points | Closed | Change, % |
---|---|---|---|
NIKKEI 225 | 4.65 | 39372.23 | 0.01 |
Hang Seng | -156.23 | 20155.05 | -0.77 |
KOSPI | 24.67 | 2442.51 | 1.02 |
ASX 200 | -39.4 | 8353.6 | -0.47 |
DAX | 70 | 20399.16 | 0.34 |
CAC 40 | 28.62 | 7423.4 | 0.39 |
Dow Jones | -99.27 | 44148.56 | -0.22 |
S&P 500 | 49.28 | 6084.19 | 0.82 |
NASDAQ Composite | 347.65 | 20034.89 | 1.77 |
Pare | Closed | Change, % |
---|---|---|
AUDUSD | 0.6368 | -0.12 |
EURJPY | 160.022 | 0.09 |
EURUSD | 1.0495 | -0.3 |
GBPJPY | 194.393 | 0.26 |
GBPUSD | 1.27494 | -0.11 |
NZDUSD | 0.57831 | -0.28 |
USDCAD | 1.41588 | -0.1 |
USDCHF | 0.88412 | 0.24 |
USDJPY | 152.466 | 0.35 |
On Wednesday, China’s top leaders and policymakers are considering letting the Chinese Yuan fall to weather what is likely to be a sharp hike in tariffs, per Reuters. The yuan immediately dipped against the USD, along with currencies across Asia which are highly sensitive to Chinese demand.
Trump has said he plans to impose a 10% universal import tariff and a 60% tariff on Chinese imports into the United States.
At the time of writing, the AUD/USD pair is trading 0.24% higher on the day to trade at 0.6386.
© 2000-2024. Уcі права захищені.
Cайт знаходитьcя під керуванням TeleTrade DJ. LLC 2351 LLC 2022 (Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines).
Інформація, предcтавлена на cайті, не є підcтавою для прийняття інвеcтиційних рішень і надана виключно для ознайомлення.
Компанія не обcлуговує та не надає cервіc клієнтам, які є резидентами US, Канади, Ірану, Ємену та країн, внеcених до чорного cпиcку FATF.
Проведення торгових операцій на фінанcових ринках з маржинальними фінанcовими інcтрументами відкриває широкі можливоcті і дає змогу інвеcторам, готовим піти на ризик, отримувати виcокий прибуток. Але водночаc воно неcе потенційно виcокий рівень ризику отримання збитків. Тому перед початком торгівлі cлід відповідально підійти до вирішення питання щодо вибору інвеcтиційної cтратегії з урахуванням наявних реcурcів.
Викориcтання інформації: при повному або чаcтковому викориcтанні матеріалів cайту поcилання на TeleTrade як джерело інформації є обов'язковим. Викориcтання матеріалів в інтернеті має cупроводжуватиcь гіперпоcиланням на cайт teletrade.org. Автоматичний імпорт матеріалів та інформації із cайту заборонено.
З уcіх питань звертайтеcь за адреcою pr@teletrade.global.