Tag: Macroeconomics

  • Australian Dollar rises as Chinese developers buy land at premium

    Australian Dollar rises as Chinese developers buy land at premium


    • The Australian Dollar advanced as the Chinese government announced its annual policy statement for 2025 on Sunday.
    • The AUD struggled as Trump instructed the Committee on Foreign Investment to limit Chinese investments in the US.
    • The US Dollar struggles following the downbeat US economic data released last week.

    The Australian Dollar (AUD) retraces its recent losses from the previous session on Monday following the Chinese government’s release of its annual policy statement for 2025 on Sunday. The statement details strategies to advance rural reforms and promote comprehensive rural revitalization. Optimism around China’s stimulus plans could strengthen the AUD, given China’s role as a key trading partner for Australia.

    China’s state-supported developers are aggressively increasing land purchases at premium prices, driven by the government’s relaxation of home price restrictions aimed at revitalizing the troubled property market. In 2025 so far, 37% of land sales have closed at prices 20% or more above the asking price — a sharp rise from 14% in 2024 and just 4.6% in 2023, according to the China Index Academy.

    The AUD/USD pair faced challenges as President Donald Trump signed a memorandum on Friday instructing the Committee on Foreign Investment in the United States (US) to limit Chinese investments in strategic sectors. Reuters cited a White House official saying that the national security memorandum seeks to encourage foreign investment while safeguarding US national security interests from potential threats posed by foreign adversaries like China.

    The Reserve Bank of Australia (RBA) lowered its Official Cash Rate (OCR) by 25 basis points to 4.10% last week—the first rate cut in four years. Reserve Bank of Australia (RBA) Governor Michele Bullock acknowledged the impact of high interest rates but cautioned that it was too soon to declare victory over inflation. She also emphasized the labor market’s strength and clarified that future rate cuts are not guaranteed, despite market expectations.

    Australian Dollar strengthens as the US Dollar falters amid disappointing economic data

    • The US Dollar Index (DXY), which measures the USD against six major currencies, depreciates below 106.50 at the time of writing. The DXY faced challenges following the downbeat US economic data including Jobless Claims S&P Global Purchasing Managers’ Index (PMI) released last week.
    • The US Composite PMI fell to 50.4 in February, down from 52.7 in the previous month. In contrast, the Manufacturing PMI rose to 51.6 in February from 51.2 in January, surpassing the forecast of 51.5. Meanwhile, the Services PMI declined to 49.7 in February from 52.9 in January, falling short of the expected 53.0.
    • US Initial Jobless Claims for the week ending February 14 rose to 219,000, exceeding the expected 215,000. Meanwhile, Continuing Jobless Claims increased to 1.869 million, slightly below the forecast of 1.87 million.
    • Federal Reserve Board Governor Adriana Kugler stated on Thursday that US inflation still has “some way to go” before reaching the central bank’s 2% target, noting that the path remains uncertain, according to Reuters.
    • St. Louis Fed President Alberto Musalem cautioned about potential stagflation risks and rising inflation expectations. Meanwhile, Atlanta Fed President Raphael Bostic kept the possibility of two rate cuts this year open, contingent on economic developments.
    • President Trump indicated that a new trade deal with China is possible and expects Chinese President Xi Jinping to visit. He also mentioned discussions with China regarding TikTok and noted that his administration is considering a 25% tariff on lumber and forest products.
    • The latest Federal Open Market Committee (FOMC) Meeting Minutes reaffirmed the decision to keep interest rates unchanged in January. Policymakers emphasized the need for more time to assess economic activity, labor market trends, and inflation before considering any rate adjustments. The committee also agreed that clear signs of declining inflation are necessary before implementing rate cuts.
    • President Trump has confirmed that a 25% tariff on pharmaceutical and semiconductor imports will take effect in April. Additionally, he reaffirmed that auto tariffs will remain at 25%, further escalating global trade tensions.
    • Australia’s Judo Bank Manufacturing PMI rose to 50.6 in February, up from 50.2 in January. The Services PMI improved to 51.4 from 51.2, while the Composite PMI edged up to 51.2 from 51.1.
    • The Australian Bureau of Statistics (ABS) reported on Thursday that Australia’s seasonally adjusted Unemployment Rate rose to 4.1% in January from 4.0% in December, aligning with market expectations. Additionally, Employment Change came in at 44K for January, down from a revised 60K in December (previously 56.3K), but still exceeding the consensus forecast of 20K.
    • Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser stated while speaking to Bloomberg News last week that the central bank’s policy “is still restrictive.” Hauser noted that the latest jobs data showed little cause for concern.

    Australian Dollar could test 0.6350 support near nine-day EMA

    AUD/USD trades near 0.6370 on Monday, moving within an ascending channel that reflects bullish market sentiment. The 14-day Relative Strength Index (RSI) stays above 50, supporting the positive outlook.

    On the upside, the AUD/USD pair could challenge the key psychological resistance at 0.6400, with the next hurdle at the ascending channel’s upper boundary around 0.6430.

    The AUD/USD pair could find immediate support at the nine-day Exponential Moving Average (EMA) of 0.6347, followed by the 14-day EMA at 0.6330. A stronger support zone aligns with the channel’s lower boundary near 0.6320.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the US Dollar.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.42% -0.28% -0.07% -0.14% -0.13% -0.07% -0.15%
    EUR 0.42%   0.06% 0.17% 0.10% 0.29% 0.17% 0.10%
    GBP 0.28% -0.06%   0.17% 0.04% 0.23% 0.12% 0.04%
    JPY 0.07% -0.17% -0.17%   -0.06% 0.04% 0.10% 0.02%
    CAD 0.14% -0.10% -0.04% 0.06%   -0.04% 0.08% 0.00%
    AUD 0.13% -0.29% -0.23% -0.04% 0.04%   -0.11% -0.18%
    NZD 0.07% -0.17% -0.12% -0.10% -0.08% 0.11%   -0.07%
    CHF 0.15% -0.10% -0.04% -0.02% -0.00% 0.18% 0.07%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).

    Australian Dollar FAQs

    One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

    The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

    China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

    Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

    The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

     



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  • EUR/USD gathers strength above 1.0450 as conservatives win German election

    EUR/USD gathers strength above 1.0450 as conservatives win German election


    • EUR/USD edges higher to 1.0480 in Monday’s early Asian session, up 0.18% on the day. 
    • Germany’s conservatives won the election, AfD leaped to second place, exit polls showed. 
    • US February PMI data came in weaker than expected, weighing on the US Dollar. 

    The EUR/USD pair attracts some buyers to near 1.0480 during the early Asian session on Monday. The Euro edges higher as Germany’s conservatives won its election as expected. Traders brace for further results from the German election. 

    Exit polls showed Germany’s opposition conservatives Christian Democratic Union (CDU) and its allied Christian Social Union (CSU) secured the largest share of votes in the German federal election on Sunday. This put leader Friedrich Merz on track to be the next chancellor, with the far-right Alternative for Germany (AfD) coming in second. The attention now is how soon the conservative Christian Democrats could form a coalition government to offer much-needed reform to a struggling economy.

    According to ZDF exit polls, the conservative CDU/CSU bloc won 28.5% of the vote, followed by the far-right Alternative for Germany (AfD) with 20% and Scholz’s Social Democratic Party with 16.5%. 

    The weaker US economic data drags the Greenback lower. Data released by S&P Global on Friday showed that the US business activity dropped to a 17-month low in February. The latest flash estimate showed the US S&P Global Composite PMI declined to 50.4 in February from 52.7 in January. Meanwhile, the Manufacturing PMI rose from 51.2 to 51.6 during the same reported period. The Services PMI dropped from 52.9 in January to 49.7 in February, signaling a loss of momentum in the services sector.

    On the other hand, concerns about the US economy and new tariff threats from US President Donald Trump cast a cloud over world markets. This, in turn, might boost the US Dollar (USD) and create a headwind for EUR/USD. 

    Euro FAQs

    The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

    The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

    Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

    Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

    Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

     

     



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  • EUR/GBP remains capped below 0.8300 after hotter UK CPI data

    EUR/GBP remains capped below 0.8300 after hotter UK CPI data


    • EUR/GBP softens to around 0.8285 in Wednesday’s early European session. 
    • UK CPI inflation rose to 3.0% YoY in January vs. 2.8% expected.
    • The dovish stance from the ECB might drag the Euro lower.

    The EUR/GBP cross weakens to near 0.8285 during the early European trading hours on Wednesday. The Pound Sterling (GBP) edges higher against the Euro (EUR) after the hotter-than-expected UK Consumer Price Index (CPI) inflation data for January. Later on Wednesday, the Eurozone Current Account will be released. 

    Data released by the United Kingdom’s Office for National Statistics on Wednesday showed that the country’s headline CPI rose 3.0% YoY in January, compared to a 2.5% increase in December. This reading came in hotter than the 2.8% expected. The Core CPI, which excludes the volatile prices of food and energy, climbed 3.7% YoY in January versus 3.2% prior, in line with the market consensus of 3.7%. 

    Meanwhile, the monthly UK CPI inflation fell to -0.1% in January from +0.3% in December. Markets projected a -0.3% reading. The Pound Sterling holds steady in an immediate reaction to the upbeat UK CPI inflation data.

    Slower growth in the Eurozone triggered the expectations of further interest rate reductions from the European Central Bank (ECB), which might weigh on the shared currency. Analysts expect the European Central Bank (ECB) to deliver quarter-point cuts at every meeting until mid-2025. That would bring the deposit rate to 2.0%

    Inflation FAQs

    Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

    The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

    Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

    Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

     



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  • EUR/JPY falls to near 159.00 following robust Japan’s GDP data

    EUR/JPY falls to near 159.00 following robust Japan’s GDP data


    • EUR/JPY declined following the release of Japan’s Gross Domestic Product report on Monday.
    • Japan’s GDP rose by 0.7% QoQ in Q4, marking the third straight quarter of growth.
    • The Euro may gain if a ceasefire in Ukraine is agreed upon and gas supplies resume.

    EUR/JPY gives up gains from the previous session, trading around 159.10 during the Asian hours on Monday. This decline is linked to a stronger Japanese Yen (JPY), driven by a robust Japan’s Gross Domestic Product (GDP) report that exceeded expectations, reinforcing market speculation that the Bank of Japan (BoJ) will continue to raise interest rates.

    Japan’s economy grew by 0.7% in the fourth quarter, compared to the revised 0.4% increase in the previous quarter. This marks the third consecutive quarter of growth, fueled by a strong rebound in business investment. Yearly growth accelerated from a revised 1.7% in Q3 to 2.8%, supporting the BoJ’s stance on further rate hikes amid signs of broadening inflation.

    Japanese Chief Cabinet Secretary Yoshimasa Hayashi remarked on Monday that Japan faces significant risks if its companies become targets due to US President Donald Trump’s policies, and the government will respond cautiously to potential impacts.

    The Euro could strengthen against its peers if a ceasefire in Ukraine is reached and gas supplies resume. Reports suggest that Trump and Russian President Vladimir Putin have agreed to start negotiations to end the conflict. BBC sources indicate that Trump administration officials are set to meet with Russian counterparts in Saudi Arabia on Tuesday to discuss a potential peace agreement.

    However, any upside for the Euro may be capped as several European Central Bank (ECB) officials remain comfortable with expectations that the central bank will lower its Deposit Facility rate three more times this year. The ECB already reduced interest rates by 25 basis points (bps) to 2.75% last month.

    Economic Indicator

    Gross Domestic Product (QoQ)

    The Gross Domestic Product (GDP), released by Japan’s Cabinet Office on a quarterly basis, is a measure of the total value of all goods and services produced in Japan during a given period. The GDP is considered as the main measure of Japan’s economic activity. The QoQ reading compares economic activity in the reference quarter to the previous quarter. Generally, a high reading is seen as bullish for the Japanese Yen (JPY), while a low reading is seen as bearish.

    Read more.

    Last release: Sun Feb 16, 2025 23:50 (Prel)

    Frequency: Quarterly

    Actual: 0.7%

    Consensus: 0.3%

    Previous: 0.3%

    Source: Japanese Cabinet Office

     



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  • AUD/USD holds below 0.6350 ahead of RBA rate decision

    AUD/USD holds below 0.6350 ahead of RBA rate decision


    • AUD/USD softens to around 0.6345 in Monday’s early Asian session.
    • The RBA poises to deliver the first rate cut in four years. 
    • The Aussie is benefiting from an easing of worst-case fears of US tariffs

    The AUD/USD pair weakens to near 0.6345 during the early Asian session on Monday. The rising speculation of the Reserve Bank of Australia (RBA) rate cut drags the Australian Dollar (AUD) lower against the Greenback. All eyes will be on the RBA interest rate decision on Tuesday. 

    The Australian central bank is expected to cut its Official Cash Rate (OCR) by 25 basis points (bps) to 4.10%, the first rate reduction in four years, at the end of its two-day policy meeting on Tuesday. The RBA dovish bets are likely to weigh on the Aussie against the US Dollar (USD) for the time being. 

    “The prudent action for the RBA now would be to cut, but cut slowly and just see how data evolves through time. The worst thing they could possibly do is cut hard and then have to reverse. That’s the clear risk case for them,” said Craig Vardy, head of fixed income, BlackRock Australasia.

    On the other hand, the downside of the AUD might be capped due to the delay in the implementation of US President Donald Trump’s tariff proposals. The process of Trump’s ultimate tariff policies might take longer than many analysts had expected. Westpac analysts are leaning toward further gains in the AUD in the near term.

    Additionally, the disappointing US economic data could exert some selling pressure on the Greenback. Data released by the US Census Bureau on Friday showed that US Retail Sales declined by 0.9% in January from the 0.7% increase (revised from 0.4%) in December. This figure came in weaker than the market expectation for a decrease of 0.1%.

    Australian Dollar FAQs

    One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

    The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

    China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

    Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

    The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

     

     



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  • US Dollar sinks to a 1.5% on the week after Retail Sales deliver the final blow for the Greenback

    US Dollar sinks to a 1.5% on the week after Retail Sales deliver the final blow for the Greenback


    • The US Dollar dives lower in the US Retail Sales aftermath and is set to close out the week at a loss. 
    • Almost a full -1 % slide in headline Retail Sales for January spells domestic issues for President Trump. 
    • The US Dollar Index (DXY) drops substantially below 107.00 and is on its way to 106.50.

    The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, is devaluing substantially towards 106.50 at the time of writing, amounting to over 1.5% loss on the week since Monday. United States (US) President Donald Trump might be facing his first domestic challenge next to the egg-crisis, with now even US Retail Sales starting to turn over big time. With a whopping -0.9% decline in January headline sales and a surprise decline in Sales excluding cars and transportation by -0.4%, it becomes clear that the US consumer is clearling keeping his money aside for a rainy day. 

    The economic calendar will start to shift as of now to next week> Investors will focus on the S&P Global Purchase Managers Index (PMI) preliminary data for February due on Friday 21. Meanwhile the weekend could get interesting in case President Donald Trump releases more headlines or actions on tariffs, Ukraine or other topics.

    Daily digest market movers: Retail sales look bleak

    • Here are the most important data releases for this Friday:
      • January Import/Export came out, with the monthly Export Price Index rising to 1.3%, beating the 0.3% expected, while the Import Price Index fcame in at 0.3%, missing the estimate from 0.4% compared to resived 0.2% in December.
      • January Retail Sales shrank by 0.9% compared to the expected 0.1% contraction, a wide decline from the revised up 0.7% growth in December. Retail Sales without Cars and Transportation contracted by 0.4%, a big disappointment from the expected 0.3% growth and the revised 0.7% in the previous month.
    • Equities are taking a turn for the worse and are all sliding in red numbers across the board with both European and US indices in red numbers just before the US opening bell. 
    • The CME FedWatch tool shows a 57.4% chance that interest rates will remain unchanged at current levels in June. This suggests that the Fed would keep rates unchanged for longer to fight against persistent inflation. 
    • The US 10-year yield is trading around 4.47%, a nosedive move over just two days time from this week’s high of 4.657%.

    US Dollar Index Technical Analysis: Next leg lower

    The US Dollar Index (DXY) is done for this week. A clear weekly loss is unavoidable, and the strong resistance at 107.35 is far away. From here, the DXY is technically handed over to the mercy of the moving averages and the Relative Strength Index (RSI), which is still bearing plenty of room for more downturn. The 200-day Simple Moving Average (SMA), trading around 104.93, might be the one to look out for. 

    On the upside, that previous support at 107.35 has now turned into a firm resistance. Further up, the 55-day SMA at 107.90 must be regained before reclaiming 108.00. 

    On the downside, look for 106.52 (April 16, 2024, high), 106.34  (100-day SMA), or even 105.89 (resistance in June 2024) as better support levels. Even though the RSI shows room for more downside, the 200-day SMA at 104.93 could be a possible outcome. 

     

    US Dollar Index: Daily Chart

     

    BRICS FAQs

    The BRICS is the acronym denoting the grouping of Brazil, Russia, India, China and South Africa. The name was created by Goldman Sachs’ economist Jim O’Neill in 2001, years before the alliance between these countries was formally established, to refer to a group of developing economies that were predicted back then to lead the global economy by 2050. The bloc is seen as a counterweight to the G7, the group of developed economies formed by Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.

    The BRICS is a bloc which intends to give voice to the so-called “Global South”. The alliance tends to have similar views on geopolitical and diplomatic issues, but still lacks a clear economic integration as the governing systems and cultural divergence between its members is significant. Still, it holds yearly summits at the highest level, coordinates multilateral policies and has implemented initiatives such as the creation of a joint development bank. Egypt, Ethiopia, Iran and the United Arab Emirates joined the group in January 2024.

    The five founding members of the BRICS alliance account for 32% of the global economy measured at purchasing power parity as of April 2023, according to data from the International Monetary Fund. This compares with the 30% of the G7 group.

    There has been increasing speculation about the BRICS alliance creating a currency backed by some sort of commodity like Gold. The proposal is meant to reduce the use of the dominant US Dollar in cross-border economic exchanges. In the BRICS’ 2023 summit, the group stressed the importance of encouraging the use of local currencies in international trade and financial transactions between the members of the bloc as well as their trading partners. The group also tasked finance ministers and central bank governors “to consider the issue of local currencies, payment instruments and platforms” for this purpose. Even if the bloc’s de-dollarization strategy looks clear, the creation and implementation of a new currency seems to have a long way to go.

     



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  • Australian Dollar remains firm as the US Dollar weakens due to lower US yields

    Australian Dollar remains firm as the US Dollar weakens due to lower US yields


    • The Australian Dollar appreciates as Trump postpones the implementation of reciprocal tariffs.
    • The AUD may face headwinds as the RBA maintains its rate-cut stance following a fresh inflation outlook.
    • The US Dollar weakens amid declining US yields, despite persistent concerns over a global trade war.

    The Australian Dollar (AUD) strengthens for the second consecutive day on Friday, driven by US President Donald Trump’s decision to postpone the implementation of reciprocal tariffs. Additionally, the AUD/USD pair appreciates as the US Dollar (USD) weakens amid falling US yields across the curve, despite ongoing concerns about a global trade war. Investors now await the release of US Retail Sales data later in the day.

    The AUD may face headwinds as expectations of a Reserve Bank of Australia (RBA) rate cut remain intact following fresh inflation outlook data. Consumer inflation expectations climbed to 4.6% in February from 4.0% in January, reaching their highest level since April 2024. This comes ahead of the RBA’s first monetary policy meeting of the year next week, with market odds indicating a 95% probability of a rate cut to 4.10%, as recent data suggests underlying inflation is cooling faster than anticipated.

    The upside of the AUD/USD pair could be limited as strong US inflation data reinforces expectations of prolonged Federal Reserve (Fed) rate holds. Fed Chair Jerome Powell recently reiterated that the central bank is in no rush to cut rates further, citing a resilient economy and persistently high inflation.

    Australian Dollar appreciates as US Dollar loses ground despite a hawkish Fed

    • The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, extends its losses for the fourth successive session. The DXY trades around 107.00 with 2-year and 10-year yields on US Treasury bonds standing at 4.31% and 4.53%, respectively, at the time of writing.
    • Core PPI inflation in the United States (US) rose to 3.6% YoY in January, exceeding the expected 3.3% but slightly below the revised 3.7% (previously reported as 3.5%). This has reinforced expectations that the Federal Reserve (Fed) will delay rate cuts until the second half of the year.
    • US Consumer Price Index (CPI) rose 3.0% year-over-year in January, exceeding expectations of 2.9%. The core CPI, which excludes food and energy, increased to 3.3% from 3.2%, surpassing the forecast of 3.1%. On a monthly basis, headline inflation jumped to 0.5% in January from 0.4% in December, while core CPI rose to 0.4% from 0.2% over the same period.
    • In his semi-annual report to Congress, Fed’s Powell said the Fed officials “do not need to be in a hurry” to cut interest rates due to strength in the job market and solid economic growth. He added that US President Donald Trump’s tariff policies could put more upward pressure on prices, making it harder for the central bank to lower rates.
    • A Reuters poll of economists now suggests the Federal Reserve will delay cutting interest rates until next quarter amid rising inflation concerns. Many who had previously expected a March rate cut have revised their forecasts. The majority of economists surveyed between February 4-10 anticipate at least one rate cut by June, though opinions on the exact timing remain divided.
    • Federal Reserve Bank of Cleveland President Beth Hammack stated on Tuesday that keeping interest rates steady for an extended period will likely be appropriate. Hammack emphasized that a patient approach will allow the Fed to assess economic conditions and noted that the central bank is well-positioned to respond to any shifts in the economy, according to Reuters.

    Technical Analysis: Australian Dollar rises above 0.6300 toward eight-week highs

    The AUD/USD pair hovers near 0.6320 on Friday, rising above the nine- and 14-day Exponential Moving Averages (EMAs) on the daily chart. This suggests that short-term price momentum is strengthening. Additionally, the 14-day Relative Strength Index (RSI) maintains its position above the 50 mark, reinforcing a bullish bias.

    On the upside, the AUD/USD pair may test the eight-week high of 0.6330, which was last reached on January 24. A break above this level could support the pair to approach a psychological level of 0.6400.

    The AUD/USD pair could fall toward primary support at the nine-day EMA of 0.6290 level, followed by the 14-day EMA of 0.6279. A decisive break below these levels could weaken the short-term price momentum, potentially pushing the pair toward the psychological level of 0.6200.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Euro.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   0.02% -0.04% -0.09% -0.01% -0.03% -0.11% -0.00%
    EUR -0.02%   -0.06% -0.11% -0.03% -0.06% -0.14% -0.03%
    GBP 0.04% 0.06%   -0.06% 0.03% 0.00% -0.07% 0.04%
    JPY 0.09% 0.11% 0.06%   0.07% 0.04% -0.04% 0.08%
    CAD 0.00% 0.03% -0.03% -0.07%   -0.04% -0.10% 0.00%
    AUD 0.03% 0.06% -0.00% -0.04% 0.04%   -0.08% 0.03%
    NZD 0.11% 0.14% 0.07% 0.04% 0.10% 0.08%   0.11%
    CHF 0.00% 0.03% -0.04% -0.08% -0.01% -0.03% -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 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).

    RBA FAQs

    The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

    While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

    Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

    Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

    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 Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.

     



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  • NZD/USD holds positive ground above 0.5650 on weaker US Dollar, lower US bond yields

    NZD/USD holds positive ground above 0.5650 on weaker US Dollar, lower US bond yields


    • NZD/USD gains ground to near 0.5680 in Thursday’s early Asian session.
    • US PPI inflation rose at a stronger pace than expected in January.
    • The RBNZ is expected to cut its OCR by 50 bps to 3.75% next week. 

    The NZD/USD pair trades stronger to around 0.5680 during the early Asian session on Friday. The US Dollar (USD) weakens amid declining US yields across the curve and despite steady concerns over a global trade war. Later on Friday, the US Retail Sales will take center stage. 

    The US Producer Price Index (PPI) increased in January, triggering the expectation that the US Federal Reserve (Fed) would not be cutting interest rates before the second half of the year. Financial markets have pushed back rate cut bets to September from June, though some economists believe the window for additional policy easing has closed due to solid domestic demand and a steady labor market.

    “The Q1 RBNZ survey of inflation expectations leaves plenty of room for the RBNZ to deliver a 50bps cut to 3.75% next week. Firms’ inflation expectations ns 2, 5 and 10 years out all dipped closer to 2%,” said BBH’s FX analysts. 

    The Reserve Bank of New Zealand (RBNZ) is expected to cut interest rates by 50 basis points (bps) next week, bringing its Official Cash Rate (OCR) to 3.75%. The markets also anticipate a further 75 bps of reduction this year. The dovish expectation from the RBNZ might drag the Kiwi lower against the USD. 

    New Zealand Dollar FAQs

    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.

     



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  • US Dollar Index looking for direction with Fed speakers set to take over the schedule for this Tuesday

    US Dollar Index looking for direction with Fed speakers set to take over the schedule for this Tuesday


    • The US Dollar flat for a second day in a row this week.
    • All eyes shift towards Fed Chairman Jerome Powell heading to Capitol Hill. 
    • The US Dollar Index (DXY) is not ging anywhere and is residing above 108.00 wh.ile looking for direction

    The US Dollar Index (DXY), which tracks the performance of the US Dollar against six major currencies, resides above 108.00 and is looking for a catalyst to move either way. The Greenback looks to be immune to US President Donald Trump’s tariff talks. While China silently slapped some minor tariffs on US goods in a tit-for-tat move on Monday, Trump introduced a 15% levy on steel and aluminum for all countries importing that will come into effect on March 12. 

    The economic calendar this Tuesday is being taken over by the Federal Reserve (Fed). Besides Fed Chairman Jerome Powell testifying before Congress, three Fed speakers are due to make an appearance. Traders will want to hear if the central bank has plans for any changes in its monetary policy soon. Meanwhile head of the Department of Government Efficiency (DOGE), Elon Musk, has mentioned the Fed is the next sucject for audit.  

    Daily digest market movers: DOGE to look at Fed

    • Elon Musk on Sunday said that the Fed could face scrutiny as the Department of Government Efficiency (DOGE) continues to audit federal agencies and spending. Musk wrote on X in response to a user’s post about the billionaire’s support for an audit of the Fed that the central bank isn’t above scrutiny from DOGE, Reuters reports. 
    • At 11:00 GMT, The National Federation of Independent Business (NFIB) has released its Business Optimism Index for January. The number came in at 102.8, below the 104.6 estimate and down from 105.1 in the December reading.
    • Fed Chairman Jerome Powell will keep his semiannual testimony before Congress at 15:00 GMT.
    • More Fed speakers are lined out to speak throughout the day:
      • At 13:50 GMT, President of the Federal Reserve Bank of Cleveland Beth Hammack will talk at the 2025 Economic Outlook Conference at the Central Bank Center.
      • At 20:30 GMT, Federal Reserve Governor Michelle Bowman speaks at the Iowa Bankers Association Bank Management and Policy Conference in Des Moines.
      • At 20:30 GMT, Federal Reserve Bank of New York President John Williams also delivers keynote remarks at the CBIA Economic Summit and Outlook 2025, organized by the Connecticut Business and Industry Association (CBIA) in Connecticut.
    • Equities are struggling this Tuesday with the tariff hangover starting to weigh on them. All major European and US indices are in the red, though less than 0.6%.
    • The CME FedWatch tool projects a 93.5% chance that the Fed will keep interest rates unchanged at its next meeting on March 19. 
    • The US 10-year yield is trading around 4.53%, ticking up further for a second day in a row and recovering further from its fresh yearly low of 4.40% printed last week. 

    US Dollar Index Technical Analysis: Things could get really messy

    The US Dollar Index (DXY) is really turning into a snooze fest this week. No real movement in the Greenback as of yet, despite plenty of headlines. Though US yields are the asset to monitor, with Powell’s testimony ahead, things might start to move from now. 

    On the upside, the first barrier at 109.30 (July 14, 2022, high and rising trendline) was briefly surpassed but did not hold last week. Once that level is reclaimed, the next level to hit before advancing further remains at 110.79 (September 7, 2022, high). 

    On the downside,  107.35 (October 3, 2023, high) is still acting as strong support after several tests last week. In case more downside occurs, look for 106.52 (April 16, 2024, high), 106.14  (100-day Simple Moving Average), or even 105.89 (resistance in June 2024) as better support levels. 

    US Dollar Index: Daily Chart

    Central banks FAQs

    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.

     



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  • XAG/USD remains steady near .50, three-month highs

    XAG/USD remains steady near $32.50, three-month highs


    • Silver price holds ground near its three-month high of $32.56, recorded on February 5.
    • The upside of the Silver appears limited as the US Dollar gains ground amid rebounding US Treasury yields.
    • Traders await US Nonfarm Payrolls to gain fresh impetus regarding the Fed’s monetary policy direction.

    Silver price (XAG/USD) remains in positive territory for the fifth consecutive session, trading around $32.30 per troy ounce during Asian hours on Friday. The precious metal maintains its position near its three-month high of $32.56, recorded on February 5. Traders are awaiting key US labor market data, including Nonfarm Payrolls (NFP), which could influence the Federal Reserve’s (Fed) monetary policy direction.

    However, Silver’s upside appears limited as the US Dollar (USD) extends its recovery amid rebounding US Treasury yields. The US Dollar Index (DXY), which tracks the USD against six major currencies, has climbed near 107.70, while 2-year and 10-year US Treasury yields stand at 4.22% and 4.43%, respectively, at the time of writing.

    Safe-haven metals like Silver have gained ground amid heightened risk aversion due to global trade and economic uncertainties. However, trade negotiations between the United States (US) and China could temper this sentiment. US President Donald Trump and Chinese President Xi Jinping are set to discuss potential tariff rollbacks, which could ease market concerns and limit Silver’s upside.

    Diminished fears of a US-China trade war also reduce the risk of rising US inflation, reinforcing expectations of two Federal Reserve rate cuts this year. As a non-yielding asset, Silver benefits from a dovish stance by major central banks.

    Meanwhile, the Reserve Bank of India (RBI) is expected to announce a 25-basis-point rate cut on Friday. Last week, the European Central Bank (ECB) lowered its Deposit Facility Rate by 25 basis points to 2.75%, while the People’s Bank of China (PBoC) has signaled potential rate cuts. Additionally, the Bank of Canada (BoC) has paused its quantitative tightening, and Sweden’s Riksbank has cut interest rates.

    Silver FAQs

    Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.

    Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold’s. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.

    Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.

    Silver prices tend to follow Gold’s moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.

     



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  • NZD/USD holds positive ground above 0.5650 on weaker US Dollar, lower US bond yields

    USD/INR jumps as RBI rate cut bets drag Indian Rupee lower to record low


    • The Indian Rupee extends its decline in Thursday’s early European session. 
    • Rising bets of RBI rate cuts and risk aversion continue to undermine the INR. 
    • The RBI interest rate decision and the US January employment report will be in the spotlight on Friday. 

    The Indian Rupee (INR) extends its downside on Thursday. The local currency remains under selling pressure amid the expectation that the Reserve Bank of India (RBI) might cut the interest rates on Friday. Additionally, global trade war concerns fuelled risk aversion among investors, weighing on the INR. 

    Nonetheless, the foreign exchange intervention by the RBI and a decline in crude oil prices might help limit the Indian Rupee’s losses. Later on Thursday, the US weekly Initial Jobless Claims, Unit Labor Costs and Nonfarm Productivity will be released. The attention will shift to the RBI interest rate decision and the US January employment data on Friday. 

    Indian Rupee falls as India’s new RBI Governor is set to begin rate cuts

    • The RBI is likely conducting buy/sell USD-INR swaps, pushing forward premiums lower, according to traders. 
    • USD/INR 1-year forward implied yield retreats from the day’s high, last at 2.19%. 
    • Most of the economists surveyed by Bloomberg anticipate the Indian central bank to lower the benchmark repurchase rate by at least 25 basis points (bps) to 6.25% on Friday.
    • HSBC India Composite PMI came in at 57.7 in January. This figure came in weaker than the previous reading and the estimation of 57.9. 
    • HSBC India Services PMI eased to a two-year low of 56.5 in January versus 56.8 prior, lower than expected. 
    • “India’s services sector lost growth momentum in January, although the PMI remained well above the 50-break-even level. The business activity and new business PMI indices eased to their lowest levels since November 2022 and November 2023, respectively,” said Pranjul Bhandari, Chief India Economist at HSBC.
    • The US Services PMI eased to 52.8 in January from 54.0 (revised from 54.1) in December, according to the Institute for Supply Management (ISM) on Wednesday. This reading came in below the market consensus of 54.3. 
    • Fed Vice Chair Philip Jefferson said on Thursday that he is happy to keep the Fed Funds on hold at the current level, adding that he will wait to see the net effect of Trump policies.

    USD/INR maintains its positive trend

    The Indian Rupee trades in negative territory on the day. The bullish view of the USD/INR pair prevails, characterized by the price holding above the key 100-day Exponential Moving Average (EMA). However, further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation as the 14-day Relative Strength Index (RSI) moves beyond the 70.00 mark. 

    The first upside barrier for USD/INR emerges at 87.49, an all-time high. Bullish candlesticks and buying pressure above this level might attract the pair to the 88.00 psychological level. 

    On the other hand, the 87.05-87.00 area acts as an initial support level for the pair, representing the low of February 5 and the round mark. More bearish candles or consistent trading below the mentioned level, the bears could take control and drag USD/INR down to 86.51, the low of February 3. 

    RBI FAQs

    The role of the Reserve Bank of India (RBI), in its own words, is “..to maintain price stability while keeping in mind the objective of growth.” This involves maintaining the inflation rate at a stable 4% level primarily using the tool of interest rates. The RBI also maintains the exchange rate at a level that will not cause excess volatility and problems for exporters and importers, since India’s economy is heavily reliant on foreign trade, especially Oil.

    The RBI formally meets at six bi-monthly meetings a year to discuss its monetary policy and, if necessary, adjust interest rates. When inflation is too high (above its 4% target), the RBI will normally raise interest rates to deter borrowing and spending, which can support the Rupee (INR). If inflation falls too far below target, the RBI might cut rates to encourage more lending, which can be negative for INR.

    Due to the importance of trade to the economy, the Reserve Bank of India (RBI) actively intervenes in FX markets to maintain the exchange rate within a limited range. It does this to ensure Indian importers and exporters are not exposed to unnecessary currency risk during periods of FX volatility. The RBI buys and sells Rupees in the spot market at key levels, and uses derivatives to hedge its positions.

     



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  • Fed’s Jefferson: Happy to keep Fed Funds on hold at current rate

    Fed’s Jefferson: Happy to keep Fed Funds on hold at current rate


    Federal Reserve Vice Chair Philip Jefferson said on Thursday that he is happy to keep the Fed Funds on hold at the current level, adding that he will wait to see the net effect of Trump policies.

    Key quotes

    Waits to see net effect of Trump policies. 

    Examining overall impact of Trump administration on policy goals needed. 

    Opts to maintain current interest rates for the time being. 

    Content with current policy level until totality of impacts better understood.  

    Sees Fed’s ability to be patient with the economy in a good place.  

    Fed’s rate still restrictive even with 100 bp drop. 

    Policy rate remains restrictive for the economy. 

    Market reaction

    The US Dollar Index (DXY) is trading unchanged on the day at 107.60, as of writing.



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  • Australian Dollar maintains position, upside seems limited as China braces for US tariffs

    Australian Dollar maintains position, upside seems limited as China braces for US tariffs


    • The Australian Dollar could struggle as China is due to be hit with a 10% tariff later in the day.
    • Traders monitor the development surrounding the tariff deal with China.
    • Trump would suspend his tariffs after both countries agreed to send 10,000 soldiers to the US border to prevent drug trafficking.

    The Australian Dollar (AUD) rebounds on Tuesday, ending its six-day losing streak as the AUD/USD pair rises amid a weakening US Dollar (USD). The USD depreciated after US President Donald Trump announced late Monday that he would pause tariffs on Mexico and Canada. However, market volatility remains a concern as investors closely watch developments in the ongoing tariff negotiations with China, Australia’s key trading partner. China is due to be hit with across-the-board tariffs of 10% that begin at 05.00 GMT on Tuesday.

    President Trump stated that he would suspend steep tariffs on Mexico and Canada after their leaders agreed to deploy 10,000 soldiers to the US border to combat drug trafficking. The tariffs on Mexico and Canada have been postponed for at least 30 days. This decision comes just two days after Trump imposed 25% tariffs on Mexican and Canadian goods and 10% tariffs on imports from China.

    The AUD may lose its ground due to the increased likelihood that the Reserve Bank of Australia (RBA) could consider a rate cut in February. The RBA has maintained the Official Cash Rate (OCR) at 4.35% since November 2023, emphasizing that inflation must “sustainably” return to its 2%-3% target range before any policy easing.

    Australian Dollar appreciates due to improved risk sentiment

    • The US Dollar Index (DXY), which measures the US Dollar’s value against six major currencies, stabilizes around 108.70 at the time of writing after giving up most of its gains in the previous session.
    • The White House announced late Monday that US President Donald Trump signed an executive order to initiate the creation of a government-owned investment fund, according to Reuters. This fund could allow the US to profit from TikTok if an American buyer is secured. TikTok has until early April to find an approved partner or purchaser. Trump is pushing for the US to acquire a 50% stake in the company.
    • Data released by the Institute for Supply Management (ISM) on Monday showed that the Manufacturing PMI rose to 50.9 in January from 49.3 in December. This reading came in better than the estimation of 49.8.
    • The US Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, rose 0.3% MoM in December, up from 0.1% in November. On an annual basis, PCE inflation accelerated to 2.6% from the previous 2.4%, while core PCE, which excludes food and energy, remained steady at 2.8% YoY for the third straight month.
    • Fed Chair Jerome Powell emphasized during the post-meeting press conference that the central bank would need to see “real progress on inflation or some weakness in the labor market” before considering any further adjustments to monetary policy.
    • US Treasury Secretary Scott Bessent warned Key Square Capital Management partners a year ago that “tariffs are inflationary and would strengthen the US Dollar—hardly a good starting point for a US industrial renaissance.” However, according to the Financial Times (FT), Bessent last week advocated for new universal tariffs on US imports, proposing an initial 2.5% rate that would gradually increase.
    • President Trump announced his threat on X (formerly Twitter) to levy 100% tariffs on BRICS nations if they attempt to introduce an alternative currency to challenge the US dollar in international trade.
    • Australia’s Retail Sales declined by 0.1% month-on-month in December 2024, marking the first drop in nine months. Although the decline was less severe than the anticipated 0.7% contraction. The annual sales increased by 4.6% compared to December 2023. On a seasonally adjusted basis, sales rose 1.0% QoQ in the December quarter of 2024.
    • China’s Caixin Manufacturing Purchasing Managers’ Index (PMI) declined to 50.1 in January, down from 50.5 in December. The reading fell short of market expectations, which had anticipated a steady 50.5.
    • ANZ, CBA, Westpac, and now National Australia Bank (NAB) all anticipate a 25 basis point (bps) rate cut from the Reserve Bank of Australia (RBA) in February. Previously, the NAB had forecasted a rate cut in May but has now moved its projection forward to the February RBA meeting.
    • The Reserve Bank of Australia released its January 2025 Bulletin, featuring a detailed analysis of how monetary policy changes influence interest rates in the economy and how fluctuations in interest rates impact economic activity and inflation.

    Australian Dollar tests nine-day EMA barrier near descending channel’s upper boundary

    AUD/USD hovers around 0.6210 on Tuesday, trading within the descending channel pattern on the daily chart, signaling a bearish bias. However, the 14-day Relative Strength Index (RSI) has rebounded toward the 50 level, signaling weakening downside momentum. A breakout above the channel and a sustained move above the 50 mark on the RSI could indicate a shift toward a bullish bias.

    On the downside, the AUD/USD pair could test the descending channel’s lower boundary at the 0.6150 level. A break below the channel would guide the pair to navigate the region around 0.6087, the lowest since April 2020, recorded on February 3.

    The AUD/USD pair tests its initial barrier at the nine-day Exponential Moving Average (EMA) of 0.6225, aligned with the upper boundary of the descending channel.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.26% -0.19% 0.31% -0.76% -0.44% -0.41% -0.09%
    EUR 0.26%   0.07% 0.58% -0.50% -0.18% -0.14% 0.17%
    GBP 0.19% -0.07%   0.48% -0.57% -0.26% -0.22% 0.10%
    JPY -0.31% -0.58% -0.48%   -1.04% -0.73% -0.71% -0.38%
    CAD 0.76% 0.50% 0.57% 1.04%   0.31% 0.35% 0.68%
    AUD 0.44% 0.18% 0.26% 0.73% -0.31%   0.04% 0.38%
    NZD 0.41% 0.14% 0.22% 0.71% -0.35% -0.04%   0.31%
    CHF 0.09% -0.17% -0.10% 0.38% -0.68% -0.38% -0.31%  

    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).

    Tariffs FAQs

    Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

    Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

    There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

    During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

     



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  • USD/INR holds steady as Trump threatens China with tariffs

    USD/INR holds steady as Trump threatens China with tariffs


    • The Indian Rupee trades flat in Wednesday’s Asian session.
    • Renewed USD demand and Trump’s tariff announcements might weigh on the INR. 
    • The routine RBI intervention and lower crude oil prices might cap the downside for local currency. 

    The Indian Rupee (INR) flat lines on Wednesday. The persistent US Dollar (USD) buying from foreign portfolio investors and local oil companies could weigh on the lNR. Additionally, US President Donald Trump’s plan to impose tariffs on China might exert some selling pressure on Asian peers, including the Indian Rupee. 

    Nonetheless, the downside for the INR might be limited as the Reserve Bank of India (RBI) could intervene in the foreign exchange market via USD sales to prevent the local currency from significant depreciation. A decline in crude oil prices might also help limit the INR’s losses as India is the world’s third-largest oil consumer. Investors will closely monitor the preliminary reading of HSBC India’s Purchasing Managers Index (PMI) and US S&P PMI data for January, which will be published later on Friday. 

    Indian Rupee looks fragile amid multiple headwinds

    • India’s GDP is estimated to grow at 6.5-6.8% in the current fiscal year, according to Deloitte India on Tuesday.
    • Moody’s lowered India’s economic growth forecast to 7.0% for the fiscal year ending March 2025, down from 8.2% recorded in the previous fiscal year.
    • Overseas investors have sold a net total of about $6.5 billion worth of local equities and bonds in January, the largest monthly outflow since October 2023.
    • Trump stated on Tuesday that his administration is discussing imposing a 10% tariff on goods imported from China on February 1 because fentanyl is being sent from China to Mexico and Canada, per Reuters. 

    USD/INR price action remains constructive in the longer term 

    The Indian Rupee trades on a flat note on the day. The path of least resistance is to the upside as the USD/INR pair has formed higher highs and higher lows while holding above the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the 14-day Relative Strength Index (RSI) is located above the midline near 67.00, indicating bullish momentum in the near term. 

    The all-time high of 86.69 appears to be a tough nut to crack for bulls. A sustained break above the mentioned level could open the door for a rally toward the 87.00 psychological level. 

    On the flip side, a move back below 86.18, the low of January 20, could clear the way for a dip to the next support level at 85.85, the low of January 10. The next downside target to watch is 85.65, the low of January 7. 

    Indian Rupee FAQs

    The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.

    The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.

    Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.

    Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.

     



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  • USD/CAD weakens to near 1.4300 as Trump delays tariffs policy

    USD/CAD weakens to near 1.4300 as Trump delays tariffs policy


    • USD/CAD softens to around 1.4300 in Tuesday’s early Asian session.
    • Trump did not impose tariffs on US trading partners on his first day in the White House.
    • BoC’s latest Business Outlook Survey suggested that the overall economic sentiment remains subdued.

    The USD/CAD pair remains on the defensive around 1.4300 during the early Asian session on Tuesday, pressured by the weakening of the US Dollar (USD). The Greenback trades in choppy trading as traders await further details on President-elect Donald Trump’s economic plans, including tariff policies. 

    Bloomberg reported on Monday that Trump will not announce tariffs immediately after his inauguration on Monday but will call federal agencies to study tariff policy and the United States’ trade ties with Canada, Mexico, and China. The USD faced some selling pressure following this report. 

    The US Federal Reserve (Fed) is anticipated to hold its benchmark overnight rate steady in the 4.25%-4.50% range at its January meeting. However, investors expect Trump’s policies could fuel inflation pressures, which may only allow the Fed to cut rates once more. This, in turn, might help limit the USD’s losses in the near term. 

    On the Loonie front, the Bank of Canada’s (BoC) Business Outlook Survey showed Canadian firms see improved demand and sales in the coming year, fuelled by rate cuts, but are concerned about the potential risks from promised US trade policies from Trump’s administration. Meanwhile, the decline in crude oil prices might drag the commodity-linked Canadian Dollar (CAD) lower. Canada is the largest oil exporter to the US, and lower crude oil prices tend to have a negative impact on the CAD value.

    Canadian Dollar FAQs

    The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.

    The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.

    The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.

    While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.

    Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

     



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  • Australian Dollar holds gains as China GDP rises in previous quarter

    Australian Dollar holds gains as China GDP rises in previous quarter


    • The Australian Dollar appreciates after the release of economic figures from China.
    • China’s GDP grew 5.4% YoY in Q4 of 2024 after reporting a 4.6% expansion in Q3.
    • US Retail Sales increased by 0.4% MoM in December, against the expected 0.6% growth.

    The Australian Dollar (AUD) edges higher against the US Dollar (USD) following the economic data from China released on Friday. China’s economy grew 5.4% over the year in the fourth quarter of 2024 after reporting a 4.6% expansion in the third quarter. Data beat the market consensus of 5% in the reported period, by a wide margin.

    Chinese Gross Domestic Product (GDP) rate rose 1.6% QoQ in Q4 2024, having increased 0.9% in the previous quarter. This figure matched the expectations of 1.6%. The annual December Retail Sales increased by 3.7% vs. the 3.5% expected and 3.0% prior, while Industrial Production arrived at 6.2% vs. the 5.4% forecast and November’s 5.4%.

    The National Bureau of Statistics (NBS) shared its outlook on the economy during a press conference on Friday. The NBS highlighted that economic operations continue to face significant difficulties and challenges. It noted that the impact of changes in the external environment is intensifying, while domestic demand remains insufficient.

    Australia’s seasonally adjusted Unemployment Rate rose to 4.0% in December, compared to 3.9% in November, aligning with market expectations. Employment increased by 56.3K in December, up from 28.2K in November (revised from 35.6K) and significantly exceeding the market forecast of 15.0K.

    Bjorn Jarvis, head of labor statistics at the ABS, highlighted key data points: “The employment-to-population ratio rose 0.1% percentage points to a new record of 64.5%. This was 0.5 percentage points higher than a year ago and 2.3 percentage points above pre-COVID-19 levels. The increase in both employment and unemployment led to a further rise in the participation rate, which reflects the proportion of the population either employed or actively seeking work.”

    Australian Dollar advances as US Dollar remains subdued amid weaker US Retail Sales data

    • The US Dollar Index (DXY), which measures the US Dollar’s performance against six major currencies, trades near 109.00. The Greenback edges lower after the weaker US Retail Sales data.
    • US Retail Sales rose by 0.4% MoM in December, reaching $729.2 billion. This reading was weaker than the market expectations of a 0.6% rise and lower than the previous reading of a 0.8% increase (revised from 0.7%).
    • Chicago Federal Reserve Bank President Austan Goolsbee stated on Thursday that he has grown increasingly confident over the past several months that the job market is stabilizing at a level resembling full employment, rather than deteriorating into something worse, according to Reuters.
    • The US Consumer Price Index increased by 2.9% year-over-year in December, up from 2.7% in November, aligning with market expectations. Monthly, CPI rose 0.4%, following a 0.3% increase in the previous month.
    • US Core CPI, which excludes volatile food and energy prices, rose 3.2% annually in December, slightly below November’s figure and analysts’ forecasts of 3.3%. Monthly, core CPI edged up 0.2% in December 2024.
    • US Producer Price Index for final demand rose 0.2% MoM in December after an unrevised 0.4% advance in November, softer than the 0.3% expected. The PPI climbed 3.3% YoY in December, the most since February 2023, after increasing 3.0% in November. This reading came in below the consensus of 3.4%.
    • On Wednesday, Scott Bessent, Donald Trump’s nominee for Treasury Secretary, emphasized the importance of maintaining the US Dollar as the world’s reserve currency for the nation’s economic stability and future prosperity. Bessent stated “Productive investment that grows the economy must be prioritized over wasteful spending that drives inflation,” per Bloomberg.
    • The Federal Reserve reported in its latest Beige Book survey, released on Wednesday, that economic activity saw slight to moderate growth across the twelve Federal Reserve Districts in late November and December. Consumer spending increased moderately, driven by strong holiday sales that surpassed expectations. However, manufacturing activity experienced a slight decline overall, as some manufacturers stockpiled inventories in anticipation of higher tariffs.

    Technical Analysis: Australian Dollar remains above 0.6200 support near 14-day EMA

    The AUD/USD pair trades near 0.6220 on Friday, attempting to break above the descending channel on the daily chart. A successful breakout would weaken the prevailing bearish bias. The 14-day Relative Strength Index (RSI) also trends upward toward the 50 level, signaling potential recovery momentum.

    The AUD/USD pair encounters immediate resistance at the upper boundary of the descending channel, approximately at 0.6220.

    On the downside, initial support is seen at the 14-day Exponential Moving Average (EMA) at 0.6213, followed by the nine-day EMA at 0.6206. A more substantial support level is located near the lower boundary of the descending channel, around the 0.5920 mark.

    AUD/USD: Daily Chart

    Australian Dollar PRICE Today

    The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.05% -0.05% 0.12% 0.01% -0.03% -0.07% -0.04%
    EUR 0.05%   -0.01% 0.19% 0.06% 0.01% -0.02% 0.00%
    GBP 0.05% 0.01%   0.17% 0.07% 0.03% -0.01% 0.01%
    JPY -0.12% -0.19% -0.17%   -0.10% -0.16% -0.21% -0.18%
    CAD -0.01% -0.06% -0.07% 0.10%   -0.05% -0.08% -0.06%
    AUD 0.03% -0.01% -0.03% 0.16% 0.05%   -0.04% -0.02%
    NZD 0.07% 0.02% 0.01% 0.21% 0.08% 0.04%   0.03%
    CHF 0.04% -0.00% -0.01% 0.18% 0.06% 0.02% -0.03%  

    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).

    Economic Indicator

    Gross Domestic Product (YoY)

    The Gross Domestic Product (GDP), released by the National Bureau of Statistics of China on a monthly basis, is a measure of the total value of all goods and services produced in China during a given period. The GDP is considered as the main measure of China’s economic activity. The YoY reading compares economic activity in the reference quarter compared with the same quarter a year earlier. Generally speaking, a rise in this indicator is bullish for the Renminbi (CNY), while a low reading is seen as bearish.

    Read more.

    Last release: Fri Jan 17, 2025 02:00

    Frequency: Quarterly

    Actual: 5.4%

    Consensus: 5%

    Previous: 4.6%

    Source:

     



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  • XAU/USD loses ground below ,700 amid firmer US Dollar

    XAU/USD loses ground below $2,700 amid firmer US Dollar


    • Gold price loses ground to around $2,690 in Monday’s early Asian session.
    • The upbeat US job report and surging USD weigh on the Gold price. 
    • Trump’s policy uncertainty and geopolitical risks might cap the downside for the precious metal.

    Gold price (XAU/USD) trades with mild losses near $2,690 on the stronger US Dollar (USD) broadly during the early Asian session on Monday. However, the safe-haven demand due to uncertainty surrounding the President-elect Donald Trump administration’s policies might help limit the Gold’s losses. 

    The stronger-than-expected US employment data on Friday reinforced expectations that the US Federal Reserve (Fed) might not cut interest rates as aggressively this year. This, in turn, weighs on the non-yielding asset. Traders expect the Fed to cut interest rates by just 30 basis points (bps) over the course of this year, compared with cuts worth about 45 bps before the NFP report. 

    On the other hand, Trump’s policy risks boosting the Gold price, a traditional safe-haven asset. “Gold is still acting resilient in the face of a much stronger-than-expected jobs report … One of the factors that’s been supporting gold is this uncertainty that we’ve seen going into the (U.S. presidential) inauguration,” said David Meger, director of metals trading at High Ridge Futures.

    Additionally, the escalating geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflict might contribute to the precious metal downside. Israeli strikes continued throughout Gaza, including attacks near Gaza City, Nuseirat, and Bureij. Two attacks were also reported in the Houmin Valley in southern Lebanon, according to Lebanon’s National News Agency.

    Gold FAQs

    Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

    Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

    Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

    The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

     



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