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  • Australian Dollar declines as US Dollar attempts to recover recent losses

    Australian Dollar declines as US Dollar attempts to recover recent losses


    • The Australian Dollar remains tepid following the release of the monthly Consumer Price Index.
    • China’s International Trade Representative and Vice Minister of Commerce met with US business leaders to discuss tariffs.
    • The Trump administration considers tightening chip export controls on China.

    The Australian Dollar (AUD) remains subdued against the US Dollar (USD) for the fourth consecutive day on Wednesday. The AUD/USD pair remains under pressure after Australia’s monthly Consumer Price Index (CPI) showed a 2.5% year-over-year rise in January, matching December’s increase. This fell short of market expectations for 2.6% growth.

    China’s Commerce Ministry announced on Wednesday that the country’s International Trade Representative and Vice Minister of Commerce, Wang Shouwen, met with US business leaders. The discussions focused primarily on tariffs, though no further details were disclosed.

    A Bloomberg report early Tuesday revealed that the Trump administration plans to tighten chip export controls on China, a key trading partner of Australia. The US is reportedly considering stricter restrictions on Nvidia chip exports and may introduce additional limitations on Chinese companies such as SMIC and CXMT.

    The AUD/USD pair struggles amid growing risk sentiment after US President Donald Trump stated late Monday that broad US tariffs on imports from Canada and Mexico “will go forward” once the month-long implementation delay ends next week. Trump asserted that the US has “been taken advantage of” by foreign countries and reaffirmed his intention to impose so-called reciprocal tariffs.

    Australian Dollar depreciates amid increased risk aversion

    • The US Dollar Index (DXY), which measures the USD against six major currencies, falls to near 106.00 with 2-year and 10-year yields on US Treasury bonds declining to 4.09% and 4.28%, respectively, at the time of writing.
    • Federal Reserve Bank of Chicago President Austan Goolsbee remarked on Monday that the US central bank needs greater clarity before considering interest rate cuts.
    • 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.
    • President Trump signed a memorandum on Friday instructing the Committee on Foreign Investment in the United States (CFIUS) 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.
    • China released its annual policy statement for 2025 on Sunday. The statement details strategies to advance rural reforms and promote comprehensive rural revitalization. Additionally, China’s state-supported developers are aggressively increasing land purchases at premium prices, driven by the government’s relaxation of home price restrictions to revitalize the troubled property market.
    • The People’s Bank of China (PBOC) injected CNY300 billion on Tuesday via the one-year Medium-term Lending Facility (MLF), maintaining the rate at 2%. Additionally, the PBOC injected CNY318.5 billion through seven-day reverse repos at 1.50%, consistent with the prior rate.
    • 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 moves toward 14-day EMA barrier after breaking below 0.6350

    AUD/USD trades near 0.6340 on Wednesday, breaking below the ascending channel that reflects a weakening bullish market bias. However, the 14-day Relative Strength Index (RSI) remains above 50, supporting the positive outlook is still in play.

    On the upside, the AUD/USD pair tests the immediate barrier at a nine-day Exponential Moving Average (EMA) of 0.6342. A successful break above this level could improve the short-term price momentum and support the pair in testing the key psychological resistance at 0.6400, with the next hurdle at the ascending channel’s upper boundary around 0.6450.

    The AUD/USD pair tests immediate support at the 14-day EMA of 0.6331. A decisive break below this level could cause the emergence of the bearish bias and lead the pair to test the psychological level of 0.6300.

    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 weakest against the US Dollar.

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   0.09% 0.11% 0.36% 0.04% 0.18% 0.11% 0.07%
    EUR -0.09%   0.03% 0.27% -0.06% 0.09% 0.02% -0.02%
    GBP -0.11% -0.03%   0.23% -0.08% 0.06% -0.00% -0.04%
    JPY -0.36% -0.27% -0.23%   -0.32% -0.18% -0.26% -0.28%
    CAD -0.04% 0.06% 0.08% 0.32%   0.14% 0.08% 0.05%
    AUD -0.18% -0.09% -0.06% 0.18% -0.14%   -0.05% -0.09%
    NZD -0.11% -0.02% 0.00% 0.26% -0.08% 0.05%   -0.04%
    CHF -0.07% 0.02% 0.04% 0.28% -0.05% 0.09% 0.04%  

    The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the 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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  • US Dollar Index flat on Monday’s geopolitical wild ride with DOGE, G7 meeting ahead of President Trump’s speech

    US Dollar Index flat on Monday’s geopolitical wild ride with DOGE, G7 meeting ahead of President Trump’s speech


    • The US Dollar steadies after an earlier wild ride as a flood of geopolitical news erupts this Monday.
    • In Germany, the far-right AfD party is outpaced by the CDU. 
    • The US Dollar Index (DXY) has recovered a near 0.50% loss andd trades marginally higher at the time of writing.

    The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, has completely recovered Asian losses in the US trading session this Monday. The initial move down in the US Dollar came in, due to euphoria for the Euro (EUR) after the first German election results showed a firm lead for the Christian Democratic Union of Germany (CDU), which will take the lead in forming a coalition. As the dust settles, this means that fundamentally, no big changes will take place in Germany regarding leadership and political agenda, which triggers the Euro to pare back gains and the DXY to turn flat to positive. 

    Meanwhile US headlines have been added where several US departments such as the Pentagon have asked employees not to go ahead with the request from Elon Musk and DOGE (Department of Government Efficiency) to disclose their duties. Elon Musk meanwhile issued warnings on Twitter that those who fail to comply coming into the office or reporting back to DOGE, will be put on leave. 

    In an ongoing G7 meeting, the group is unable to agree on a joint statement to mark the three year since Russia invaded Ukraine, due to disagreements between the US and its European allies. The US opposed language condemning Moscow and a call for more energy sanctions, and has threatened to pull support for a statement altogether, although discussions are ongoing.

    The US economic calendar starts off the week slowly, with all eyes on the US Gross Domestic Product (GDP) release for the fourth quarter of 2024 on Thursday and Personal Consumption Expenditures (PCE) for January on Friday. However, the Chicago Fed National Activity Index for January is due this Monday. Later in the day, United States (US) President Donald Trump is also due to deliver a speech. 

    Daily digest market movers: Not impressed

    • The Euro (EUR) has given up all its gains against the US Dollar (USD) as traders are not impressed with the possible lack of major reforms or changes in the German political landscape for the new government formation.
    • The Chicago Fed National Activity Index for January came in at -0.03, a small loss compared to the previous 0.15 reading.
    • The US Treasury will auction a 3-month, 6-month Bills, and a 2-year Note auction this Monday.
    • US President Donald Trump is set to hold a press conference with President of France Macron near 19:00 GMT. 
    • Equities are having a sigh of relief after the German election outcome, though the German Dax is fading its intraday gains at the start of the US trading session. The broader pan-European Stoxx 50 index is even turning negative after the US opening bell. 
    • The CME FedWatch tool shows a 41.2% chance that interest rates will remain unchanged at current levels in June against a bigger 46.2% for a 25 basis points (bps) rate cut. 
    • The US 10-year yield trades around 4.43%, down over 3% from last week’s high at 4.574%.

    US Dollar Index Technical Analysis: It is bound to move

    The US Dollar Index (DXY) portrays a textbook element here, with the German election outcome as a catalyst. During the Asian session, a sigh of relief and support for the Euro was outpacing the Greenback in the idea that a crisis was averted with the Far-Right not having enough seats to secure the lead in Germany. However, now that the dust settles, markets start to realise that the current coalition probability is dull and the same politics markets saw in the past few decades is due, which is seen as not enough to trigger substantial additional upside in Euro.

    On the upside, the 100-day Simple Moving Average (SMA) could limit bulls buying the Greenback near 106.61. From there, the next leg could go up to 107.35, a pivotal support from December 2024 and January 2025. In case US President Trump has some surprise comments on Monday, even 107.96 (55-day SMA) could be tested. 

    On the downside, the 106.52 (April 16, 2024, high) level has seen a false break for now. However, that does mean quite a few stops might have been triggered in the markets, with a few bulls having been washed out of their long US Dollar positions. Another leg lower might be needed to entice those Dollar bulls to reenter at lower levels, near 105.89 or even 105.33.

    US Dollar Index: Daily Chart

    Fed FAQs

    Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

    The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

    In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

    Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

     



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  • 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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  • Gold rally takes a breather, still heading for eight straight weekly advance

    Gold rally takes a breather, still heading for eight straight weekly advance


    • Gold touches all-time high of $2,954 amid trade policy uncertainty.
    • Trump expands tariffs to lumber and soft commodities, adding market jitters.
    • US data mixed: Manufacturing PMI improves, but Services PMI contracts.

    Gold price slides late on Friday, poised to end the week positively, accumulating eight straight weeks of gains that pushed the yellow metal to all-time highs of $2,954. At the time of writing, the XAU/USD trades at $2,940, down 0.15%.

    The financial markets’ narrative has not changed as US President Donald Trump continues with rhetoric related to tariffs. In addition to imposing 25% tariffs on cars, pharmaceuticals and chips, Trump broadened duties to lumber and other soft commodities.

    This fueled the rally in Bullion prices as investors seeking safety drove prices higher amidst uncertainty about US trade policies. Meanwhile, geopolitics took a second stage as there was some progress in the discussion to end the Russia-Ukraine war, which relieved the markets.

    Data-wise, business activity in the United States was mixed. The manufacturing PMI improved. Conversely, the Services PMI plunged for the first time since January 2023.

    Other data showed that Existing Home Sales plunged, and the University of Michigan (UoM) Consumer Sentiment Final reading for February deteriorated further.

    Daily digest market movers: Gold price fails to capitalize on US yields drop

    • The US 10-year Treasury bond yield falls nine basis points (bps) and yields 4.416%.

    • US real yields, which correlate inversely to Bullion prices, drop four basis points to 1.996%, a tailwind for Bullion prices.
    • US S&P Global revealed the Manufacturing PMI in February expanded by 51.6, up from 51.2, exceeding forecasts. The Services PMI plummeted from 52.9 to 49.7.
    • The University of Michigan Consumer Sentiment Index in February dipped from 71.1 to 64.7. American consumers’ inflation expectations for one year rose from 3.3% to 4.3% as foreseen, and for a five-year period, they are anchored at 3.5%, up from 3.2% revealed in the previous month.
    • The Federal Reserve’s Meeting Minutes from Wednesday revealed that Trump’s trade and immigration policies fueled concerns over rising prices.
    • The World Gold Council revealed that central bank purchases rose more than 54% YoY to 333 tonnes following Trump’s victory.
    • Money market fed funds futures are pricing in 50 basis points of easing by the Fed in 2025.

    XAU/USD technical outlook: Gold price faces resistance and retreats

    Gold price remains upwardly biased, yet the trend seems exhausted. The Relative Strength Index (RSI) suggests that buyers are losing ground with the RSI’s exiting from overbought territory opening the door for a retracement in Bullion prices.

    The first key support area to look at is $2,900. Once surpassed, sellers would target the February 14 swing low of $2,877, followed by the February 12 daily low of $2,864. Conversely, if XAU/USD rises past $2,954, the first resistance would be the psychological $2,950, followed by $3,000.

    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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  • Trade and inmigration pose risks to inflation

    Trade and inmigration pose risks to inflation


    At last month’s meeting, Fed officials debated whether it might be wise to slow or even pause the reduction of their balance sheet holdings, given that renewed concerns over the federal debt ceiling have come back into play.

    In addition, the Minutes showed the staff’s economic outlook remained largely unchanged from December.

    Key highlights

    All participants at Fed’s January 28-29 meeting saw it as appropriate to hold target interest rate unchanged.

    Some participants cited potential changes in trade and immigration policy as having potential to hinder disinflation process.

    Vast majority of participants judged risks to dual mandate objectives were roughly in balance.

    A couple of participants said it appeared that risks to achieving inflation mandate were greater than risks to employment mandate.

    Various participants said it may be appropriate to consider pausing or slowing balance sheet runoff until resolution of debt ceiling dynamics.

    Many participants said after conclusion of balance sheet runoff it would be appropriate to structure asset purchases to move maturity composition closer to outstanding stock of Treasury debt.

    Fed survey respondents saw balance sheet runoff process concluding by mid-2025, slightly later than previously expected.

    Fed staff’s economic outlook largely unchanged from the one provided at December meeting.

    In initial discussions of framework review, policymakers expressed openness to changing elements introduced in 2020 document.

    This section below was published as a preview of the FOMC Minutes of the December 17-18 meeting at 18:00 GMT. 

    • The Minutes of the Fed’s January 28-29 policy meeting will be published on Wednesday.
    • Details surrounding the discussions on the decision to keep policy settings unchanged will be scrutinized by investors.
    • Markets see virtually no chance of a 25 bps Fed rate cut in March. 

    The Minutes of the United States (US) Federal Reserve’s (Fed) January 28-29 monetary policy meeting will be published on Wednesday at 19:00 GMT. Policymakers decided to maintain the policy rate at the range of 4.25%-4.5% at the first meeting of 2025. However, the central bank removed earlier language suggesting inflation had “made progress” toward its 2% target, instead stating that the pace of price increases “remains elevated.”

    Jerome Powell and co decided to hold policy settings unchanged after January meeting

    The Federal Open Market Committee (FOMC) voted unanimously to keep the policy rate unchanged. The statement showed that officials expressed confidence that progress in reducing inflation will likely resume later this year but emphasized the need to pause and await further data to confirm this outlook.

    In the post-meeting press conference, Fed Chairman Jerome Powell reiterated that they don’t need to be in a hurry to make any adjustments to the policy. 

    Commenting on the policy outlook earlier in the week, Philadelphia Fed President Patrick Harker said that the current economy argues for a steady policy for now. Similarly, Atlanta Fed President Raphael Bostic noted that the need for patience suggests that the next rate cut could happen later to give more time for information.

    When will FOMC Minutes be released and how could it affect the US Dollar?

    The FOMC will release the minutes of the January 28-29 policy meeting at 19:00 GMT on Wednesday. Investors will scrutinize the discussions surrounding the policy outlook.

    In case the publication shows that policymakers are willing to wait until the second half of the year before reconsidering rate cuts, the immediate reaction could help the US Dollar (USD) gather strength against its rivals. On the other hand, the market reaction could remain subdued and short-lived if the document repeats that officials will adopt a patient approach to further policy easing without providing any fresh clues on the timing.

    According to the CME FedWatch Tool, markets currently see virtually no chance of a 25 basis point rate cut in March. Moreover, they price in a more than 80% probability of another policy hold in May. Hence, the market positioning suggests that the publication would need to offer very clearly hawkish language to provide a steady boost to the USD.

    Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief outlook for the USD Index:

    “The Relative Strength Index (RSI) indicator on the daily chart stays well below 50 and the index remains below the 20-day Simple Moving Average (SMA), highlighting a bearish bias in the short term.”

    “On the downside, 106.30-106.00 aligns as a key support area, where the 100-day SMA and the Fibonacci 38.2% retracement of the October 2024 – January 2025 uptrend are located. If this support area fails, 105.00-104.90 (200-day SMA, Fibonacci 50% retracement) could be set as the next bearish target. Looking north, resistances could be spotted at 107.50-107.70 (20-day SMA, Fibonacci 23.6% retracement), 108.00 (50-day SMA) and 109.00 (round level).”

    Fed FAQs

    Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

    The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

    In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

    Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

    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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  • Mexican Peso extends rally to six days amid lack of catalyst

    Mexican Peso extends rally to six days amid lack of catalyst


    • USD/MXN dips below 50-day SMA at 20.42, trading at 20.27.
    • Weak US Retail Sales and softer PPI sub-components fuel Fed easing expectations.
    • Mexico’s Retail Sales, Banxico minutes, and Q4 GDP are in focus this week.

    The Mexican Peso (MXN) extended its gains versus the US Dollar (USD), clearing key support at the 50-day Simple Moving Average (SMA) of 20.42 as the USD/MXN found acceptance at lower exchange rates. At the time of writing, the exotic pair trades at 20.27, down 0.09%.

    Last week’s worse-than-expected United States (US) Retail Sales report drove the USD/MXN pair lower amid the uncertainty about economic growth in the US.

    Although US consumer inflation data surged, some sub-components of the Producer Price Index (PPI) used to calculate the Federal Reserve’s (Fed) preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, suggests that prices could aim lower, increasing the chances for Fed’s easing.

    After Friday’s data, figures from the Chicago Board of Trade (CBOT) suggest that investors had priced in 43 basis points (bps) of easing.

    Despite this, the Philadelphia Fed President Patrick Harker stated that the current state of the economy justifies maintaining a steady rate policy, noting that monetary policy is well-positioned now. He acknowledged that inflation has remained elevated and persistent in recent months, emphasizing that the Fed’s policy stance should continue to work towards lowering inflation.

    Ahead of this week, Mexico’s economic docket will feature Retail Sales for December, the release of Banco de Mexico (Banxico) latest meeting minutes, and Gross Domestic Product (GDP) figures for Q4 2024.

    Daily digest market movers: Mexican Peso climbs despite Banxico’s dovish stance

    • Monetary policy divergence between Banxico and the Fed favors further USD/MXN upside, as the Fed would likely hold rates for a longer period, while Banxico is expected to cut rates again by  50 basis points in the next meeting.
    • The US Dollar Index (DXY), which tracks the buck’s performance against a basket of currencies, is virtually unchanged at 106.77, a headwind for USD/MXN.
    • Trade disputes between the US and Mexico remain in the boiler room. Although the countries found common ground previously, USD/MXN traders should know that there is a  30-day pause and that tensions could arise toward the end of February.

    USD/MXN technical outlook: Mexican Peso surges as USD/MXN drops below 50-day SMA

    USD/MXN trends lower on Monday and close into the 100-day SMA at 20.24, which, if cleared, could open the door for further downside. The Relative Strength Index (RSI) turned bearish, which indicated that the exotic pair could be headed to the 20.00 psychological figure.

    In that outcome, if sellers push prices below 20.00, the next support would be the October 18 swing low at 19.64, followed by the 200-day SMA at 19.37.

    Conversely, if USD/MXN rises back above the 50-day SMA, the next resistance would be 20.50, followed by the January 17 high of 20.90, the 21.00 figure, and the year-to-date (YTD) high of 21.29.

    Risk sentiment FAQs

    In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

    Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

    The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

    The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

     



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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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  • Dow Jones gains ground as investors shrug off new tariff threats

    Dow Jones gains ground as investors shrug off new tariff threats


    • The Dow Jones rose on Thursday, testing near 44,750.
    • Equities are cautiously optimistic after PPI numbers softened inflation blow.
    • Markets continue to shrug off US President Donald Trump’s tariff threats.

    The Dow Jones Industrial Average (DJIA) found some room on the high side on Thursday, rising around 350 points and testing the 44,750 level. Equities were jarred by some steep upside revisions in Producer Price Index (PPI) inflation figures, but the overall print hit a decidedly softer tone than this week’s Consumer Price Index (CPI) inflation figures. A spike in inflation fears has subsided, and rate markets are now pricing in revisions to when the Federal Reserve (Fed) is expected to deliver its next rate cut.

    United States (US) President Donald Trump delivered his latest batch of tariff threats on Thursday. “Reciprocal tariffs” on most of the US’ closest trading partners are now on the block, alongside specific flat tariffs against Canada and Mexico, as well as punitive import taxes on things like automobiles, microchips, and pharmaceuticals. Markets are getting used to brushing off trade war threats from Donald Trump, and this represents the fourth consecutive time that the Trump administration’s threats of imposing steep import taxes on foreign goods have been announced and then put off until some point in the future.

    Core US PPI inflation clocked in at 3.6% YoY in January, well above the forecast of 3.3%. The previous period also saw a sharp revision higher to 3.7% from 3.5%, but the overall tick lower post-revision helped to assuage market fears of a resurgence of widespread inflation pressures. According to the CME’s FedWatch tool, rate markets are now pricing in better-then-even odds that the Fed will deliver at least a 25 bps rate trim in September compared to Wednesday’s forecast of December.

    Dow Jones news

    The Dow Jones saw a late bullish break across the board on Thursday, and nearly every single listed security is finding room on the green side for the day. Nvidia (NVDA) rallied 3.0% to $135 per share on stronger-than-expected microchip demand, giving the overall tech sector a leg up. Merck & Co (MRK) fell 1.35% to $84.50 per share.

    Dow Jones price forecast

    44,500 is becoming familiar territory for the Dow Jones. The mega-cap index has been churning within a choppy range between 45,000 and 44,000 since mid-January with bidders unable to find a foothold into fresh record highs, but short pressure is still unable to knock the DJIA lower.

    Price action is still leaning in favor of buyers with bids churning north of the 50-day Exponential Moving Average (EMA) near 43,850. The gap between intraday prices and the long-run 200-day EMA near 41,800 has closed in recent weeks, but the Dow Jones is still trending well above its long-term average, outpacing the 200-day EMA since November of 2023. The Dow Jones has closed higher for all but three of the last 14 consecutive months.

    Dow Jones daily chart

    Economic Indicator

    Producer Price Index ex Food & Energy (YoY)

    The Producer Price Index ex Food & energy released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Those volatile products such as food and energy are excluded in order to capture an accurate calculation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).

    Read more.

     



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  • Fed Chair speaks after higher US CPI in January

    Fed Chair speaks after higher US CPI in January


    Jerome Powell, Chairman of the U.S. Federal Reserve (Fed), said in his semiannual Monetary Policy Report, this time before the House Financial Services Committee, that there is still job to be done regarding inflation.

     

    Key highlights

    “No changes to own commitment that will not resign if asked by Trump.”

    “The Fed’s last policy framework did not limit the Fed’s response to inflation”.

    “The Fed makes its decisions based on what’s happening in the economy.”

    “We have ways to go on shrinking the balance sheet.”

    “We want to keep policy restrictive for now.”

    “We are close but not there on inflation”.

    “It is possible that the Fed would have to move the policy rate on tariffs.”

     

    This section below was published following Federal Reserve Chairman Jerome Powell’s testimony at 15:00 GMT on February 11:

    Powell testimony key takeaways

    “Policy is well-positioned to deal with risks, uncertainties.”

    “We can maintain policy restraint for longer if economy remains strong and inflation does not move toward 2%.”

    “We can ease policy if labor market unexpectedly weakens or inflation falls more quickly than expected.”

    “The US is economy strong overall; inflation is closer to 2% goal but still somewhat elevated.”

    “Fed’s framework review will not include a focus on inflation target, which will remain 2%.”

    “Fed will wrap up framework review by late summer.”

    “We are in a pretty good place with this economy.”

    “Want to make more progress on inflation.”

    “Don’t see any reason to be in a hurry.”

    “We are not in recession.”

    “Not for the Fed to comment on tariff policy”

    “Clearly not allowed under the law for President to remove a Fed board member.”

    “Would use quantitative easing only when rates are at zero.”

    “Believe neutral rate has risen from very low pre-pandemic level.”

    “A sharp increase in M2 might cause some inflation.”

    This section below was published as a preview of Federal Reserve Chairman Jerome Powell’s testimony at 10:00 GMT.

    • Jerome Powell’s testimony in the US Congress will be a top-tier market-moving event this week.
    • New clues on the Federal Reserve interest rate path are awaited.
    • US Dollar, stock markets and other asset classes could see big swings with the Fed Chair’s words. 

    Jerome Powell, Chairman of the United States (US) Federal Reserve (Fed), will deliver the Semi-Annual Monetary Policy Report and testify before the Senate Banking Committee on Tuesday. The hearing, entitled “The Semi-Annual Monetary Policy Report to the Congress,” will start at 15:00 GMT and it will have the full attention of all financial market players. 

    Jerome Powell is expected to address the main takeaways of the Fed’s Semi-Annual Federal Reserve Monetary Policy Report, published last Friday. In that report, the Fed noted that financial conditions continue to appear “somewhat restrictive” and reiterated that policymakers will weigh data when deciding on future policy moves.

    In a long Q&A session, US representatives are expected to ask Powell about the interest rate path, inflation developments, and the economic outlook. They are also very likely to inquire about how US President Donald Trump’s policies could influence prices, growth prospects and the monetary policy moving forward.

    The CME Group FedWatch Tool shows that markets price in a less-than-10% probability that the Fed will lower the policy rate by 25 basis points (bps) in March after the latest employment report reaffirmed tight conditions in the labor market.

    In January, Nonfarm Payrolls (NFP) rose 143,000. Although this reading came in below the market expectation of 170,000, the US Bureau of Labor Statistics (BLS) announced upward revisions to previous NFP prints. “The change in total Nonfarm Payroll employment for November was revised up by 49,000, from +212,000 to +261,000, and the change for December was revised up by 51,000, from +256,000 to +307,000. With these revisions, employment in November and December combined is 100,000 higher than previously reported,” the BLS noted in its press release.

    The market positioning suggests that the US Dollar (USD) has little room left on the upside even if Powell confirms that they will hold the policy unchanged in March. On the other hand, the USD could come under selling pressure in case Powell adopts an optimistic tone about the inflation outlook and leaves the door open for a rate reduction at the next policy meeting. 

    About Jerome Powell (via Federalreserve.gov)

    “Jerome H. Powell first took office as Chair of the Board of Governors of the Federal Reserve System on February 5, 2018, for a four-year term. He was reappointed to the office and sworn in for a second four-year term on May 23, 2022. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System’s principal monetary policymaking body. Mr. Powell has served as a member of the Board of Governors since taking office on May 25, 2012, to fill an unexpired term. He was reappointed to the Board and sworn in on June 16, 2014, for a term ending January 31, 2028.”

     



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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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  • Mexican Peso extends rally to six days amid lack of catalyst

    Mexican Peso on the backfoot following Banxico’s Rodriguez remarks


    • Mexican Peso weighed down by steek and aluminum tariffs enacted by The White House.
    • Mexican automobile production and exports declined, creating a headwind for the emerging market currency.
    • USD/MXN traders eye testimony from Fed Chair Jerome Powell on Tuesday.

    The Mexican Peso depreciated against the US Dollar on Monday after US President Donald Trump decided to apply 25% tariffs on aluminum and steel imports into the United States (US), including Mexico and Canada. At the time of writing, the USD/MXN trades at 20.67, a gain of 0.66%.

    On Sunday, Trump stated that he would apply tariffs on base metals. He added that reciprocal tariffs could be enacted as soon as Tuesday or Wednesday and that the tariffs would address the deficit.

    The USD/MXN jumped on those remarks, extending its gains during the North American session. Meanwhile, the market mood remained upbeat, as depicted by US equities trading with gains.

    Mexican data revealed that auto production dipped and exports plummeted for the third consecutive month in January, according to the Instituto Nacional de Estadistica Geografia e Informatica (INEGI).

    Earlier, Banxico Governor Victoria Rodriguez Ceja was dovish, revealing that the Central Bank could cut rates of the same magnitude as in February, adding that the job of bringing inflation to the 3% goal has not concluded.

    Mexican Industrial Production for December is expected to remain unchanged at 0.1% MoM. US Federal Reserve (Fed) Chair Jerome Powell will cross the wires in the US for his semi-annual testimony at the US Congress. US inflation data on the consumer and producer side and retail sales will also update the status of the US economy.

    Daily digest market movers: Mexican data failed to cap Peso’s fall spurred by Trump’s rhetoric

    • Mexico’s Auto Exports plunged from -5.8% YoY to -13.7% in January. Production dipped from 4.2% to 1.7% YoY.
    • Banxico’s Rodriguez added that Mexico’s role in US production chains allowed American consumers access to products at competitive prices. She said the central bank remains attentive to what might happen in March after the 30-day grace period provided by Trump.
    • She added that despite being volatile, the Mexican Peso market has operated in an orderly way.
    • The New York Fed Survey of Consumer Expectations revealed that US consumers expect inflation to remain at 3%. For five years, prices are expected to edge up from 2.7% to 3% in December.
    • Trade disputes between the US and Mexico remain in the boiler room. Although the countries found common ground previously, USD/MXN traders should know that there is a 30-day pause and that tensions could arise toward the end of February.
    • Money market fed funds rate futures are pricing in 39 basis points (bps) of easing by the Fed in 2025.

    USD/MXN technical outlook: Mexican Peso poised for further losses

    The USD/MXN uptrend remains in place, but the exotic pair could remain sideways in the short term, trading within the 20.30 – 20.70 area. Momentum remains bullish, as depicted by the Relative Strength Index (RSI), but buyers need to push prices above 20.70, so they could target higher prices.

    The next resistance would be the January 17 daily peak at 20.90 before testing the 21.00 figure and the year-to-date (YTD) high at 21.29. Conversely, a drop below the 50-day Simple Moving average (SMA) at 20.57 could clear the path toward the 100-day SMA at 20.22. On further weakness, look for a test of 20.00.

    Economic Indicator

    Central Bank Interest Rate

    The Bank of Mexico announces a key interest rate which affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers.  Generally speaking, if the central bank is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the Mexican Peso.

    Read more.

    Last release: Thu Feb 06, 2025 19:00

    Frequency: Irregular

    Actual: 9.5%

    Consensus: 9.5%

    Previous: 10%

    Source: Banxico

     



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  • Canadian Dollar flattens ahead of key labor prints

    Canadian Dollar flattens ahead of key labor prints


    • The Canadian Dollar churned on Thursday, holding flat against the Greenback.
    • PMI figures from Canada contracted sharply in January, limiting Loonie gains.
    • Key US NFP and Canadian employment figures are due on Friday.

    The Canadian Dollar (CAD) spun in a tight circle on Thursday, churning chart paper near 1.4300 against the US Dollar (USD) as markets gear up for another Nonfarm Payrolls (NFP) Friday. Markets are treading water near familiar levels as investors shrug off the early week’s trade war fears and resume focusing on hopes for future Federal Reserve (Fed) rate cuts.

    Canadian Purchasing Managers Index (PMI) figures for January sharply missed the mark on Thursday. Canadian Net Change in Employment and Average Hourly Wages numbers are due on Friday but will be overshadowed by the much larger US NFP jobs data package.

    Daily digest market movers: Canadian Dollar flattens ahead of NFP

    • The Canadian Dollar has fought back from 21-year lows this week, but remains trapped in familiar consolidation territory against the Greenback.
    • Canada’s Ivey PMI for January contracted sharply on a seasonally adjusted basis, falling to a four-year low of 47.1.
    • US tariffs on Mexico and Canada have been kicked down the road by another 30 days, and market tensions are loosening for the time being. 
    • US tariffs on China are still in place, as are reciprocal tariffs on the US from China, but these tit-for-tat import fees are largely symbolic and markets are expected to circumvent them quickly.
    • Canada is expected to add far fewer jobs in January compared to December, down to 25K from 90.9K, and the Canadian Unemployment rate is forecast to tick up to 6.8% from 6.7%.
    • Friday’s US NFP is likewise expected to shift lower to 170K net new jobs additions from 256K, but bumper labor prints from earlier in the week could signal an upside surprise.

    Canadian Dollar price forecast

    With key data due to wrap up the trading week, the Canadian Dollar is stuck back in familiar consolidation territory against the US Dollar. USD/CAD remains hung up on the 1.4300 handle, at the bottom end of a choppy sideways grind that has kept the pair traveling horizontally since mid-December.

    The Loonie tumbled early this week to a 21-year low against the Greenback, sending USD/CAD to a two-decade high near 1.4800, but the move was unsustainable and the pair is now back to its middling ways. Price action is drawing into the midrange at the 50-day Exponential Moving Average (EMA), and it will take a material shift in markets to punch in new technical levels.

    USD/CAD daily chart

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

    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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  • EUR/USD recovers strongly as Trump defers tariff plans for Canada and Mexico

    EUR/USD recovers strongly as Trump defers tariff plans for Canada and Mexico


    • EUR/USD rebounds sharply to near 1.0350 as US President Trump postpones his orders of tariffs on Canada and Mexico for 30 days.
    • Trump’s intentions to impose tariffs on China remain intact.
    • The ECB is expected to cut interest rates three times more this year.

    EUR/USD bounces back from the intraday low of 1.0270 and rebounds to near 1.0350 in Tuesday’s North American session. The major currency pair finds buyers’ demand as United States (US) President Donald Trump’s decision to postpone tariffs on Canada and Mexico has diminished the safe-haven appeal of the US Dollar (USD).

    The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, surrenders its intraday gains and trades at 108.44 at the time of writing, right on track to Monday’s low of 108.40.

    US President Trump suspended tariff imposition on his North American partners after they agreed to cooperate to stop the flow of fentanyl. On the other hand, the president’s proposal of imposing 10% tariffs on China is still on the table, and moreover, he has even proposed to go further. “China hopefully is going to stop sending us fentanyl, and if they’re not, the tariffs are going to go substantially higher,” Trump said.

    Meanwhile, China has delivered a swift response to Trump’s tariffs with higher levies of 15% on Coal and Liquified Natural Gas (LNG), and 10% for Crude Oil, farm equipment, and some autos.

    Such a scenario indicates that the trade war will not go global and will remain majorly between the US and China, which has weighed on demand for safe-haven assets.

    On the economic front, the US Dollar will be guided by a slew of labor market-related economic indicators this week, such as JOLTS Job Openings, ADP Employment Change and Nonfarm Payrolls (NFP) data, and the US ISM Services PMI figures.

    The labor market data will influence market speculation for the Federal Reserve’s (Fed) monetary policy outlook for the entire year. Currently, the Fed is in a waiting mode in interest rates until it sees any “real progress in inflation or at least some weakness in the labor market”.

    US Dollar PRICE Today

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

      USD EUR GBP JPY CAD AUD NZD CHF
    USD   -0.49% -0.24% 0.36% -1.25% -0.53% -0.40% -0.47%
    EUR 0.49%   0.25% 0.85% -0.77% -0.04% 0.09% 0.01%
    GBP 0.24% -0.25%   0.58% -1.02% -0.29% -0.16% -0.23%
    JPY -0.36% -0.85% -0.58%   -1.59% -0.87% -0.75% -0.81%
    CAD 1.25% 0.77% 1.02% 1.59%   0.73% 0.86% 0.81%
    AUD 0.53% 0.04% 0.29% 0.87% -0.73%   0.13% 0.09%
    NZD 0.40% -0.09% 0.16% 0.75% -0.86% -0.13%   -0.07%
    CHF 0.47% -0.01% 0.23% 0.81% -0.81% -0.09% 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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

    Daily digest market movers: EUR/USD rebounds at USD’s expense

    • The recovery move in the EUR/USD pair has come from some weakness in the US Dollar, while the outlook for the Euro (EUR) continues to remain uncertain as investors expect the Eurozone would be the next to face lethal tariff threats by US President Trump. Over the weekend, Trump said that he would definitely impose tariffs on the Eurozone after accusing the old continent of not buying enough US cars and farm products. He added that the EU takes “almost nothing and we take everything from them”.
    • In response to Trump’s tariff threats, French President Emmanuel Macron said that the European Union (EU) would retaliate if its interests were targeted. “If our commercial interests are attacked, Europe, as a true power, will have to make itself respected and therefore react,” Macron said, The Guardian reported.
    • Market experts believe that trade and investment between the old continent and the US are one of the largest globally, and a trade war between them would accelerate inflation and lead to an economic disruption. Higher Eurozone inflation would also create troubles for the European Central Bank (ECB), which is on the policy expansion path amid confidence that price pressures will sustainably return to the central bank’s target of 2% this year. 
    • On Tuesday, ECB policymaker and French Central Bank Governor François Villeroy de Galhau said, “There probably will be more ECB rate cuts as we are nearing to 2% inflation target.”
    • The ECB reduced its Deposit Facility rate by 25 basis points (bps) to 2.75% and guided that the monetary policy path is clear. Traders are confident that the ECB will deliver three more interest rate cuts by the summer.

    Technical Analysis: EUR/USD aims to return above 20-day EMA

    EUR/USD recovers from its three-week low of 1.0210 to trade near 1.0350 on Tuesday, but is still trading below the 20-day and 50-day Exponential Moving Averages (EMAs) around 1.0379 and 1.0439, respectively, suggesting a bearish trend.

    The 14-day Relative Strength Index (RSI) holds above 40.00. A bearish momentum could trigger if the RSI breaks below that level.

    Looking down, the January 13 low of 1.0177 and the round-level support of 1.0100 will act as major support zones for the pair. Conversely, the psychological resistance of 1.0500 will be the key barrier for the Euro bulls.

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

    Australian Dollar defends its ground despite tariffs-related cautious market mood


    • AUD/USD hovers above 0.6200, defending mild bids amid US tariff concerns and weak Chinese data.
    • US PCE data showed no surprises, Fed remains cautious.
    • RBA dovish bets continue to pressure the pair.

    The Australian Dollar clings to mild gains on Friday, trading around 0.6215 after briefly touching a two-week low. The pair remains under pressure as US President Donald Trump reaffirmed plans to impose tariffs on Chinese imports, dampening risk sentiment.

    Meanwhile, speculation over a potential rate cut by the Reserve Bank of Australia (RBA) in February and ongoing economic struggles in China continue to weigh on the Aussie.

    Daily digest market movers: Aussie struggles on US tariffs concerns

    • US confirms 25% tariffs on Canada and Mexico, 10% on China, effective February 1.
    • US Dollar retreats as weak economic data erases weekly gains, pushing the DXY lower from its peak near 108.00.
    • China’s PMI data disappoints with manufacturing contracting and services barely expanding, pressuring the Aussie.
    • Iron ore prices hit yearly highs, offering mild support to AUD despite concerns over China’s weak demand.
    • Markets consider that the RBA cutting rates in February is a done deal, which is also weakening the Aussie.
    • On the US data front, the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation measure, rose by 0.3% MoM in December, following a 0.1% increase in November.
    • On an annual basis, the PCE inflation rate increased to 2.6% from the previous month’s 2.4%. The core PCE, which excludes food and energy prices, remained steady at 2.8% YoY for the third consecutive month.
    • Markets are expecting no rate cut by the Fed in March.

    Technical outlook: AUD/USD struggles for direction

    AUD/USD remains confined within a narrow range, facing resistance near 0.6230 while holding support at 0.6200. The Relative Strength Index (RSI) stands at 42 in negative territory, reflecting a lack of clear directional momentum. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram prints decreasing green bars, suggesting fading bullish strength.

    Despite recent recovery attempts, the Aussie’s upside potential appears limited. A break below 0.6200 could trigger further losses, while a move above 0.6230 may offer short-term relief.

     

    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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