Forex News Timeline

Tuesday, July 16, 2024

The US Dollar (USD) is likely to trade in a sideways range of 7.2650/7.2850 and, ultimately, with a downward bias towards 7.2400, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note.

The US Dollar (USD) is likely to trade in a sideways range of 7.2650/7.2850 and, ultimately, with a downward bias towards 7.2400, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note. USD may test 7.2850 in the short run 24-HOUR VIEW: “We highlighted yesterday that ‘the risk is for USD rising today, but any advance is expected to face strong resistance at 7.2910.’ Our expectations did not quite materialise, as after rising to 7.2862, USD pulled back to close at 7.2740 (+0.04%). The current price movements are likely part of a sideways trading phase. Today, USD is likely to trade in a range of 7.2650/7.2850.” 1-3 WEEKS VIEW: “Last Friday (12 Jul, spot at 7.2685), we indicated that USD ‘is likely to trade with a downward bias towards 7.2400.’ We highlighted that ‘the downward bias is intact as long as USD remains below 7.2910.’ There is no chance in our view.

EUR/USD hovers in a tight range near the round-level figure of 1.0900 in Tuesday’s European session as the upside move stalls with a focus on Thursday's European Central Bank (ECB) monetary policy meeting.

.fxs-faq-module-wrapper{border:1px solid #dddedf;background:#fff;margin-bottom:32px;width:100%;float:left;font-family:Roboto,sans-serif}.fxs-faq-module-title{color:#1b1c23;font-size:16px;font-style:italic;font-weight:700;line-height:22.4px;text-transform:uppercase;background:#f3f3f8;padding:8px 16px;margin:0}.fxs-faq-module-container{padding:16px;width:100%;box-sizing:border-box;display:flex;flex-direction:column;gap:12px}.fxs-faq-module-section{padding-bottom:16px;border-bottom:1px solid #ececf1;margin-bottom:0}.fxs-faq-module-section:last-child{border:none;margin-bottom:0}.fxs-faq-module-container input[type=checkbox]{display:none}.fxs-faq-module-header{padding:4px 0;background-color:#fff;border:none;position:relative;cursor:pointer;margin:0}.fxs-faq-module-header label{display:block;cursor:pointer}.fxs-faq-module-header label span{display:block;width:calc(100% - 50px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{content:"";position:absolute;top:50%;right:16px;width:8px;height:2px;background-color:#49494f;transition:all .2s ease-in-out;transition-delay:0}.fxs-faq-module-header label:after{transform:rotate(45deg) translateX(-4px)}.fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(4px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{transition:transform .3s ease-in-out}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:after{transform:rotate(45deg) translateX(4px)}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(-4px)}.fxs-faq-module-content{max-height:0;overflow:hidden;transition:all .3s ease-in-out;color:#49494f;font-weight:300;padding:0;font-size:14.72px;line-height:20px;margin:0}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-content{max-height:1000px;margin-top:8px}@media (min-width:680px){.fxs-faq-module-title{font-size:19.2px;line-height:27.2px}.fxs-faq-module-header{font-size:19.2px;line-height:25.92px}.fxs-faq-module-content{font-size:16px;line-height:21.6px}}EUR/USD consolidates near 1.0900 as investors shift focus to the US monthly Retail Sales and the ECB policy meeting.The ECB is expected to leave interest rates unchanged.Monthly US Retail Sales are estimated to have remained unchanged in June.EUR/USD hovers in a tight range near the round-level figure of 1.0900 in Tuesday’s European session as the upside move stalls with a focus on Thursday's European Central Bank (ECB) monetary policy meeting. The major currency pair is broadly firm as investors expect the ECB will not deliver subsequent rate cuts.  The ECB is expected to leave its key rates unchanged as policymakers worry that an aggressive policy-easing approach could uplift price pressures again. In the last monetary policy meeting, the ECB forecasted the price pressures to remain at their current levels for the entire year.  As the ECB is expected to keep interest rates at their current levels, investors will focus on cues about when the central bank will cut interest rates again. Currently, financial markets expect that the ECB will cut interest rates two times more this year. The ECB is expected to deliver rate cuts in the September and December meetings.  On the economic data front, a sharp decline in the German ZEW Survey – Economic Sentiment for July has raised concerns over the economic outlook. The sentiment data, a key measure of the sentiment of institutional investors towards economic growth, falls at a faster pace to 41.8 from the estimates of 42.5 and the former release of 47.5. On the contrary, the other component, known as the Current Situation, surprisingly improves to -68.9. Economists expected the sentiment data to have worsened further to -74.3 and the prior release of -73.8 Daily digest market movers: EUR/USD turns sideways as USD Index steadies around 104.00 EUR/USD struggles to extend its upside above more than the three-month high of 1.0920. The upside move in the shared currency pair appears to have stalled for the time being as the US Dollar (USD) gains ground after Federal Reserve (Fed) Chair Jerome Powell’s speech at the Economic Club of Washington on Monday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, manages to protect its immediate support of 104.00. In his speech on Monday, Powell acknowledged that the inflation data in the second quarter has added to confidence that inflation will return sustainably to the bank’s target of 2%. However, Powell cited the need of more good data to gain greater confidence before cutting interest rates. According to the CME FedWatch tool, 30-day Federal Fund futures pricing data shows that the central bank will cut interest rates twice this year and will start reducing them from the September meeting. Recent Consumer Price Index (CPI) data for June showed that headline and core inflation decelerated at a faster pace than expected on a monthly and annual basis. The monthly headline CPI deflated for the first time in more than four years.  In Tuesday’s session, the major trigger for the US Dollar will be the United States (US) Retail Sales data for June, which will be published at 12:30 GMT. The Retail Sales data, a key measure of consumer spending that drives consumer inflation, is estimated to have remained unchanged month-on-month after barely growing in May. Technical Analysis: EUR/USD holds symmetrical triangle breakoutEUR/USD tests the breakout region of the Symmetrical Triangle formation on a daily timeframe near 1.0880. A breakout of the above-mentioned chart pattern results in wider ticks and heavy volume. The near-term outlook of the major currency pair is bullish as the 20-day Exponential Moving Average (EMA) near 1.0816 is sloping higher.  The 14-day Relative Strength Index (RSI) shifts into the bullish range of 60.00-80.00, suggesting a strong upside momentum. Euro FAQs What is the Euro? The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%). What is the ECB and how does it impact the Euro? The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde. How does inflation data impact the value of the Euro? Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money. How does economic data influence the value of the Euro? Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy. How does the Trade Balance impact the Euro? Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.  

The US Dollar (USD) is expected to trade in a 157.50/158.80 range.

The US Dollar (USD) is expected to trade in a 157.50/158.80 range. Scope for USD to continue to weaken; it is too early to determine if the significant support at 155.50 will come into view, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note. USD/JPY eyes testing 158.80 24-HOUR VIEW: “Yesterday, we expected USD to trade in a 157.55/159.55 range. However, USD dipped briefly to 157.15 and then rebounded to close largely unchanged (158.01, +0.08%). The brief decline did not result in any clear increase in momentum. Today, we continue to expect USD to trade in a range, probably between 157.50 and 158.80.” 1-3 WEEKS VIEW: “We continue to hold the same view as last Friday (12 Jul, spot at 159.00). As indicated, after the outsized drop last Thursday, there is scope for JPY to continue to weaken. However, it is too early to determine if the significant support level at 155.50 will come into view. All in all, the near-term bias is on the downside, as long as USD remains below 160.00 (‘strong resistance’ was at 160.70 yesterday).”

Underlying tone has softened; NZD is likely to edge lower but is unlikely to break below 0.6045.

Underlying tone has softened; NZD is likely to edge lower but is unlikely to break below 0.6045. Current price movements in NZD are likely part of a range trading phase, probably between 0.6045 and 0.6145, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note. NZD/USD eyes a test of 0.6045 24-HOUR VIEW: “We highlighted yesterday that ‘further range trading seems likely, but the slightly softened underlying tone suggests a lower range of 0.6070/0.6115.’ Our view was not wrong, as NZD traded between 0.6072 and 0.6112, closing on a soft note at 0.6075. The underlying tone has softened further. Today, NZD is likely to edge lower, but any decline is unlikely to break below 0.6045 (there is another support level at 0.6060). Resistance is at 0.6090; a breach of 0.6105 would mean that the current mild downward pressure has eased.” 1-3 WEEKS VIEW: “Our update from last Friday (12 Jul, spot at 0.6090) still stands. As highlighted, the current price movements are likely part of a range trading phase, probably between 0.6045 and 0.6155.”

Eurozone ZEW Survey – Economic Sentiment below expectations (48.1) in July: Actual (43.7)

Italy Trade Balance EU rose from previous €-0.228B to €0.524B in May

The headline German ZEW Economic Sentiment Index dropped sharply from 47.5 in June to 41.8 in July, missing the market expectations of 42.5.

Germany’s ZEW Economic Sentiment Index tumbles to 41.8 in July.EUR/USD keeps its range at around 1.0900 after the mixed German and Eurozone ZEW surveys.The headline German ZEW Economic Sentiment Index dropped sharply from 47.5 in June to 41.8 in July, missing the market expectations of 42.5. more to come ....

Italy Global Trade Balance came in at €6.43B, above forecasts (€3.55B) in May

Eurozone Trade Balance n.s.a. registered at €13.9B, below expectations (€17.1B) in May

Eurozone Trade Balance s.a. dipped from previous €19.4B to €12.3B in May

France Current Account: €-3.1B (May) vs previous €-1.8B

Germany ZEW Survey – Current Situation above forecasts (-74.3) in July: Actual (-68.9)

Germany ZEW Survey – Economic Sentiment below expectations (42.5) in July: Actual (41.8)

West Texas Intermediate (WTI) Oil price extends its losses for the third consecutive session, trading around $80.10 per barrel during the European hours on Tuesday.

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This decline is attributed to a slowing Chinese economy, which is reducing demand in the world's largest Oil-importing country. China's Gross Domestic Product (GDP) grew 4.7% year-over-year in the second quarter, compared to a 5.3% expansion in the first quarter and an expected 5.1%. The National Bureau of Statistics (NBS) reported that China's economy operated generally steadily in the first half of the year, with H1 GDP growth at +5.0% year-on-year. Looking ahead, the NBS highlighted increasing external uncertainties and numerous domestic challenges that China's economy faces in the second half of the year. Crude Oil imports fell both month-over-month and year-over-year to 46.45 million tons in June. This decline aligns with indications that the rapid adoption of electric vehicles in China may mean that demand has already peaked. Year-to-date shipments are 2.3% lower than the same period last year, per Bloomberg. In the United States, Federal Reserve Chair Jerome Powell mentioned on Monday that this year's three inflation readings "add somewhat to confidence" that inflation is on track to meet the Fed’s target sustainably, suggesting that interest rate cuts may not be far off, per Reuters. Additionally, Fed Bank of San Francisco President Mary Daly noted that inflation is cooling in a way that increases confidence it’s heading toward the 2% target. However, Daly emphasized the need for more data before making a rate decision. Lower interest rates reduce borrowing costs, potentially boosting economic activity in the United States, the world’s largest economy, which may increase Oil demand. WTI Oil FAQs What is WTI Oil? WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media. What factors drive the price of WTI Oil? Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa. How does inventory data impact the price of WTI Oil The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency. How does OPEC influence the price of WTI Oil? OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.

Further range trading seems likely, probably in a range of 0.6740/0.6785.

Further range trading seems likely, probably in a range of 0.6740/0.6785. Room for AUD to continue to rise, but it has to surpass 0.6800 before further advance can be expected, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note. AUD eyes 0.6735  24-HOUR VIEW: “AUD trade between 0.6753 and 0.6789 yesterday, narrower than our expected range of 0.6745/0.6790. Further range trading seems likely, even though the slight softened underlying tone suggests a lower range of 0.6740/0.6785.” 1-3 WEEKS VIEW: ”We highlighted last Friday (12 Jul, spot at 0.6765) that ‘while there is room for AUD to continue to rise, it has to surpass 0.6800 before further advance can be expected.’ Our view remains unchanged, but given the overbought conditions, it remains to be seen if AUD can break above 0.6800. Overall, only a breach of 0.6735 (no change in ‘strong support’ level) would indicate that the AUD strength from two weeks ago has come to an end.”

The Pound Sterling (GBP) is likely to consolidate in a range of 1.2940/1.2995.

The Pound Sterling (GBP) is likely to consolidate in a range of 1.2940/1.2995. GBP must break above 1.3000 before further advance can be expected, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note. Rangebound between 1.2940 and 1.2995 24-HOUR VIEW: “We indicated yesterday that GBP ‘could pullback, but any decline is unlikely to threaten the support at 1.2915.’ We noted that ‘resistance levels are at 1.2985 and 1.3000.’ Our view did not materialise as GBP traded between 1.2960 and 1.2995, closing slightly lower at 1.2967 (-0.17%). The current price action is likely part of a consolidation phase. Today, we expect GBP to trade in a 1.2940/1.2995 range.” 1-3 WEEKS VIEW: “In our most recent narrative from last Friday (12 Jul, spot at 1.2925), we indicated that ‘the risk for GBP remains on the upside, but overbought conditions suggest 1.3000 might not come into view so soon.’ Yesterday, GBP edged to a high of 1.2995 and then pulled back. The 1.3000 level is turning out to be a significant resistance, and GBP must break above this level before further advance can be expected. Looking ahead, the next level to watch above 1.3000 is at 1.3045. The risk of GBP breaking clearly above 1.3000 will remain intact as long as 1.2885 (‘strong support’ level was at 1.2870 yesterday) is not breached.”

The Mexican Peso (MXN) dips in its most traded pairs on Tuesday.

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The Peso’s weakness comes on the back of the news that former US President Donald Trump was wounded in an assassination attempt at a rally in Pennsylvania on Saturday. This has led to sudden rise in US Treasury yields and the US Dollar (USD), but has weakened MXN.  Although the attack harmed Trump physically it improved his poll ratings by several points. This is negative for the Mexican Peso since a Trump presidency would probably lead to increased tariffs on foreign imports including those from Mexico, negatively impacting US-Mexico trade.  At the time of writing, one US Dollar (USD) buys 17.77 Mexican Pesos, EUR/MXN trades at 19.36, and GBP/MXN at 23.03. Mexican Peso reacts to Banxico dissenter’s comment The Mexican Peso made back some of its losses on Monday as a result of comments from the Deputy Governor of the Bank of Mexico (Banxico), Omar Mejia which supported the Mexican currency. Mejia was the only person on the Banxico board who voted to cut interest rates at the Banxico’s last June meeting, according to the Minutes which were released last week.    In his comments, Mejia qualified his decision to vote for a 0.25% rate cut by saying that cuts should be implemented gradually, and one interest-rate cut would not imply the beginning of an easing cycle.  The Banxico’s policy interest rate currently stands at 11.00%, one of the highest in a developing country. It is the main reason for the Peso’s show of strength since 2020, when it traded at a low of 25.79 against the US Dollar, only to rise over the following four years to a high of 16.26 in April 2024.  Currencies in countries with high interest rates tend to appreciate because they benefit from greater capital inflows.   Technical Analysis: USD/MXN shows signs of bullish reversal USD/MXN is showing signs of reversing its recent decline from the June 12 high.  It found support at the 50-day Simple Moving Average (SMA) at 17.65 and formed a green up day on Monday after the long, red down day on Friday (shaded blue rectangle in chart below). This pattern is similar to a two-day reversal pattern and could be a sign the pair is about to start a more bullish phase. USD/MXN Daily Chart  Another bullish sign is that USD/MXN might also have completed a Measured Move (MM) pattern.  MMs are large, three-wave zig-zags, with waves labeled A,B and C. The end of wave C can be estimated using the length of wave A as a guide. C is usually equal to A or, at least, a Fibonacci ratio of A. C is now roughly the same length as A and is more than the Fibonacci 0.618 ratio of A, suggesting the pattern could be complete. Although it is too early to be sure, the pair could be reversing course and beginning a short-term uptrend. A break below the 50-day Simple Moving Average (SMA) at 17.60, however, would reconfirm the dominant short-term downtrend and lead to a probable decline to 17.27 at the level of the 200-day SMA and a major multi-month trendline.  Meanwhile, the direction of the medium and long-term trends remain in doubt.  Banxico FAQs What is the Bank of Mexico? The Bank of Mexico, also known as Banxico, is the country’s central bank. Its mission is to preserve the value of Mexico’s currency, the Mexican Peso (MXN), and to set the monetary policy. To this end, its main objective is to maintain low and stable inflation within target levels – at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%. How does the Bank of Mexico’s monetary policy influence the Mexican Peso? The main tool of the Banxico to guide monetary policy is by setting interest rates. When inflation is above target, the bank will attempt to tame it by raising rates, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN. The rate differential with the USD, or how the Banxico is expected to set interest rates compared with the US Federal Reserve (Fed), is a key factor. How often does the Bank of Mexico meet during the year? Banxico meets eight times a year, and its monetary policy is greatly influenced by decisions of the US Federal Reserve (Fed). Therefore, the central bank’s decision-making committee usually gathers a week after the Fed. In doing so, Banxico reacts and sometimes anticipates monetary policy measures set by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised rates, Banxico did it first in an attempt to diminish the chances of a substantial depreciation of the Mexican Peso (MXN) and to prevent capital outflows that could destabilize the country.  

The Euro (EUR) is expected to trade in a range, likely between 1.0875 and 1.0915.

The Euro (EUR) is expected to trade in a range, likely between 1.0875 and 1.0915. Upward momentum is slowing; it remains to be seen if EUR can rise further to 1.0940, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note. Next resistance above 1.0915 is at 1.0940 24-HOUR VIEW: “Yesterday, we expected EUR to trade in a range between 1.0855 and 1.0905. Our expectations were incorrect, as it rose to 1.0922 before pulling back to close at 1.0894 (-0.11%). The advance did not result in any clear increase in momentum. Today, we continue to expect EUR to trade in a range, probably between 1.0875 and 1.0915.” 1-3 WEEKS VIEW: “We highlighted last Friday (12 Jul, spot at 1.0865) that EUR ‘is expected to continue to rise.’ We also highlighted that ‘severely overbought conditions suggest it might take a couple of days before 1.0915 comes into view.’ Yesterday, EUR broke above 1.0915, reaching a high of 1.0922. EUR pulled back from the high, closing at 1.0894 (-0.11%). While there is still scope for EUR to rise further, upward momentum is slowing, and it remains to be seen if any further advance can reach 1.0940. On the downside, a breach of 1.0850 (‘strong support’ level previously at 1.0825) would mean that the EUR strength from early this month has run its course.”

USD/CAD continues its winning streak for the fourth successive session, trading around 1.3690 during the European hours on Tuesday.

.fxs-faq-module-wrapper{border:1px solid #dddedf;background:#fff;margin-bottom:32px;width:100%;float:left;font-family:Roboto,sans-serif}.fxs-faq-module-title{color:#1b1c23;font-size:16px;font-style:italic;font-weight:700;line-height:22.4px;text-transform:uppercase;background:#f3f3f8;padding:8px 16px;margin:0}.fxs-faq-module-container{padding:16px;width:100%;box-sizing:border-box;display:flex;flex-direction:column;gap:12px}.fxs-faq-module-section{padding-bottom:16px;border-bottom:1px solid #ececf1;margin-bottom:0}.fxs-faq-module-section:last-child{border:none;margin-bottom:0}.fxs-faq-module-container input[type=checkbox]{display:none}.fxs-faq-module-header{padding:4px 0;background-color:#fff;border:none;position:relative;cursor:pointer;margin:0}.fxs-faq-module-header label{display:block;cursor:pointer}.fxs-faq-module-header label span{display:block;width:calc(100% - 50px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{content:"";position:absolute;top:50%;right:16px;width:8px;height:2px;background-color:#49494f;transition:all .2s ease-in-out;transition-delay:0}.fxs-faq-module-header label:after{transform:rotate(45deg) translateX(-4px)}.fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(4px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{transition:transform .3s ease-in-out}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:after{transform:rotate(45deg) translateX(4px)}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(-4px)}.fxs-faq-module-content{max-height:0;overflow:hidden;transition:all .3s ease-in-out;color:#49494f;font-weight:300;padding:0;font-size:14.72px;line-height:20px;margin:0}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-content{max-height:1000px;margin-top:8px}@media (min-width:680px){.fxs-faq-module-title{font-size:19.2px;line-height:27.2px}.fxs-faq-module-header{font-size:19.2px;line-height:25.92px}.fxs-faq-module-content{font-size:16px;line-height:21.6px}}USD/CAD extends its gains as the commodity-linked CAD struggles due to lower Oil prices.WTI price depreciates due to the potential for reduced demand in China, the world's largest Oil-importing country.Fed Chair Jerome Powell stated that inflation is on track to meet the Fed's target in a sustainable manner.USD/CAD continues its winning streak for the fourth successive session, trading around 1.3690 during the European hours on Tuesday. The commodity-linked Canadian Dollar (CAD) faces challenges due to declining Oil prices. Given the fact that Canada is the biggest Oil exporter to the United States (US). West Texas Intermediate (WTI) Oil price extends its losses for the third consecutive session, trading around $80.30 per barrel at the time of writing. This decline is attributed to a slowing Chinese economy, which is reducing demand in the world's largest oil-importing country. China's Gross Domestic Product (GDP) grew 4.7% year-over-year in the second quarter, compared to a 5.3% expansion in the first quarter and an expected 5.1%. The National Bureau of Statistics (NBS) reported that China's economy operated generally steadily in the first half of the year, with H1 GDP growth at +5.0% year-on-year. Looking ahead, the NBS highlighted increasing external uncertainties and numerous domestic challenges that China's economy faces in the second half of the year. Traders are now awaiting the upcoming release of Canada's Consumer Price Index (CPI) inflation data, which could influence the Bank of Canada’s (BoC) decision on potential further rate cuts following a recent quarter-point reduction in June. On the USD’s front, Fed Chair Jerome Powell mentioned on Monday that the three US inflation readings of this year "add somewhat to confidence" that inflation is on course to meet the Fed’s target sustainably, suggesting that a shift to interest rate cuts may not be far off. Additionally, Fed Bank of San Francisco President Mary Daly stated that inflation is cooling down in a way that bolsters confidence that it’s on its way to 2%. However, Daly added that more information is needed before making a rate decision. According to CME Group’s FedWatch Tool, markets now indicate an 85.7% probability of a 25-basis point rate cut at the September Fed meeting, up from 71.0% a week earlier. Investors will likely observe the US Retail Sales data for June, which are set to be released later in the day, for further insights into US economic situation. Canadian Dollar FAQs What key factors drive the Canadian Dollar? 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. How do the decisions of the Bank of Canada impact 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. How does the price of Oil impact the Canadian Dollar? 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. How does inflation data impact the value of the Canadian Dollar? 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. How does economic data influence the value of the Canadian Dollar? Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.

The Pound Sterling (GBP) turns sideways slightly below the psychological resistance of 1.3000 against the US Dollar (USD) in Tuesday’s London session.

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The GBP/USD pair struggles to extend its upside as the US Dollar gains ground after Federal Reserve (Fed) Chair Jerome Powell’s speech at the Economic Club of Washington on Monday. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, manages to hold the key support at around 104.00. Powell acknowledged that recent inflation data has added confidence that inflation is on course to return to the desired rate of 2%. However, he mentioned that policymakers need to gain more confidence before considering interest rate cuts.  Separately, San Francisco Federal Reserve Bank President Mary Daly said, “confidence is growing” that inflation is heading towards the 2% target. Daly refrained from providing a timeframe for rate cuts. She further said that the central bank should hold rates so that they manage to maintain downside pressure on inflation but not too long that they become a challenge to job growth. In Tuesday’s session, investors will focus on the US Retail Sales data, which is expected to show that sales at retail stores remained unchanged in June after a meager growth of 0.1% in May. Daily digest market movers: Pound Sterling remains firm ahead of UK data-packed week The Pound Sterling remains broadly bullish against its major peers on Tuesday, with the focus on the United Kingdom (UK) Consumer Price Index (CPI) for June and the employment data for the three months ending May, which will be published on Wednesday and Thursday, respectively. Investors will pay close attention to the inflation readings as they will suggest whether the Bank of England (BoE) will start reducing interest rates from the August meeting, as expected by financial markets. Economists expect the annual headline and core CPI, which excludes volatile food and energy prices, to have grown steadily by 2% and 3.5%, respectively. The monthly headline inflation is estimated to have risen at a slower pace of 0.1% from the former reading of 0.3%. Apart from the standard inflation components, investors will keenly focus on the status of price pressures in the service sector, a major factor that has been restricting BoE policymakers from advocating early rate cuts. On Monday, BoE’s external member of the Monetary Policy Committee Swati Dhingra cited concerns over squeezing consumer spending due to the maintenance of a restrictive interest rate framework. She favored cutting borrowing rates with the belief that inflation is unlikely to rise sharply again. Meanwhile, the three-month-ending in May ILO Unemployment Rate is estimated to remain steady at 4.4%. In the same period, other key components on which market participants will keenly focus are Average Earnings, Excluding and Including bonuses, a key measure of wage growth that fuels service inflation. The wage growth measure, Excluding and Including bonuses, is estimated to decelerate to 5.7%. Technical Analysis: Pound Sterling hovers near 1.3000The Pound Sterling trades back and forth after rising to near the psychological figure of 1.3000. The GBP/USD pair clings to gains amid uncertainty over the US Dollar’s outlook. The Cable's near-term appeal has strengthened after a breakout above the March 8 high near 1.2900. The pair is expected to extend its upside towards the two-year high near 1.3140.  All short-to-long-term Exponential Moving Averages (EMAs) are sloping higher, suggesting a strong bullish trend. The 14-day Relative Strength Index (RSI) jumps to nearly 70.00 for the first time in more than a year, indicating a strong momentum towards the upside.  Pound Sterling FAQs What is the Pound Sterling? The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE). How do the decisions of the Bank of England impact on the Pound Sterling? The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects. How does economic data influence the value of the Pound? Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall. How does the Trade Balance impact the Pound? Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.  

Turkey Budget Balance down to -275.28B in June from previous 219.41B

Italy Consumer Price Index (MoM) meets expectations (0.1%) in June

Italy Consumer Price Index (YoY) meets forecasts (0.8%) in June

Italy Consumer Price Index (EU Norm) (YoY) meets forecasts (0.9%) in June

Italy Consumer Price Index (EU Norm) (MoM) in line with expectations (0.2%) in June

Canada is set to reveal the latest inflation data on Tuesday, with Statistics Canada publishing the Consumer Price Index (CPI) for June.

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Forecasts predict disinflationary pressures to resume in both the headline CPI and the Core CPI following May’s hiccup. In addition to the CPI data, the Bank of Canada (BoC) will release its core Consumer Price Index, which excludes volatile components such as food and energy. As witnessed, the BoC core CPI showed a 0.6% monthly increase and a 1.8% year-on-year rise in May, while the headline print rose by 2.9% over the last twelve months and 0.6% from the previous month. These figures are closely monitored as they could influence the Canadian Dollar (CAD) in the short term and affect perceptions of the Bank of Canada's monetary policy, particularly after the central bank reduced its policy rate by 25 bps to 4.75% in June. Looking at the FX world, the Canadian Dollar keeps navigating the 1.3600-1.3800 range vs. its American counterpart, while the floor of this range still appears propped up by the key 200-day SMA (1.3596). What can we expect from Canada’s inflation rate? Analysts expect that price pressures across Canada will ease marginally in June, albeit still well above the bank’s target. That said, consumer prices should mirror the recent performance seen in the US, where lower-than-estimated CPI data have reignited expectations of a sooner-than-anticipated interest rate cut by the Federal Reserve (Fed). If the upcoming data aligns with these predictions, investors might consider that the BoC could ease its monetary policy further and go for another quarter-point interest rate cut, taking the policy rate to 4.50% at its July gathering. According to the Minutes of its June meeting, the BoC has expressed concerns that progress on reducing inflation could stall, adding that officials considered the advantages of delaying interest rate cuts by an additional month before ultimately deciding to ease monetary policy on June 5. Back to inflation, the BoC’s statement following the interest rate cut in June said, “With continued evidence that underlying inflation is easing, the Governing Council agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by 25 basis points. Recent data has increased our confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain. The Governing Council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour.” Analysts at TD Securities argued that: “Markets are 70% priced for a cut, and we look for CPI… to add to the case for easing with headline/core CPI pushing 0.20/0.15pp lower (y/y)...”. When is the Canada CPI data due, and how could it affect USD/CAD? On Tuesday at 12:30 GMT, Canada is set to release the Consumer Price Index (CPI) for June. The reaction of the Canadian Dollar will largely depend on shifts in monetary policy expectations from the Bank of Canada (BoC). However, unless there are significant surprises in either direction, the BoC is expected to maintain its current cautious monetary policy stance, similar to the approach of other central banks like the Federal Reserve (Fed). The USD/CAD has started the new trading year with a strong bullish trend, which eventually morphed into yearly highs north of 1.3800 the figure in April. However, that initial uptrend has gradually run out of steam and motivated spot to embark on a consolidative phase between 1.3600 and 1.3800. According to Pablo Piovano, Senior Analyst at FXStreet, there is a high probability of USD/CAD maintaining its side-line theme for the time being as market participants remain focused on the Fed-BoC policy divergence as the almost exclusive driver of the price action. “This range-bound pattern appears to be underpinned by the always-relevant 200-day Simple Moving Average (SMA) at 1.3596 so far. On the upside, there is immediate resistance at the June top of 1.3791 (June 11) prior to the 2024 peak of 1.3846 (April 16),” Piovano said. “Conversely, if USD/CAD falls below the 200-day SMA, it could face additional losses, potentially dropping to the January 31 low of 1.3358. Beyond this, notable support levels are scarce until the December 2023 bottom of 1.3177, recorded on December 27.” Pablo emphasizes that significant increases in CAD volatility would require unexpected inflation figures. A CPI below expectations could strengthen the case for another BoC interest rate cut in the upcoming meeting, thereby boosting USD/CAD. On the flip side, a CPI rebound might offer limited support to the Canadian Dollar. A higher-than-anticipated inflation reading would increase pressure on the Bank of Canada to maintain rates for a longer period, potentially posing prolonged challenges for Canadians dealing with higher interest rates. Economic Indicator Consumer Price Index (YoY) The Consumer Price Index (CPI), released by Statistics Canada on a monthly basis, represents changes in prices for Canadian consumers by comparing the cost of a fixed basket of goods and services. The YoY reading compares prices in the reference month to the same month a year earlier. Generally, a high reading is seen as bullish for the Canadian Dollar (CAD), while a low reading is seen as bearish. Read more. Last release: Tue Jun 25, 2024 12:30 Frequency: MonthlyActual: 2.9%Consensus: 2.6%Previous: 2.7%Source: Statistics Canada   TREND INDEX OB/OS INDEX VOLATILY INDEX 15M Bearish Neutral High 1H Bullish Neutral Shrinking 4H Bullish Overbought High 1D Bearish Neutral Expanding 1W Bearish Neutral Low Updated Jul 15, 16:00 GMT  

Silver price (XAG/USD) halts its two-day losing streak, trading around $30.80 per troy ounce during the early European hours on Tuesday.

.fxs-faq-module-wrapper{border:1px solid #dddedf;background:#fff;margin-bottom:32px;width:100%;float:left;font-family:Roboto,sans-serif}.fxs-faq-module-title{color:#1b1c23;font-size:16px;font-style:italic;font-weight:700;line-height:22.4px;text-transform:uppercase;background:#f3f3f8;padding:8px 16px;margin:0}.fxs-faq-module-container{padding:16px;width:100%;box-sizing:border-box;display:flex;flex-direction:column;gap:12px}.fxs-faq-module-section{padding-bottom:16px;border-bottom:1px solid #ececf1;margin-bottom:0}.fxs-faq-module-section:last-child{border:none;margin-bottom:0}.fxs-faq-module-container input[type=checkbox]{display:none}.fxs-faq-module-header{padding:4px 0;background-color:#fff;border:none;position:relative;cursor:pointer;margin:0}.fxs-faq-module-header label{display:block;cursor:pointer}.fxs-faq-module-header label span{display:block;width:calc(100% - 50px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{content:"";position:absolute;top:50%;right:16px;width:8px;height:2px;background-color:#49494f;transition:all .2s ease-in-out;transition-delay:0}.fxs-faq-module-header label:after{transform:rotate(45deg) translateX(-4px)}.fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(4px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{transition:transform .3s ease-in-out}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:after{transform:rotate(45deg) translateX(4px)}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(-4px)}.fxs-faq-module-content{max-height:0;overflow:hidden;transition:all .3s ease-in-out;color:#49494f;font-weight:300;padding:0;font-size:14.72px;line-height:20px;margin:0}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-content{max-height:1000px;margin-top:8px}@media (min-width:680px){.fxs-faq-module-title{font-size:19.2px;line-height:27.2px}.fxs-faq-module-header{font-size:19.2px;line-height:25.92px}.fxs-faq-module-content{font-size:16px;line-height:21.6px}}Silver price edges higher due to the dovish sentiment surrounding the Fed regarding its policy stance.Fed Chair Jerome Powell mentioned that inflation is on course to meet the Fed’s target in a sustainable manner.Silver demand could face challenges as China's economy grew less than expected in Q2.Silver price (XAG/USD) halts its two-day losing streak, trading around $30.80 per troy ounce during the early European hours on Tuesday. This upward movement is attributed to dovish comments from Federal Reserve Chair Jerome Powell regarding the monetary policy stance, which has increased the appeal of precious metals. Lower borrowing costs make non-yielding assets like Silver more attractive to investors. Fed Chair Jerome Powell mentioned on Monday that three US inflation readings of this year "add somewhat to confidence" that inflation is on course to meet the Fed’s target sustainably, suggesting that a shift to interest rate cuts may not be far off. Additionally, Fed Bank of San Francisco President Mary Daly stated that inflation is cooling down in a way that bolsters confidence that it’s on its way to 2%. However, Daly added that more information is needed before making a rate decision. According to CME Group’s FedWatch Tool, markets now indicate an 85.7% probability of a 25-basis point rate cut at the September Fed meeting, up from 71.0% a week earlier. Investors will likely observe the US Retail Sales data for June, which are set to be released later in the day, for further insights into the US economic situation. The price of the grey metal may face challenges as economic data on Monday showed that China’s economy grew less than expected in the second quarter and weak domestic demand. Silver is essential in various industrial applications, such as electronics, solar panels, and automotive components. Given China's status as one of the world's largest manufacturing hubs, the country's industrial demand for Silver is significant. The third plenum of the Chinese Communist Party's 20th National Congress continues today, being held from July 15 to 18. Standard Chartered expects cuts from the People's Bank of China in rates and the reserve requirement ratio (RRR), as GDP growth decelerated in Q2. China’s growth drivers remain uneven, and trade tensions are rising, with the US and EU imposing new tariffs on Chinese electric vehicles (EVs). Silver FAQs Why do people invest in Silver? Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets. Which factors influence Silver prices? Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices. How does industrial demand affect Silver prices? Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices. How do Silver prices react to Gold’s moves? Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.

Here is what you need to know on Tuesday, July 16: Following the previous week's sharp decline, the US Dollar (USD) Index edges higher early Tuesday after posting small gains on Monday.

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Export Price Index, Import Price Index and Retail Sales data for June will be featured in the US economic docket. Statistics Canada will release June Consumer Price Index (CPI) figures in the early trading hours of the American session. US Dollar PRICE This week The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.   USD EUR GBP JPY CAD AUD NZD CHF USD   0.11% 0.18% 0.19% 0.34% 0.60% 0.83% 0.05% EUR -0.11%   0.11% 0.28% 0.42% 0.53% 0.91% 0.13% GBP -0.18% -0.11%   0.27% 0.33% 0.42% 0.75% 0.02% JPY -0.19% -0.28% -0.27%   0.14% 0.18% 0.59% -0.34% CAD -0.34% -0.42% -0.33% -0.14%   0.19% 0.48% -0.30% AUD -0.60% -0.53% -0.42% -0.18% -0.19%   0.38% -0.39% NZD -0.83% -0.91% -0.75% -0.59% -0.48% -0.38%   -0.78% CHF -0.05% -0.13% -0.02% 0.34% 0.30% 0.39% 0.78%   The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote). The cautious market mood at the start of the week helped the USD stay resilient against its rivals. In the second half of the day, Federal Reserve (Fed) Chairman Jerome Powell refrained from confirming a rate cut in September, further supporting the currency. Powell acknowledged the soft inflation data, saying that the last three readings represent further progress, but reiterated that they will make decisions meeting-by-meeting. The USD Index edges higher toward 104.50 in the European session and the benchmark 10-year US Treasury bond yield stays near 4.2%. Meanwhile, US stock index futures trade marginally higher after Wall Street's main indexes closed the first trading day of the week in positive territory.USD/CAD started the week on a bullish note and gained nearly 0.4% on Monday. Investors expect the CPI to rise 0.1% on a monthly basis in June following the surprising 0.6% increase recorded in May. Ahead of the inflation data, USD/CAD inches higher toward 1.3700.EUR/USD climbed to its highest level since late March above 1.0920 on Monday but failed to preserve its bullish momentum. The pair trades in a tight channel at around 1.0900 in the European morning. ZEW sentiment data for Germany and the Eurozone will be published on Tuesday. After registering impressive gains for two consecutive weeks, GBP/USD staged a correction as buyers backed away after testing 1.3000. The pair was last seen moving sideways slightly above 1.2950. The UK's Office for National Statistics will publish June inflation data in the early European morning on Wednesday.Gold regained its traction after testing $2,400 and closed modestly higher on Monday. XAU/USD holds its ground and pushes higher toward $2,440 at the beginning of the European session on Tuesday.USD/JPY closed the first day of the week virtually unchanged after suffering large losses in the second half of the previous week. The pair gain traction early Tuesday and trades in positive territory near 158.50. Inflation FAQs What is inflation? 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%. What is the Consumer Price Index (CPI)? 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. What is the impact of inflation on foreign exchange? 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. How does inflation influence the price of Gold? Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.  

The USD/CHF pair trades on a softer note near 0.8945 on Tuesday during the early European session.

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The downtick of the pair is supported by the rising expectation, that US Fed would cut the interest rate sooner than earlier this September. This, in turn, exerts some selling pressure on the Greenback. Traders are now pricing in a 100% odds that the Fed funds rate will decline by at least 25 basis points when the Federal Open Market Committee (FOMC) meets in September. 

Fed Chair Jerome Powell said on Monday that the recent inflation data had added to confidence that price increases are returning to the target in a sustainable fashion. Powell further stated that the Fed doesn't expect to wait until inflation reaches 2% before acting, suggesting that rate cuts may not be far off. 

On the Swiss front, the political uncertainty in the US and the second round of France’s parliamentary elections last weekend provide some support to the safe-haven currency like the CHF. Donald Trump was shot in the ear during his rally in Butler, Pennsylvania in an assassination attempt. One spectator was killed in the attack, two others were critically injured, and Trump was pictured with blood spilling from his ear, per the BBC. Furthermore, the concern about France’s budget remains, which helps to boost the INR.  Swiss economy FAQs Where does Switzerland stand in terms of economic power? Switzerland is the ninth-largest economy measured by nominal Gross Domestic Product (GDP) in the European continent. Measured by GDP per capita – a broad measure of average living standards –, the country ranks among the highest in the world, meaning that it is one the richest countries globally. Switzerland tends to be in the top spots in global rankings about living standards, development indexes, competitiveness or innovation. Where does Swiss economic growth come from? Switzerland is an open, free-market economy mainly based on the services sector. The Swiss economy has a strong export sector, and the neighboring European Union (EU) is its main trading partner. Switzerland is a leading exporter of watches and clocks, and hosts leading firms in the food, chemicals and pharmaceutical industries. The country is considered to be an international tax haven, with significantly low corporate and income tax rates compared with its European neighbors. How does the Swiss economy impact the Swiss Franc’s valuation? As a high-income country, the growth rate of the Swiss economy has diminished over the last decades. Still, its political and economic stability, its high education levels, top-tier firms in several industries and its tax-haven status have made it a preferred destination for foreign investment. This has generally benefited the Swiss Franc (CHF), which has historically kept relatively strong against its main currency peers. Generally, a good performance of the Swiss economy – based on high growth, low unemployment and stable prices – tends to appreciate CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate. Do commodity prices impact the Swiss Franc’s valuation? Switzerland isn’t a commodity exporter, so in general commodity prices aren’t a key driver of the Swiss Franc (CHF). However, there is a slight correlation with both Gold and Oil prices. With Gold, CHF’s status as a safe-haven and the fact that the currency used to be backed by the precious metal means that both assets tend to move in the same direction. With Oil, a paper released by the Swiss National Bank (SNB) suggests that the rise in Oil prices could negatively influence CHF valuation, as Switzerland is a net importer of fuel.
 

The GBP/JPY cross recovers some lost ground near 205.70, snapping the three-day losing streak during the early European session on Tuesday.

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According to the 4-hour chart, the bullish outlook of the cross remains intact as it holds above the key 100-period Exponential Moving Average (EMA). However, further consolidation cannot be ruled out as the Relative Strength Index (RSI) hovers around the 50-midline, indicating the neutral momentum of the cross. 

The first upside barrier for GBP/JPY will emerge at 206.35, a high of July 12. Extended gains will see a rally to 206.67, a high of July 8. Any follow-through buying about this level will pave the way to the 207.60–207.70 region, portraying the upper boundary of the Bollinger Band and a high of July 10. 

On the downside, the 100-period EMA at 205.60 acts as an initial support level for the cross. A breach of this level will see a drop to 203.50. Further south, the next contention level is seen at the psychological level  GBP/JPY 4-hour chartPound Sterling FAQs What is the Pound Sterling? The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE). How do the decisions of the Bank of England impact on the Pound Sterling? The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects. How does economic data influence the value of the Pound? Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall. How does the Trade Balance impact the Pound? Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.  

Gold prices rose in India on Tuesday, according to data compiled by FXStreet.

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FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly. Gold FAQs Why do people invest in Gold? 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. Who buys the most Gold? 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. How is Gold correlated with other assets? 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. What does the price of Gold depend on? The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up. (An automation tool was used in creating this post.)

FX option expiries for July 16 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

FX option expiries for July 16 NY cut at 10:00 Eastern Time, via DTCC, can be found below. EUR/USD: EUR amounts 1.0790 732m 1.0820 645m 1.0835 730m 1.0875 607m1.0900 2.6b1.0905 598m 1.0910 487m 1.0925 1.3b 1.0975 577m 1.1000 935m USD/JPY: USD amounts                      156.70 630m 158.00 675m 158.30 795m 159.00 478m 159.20 882m 159.35 683m 160.00 1.3b USD/CHF: USD amounts      0.8915 636m 0.9000 554m 0.9030 455m AUD/USD: AUD amounts0.6600 2.1b0.6810 604m USD/CAD: USD amounts        1.3600 1.1b 1.3630 560m1.3800 2.2b1.3810 605m EUR/GBP: EUR amounts         0.8400 830m 0.8500 1.5b

EUR/GBP continues to gain ground for the second consecutive session, trading around 0.8400 during the Asian hours on Tuesday.

.fxs-faq-module-wrapper{border:1px solid #dddedf;background:#fff;margin-bottom:32px;width:100%;float:left;font-family:Roboto,sans-serif}.fxs-faq-module-title{color:#1b1c23;font-size:16px;font-style:italic;font-weight:700;line-height:22.4px;text-transform:uppercase;background:#f3f3f8;padding:8px 16px;margin:0}.fxs-faq-module-container{padding:16px;width:100%;box-sizing:border-box;display:flex;flex-direction:column;gap:12px}.fxs-faq-module-section{padding-bottom:16px;border-bottom:1px solid #ececf1;margin-bottom:0}.fxs-faq-module-section:last-child{border:none;margin-bottom:0}.fxs-faq-module-container input[type=checkbox]{display:none}.fxs-faq-module-header{padding:4px 0;background-color:#fff;border:none;position:relative;cursor:pointer;margin:0}.fxs-faq-module-header label{display:block;cursor:pointer}.fxs-faq-module-header label span{display:block;width:calc(100% - 50px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{content:"";position:absolute;top:50%;right:16px;width:8px;height:2px;background-color:#49494f;transition:all .2s ease-in-out;transition-delay:0}.fxs-faq-module-header label:after{transform:rotate(45deg) translateX(-4px)}.fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(4px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{transition:transform .3s ease-in-out}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:after{transform:rotate(45deg) translateX(4px)}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(-4px)}.fxs-faq-module-content{max-height:0;overflow:hidden;transition:all .3s ease-in-out;color:#49494f;font-weight:300;padding:0;font-size:14.72px;line-height:20px;margin:0}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-content{max-height:1000px;margin-top:8px}@media (min-width:680px){.fxs-faq-module-title{font-size:19.2px;line-height:27.2px}.fxs-faq-module-header{font-size:19.2px;line-height:25.92px}.fxs-faq-module-content{font-size:16px;line-height:21.6px}}EUR/GBP gains ground as the ECB could maintain the main refinancing rate at 4.25% at Thursday’s meeting.The Pound Sterling may appreciate further as investors consider UK markets to be a more attractive investment option.BoE may initiate reducing interest rates at the August meeting.EUR/GBP continues to gain ground for the second consecutive session, trading around 0.8400 during the Asian hours on Tuesday. However, the EUR/GBP cross still remains close to 0.8386, the lowest level since August 2022 recorded on Monday. The Euro finds support from bullish expectations surrounding the European Central Bank (ECB). The ECB is expected to maintain the main refinancing rate at 4.25% during its upcoming July meeting on Thursday. In June, the central bank reduced the interest rate for the first time since 2019, following nine months of unchanged rates. Analysts anticipate two additional rate cuts later this year, likely in September and December. On the GBP’s side, investors increasingly view the United Kingdom's (UK) financial markets as a preferable investment destination over both European and US markets, which are grappling with political uncertainties. The Labour Party's resounding victory under Keir Starmer has assured stable fiscal policies and streamlined ministerial appointments. This positive sentiment contributes to support for the Pound Sterling (GBP). Additionally, the GBP's strength has been bolstered by heightened uncertainty surrounding the timing of potential rate cuts by the Bank of England (BoE). Traders anticipate that the BoE will initiate interest rate reductions starting from the August meeting. Traders assess the upcoming economic data on Wednesday that could impact the Bank of England's monetary policy stance. The Consumer Price Index (YoY) is projected to hold steady at the BoE's 2% target, with core inflation anticipated to dip to 3.4%. Additionally, the Retail Price Index is likely to see a decline, marking the fourth drop in five months. Interest rates FAQs What are interest rates? Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation. How do interest rates impact currencies? Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money. How do interest rates influence the price of Gold? Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold. What is the Fed Funds rate? The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

The AUD/JPY cross attracts some buyers during the Asian session on Tuesday and moves away from over a two-week low, around the 106.55 area touched the previous day.

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Spot prices climb back above the 107.00 mark in the last hour and for now, seem to have snapped a three-day losing streak amid the emergence of fresh selling around the Japanese Yen (JPY). The prevalent risk-on environment – as depicted by an extension of a runaway rally across the global equity markets – is seen as a key factor undermining the JPY's relative safe-haven status. Apart from this, the JPY depreciating move lacks any obvious catalyst and is likely to remain cushioned in the wake of speculations that Japanese authorities might intervene in the markets to prop up the domestic currency.  In fact, Japanese Chief Cabinet Secretary Yoshimasa Hayashi was out with some verbal intervention earlier this Tuesday and showed readiness to employ all available measures regarding forex. This comes on top of speculations that the Bank of Japan (BoJ) may raise interest rates in response to a weakening domestic currency should act as a tailwind for the JPY, warranting some caution for the AUD/JPY bulls. Apart from this, concerns about a slowdown Chinese economy – the world's second-largest economy – seem to weigh on the China-proxy Australian Dollar (AUD) and might cap the AUD/JPY cross. The market worries resurfaced after the official data released on Monday showed that China's economy grew by 4.7% over the year during the second quarter of 2024 as compared to the 5.3% rise in the previous quarter.  Hence, it will be prudent to wait for strong follow-through buying before confirming that the recent corrective slide from the highest level since May 1991, around the 109.35 region touched last Thursday, has run its course and positioning for any further appreciating move. Traders now look forward to the release of the monthly Australian employment details for some meaningful impetus on Thursday. Australian Dollar FAQs What key factors drive the Australian Dollar? 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. How do the decisions of the Reserve Bank of Australia impact the Australian Dollar? 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. How does the health of the Chinese Economy impact the Australian Dollar? 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. How does the price of Iron Ore impact the Australian Dollar? 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. How does the Trade Balance impact the Australian Dollar? The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.  

The EUR/USD pair trades on a weaker note around 1.0890 during the early Asian trading hours on Tuesday.

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Traders increased their bets that the US Federal Reserve (Fed) would cut the interest rate in September. On Monday, Fed Chair Jerome Powell said that the central bank will not wait until inflation hits the 2% target to cut interest rates. “The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%,” said Powell. 

Meanwhile, Fed Bank of San Francisco President Mary Daly stated that inflation is cooling down in a way that bolsters confidence it’s on its way to 2%. However, Daly added that more information is needed before making a rate decision. The Fed rate cut expectation is likely to drag the Greenback lower and create a tailwind for EUR/USD. 

On the other hand, the ECB is anticipated to hold the main refinancing rate, the interest rate on the marginal lending facility, and the deposit facility unchanged at 4.25%, 4.50%, and 3.75%, respectively, at its July meeting on Thursday. The ECB decided to cut the interest rate for the first time since 2019 in June after nine months of leaving the rate unchanged. Analysts expect that two more rate cuts are on the table this year, in September and December  Euro FAQs What is the Euro? The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%). What is the ECB and how does it impact the Euro? The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde. How does inflation data impact the value of the Euro? Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money. How does economic data influence the value of the Euro? Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy. How does the Trade Balance impact the Euro? Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.  

Japan Tertiary Industry Index (MoM) below expectations (0.1%) in May: Actual (-0.4%)

GBP/USD trades around 1.2960 during the Asian session on Tuesday, remaining close 13-month high at 1.2995 recorded in the previous session.

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The British Pound (GBP) may appreciate further as investors consider UK markets a more attractive investment destination compared to US markets, which face political uncertainties. The decisive victory of Keir Starmer’s Labour Party has assured stable fiscal policies and smooth ministerial appointments. The increased uncertainty over the timeframe for Bank of England (BoE) rate cuts has been a significant factor in the GBP’s strength. Traders anticipate the BoE to start lowering interest rates at the August meeting. Traders assess the upcoming economic data on Wednesday that could impact the Bank of England's monetary policy stance. The Consumer Price Index (YoY) is projected to hold steady at the BoE's 2% target, with core inflation anticipated to dip to 3.4%. Additionally, the Retail Price Index is likely to see a decline, marking the fourth drop in five months. The US Dollar (USD) strengthened amid rising risk aversion triggered by the attempted assassination of former US President Donald Trump on Saturday. However, cooling US inflation strengthened bets for a Federal Reserve rate cut in September, which may limit the upside of the Greenback. According to CME Group’s FedWatch Tool, markets now indicate an 85.7% probability of a 25-basis point rate cut at the September Fed meeting, up from 71.0% a week earlier. Pound Sterling FAQs What is the Pound Sterling? The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE). How do the decisions of the Bank of England impact on the Pound Sterling? The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects. How does economic data influence the value of the Pound? Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall. How does the Trade Balance impact the Pound? Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

WTI drifts lower for the third straight day amid worries about slowing Chinese economy.

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A modest US Dollar strength contributes to the driving flows away from the commodity.
Worries about supply disruption from the Middle East might continue to act as a tailwind. West Texas Intermediate (WTI) US crude Oil prices trade with a negative bias for the third successive day on Tuesday, albeit lack follow-through selling and hold above the overnight swing low. The commodity currently trades around the $80.70 region, down nearly 0.40% for the day and is pressured by a combination of factors.  The official data released on Monday showed that China's economy expanded by 4.7% over the year during the second quarter of 2024, down from the 5.3% rise recorded in the first quarter. This adds to worries about a slowdown in the world's second-largest economy and waning fuel demand in the world's biggest oil importer, which, in turn, is seen as a key factor exerting some downward pressure on Crude Oil prices.  Meanwhile, the US Dollar (USD) gains some positive traction and recovers further from over a three-month trough touched on Monday, which further contributes to driving flow away from the USD-denominated commodity. That said, growing acceptance that the Federal Reserve (Fed) will begin the rate-cutting cycle as soon as September might hold back the USD bulls from placing aggressive bets and positioning for further gains. Apart from this, concerns about supply disruptions stemming from the ongoing conflicts in the Middle East should act as a tailwind for Crude Oil prices and help limit deeper losses. Hence, it will be prudent to wait for strong follow-through selling before positioning for an extension of the recent pullback from the vicinity of the $84.0 mark, or over the two-month peak touched on July 5. Traders now look to the US Retail Sales for a fresh impetus. WTI Oil FAQs What is WTI Oil? WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media. What factors drive the price of WTI Oil? Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa. How does inventory data impact the price of WTI Oil The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency. How does OPEC influence the price of WTI Oil? OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.  

The Japanese Yen (JPY) extends its losses on Tuesday with traders remaining on alert after the currency surged about 2% last week on a suspected intervention by Japanese authorities.

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According to data released by the Bank of Japan (BoJ) on Friday, it's estimated that Japanese authorities may have spent between ¥3.37 trillion to ¥3.57 trillion on Thursday to stem the rapid depreciation of the JPY, as reported by Reuters. The US Dollar (USD) strengthens amid rising risk aversion triggered by the attempted assassination of former US President Donald Trump on Saturday. However, cooling US inflation strengthened bets for a Federal Reserve rate cut in September, which may limit the upside of the Greenback. According to CME Group’s FedWatch Tool, markets now indicate an 85.7% probability of a 25-basis point rate cut at the September Fed meeting, up from 71.0% a week earlier. Daily Digest Market Movers: Japanese Yen declines despite intervention threats Fed Chair Jerome Powell mentioned on Monday that the three US inflation readings of this year "add somewhat to confidence" that inflation is on course to meet the Fed’s target sustainably, suggesting that a shift to interest rate cuts may not be far off. Fed Bank of San Francisco President Mary Daly stated that inflation is cooling down in a way that bolsters confidence that it’s on its way to 2%. However, Daly added that more information is needed before making a rate decision. US President Joe Biden on Monday addressed the nation from the White House, where he condemned all political violence and called for unity, according to CNBC. Biden further stated that “it’s time to cool it down” and noted not just the weekend attack on Trump but also the possibility of election-year violence on multiple fronts. ING’s FX analyst Francesco Pesole observes that Japan’s Ministry of Finance has adjusted its FX intervention strategy. Following the soft US CPI print on Friday, the USD/JPY pair declined approximately 2%, a larger drop compared to other USD pairs. The increase in JPY futures volumes appears to align with indications of FX intervention. UBS FX strategists observe that speculative investors hold near-record short positions on the Yen. They suggest that if US economic data continues to indicate a soft landing, USD/JPY could experience periods of pullbacks. BBH FX strategists highlight that recent softness in US data poses challenges to their perspective that the backdrop of sustained inflation and strong growth in the US largely remains intact. They note increasing concern among Federal Reserve officials regarding weaknesses in the labor market. Japanese Chief Cabinet Secretary Yoshimasa Hayashi stated his readiness to employ all available measures regarding forex. Hayashi noted that the Bank of Japan (BoJ) would determine the specifics of monetary policy. He expects the BoJ to implement appropriate measures to sustainably and steadily achieve the 2% price target, reported by Reuters on Friday. On Friday, Japanese Finance Minister Shunichi Suzuki emphasized that rapid foreign exchange (FX) movements are undesirable. Suzuki refrained from commenting on FX intervention and declined to address media reports regarding Japan's FX rate checks, as reported by Reuters. Technical Analysis: USD/JPY breaks above 158.50 USD/JPY trades around 158.70 on Tuesday. The daily chart analysis indicates a reinforcement of the bullish bias as the pair rises toward the lower boundary of an ascending channel pattern. The 14-day Relative Strength Index (RSI) is also slightly below the 50 level. A further increase could strengthen the bullish trend. The immediate resistance is observed around the nine-day Exponential Moving Average (EMA) at 159.46, followed by the lower boundary of the ascending channel around 160.30. A return to trading within the ascending channel would likely improve sentiment for the USD/JPY pair, with a potential target toward the upper boundary of the ascending channel near 163.70. On the downside, the USD/JPY pair could find key support around the psychological level of 158.00. A break below this level could exert pressure on the pair to navigate the region around June's low at 154.55. USD/JPY: Daily ChartInflation FAQs What is inflation? 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%. What is the Consumer Price Index (CPI)? 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. What is the impact of inflation on foreign exchange? 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. How does inflation influence the price of Gold? Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

Silver (XAG/USD) attracts some buyers during the Asian session on Tuesday, snapping a two-day losing streak and stalling the recent pullback from the $31.75 area or its highest level since May 31 touched last week.

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The white metal currently trades around the $30.80-$30.85 region, up 0.45% for the day, with bulls now awaiting a sustained move beyond the 200-hour Simple Moving Average (SMA) before positioning for further gains. Looking at the broader picture, the XAG/USD remains confined in a multi-day-old trading range. Furthermore, neutral technical indicators on the 1-hour chart warrant some caution before positioning for a firm intraday direction. Meanwhile, oscillators on the daily chart are holding in the positive territory and suggest that the path of least resistance for the commodity is to the upside. That said, a convincing break below the short-term trading range support, near the $30.40-$30.35 area, will be seen as a fresh trigger for bearish traders and pave the way for deeper losses. The XAG/USD might then accelerate the downfall and weaken further below the $30.00 psychological mark, towards testing the next relevant support near the $29.75 horizontal zone. The downward trajectory could extend further towards intermediate support near the $29.40 region en route to the $29.00 round figure and the June monthly swing low, around the $28.55 area. On the flip side, any further move up is more likely to face some resistance near the $31.00 mark, representing the top end of the trading range. Acceptance above the said handle will suggest that the corrective decline has run its course and pave the way for a move towards the $31.30 hurdle before the XAG/USD eventually climbs to the monthly swing high, around the $31.75 region. The momentum could extend further towards reclaiming the $32.00 mark for the first time since May 30. Silver 1-hour chartSilver FAQs Why do people invest in Silver? Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets. Which factors influence Silver prices? Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices. How does industrial demand affect Silver prices? Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices. How do Silver prices react to Gold’s moves? Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.  

Japanese Chief Cabinet Secretary Yoshimasa Hayashi is out with some verbal intervention, as the Yen once again sees heavy selling pressure against the US Dollar early Tuesday.e Key quotes No comment on forex intervention.

Japanese Chief Cabinet Secretary Yoshimasa Hayashi is out with some verbal intervention, as the Yen once again sees heavy selling pressure against the US Dollar early Tuesday.e Key quotes No comment on forex intervention. Believe forex should reflect fundamentals. Market reactionUSD/JPY is holding higher ground near 158.65 on these above comments, adding 0.40% on the day.

The Indian Rupee (INR) extends downside on Tuesday as the US Dollar (USD) strengthened across the board.

.fxs-faq-module-wrapper{border:1px solid #dddedf;background:#fff;margin-bottom:32px;width:100%;float:left;font-family:Roboto,sans-serif}.fxs-faq-module-title{color:#1b1c23;font-size:16px;font-style:italic;font-weight:700;line-height:22.4px;text-transform:uppercase;background:#f3f3f8;padding:8px 16px;margin:0}.fxs-faq-module-container{padding:16px;width:100%;box-sizing:border-box;display:flex;flex-direction:column;gap:12px}.fxs-faq-module-section{padding-bottom:16px;border-bottom:1px solid #ececf1;margin-bottom:0}.fxs-faq-module-section:last-child{border:none;margin-bottom:0}.fxs-faq-module-container input[type=checkbox]{display:none}.fxs-faq-module-header{padding:4px 0;background-color:#fff;border:none;position:relative;cursor:pointer;margin:0}.fxs-faq-module-header label{display:block;cursor:pointer}.fxs-faq-module-header label span{display:block;width:calc(100% - 50px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{content:"";position:absolute;top:50%;right:16px;width:8px;height:2px;background-color:#49494f;transition:all .2s ease-in-out;transition-delay:0}.fxs-faq-module-header label:after{transform:rotate(45deg) translateX(-4px)}.fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(4px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{transition:transform .3s ease-in-out}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:after{transform:rotate(45deg) translateX(4px)}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(-4px)}.fxs-faq-module-content{max-height:0;overflow:hidden;transition:all .3s ease-in-out;color:#49494f;font-weight:300;padding:0;font-size:14.72px;line-height:20px;margin:0}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-content{max-height:1000px;margin-top:8px}@media (min-width:680px){.fxs-faq-module-title{font-size:19.2px;line-height:27.2px}.fxs-faq-module-header{font-size:19.2px;line-height:25.92px}.fxs-faq-module-content{font-size:16px;line-height:21.6px}}The Indian Rupee loses momentum in Tuesday’s Asian session amid a stronger Greenback. India’s foreign fund inflows, rising Fed rate cut bets, and lower crude oil prices might cap the INR’s downside. Investors await the US June Retail Sales and Fed’s Kugler speech on Tuesday. The Indian Rupee (INR) extends downside on Tuesday as the US Dollar (USD) strengthened across the board. The weakness in the Chinese Yuan after slower-than-expected economic growth in China for the second quarter might weigh on Asian currencies, including the INR. 

Nonetheless, the significant India’s foreign fund inflows and the rising odds of the US Federal Reserve (Fed) rate cuts in September could limit the loss in the local currency. Also, the fall in crude oil prices underpin the INR as India was the third-largest oil consumer after the United States (US) and China. Later on Tuesday, investors will monitor the US Retail Sales for June and the speech from the Federal Reserve’s (Fed) Adriana Kugler.  Daily Digest Market Movers: Indian Rupee remains sensitive to global factors and risk sentiment India’s Wholesale Price Index (WPI) Inflation rose to a 16-month high of 3.36% YoY in June from 2.61% in May, according to the latest official data released on Monday. This figure was weaker than the 3.50% expected.  "Positive rate of inflation in June, 2024 is primarily due to increase in prices of food articles, manufacture of food products, crude petroleum & natural gas, mineral oils, other manufacturing etc," said the official press release. Indian WPI Food came in at 10.87% YoY in June, compared to 9.82% in May. Meanwhile, the WPI Fuel arrived at 1.03% versus 1.35% earlier.  Fed Chair Jerome Powell said on Monday that the US has performed remarkably well in recent years, adding that the central bank won't be waiting until inflation reaches the 2% annual target.  Federal Reserve Bank of San Francisco President Mary Daly did not provide time-based rate cut guidance but acknowledged significant progress on inflation. Technical analysis: USD/INR sticks to the consolidation scheme in the short-term The Indian Rupee weakens on the day. The trend of the USD/INR pair appears to be bullish, with the pair holding above the key 100-day Exponential Moving Average (EMA) on the daily chart. Additionally, the 14-day Relative Strength Index (RSI) points higher above 56.40, indicating that further upside looks favorable.

In the near term, the pair has traded within its month-long trading range since March 21.

A move past the resistance area at the upper boundary of the trading range at 83.65 could clear the way for a move back to the all-time high of 83.75. The next upside barrier will emerge at the 84.00 psychological level. 

On the other hand, the initial target could be the support level around the 100-day EMA at 83.37. If bearish momentum continues, look for further downside toward the 83.00 round figure, followed by 82.82, a low of January 12.


  Indian Rupee FAQs What are the key factors driving the Indian Rupee? The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee. How do the decisions of the Reserve Bank of India impact the Indian Rupee? The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference. What macroeconomic factors influence the value of the Indian Rupee? Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee. How does inflation impact the Indian Rupee? Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.  

Gold price (XAU/USD) attracts some dip-buyers during the Asian session on Tuesday and for now, seems to have stalled the previous day's late pullback from the $2,430 area, or its highest level since May 20.

.fxs-faq-module-wrapper{border:1px solid #dddedf;background:#fff;margin-bottom:32px;width:100%;float:left;font-family:Roboto,sans-serif}.fxs-faq-module-title{color:#1b1c23;font-size:16px;font-style:italic;font-weight:700;line-height:22.4px;text-transform:uppercase;background:#f3f3f8;padding:8px 16px;margin:0}.fxs-faq-module-container{padding:16px;width:100%;box-sizing:border-box;display:flex;flex-direction:column;gap:12px}.fxs-faq-module-section{padding-bottom:16px;border-bottom:1px solid #ececf1;margin-bottom:0}.fxs-faq-module-section:last-child{border:none;margin-bottom:0}.fxs-faq-module-container input[type=checkbox]{display:none}.fxs-faq-module-header{padding:4px 0;background-color:#fff;border:none;position:relative;cursor:pointer;margin:0}.fxs-faq-module-header label{display:block;cursor:pointer}.fxs-faq-module-header label span{display:block;width:calc(100% - 50px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{content:"";position:absolute;top:50%;right:16px;width:8px;height:2px;background-color:#49494f;transition:all .2s ease-in-out;transition-delay:0}.fxs-faq-module-header label:after{transform:rotate(45deg) translateX(-4px)}.fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(4px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{transition:transform .3s ease-in-out}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:after{transform:rotate(45deg) translateX(4px)}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(-4px)}.fxs-faq-module-content{max-height:0;overflow:hidden;transition:all .3s ease-in-out;color:#49494f;font-weight:300;padding:0;font-size:14.72px;line-height:20px;margin:0}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-content{max-height:1000px;margin-top:8px}@media (min-width:680px){.fxs-faq-module-title{font-size:19.2px;line-height:27.2px}.fxs-faq-module-header{font-size:19.2px;line-height:25.92px}.fxs-faq-module-content{font-size:16px;line-height:21.6px}}Gold price remains close to a nearly two-month top set on Monday amid rising Fed rate cut bets.Investors seem convinced that the Fed will begin its rate-cutting cycle at the September meeting.The risk-on mood, along with a modest US Dollar strength, might cap the upside for the XAU/USD. Gold price (XAU/USD) attracts some dip-buyers during the Asian session on Tuesday and for now, seems to have stalled the previous day's late pullback from the $2,430 area, or its highest level since May 20. The overnight comments from Federal Reserve (Fed) Chair Jerome Powell reaffirmed market expectations that the US central bank will begin cutting interest rates as soon as September. This keeps the US Treasury bond yields depressed and is seen as a key factor acting as a tailwind for the non-yielding yellow metal. Meanwhile, a failed assassination attempt on leading Republican candidate Donald Trump improved his chances of winning the 2024 presidential election and raised hopes of a looser regulatory environment. This further boosts investors' appetite for riskier assets and might keep a lid on any meaningful appreciating move for the safe-haven Gold price. Moreover, the assumption that Trump policies would add to government debt and inflation benefits the US Dollar (USD), which could also contribute to capping the upside for the XAU/USD. Daily Digest Market Movers: Gold price continues to draw support from dovish Fed expectations Federal Reserve Chair Jerome Powell said on Monday that the recent inflation data had added to confidence that price increases are returning to the target in a sustainable fashion.  The US Labor Department reported last week that the headline CPI dipped in June for the first time in more than four years, and the yearly rate decelerated to 3% from 3.3% in May.  Powell added that the Fed doesn't expect to wait until inflation reaches 2% before acting, suggesting that rate cuts may not be far off and lending some support to the Gold price.  The current market pricing indicates a greater chance that the Fed will lower borrowing costs in September and the possibility of another interest rate cut by the end of this year.  The US Dollar, meanwhile, gains some positive traction and moves away from over a three-month low touched on Monday, which might cap any further gains for the commodity. Apart from this, an extension of the risk-on rally across the global equity markets should contribute to keeping a lid on the safe-haven XAU/USD ahead of the US Retail Sales. According to the consensus estimates, the headline sales are expected to remain flat in May, while sales excluding automobiles are forecasted to rise by 0.1% during the reported month. Technical Analysis: Gold price seems poised to retest all-time peak, near $2,450 touched in May From a technical perspective, last week's breakout through the $2,390-2,388 supply zone and sustained strength above the $2,400 mark favors bullish traders. Furthermore, oscillators on the daily chart hold in positive territory and are still away from being in the overbought zone, suggesting that the path of least resistance for the Gold price is to the upside. Hence, a subsequent strength towards challenging the all-time peak, around the $2,450 area touched in May, looks like a distinct possibility. Some follow-through buying will be seen as a fresh trigger for bullish traders and pave the way for an extension of the recent uptrend witnessed over the past three weeks or so.  On the flip side, dips below the $2,400 round figure could now be seen as a buying opportunity and remain limited near the $2,390-2,388 resistance breakpoint. Some follow-through selling, however, could drag the Gold price to the $2,358 region with some intermediate support near the $2,372-2,371 area. The subsequent fall might expose the 50-day Simple Moving Average (SMA) support, currently pegged near the $2,350 region. Gold FAQs Why do people invest in Gold? 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. Who buys the most Gold? 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. How is Gold correlated with other assets? 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. What does the price of Gold depend on? The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.  

The Australian Dollar (AUD) continues to decline for the second consecutive session on Tuesday.

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The AUD/USD pair loses ground due to a modest rebound in the US Dollar (USD), which could be attributed to increased risk aversion following the attempted assassination of former US President Donald Trump on Saturday. Investors are also looking ahead to the US June Retail Sales data, which are set to be released later today, for further insights. The AUD/USD pair remains close to its strongest levels as speculation grows that the Reserve Bank of Australia (RBA) might delay joining the global rate-cutting cycle or even raise interest rates again. Persistently high inflation in Australia prompts the RBA to maintain a hawkish stance. In contrast, cooling US inflation strengthened bets for a Federal Reserve rate cut in September. The US Dollar (USD) may limit its upside due to increasing speculation that the US Fed will lower borrowing costs. According to CME Group’s FedWatch Tool, markets now indicate an 85.7% probability of a 25-basis point rate cut at the September Fed meeting, up from 71.0% a week earlier. Daily Digest Market Movers: Australian Dollar declines due to risk-off mood Fed Chair Jerome Powell mentioned on Monday that the three US inflation readings of this year "add somewhat to confidence" that inflation is on course to meet the Fed’s target in a sustainable manner, suggesting that a shift to interest rate cuts may not be far off. Fed Bank of San Francisco President Mary Daly stated that inflation is cooling down in a way that bolsters confidence that it’s on its way to 2%. However, Daly added that more information is needed before making a rate decision. In China, a close trade partner of Australia, Gross Domestic Product (GDP) grew 4.7% year-over-year in the second quarter, compared to a 5.3% expansion in the first quarter and an expected 5.1%. The National Bureau of Statistics (NBS) reported that China's economy operated generally steadily in the first half of the year, with H1 GDP growth at +5.0% year-on-year. Looking ahead, the NBS highlighted increasing external uncertainties and numerous domestic challenges that China's economy faces in the second half of the year. US President Joe Biden on Monday addressed the nation from the White House, where he condemned all political violence and called for unity, per CNBC. Biden further stated that “it’s time to cool it down” and noted not just the weekend attack on Trump but also the possibility of election-year violence on multiple fronts. China's Retail Sales (YoY) increased by 2.0% in June, falling short of the expected 3.3% and below May's 3.7%. Meanwhile, the country's Industrial Production for the same period showed a growth rate of 5.3% year-over-year, surpassing estimates of 5.0%, albeit slightly lower than May's 5.6%. On Thursday, the data showed that the US Core Consumer Price Index (CPI), which excludes volatile food and energy prices, rose by 3.3% year-over-year in June, compared to May's increase of 3.4% and the same expectation. Meanwhile, the core CPI increased by 0.1% month-over-month, against the expected and prior reading of 0.2%. Technical Analysis: Australian Dollar hovers around 0.6750 The Australian Dollar trades around 0.6750 on Tuesday. The analysis of the daily chart shows that the AUD/USD pair consolidates within an ascending channel, indicating a bullish bias. However, the 14-day Relative Strength Index (RSI) declines toward the 50 level, suggesting a correction. A further decline could weaken the bullish trend. The AUD/USD pair may test the psychological level of 0.6800. A breakthrough above this level could support the pair to approach the upper boundary of the ascending channel near 0.6810. On the downside, immediate support appears around the nine-day Exponential Moving Average (EMA) at 0.6743. Further support is seen near the lower boundary of the ascending channel at 0.6695. A break below this level could push the AUD/USD pair toward the throwback support at 0.6590. AUD/USD: Daily ChartInterest rates FAQs What are interest rates? Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation. How do interest rates impact currencies? Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money. How do interest rates influence the price of Gold? Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold. What is the Fed Funds rate? The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

The People’s Bank of China (PBOC) set the USD/CNY central rate on Tuesday at 7.1328, as against the previous day's fix of 7.1313 and 7.2671 Reuters estimates.

The People’s Bank of China (PBOC) set the USD/CNY central rate on Tuesday at 7.1328, as against the previous day's fix of 7.1313 and 7.2671 Reuters estimates.

The USD/JPY pair trades on a stronger note around 158.30 on Tuesday during the early Asian trading hours.

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Fed Chair Jerome Powell said on Monday the three US inflation readings of this year "add somewhat to confidence" that the inflation is on course to meet the Fed’s target in a sustainable fashion, suggesting a shift to interest rate cuts may not be far off. Fed Bank of San Francisco President Mary Daly stated that inflation is cooling down in a way that bolsters confidence that it’s on its way to 2%. However, Daly added that more information is needed before making a rate decision.

The growing speculation that the US Fed would lower its borrowing costs might undermine the Greenback in the near term. According to the CME’s FedWatch Tool, the market is now pricing in 100% odds that the Fed funds rate will decline by at least 25 basis points when the Federal Open Market Committee (FOMC) meets in September. 

The potential foreign exchange (FX) intervention by Japanese authorities might provide some support to the Japanese Yen (JPY). On Friday, Japanese Finance Minister Shunichi Suzuki highlighted that rapid FX movements are undesirable. Meanwhile, Japanese Chief Cabinet Secretary Yoshimasa Hayashi said that he is “ready to take all possible means on forex.” Japanese Yen FAQs What key factors drive the Japanese Yen? The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors. How do the decisions of the Bank of Japan impact the Japanese Yen? One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. How does the differential between Japanese and US bond yields impact the Japanese Yen? The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen. How does broader risk sentiment impact the Japanese Yen? The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.  

The NZD/USD pair remains on the defensive near 0.6075 during the early Asian session on Monday.

.fxs-faq-module-wrapper{border:1px solid #dddedf;background:#fff;margin-bottom:32px;width:100%;float:left;font-family:Roboto,sans-serif}.fxs-faq-module-title{color:#1b1c23;font-size:16px;font-style:italic;font-weight:700;line-height:22.4px;text-transform:uppercase;background:#f3f3f8;padding:8px 16px;margin:0}.fxs-faq-module-container{padding:16px;width:100%;box-sizing:border-box;display:flex;flex-direction:column;gap:12px}.fxs-faq-module-section{padding-bottom:16px;border-bottom:1px solid #ececf1;margin-bottom:0}.fxs-faq-module-section:last-child{border:none;margin-bottom:0}.fxs-faq-module-container input[type=checkbox]{display:none}.fxs-faq-module-header{padding:4px 0;background-color:#fff;border:none;position:relative;cursor:pointer;margin:0}.fxs-faq-module-header label{display:block;cursor:pointer}.fxs-faq-module-header label span{display:block;width:calc(100% - 50px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{content:"";position:absolute;top:50%;right:16px;width:8px;height:2px;background-color:#49494f;transition:all .2s ease-in-out;transition-delay:0}.fxs-faq-module-header label:after{transform:rotate(45deg) translateX(-4px)}.fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(4px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{transition:transform .3s ease-in-out}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:after{transform:rotate(45deg) translateX(4px)}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(-4px)}.fxs-faq-module-content{max-height:0;overflow:hidden;transition:all .3s ease-in-out;color:#49494f;font-weight:300;padding:0;font-size:14.72px;line-height:20px;margin:0}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-content{max-height:1000px;margin-top:8px}@media (min-width:680px){.fxs-faq-module-title{font-size:19.2px;line-height:27.2px}.fxs-faq-module-header{font-size:19.2px;line-height:25.92px}.fxs-faq-module-content{font-size:16px;line-height:21.6px}}NZD/USD trades on a softer note around 0.6075 in Tuesday’s early Asian session. New Zealand inflation data is expected to slow more than central bank expects in Q2, paving the way for rate cuts. Traders raise their bets on Fed rate cuts in September. The NZD/USD pair remains on the defensive near 0.6075 during the early Asian session on Monday. The weaker Chinese economic data and modest rebound of the US Dollar (USD) continue to undermine the pair. The US Retail Sales for June will be in the spotlight on Tuesday. The attention will shift to the New Zealand Consumer Price Index (CPI) inflation data, which is due on Wednesday. 

New Zealand CPI inflation data is expected to slow more than the Reserve Bank of New Zealand (RBNZ) expects in the second quarter, paving the way for interest-rate cuts. The annual CPI is estimated to show an increase of 3.5% in Q2, compared to the previous reading of 4.0%. On a quarterly basis, the CPI is forecast to rise 0.6% QoQ in Q2. “For easing to begin in August, we would likely need to have seen a significant broad-based downside surprise in the Q2 CPI on 17 July,” Kelly Eckhold, Westpac’s chief economist, said. 

Elsewhere, weaker-than-expected Chinese Gross Domestic Product (GDP) data on Monday exerted some mild bearish pressure on the Kiwi. The performance of the Chinese economy tends to influence the Kiwi as China is New Zealand's major trade partner. China’s economy expanded 4.7% YoY in the second quarter (Q2), compared to a 5.3% expansion in the first quarter, according to the National Bureau of Statistics (NBS) on Monday.

On the USD’s front, market players expect the US Federal Reserve (Fed) to start its easy cycle in September. Powell avoided sending a clear signal about when the Fed would begin to cut interest rates, despite a recent cool-down in inflation. Financial markets are now pricing in a September rate cut, with 100% odds of at least 25 basis points (bps) in the fed funds rate when the Federal Open Market Committee (FOMC) meets on September 18. New Zealand Dollar FAQs What key factors drive the New Zealand Dollar? The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD. How do decisions of the RBNZ impact the New Zealand Dollar? The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair. How does economic data influence the value of the New Zealand Dollar? Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate. How does broader risk sentiment impact the New Zealand Dollar? The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
 

 

 

EUR/USD fell short of recent bullish momentum, pulling back sharply after a brief jump above 1.0900 to kick off the new trading week and keeping price action strung out along the top end of a descending price channel.

.fxs-faq-module-wrapper{border:1px solid #dddedf;background:#fff;margin-bottom:32px;width:100%;float:left;font-family:Roboto,sans-serif}.fxs-faq-module-title{color:#1b1c23;font-size:16px;font-style:italic;font-weight:700;line-height:22.4px;text-transform:uppercase;background:#f3f3f8;padding:8px 16px;margin:0}.fxs-faq-module-container{padding:16px;width:100%;box-sizing:border-box;display:flex;flex-direction:column;gap:12px}.fxs-faq-module-section{padding-bottom:16px;border-bottom:1px solid #ececf1;margin-bottom:0}.fxs-faq-module-section:last-child{border:none;margin-bottom:0}.fxs-faq-module-container input[type=checkbox]{display:none}.fxs-faq-module-header{padding:4px 0;background-color:#fff;border:none;position:relative;cursor:pointer;margin:0}.fxs-faq-module-header label{display:block;cursor:pointer}.fxs-faq-module-header label span{display:block;width:calc(100% - 50px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{content:"";position:absolute;top:50%;right:16px;width:8px;height:2px;background-color:#49494f;transition:all .2s ease-in-out;transition-delay:0}.fxs-faq-module-header label:after{transform:rotate(45deg) translateX(-4px)}.fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(4px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{transition:transform .3s ease-in-out}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:after{transform:rotate(45deg) translateX(4px)}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(-4px)}.fxs-faq-module-content{max-height:0;overflow:hidden;transition:all .3s ease-in-out;color:#49494f;font-weight:300;padding:0;font-size:14.72px;line-height:20px;margin:0}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-content{max-height:1000px;margin-top:8px}@media (min-width:680px){.fxs-faq-module-title{font-size:19.2px;line-height:27.2px}.fxs-faq-module-header{font-size:19.2px;line-height:25.92px}.fxs-faq-module-content{font-size:16px;line-height:21.6px}}EUR/USD bidders failed to make a clean break of 1.0900 on Monday.Fiber’s near-term bull run set to end as technicals weigh heavily on buyers.ECB rate call due in the back half of the week to constrain Euro bids.EUR/USD fell short of recent bullish momentum, pulling back sharply after a brief jump above 1.0900 to kick off the new trading week and keeping price action strung out along the top end of a descending price channel. Traders are weighing their stance on the Greenback as Fedspeak dominated investor sentiment with appearances from key policymakers on Monday.Forex Today: Markets’ attention shifts to data and FedspeakFederal Reserve Chairman Jerome Powell acknowledged the recent progress on inflation on Monday. He was followed by a less important statement from San Francisco Fed President Mary Daly. Both key Fed policymakers emphasized that there is no fixed guidance on when Fed rate cuts will happen and that decisions will be made on a meeting-by-meeting basis.Read more:
Fed's Powell: Decisions to be made on a meeting-by-meeting basis
Fed's Daly: Confidence is growing that inflation is heading lower
According to the CME’s FedWatch Tool, the market is expecting a rate cut in September. Rate traders are now pricing in a 100% chance that the Fed funds rate will decline by at least 25 basis points when the Federal Open Market Committee (FOMC) meets on September 18. The upcoming US Retail Sales data release on Tuesday will conclude the recent series of important US economic data releases. It is anticipated that there will be a continued slowdown in US economic activity, with US Retail Sales expected to remain unchanged at 0.0% month-over-month in June. Euro traders will be buckling down for the wait to Thursday’s latest rate call from the European Central Bank (ECB). A follow-up rate cut to June’s quarter-point trim is anticipated, but not expected until September with a third 2024 rate cut penciled in for December. As noted by Pimco Executive Vice President and Portfolio Manager, Konstantin Veit pointed out that “the ECB has clearly signalled its preference to make interest rate decisions at forecast meetings, i.e. in September and December, and not in July, October or January". EUR/USD technical outlook Despite tipping into a fresh 16-week high on Monday, EUR/USD flubbed a challenge of the 1.0900 handle, easing back and leaving daily candlesticks mired in technical consolidation at the top end of a rough descending channel. Fiber ended a three-day winning streak, and is poised to tumble out of a bullish stance that dragged bids into the green for all but two of the last 12 consecutive trading days. EUR/USD daily chart Euro FAQs What is the Euro? The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%). What is the ECB and how does it impact the Euro? The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde. How does inflation data impact the value of the Euro? Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money. How does economic data influence the value of the Euro? Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy. How does the Trade Balance impact the Euro? Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.  

GBP/USD took a breather from bullish momentum on Monday, pulling back just shy of the 1.3000 handle after FX markets took a break from Greenback selling to reconsider recent moves and re-weigh odds of a September rate cut from the US Federal Reserve (Fed).

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Fed's Powell: Decisions to be made on a meeting-by-meeting basis
Fed's Daly: Confidence is growing that inflation is heading lower
According to the CME’s FedWatch Tool, rate markets are pinning all of their hopes on a September rate cut. Rate markets have fully priced in a September rate trim, with 100% odds of at least a 25 basis point decline in the fed funds rate when the Federal Open Market Committee (FOMC) meets on September 18. US Retail Sales on Tuesday will wrap up the recent bout of US key data releases from the past week, and markets are expecting a continued cooling in US activity data. US Retail Sales are forecast to flatten to 0.0.% MoM in June. Early Wednesday will bring the latest iteration of UK Consumer Price Index (CPI) inflation, with MoM headline CPI inflation in June expected to tick down to 0.1% from 0.3%. After that will be UK labor and wages figures on Thursday, and Friday will wrap up the GBP’s representation on the economic data docket with UK Retail Sales. GBP/USD technical outlook Cable bidding took a break on Monday, snapping a three-day winning streak and etching in a thin bearish candle after the pair closed in the green for all but two of the previous 12 consecutive trading days. GBP/USD’s swing low towards 1.2600 in late June failed to pierce the major price handle, sending bullish bids higher, and Monday trading managed to eke out a fresh 12-month high at 1.29949 before pulling back and rotating lower just shy of the 1.3000 key price level. GBP/USD daily chart Pound Sterling FAQs What is the Pound Sterling? The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, aka ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE). How do the decisions of the Bank of England impact on the Pound Sterling? The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects. How does economic data influence the value of the Pound? Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall. How does the Trade Balance impact the Pound? Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.  

The USD/CAD pair consolidates its gains around 1.3680 during the early Asian session on Tuesday.

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Fed Chair Jerome Powell said on Monday that the US has performed remarkably well in recent years, adding that the central bank won't be waiting until inflation reaches the 2% annual target. Meanwhile, Fed Bank of San Francisco President Mary Daly did not provide time-based rate cut guidance, but acknowledged significant progress on inflation. 

The odds for Fed rate cuts in September increase after the cooler US inflation data last week, which might weigh on the US Dollar (USD). Traders continue to anticipate a September rate cut followed by further cuts in November and December, bringing the policy rate down to 4.5%-4.75% by year-end.

On the other hand, the Bank of Canada (BoC) Business Outlook Survey on Monday showed that business and consumer expectations for inflation are subdued. “By in large, all of the data or most of the data that is included in that report could be used by Bank of Canada later this month in order to cut rates by a further 25 basis points,” David Doyle, managing director and head of economics at Macquarie Group, said. Meanwhile, the fall of crude oil prices might drag the commodity-linked Canadian Dollar (CAD) lower and cap the pair’s downside as Canada is the major crude oil exporter to the United States. Canadian Dollar FAQs What key factors drive the Canadian Dollar? 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. How do the decisions of the Bank of Canada impact 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. How does the price of Oil impact the Canadian Dollar? 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. How does inflation data impact the value of the Canadian Dollar? 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. How does economic data influence the value of 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.  

Federal Reserve (Fed) Bank of San Francisco President Mary Daly refused to give time-based guidance on the Fed's likely pace of rate cuts but acknowledged that significant progress has been on inflation.

Federal Reserve (Fed) Bank of San Francisco President Mary Daly refused to give time-based guidance on the Fed's likely pace of rate cuts but acknowledged that significant progress has been on inflation. Key highlights Sees growing confidence in nearing 2% inflation goal. More information needed before making rate decision. Not going to provide time-based rate cut guidance. Sees progress towards goals, but not yet achieved.

West Texas Intermediate (WTI) Crude Oil tested into the south end of the $81.00 handle on Monday as Crude Oil’s bullish break out of recent consolidation fizzles out.

.fxs-faq-module-wrapper{border:1px solid #dddedf;background:#fff;margin-bottom:32px;width:100%;float:left;font-family:Roboto,sans-serif}.fxs-faq-module-title{color:#1b1c23;font-size:16px;font-style:italic;font-weight:700;line-height:22.4px;text-transform:uppercase;background:#f3f3f8;padding:8px 16px;margin:0}.fxs-faq-module-container{padding:16px;width:100%;box-sizing:border-box;display:flex;flex-direction:column;gap:12px}.fxs-faq-module-section{padding-bottom:16px;border-bottom:1px solid #ececf1;margin-bottom:0}.fxs-faq-module-section:last-child{border:none;margin-bottom:0}.fxs-faq-module-container input[type=checkbox]{display:none}.fxs-faq-module-header{padding:4px 0;background-color:#fff;border:none;position:relative;cursor:pointer;margin:0}.fxs-faq-module-header label{display:block;cursor:pointer}.fxs-faq-module-header label span{display:block;width:calc(100% - 50px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{content:"";position:absolute;top:50%;right:16px;width:8px;height:2px;background-color:#49494f;transition:all .2s ease-in-out;transition-delay:0}.fxs-faq-module-header label:after{transform:rotate(45deg) translateX(-4px)}.fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(4px)}.fxs-faq-module-header label:after,.fxs-faq-module-header label:before{transition:transform .3s ease-in-out}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:after{transform:rotate(45deg) translateX(4px)}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-header label:before{transform:rotate(-45deg) translateX(-4px)}.fxs-faq-module-content{max-height:0;overflow:hidden;transition:all .3s ease-in-out;color:#49494f;font-weight:300;padding:0;font-size:14.72px;line-height:20px;margin:0}input[type=checkbox]:checked+.fxs-faq-module-section .fxs-faq-module-content{max-height:1000px;margin-top:8px}@media (min-width:680px){.fxs-faq-module-title{font-size:19.2px;line-height:27.2px}.fxs-faq-module-header{font-size:19.2px;line-height:25.92px}.fxs-faq-module-content{font-size:16px;line-height:21.6px}}WTI tested back underneath $81.00 as Crude Oil markets wobble.Forecasts of Chinese Crude Oil demand have flipped from hopeful to fearful.OPEC+ production cuts set to begin ending at the end of September.West Texas Intermediate (WTI) Crude Oil tested into the south end of the $81.00 handle on Monday as Crude Oil’s bullish break out of recent consolidation fizzles out. Barrel bids have been left within near-term consolidation levels, and global energy markets are running out of far-flung reasons to keep Crude Oil prices on the high end. China reported a slowdown in quarterly Gross Domestic Product (GDP) growth recently, sparking fears that an upswing in Chinese Crude Oil demand, which has helped bolster Crude Oil prices through most of 2024, has given way to a feared slump in Chinese Crude Oil demand. WTI prices stopped just short of $84.00 per barrel in July before reversing direction and easing lower after it became clear that the uptick in Chinese fossil field demand markets spent over six months waiting for failed to materialize. Energy markets are now concerned that a steep decline in growth in China could cause barrel demand to fall even further. The Organization of the Petroleum Exporting Countries (OPEC) and its extended non-member ally network, OPEC+, is still on pace to begin ending long-standing voluntary production cuts at the end of September. The production cuts, meant to prop up floundering Crude Oil prices, are facing increasingly stiff opposition within OPEC+ as the small-scale countries shouldering the burden of voluntarily pumping less Crude Oil than possible rely on market participation to balance government budgets. WTI technical outlook WTI US Crude Oil is back to batting the $81.00 price handle, a key inflection point, after a failed bullish break out of recent consolidation. Price action holds above the 200-day Exponential Moving Average (EMA) near $79.27, and short pressure could see an extended backslide towards early June’s bottom bids near $72.45. WTI daily chart WTI Oil FAQs What is WTI Oil? WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media. What factors drive the price of WTI Oil? Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa. How does inventory data impact the price of WTI Oil The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency. How does OPEC influence the price of WTI Oil? OPEC (Organization of the Petroleum Exporting Countries) is a group of 13 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.  

The EUR/JPY remains under pressure for the third straight day after Japanese authorities intervened in the FX space last Thursday, although policymakers have not confirmed this.

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The cross-pair trades at 172.12, down 0.03%. EUR/JPY Price Analysis: Technical outlook From a daily chart perspective, the pair is upward biased as price action stills above the Ichimoku Cloud (Kumo) and a series of successive higher highs and lows, which could pave the way for further upside. As measured by the Relative Strength Index (RSI), the momentum suggests that sellers had stepped in firmly, as the RSI hovers around the 50-neutral line, following a steep fall. Given the backdrop, the EUR/JPY could consolidate in the short term. If the pair falls below 172.00, that can pave the way for further loss. The following support would be Kijun-Sen at 171.58, ahead of the 50-day moving average (DMA) at 170.56, ahead of the psychological 170.00 figure, ahead of the Senkou Span B at 169.92. On further strength, the EUR/JPY first resistance would be the Senkou Span A at 172.45 before testing the Tenkan-Sen at 173.43. EUR/JPY Price Action – Daily ChartEuro FAQs What is the Euro? The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%). What is the ECB and how does it impact the Euro? The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde. How does inflation data impact the value of the Euro? Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money. How does economic data influence the value of the Euro? Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy. How does the Trade Balance impact the Euro? Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.  

On Monday, the NZD/JPY registered a substantial decline of 0.45% to end at 96.15.

Monday's session saw a further 0.45% decline in the NZD/JPY pair, reinforcing the bearish momentum.The cross extends its losses, marking a four-day bearish streak with a cumulative drop of more than 2.50% since last week. Indicators increasingly burrow into the negative zone, edging dangerously close to oversold conditions.On Monday, the NZD/JPY registered a substantial decline of 0.45% to end at 96.15. This led the cross to culminate a quadruple daily loss, sparking off from last week. The net plummet has thus far exceeded 2.50%. The daily technical signals continue to display unabated negative conditions. The Relative Strength Index (RSI), currently at 36, has tanked further and the Moving Average Convergence Divergence (MACD) concurs with this scenario by demonstrating growing selling activity with the printing of ascending red bars. NZD/JPY daily chart Given the intensified bearish conditions, immediate support levels are found at 96.00 and 95.50. A breach below these levels, especially the potent support at 95.50, would further validate and confirm the bearish perspective. Conversely, levels of resistance are now situated at the former support thresholds of 97.00, the 20-day Simple Moving Average (SMA) at 97.70, and the critical level of 98.00.

South Korea Import Price Growth (YoY) rose from previous 4.6% to 9.7% in June

South Korea Export Price Growth (YoY) climbed from previous 7.5% to 12.2% in June

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