외환거래 뉴스 타임라인

월요일, 9월 30, 2024

The Pound Sterling’s recent strength has partly relied on the ‘no news is good news’ narrative, as quiet calendars allowed markets to look elsewhere for easing bets while happily keeping the Bank of England in the group of relatively hawkish outliers, ING’s FX strategist Francesco Pesole notes.

The Pound Sterling’s recent strength has partly relied on the ‘no news is good news’ narrative, as quiet calendars allowed markets to look elsewhere for easing bets while happily keeping the Bank of England in the group of relatively hawkish outliers, ING’s FX strategist Francesco Pesole notes. EUR/GBP to face a bit more downside risk “We remain somewhat concerned that the pound will soon face a correction as UK figures start to point to more urgency for easing, although this week may just be too early for that.” “Second-quarter GDP was revised slightly lower to 0.5% quarter-on-quarter this morning, but there isn’t a major UK release until the 15 October jobs figures, with only the partial exception of the Bank of England’s Decision Maker Panel survey.” “With that in mind, together with the risk of eurozone inflation cementing ECB easing bets, EUR/GBP will likely face a bit more downside risk over the coming days and may well test the 0.8300 support.”  

Just as hopes were building that some of the recent volatility in USD/JPY was on course to die-back, Japanese political change has proved that the currency pair maintains a nervous disposition, Rabobank’s FX strategist Jane Foley notes.

Just as hopes were building that some of the recent volatility in USD/JPY was on course to die-back, Japanese political change has proved that the currency pair maintains a nervous disposition, Rabobank’s FX strategist Jane Foley notes. USD/JPY to reach 140 in 3 to 6 months “Despite the changing political landscape both the Japan and in the US, we would expect central bank policy to remain the primary driver of USD/JPY over the coming months. US economic data will be watched for any signs that the US could repeat its 50 bps rate cut before the end of the year, while Japanese numbers will be assessed against the expectation that BoJ interest rates will be raised again around the turn of the year.” “The reassurance from Ishiba that the government would announce further fiscal stimulus ‘if necessary’ should be reassuring to JPY bulls. Ishiba’s goal that the country ‘fully emerge from deflation’ is also JPY supportive. Ishiba on Friday reportedly vowed to accelerate Kishida policies which aimed to boost household consumption through higher wage growth.” “This sets the scene for another strong round of wage talks next spring. We continue to target USD/JPY140 on a 3-to-6-month view.”

French and Spanish inflation figures surprised on the downside on Friday, coming in at 1.2% and 1.5% respectively.

French and Spanish inflation figures surprised on the downside on Friday, coming in at 1.2% and 1.5% respectively. That is helping explain the euro’s muted reaction to China’s stock rally this morning, as markets are almost fully pricing in a 25bp European Central Bank rate cut in October, due to both those lower inflation prints and a Reuters report suggesting Governing Council doves are ramping up pressure to stay keep easing policy, ING’s FX strategist Francesco Pesole notes. Short-term move to 1.1200 is possible in EUR/USD “What appears clear from the latest off-meeting communication is that the hawk-dove factions are at a recent high within the ECB. Ultimately, data should be the tie-breaker for an October cut, so expect this morning’s German CPI and tomorrow’s eurozone-wide figures to trigger some EUR moves.” “We may also get some clues from today’s speech from ECB President Christine Lagarde at the EU Parliament. We have a number of hawkish and dovish members speaking later this week, including Isabel Schnabel and Philip Lane. If we end the week with slower-than-expected eurozone inflation and somewhat weaker US payrolls figures endorsing a 50bp Fed cut, then expect the euro to be one of the laggards in a weak USD environment as markets cement bets that the ECB will continue cutting in October.” “Another short-term move to 1.1200 is possible in EUR/USD on the back of some USD weakness, but unless we see surprisingly strong eurozone inflation, a big break higher may not be on the cards. We favour a stable 1.11-1.12 trading range in the first half of October.”

The US Dollar (USD) is likely to edge lower; any decline is not expected to reach the support at 6.9400.

The US Dollar (USD) is likely to edge lower; any decline is not expected to reach the support at 6.9400. In the longer run, price action continues to suggest USD weakness, albeit likely at a slower pace; the levels to monitor are 6.9400 and 6.9200, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note. Levels to monitor are 6.9400 and 6.9200 24-HOUR VIEW: “Last Thursday, USD plummeted and closed sharply lower. Last Friday, we indicated that ‘the outsized decline has resulted in oversold conditions, and USD is unlikely to weaken much further.’ We expected USD to ‘trade in a range between 6.9700 and 7.0100.’ USD subsequently traded in a narrower range than expected (6.9725/7.0040). Despite closing slightly higher at 6.9806 (+0.11%), the underlying tone appears to have softened. Today, we expect USD to drift lower, but any decline is unlikely to reach the support at 6.9400 (there is a minor support level at 6.9580). Resistance is at 6.9930, followed by 7.0050.” 1-3 WEEKS VIEW: “We continue to hold the same view as last Friday (27 Sep, spot at 6.9810). As indicated, the recent price action continues to suggest USD weakness, albeit likely at a slower pace. The levels to monitor are 6.9400 and 6.9200. On the upside, a breach of 7.0350 (‘strong resistance’ level was at 7.0450 last Friday) would mean that USD is not weakening further.”

Inflation in Germany, as measured by the change in the Consumer Price Index (CPI), declined to 1.6% on a yearly basis in September from 1.9% in August, Destatis reported.

Inflation in Germany continued to soften in September.EUR/USD trades in positive territory near 1.1200 after the German CPI data.Inflation in Germany, as measured by the change in the Consumer Price Index (CPI), declined to 1.6% on a yearly basis in September from 1.9% in August, Destatis reported. On a monthly basis, the CPI was unchanged following the 0.1% decline recorded in August. The Harmonized Index of Consumer Prices in Germany, the European Central Bank's preferred gauge of inflation, rose 1.8% on a yearly basis, down from 2% in August and below the market expectation of 1.9%. Market reaction These figures failed to trigger a noticeable reaction in EUR/USD. At the time of press, the pair was trading near 1.1200, where it was up about 0.3% on the day.

Germany Harmonized Index of Consumer Prices (MoM) increased to -0.1% in September from previous -0.2%

Germany Consumer Price Index (YoY) fell from previous 1.9% to 1.6% in September

Germany Consumer Price Index (MoM) below forecasts (0.1%) in September: Actual (0%)

South Africa Trade Balance (in Rands) down to 5.63B in August from previous 17.61B

Germany Harmonized Index of Consumer Prices (YoY) came in at 1.8%, below expectations (1.9%) in September

China’s steps to support the housing and stock market have led to a rush to buy Chinese stocks this morning, ahead of the National Day 1-7 October holiday.

China’s steps to support the housing and stock market have led to a rush to buy Chinese stocks this morning, ahead of the National Day 1-7 October holiday. The CSI index is up 7%, the Hang Seng 3% – and that is translating into stronger China-proxy Aussie and Kiwi dollars, along with a generally soft USD as safe-haven demand wanes, ING’s FX strategist Francesco Pesole notes. Debates may influence the outcome of presidential elections “Looking at this week’s busy US calendar, we’ll start tomorrow with the key JOLTS jobs openings, which surprised on the downside last month, followed by ISM manufacturing, which should keep hovering around the 47-48 level. Regional surveys also point to small changes in the ISM services index (Thursday), which remains in expansionary territory.” “The biggest binary event will be Friday’s jobs report. Our economist expects a softer payroll read (115k) relative to consensus (146k) and also an increase in the unemployment rate to 4.3% against expectations for a flattening at 4.2%. The greater focus of the Federal Reserve on the employment side of its mandate means high sensitivity of the market to the details of the release.”   “One more event to keep an eye on is tomorrow’s TV debate of the two US vice-presidential candidates JD Vance and Tim Waltz. This is the last chance for either campaign to attract voters in a debate as Donald Trump has ruled out another face-off with Kamala Harris. Incidentally, both Vance and Waltz have had a rather important role in their respective campaigns, so polls will be monitored closely later this week to gauge any impact, especially on Midwestern swing states. “  

The US Dollar (USD) could rise 145.50; a sustained advance above this major resistance level is unlikely.

The US Dollar (USD) could rise 145.50; a sustained advance above this major resistance level is unlikely. In the longer run, upward momentum has dissipated; USD could continue to trade choppily but is likely to stay within a 140.00/146.00 range, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note. USD likely to stay within a 140.00/146.00 range 24-HOUR VIEW: “Last Friday, we held the view that USD ‘could rise above the major resistance at 145.50, but a sustained advance above this level seems unlikely.’ We were also of the view that ‘the next resistance at 146.10 is unlikely to come into view.’ The subsequent price movements did not turn out as we anticipated; USD soared to a high of 146.49, then quickly plunged to a low of 142.05. The outsized selloff seems to be overdone, but the weakness in USD could retest the 142.00 level before stabilisation is likely. Today, a sustained decline below 142.00 is unlikely. Resistance 143.70; a breach of 144.50 would mean that the weakness has stabilised.” 1-3 WEEKS VIEW: “We shifted to a positive USD stance on 17 Sep (spot at 143.00), indicating that ‘if USD can break above 144.00, it could trigger a stronger recovery towards 145.50.’ As we tracked the advance, in our update from last Friday (27 Sep, spot at 144.95), we indicated that ‘we continue to expect USD to rise to 145.50, but it has to break and maintain a foothold above this level before a further advance is likely.’ We added, ‘given that momentum has not increased much, the chance of it reaching the next major resistance at 147.00 is not high for now.’ We did not anticipate the subsequent volatility, as USD soared to 146.49 and then, in a dramatic reversal, plunged to 142.05. The breach of our ‘strong support’ level at 143.40 indicates that the buildup in upward momentum has dissipated. From here, USD could continue to trade in a choppy manner, but it is expected to stay within a range of 141.00/146.00 range.”

USD/CHF has fallen to the 0.8400 floor of the range and rebounded.

USD/CHF might be starting a new up leg within its sideways market range. MACD is starting to bend and if it crosses its signal line bulls may pile in. USD/CHF has fallen to the 0.8400 floor of the range and rebounded. It is too early to decide whether this is the start of a new up leg within the range but given the established sideways trend the odds favor such a move developing and the range extending.  USD/CHF 4-hour Chart The Moving Average Convergence Divergence (MACD) momentum indicator is below the zero line and turning. If the blue MACD crosses above the red signal line it will provide a stronger signal that a new up leg within the range-bound consolidation is forming. MACD is a more reliable indicator within sideways compared to strongly trending markets.  If the MACD line crosses above its signal line and price continues to rise it will probably continue all the way up to an initial target at about 0.8517 (September 23 and 26 highs) followed by the roof of the range at 0.8539.  There is a possibility the pair could breakout of the range and given the prior trend to its formation was bearish, a downside break is mildly favored. A close below 0.8375 (September 6 low) would signal such a breakout. A decisive break would be one accompanied by a longer-than-average red candlestick that closed near its low or three consecutive bearish candles that broke below the level. Such a move would be expected to go as low as 0.8318, the 61.8% Fibonacci extrapolation of the height of the range extrapolated lower.    

India Balance Payment $ down to $5.2B in 2Q from previous $30.8B

India Trade Deficit – RBI: -65.1B (2Q) vs previous -50.9B

The US Dollar (USD) trades broadly flat at the start of this week, close to the year-to-date lows registered on Friday, ahead of a busy week that will end with the key Nonfarm Payrolls data.

.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 US Dollar trades flat at the start of this week with US Nonfarm Payrolls as the main event on Friday. The US calendar starts quietly with Chicago PMIs and the Dallas Fed Manufacturing survey.The US Dollar Index resides near the 2024 low in search of substantial support.  The US Dollar (USD) trades broadly flat at the start of this week, close to the year-to-date lows registered on Friday, ahead of a busy week that will end with the key Nonfarm Payrolls data. The main theme surrounding the jobs data will be how much the US Federal Reserve (Fed) will cut rates in its November meeting.  On Monday’s economic calendar, the Chicago Purchasing Managers Index (PMI) for September is due to be released, followed by the Dallas Fed Manufacturing Business Index for September. With both indices in contraction territory, it will be interesting to see how they will move before US Federal Reserve Chairman Jerome Powell takes the stage around 17:00 GMT. Daily digest market movers: What could Powell add?Monday will start with already two quite important data releases. The first one is the The Chicago Purchasing Managers Index for September, to be published at 13:45 GMT. The expectation is for a number still in contraction at 46.5, a bit better than the 46.1 in August.  At 14:30 GMT, the Dallas Fed Manufacturing Business Index for September is foreseen to be released. Expectations are similar to the ones for the Chicago PMI, with analysts anticipating the index to remain in contraction at -4.5 but improving from the previous -9.7. Two Fed speakers this Monday to look out for: Near 12:50 GMT, Federal Reserve Governor Michelle Bowman delivers a speech about the US economic outlook and monetary policy at the Bankers Association President/CEO Conference in Charleston, South Carolina. Around 17:00 GMT, Federal Reserve Chairman Jerome Powell delivers a speech about the US economic outlook at the 66th National Association for Business Economics annual meeting in Nashville, Tennessee. Asian equity markets trade mixed, with Japanese stocks sinking over 3%, while Chinese equities are rallying higher with the Shanghai Shenzhen CSI 300 composite index up over 8%.  The CME Fedwatch Tool shows a 60.4% chance of a 25 basis-point rate cut at the next Fed meeting on November 7, while 39.6% is pricing in another 50-basis-point rate cut.  The US 10-year benchmark rate trades at 3.77%, looking to test the three-week high at 3.81%US Dollar Index Technical Analysis: Anything from here is an adventureThe US Dollar Index (DXY) is unable to move away from that fresh yearly low at 100.16. The biggest issue is that there are no technical levels to trade on. Either venturous traders will get in and could push the DXY back higher or they will wait for the next pivotal support sub-100.00 at 99.58. A reshuffle of resistance levels is needed at the start of this week. With three daily closes below 100.62, this level is now considered a firm resistance. In case Dollar bulls can turn things around, look at 101.90 for the second resistance level on the upside. Just above there, the 55-day Simple Moving Average (SMA) at 102.22 will come in.  Time to make our homework as well for more downside. The fresh low of 2024 is at 100.16, so a test will take place before more downside takes place. Further down, and that means giving up the big 100.00 level, the July 14, 2023, low at 99.58 comes into play.US Dollar Index: Daily Chart US Dollar FAQs What is the US Dollar? The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away. How do the decisions of the Federal Reserve impact the US Dollar? The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback. What is Quantitative Easing and how does it influence the US Dollar? In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar. What is Quantitative Tightening and how does it influence the US Dollar? Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.  

US Dollar (USD) net long positions have fallen further after the previous week’s plunge.

US Dollar (USD) net long positions have fallen further after the previous week’s plunge. Euro (EUR) net long positions have moved higher, driven by an increase in long positions. Pound Sterling (GBP_ net long positions have regained some ground, driven by a jump in long positions, and Japanese Yen (JPY) net long positions have increased for the sixth consecutive week to their highest level since 2016, driven by an increase in long positions, Rabobank’s FX analysts Jane Foley and Molly Schwartz note. USD net longs fall, EUR, GBP and JPY net longs grow “USD net long positions have fallen further after the previous week’s plunge. Net longs are now at their lowest level since April following the decision by the Fed to cut rates by 50 bps at September’s FOMC meeting. Further rate cuts are expected before the end of the year, with another 50 bp move being touted by some commentators.” “EUR net long positions have moved higher, driven by an increase in long positions. That said, in recent sessions speculation has increased that the ECB could bring forward expected rate cuts on the back of weak PMI data in Germany and France and softening inflation data in various Eurozone countries.” “GBP net long positions have regained some ground, driven by a jump in long positions. GBP remains the best performing G10 currency in the year-to-date. JPY net long positions have increased for the sixth consecutive week to their highest level since 2016, driven by an increase in long positions. The JPY suffered further volatility on the back of the LDP leadership election and rallied with the announcement that Ishiba had won.”
 

India Current Account Balance $ dipped from previous $5.7B to $-9.7B in 2Q

USD/SGD continued to trade lower, tracking the broad decline in USD, rebound in RMB and JPY.

USD/SGD continued to trade lower, tracking the broad decline in USD, rebound in RMB and JPY. Pair was last at 1.2811, OCBC FX analysts Frances Cheung and Christopher Wong note.   Broader trend remains skewed to the downside “Daily momentum is turning mild bearish while RSI is near oversold conditions. We remain cautious of near term rebound risks but broader trend remains skewed to the downside.” “Support at 1.28, 1.2740 levels (76.4% fibo retracement of 2012 low to 2020 high). Resistance at 1.29, 1.30 levels. S$NEER was last estimated at ~1.95% above our model-implied mid.”

The New Zealand Dollar (NZD) could test the resistance at 0.6370 before the risk of a pullback increases; a sustained break above this level is unlikely.

The New Zealand Dollar (NZD) could test the resistance at 0.6370 before the risk of a pullback increases; a sustained break above this level is unlikely. In the longer run, NZD is likely to rise above 0.6370; it is unclear if there is sufficient momentum for it to reach 0.6410, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note. Can try testing the resistance at 0.6370 24-HOUR VIEW: “Our view for NZD to ‘continue to rise’ last Friday was correct, but we did not expect it to break above 0.6355 (high has been 0.6367). The rapid rise seems to be overdone, but NZD could test the resistance at 0.6370 before the risk of a pullback increases. A sustained break above 0.6370 is unlikely today. To maintain the momentum, NZD must remain above 0.6305 with minor support at 0.6325.” 1-3 WEEKS VIEW: “We turned neutral in NZD last Thursday (26 Sep, 0.6260), indicating that it ‘is likely to trade between 0.6200 and 0.6340.’ After NZD rose and approached 0.6340, we indicated on Friday (27 Sep, spot at 0.6325) that ‘despite the advance, upward momentum has not increased much, and to continue to advance, NZD must break clearly above 0.6355.’ NZD subsequently rose to 0.6367 in NY trade. From here, we expect NZD to rise above 0.6370, but it is unclear for now if there is sufficient momentum for it to reach last July’s high, near 0.6410. To keep the momentum going, NZD must not break below 0.6280 (‘strong support’ level was at 0.6240 last Friday).”

USD/JPY had a choppy session last Friday. Pair was last at 142.64, OCBC FX analysts Frances Cheung and Christopher Wong note.

USD/JPY had a choppy session last Friday. Pair was last at 142.64, OCBC FX analysts Frances Cheung and Christopher Wong note.   Risks skewed to the downside “Last Friday, USD/JPY traded up to high of 146.49 after candidate Takaichi managed to get into run-off against Ishiba. But it turned out that Ishiba beat Takaichi, who has been vocal against BoJ raising rates. The risk she may win was one of the factors that kept USD/JPY rather supported for most of last week. And as soon as run-off results was known, USD/JPY fell sharply.” “We still expect the direction of travel for USD/JPY to be down but the BoJ going for a gradual pace of policy normalisation may see pace of USD/JPY decline slow in the short term. To add to uncertainty, PM Ishiba plans to dissolve parliament on 9 Oct and calls for general elections on 27 Oct. Political uncertainty may see Japanese equities fall further, and that may weigh on USD/JPY.” “Bullish momentum on daily chart is fading while RSI fell. Risks skewed to the downside but consolidation likely to hold. Support at 142, 139.60 levels (recent low). Resistance at 143.30 (21 DMA), 144.80 (23.6% fibo retracement of Jul high to Sep low) and 146.20 (50 DMA).”

Federal Reserve Chairman Jerome Powell participates on Monday in a moderated discussion titled "A View from the Federal Reserve Board" at the National Association for Business Economics Annual Meeting in Nashville, starting at 17:00 GMT.

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Powell is expected to speak on the economic outlook and comment on the monetary policy path. Fed rate outlook remains uncertain The Fed opted for a 50 basis points (bps) interest-rate cut following the September policy meeting, bringing the fed funds rate to the range of 4.75%-5.0%. The revised Summary of Economic Projections (SEP), the so called dot-plot published alongside the policy statement, showed that projections imply 50 bps of additional rate cuts in 2024 from current level, 100 bps more in 2025 and another 50 bps in 2026. The CME FedWatch Tool shows that markets are currently pricing in a nearly 50% probability of another 50 bps rate reduction at the next policy meeting in early November. On Friday, the US Bureau of Economic Analysis reported that the core Personal Consumption Expenditures (PCE) Price Index rose 0.1% on a monthly basis in August, at a softer pace than the market expectation of 0.2%.  Fed policymakers spoke on the policy outlook recently and their remarks painted a mixed picture. Fed Governor Michelle Bowman, who is also set to speak again at 12:50 GMT, noted that she prefers a more measured re-calibration of policy and added that she continues to see greater risks to price stability. On a dovish note, Chicago Fed President Austan Goolsbee argued that interest rates need to come down significantly and said that "many more rate cuts" are likely needed over the next year. Related newsFed’s Musalem: Central bank should cut US interest rates ‘graduallyThe Fed’s vindicated by PCE data, as US stocks set to hit another recordFed policymakers shed light on inflation and interest rate outlookFed FAQs What does the Federal Reserve do, how does it impact the US Dollar? Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback. How often does the Fed hold monetary policy meetings? The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis. What is Quantitative Easing (QE) and how does it impact USD? In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar. What is Quantitative Tightening (QT) and how does it impact the US Dollar? Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.  

Room for the Australian Dollar (AUD) to test 0.6940 before a pullback is likely.

Room for the Australian Dollar (AUD) to test 0.6940 before a pullback is likely. In the longer run, AUD is likely to edge higher; it remains to be seen if there is enough momentum for it to reach 0.6980, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note. AUD is likely to edge higher towards 0.6980 24-HOUR VIEW: “We highlighted last Friday that AUD ‘could edge higher, but it is unlikely to be able to break above 0.6930.’ AUD then rose more than expected to 0.6937 before pulling back to close largely unchanged at 0.6902 (+0.09%). Although upward momentum has not increased much, there is room for AUD to test 0.6940 today before another pullback is likely. The major resistance at 0.6980 is not expected to come under threat. Support levels are at 0.6890 and 0.6870.” 1-3 WEEKS VIEW: “Last Thursday (26 Sep, spot at 0.6825), we indicated that ‘the advance in AUD has come to an end, and it is likely to trade between 0.6750 and 0.6900 for now.’ After AUD rose above to 0.6905, we indicated on Friday (27 Sep, spot at 0.6890) that ‘upward momentum has not increased sufficiently to indicate that AUD is ready to rise in a sustained manner.’ We added, ‘AUD has to break and remain above 0.6930 before an advance to 0.6980 can be expected.’ AUD subsequently rose to 0.6937, pulling back to close at 0.6902 (+0.09%). Although upward momentum has not increased as much as we would prefer, the price action suggests that AUD is likely to edge higher from here. However, it remains to be seen if there is enough momentum for AUD to reach 0.6980. On the downside, the ‘strong support’ level has moved higher to 0.6845 from 0.6820.”

The AUD/USD holds gains above the key level of 0.6900 in Monday’s European session.

.fxs-major-currency-prices-wrapper{border:1px solid #dddedf;background:#fff;margin-bottom:32px;width:100%;float:left}.fxs-major-currency-prices-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-major-currency-prices-content{color:#49494f;font-weight:300;padding:0;font-size:14.72px;line-height:20px;margin:8px 16px}table.fxs-major-currency-prices-currency-prices-table{width:100%;text-align:center;border-collapse:collapse;font-size:1.8svh}table.fxs-major-currency-prices-currency-prices-table th{background-color:#f2f2f2}table.fxs-major-currency-prices-currency-prices-table td{color:#fff}table.fxs-major-currency-prices-currency-prices-table td.green{background-color:#9cd6cd}table.fxs-major-currency-prices-currency-prices-table td.red{background-color:#faafb5}table.fxs-major-currency-prices-currency-prices-table td.blue-grey{background-color:#888a93}.fxs-major-currency-prices-currency-prices-legend{font-size:11px;margin:8px;color:#49494f}@media (min-width:680px){.fxs-major-currency-prices-content{font-size:16px;line-height:21.6px}.fxs-major-currency-prices-title{font-size:19.2px;line-height:27.2px}}.fxs-major-currency-prices-currency-price td.dark-green{background-color:#39ad9a}.fxs-major-currency-prices-currency-price td.light-green{background-color:#9cd6cd}.fxs-major-currency-prices-currency-price td.gray{background-color:#888a93}.fxs-major-currency-prices-currency-price td.light-red{background-color:#faafb5}.fxs-major-currency-prices-currency-price td.strong-red{background-color:#f55e6a} .fxs-related-module-wrapper{border:1px solid #dddedf;background:#fff;margin-bottom:32px;width:100%;float:left}.fxs-related-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-related-module-related-link a{font-size:19.2px;line-height:25.92px}.fxs-related-module-related-link a{text-decoration:none;color:#1b1c23;font-weight:700;font-size:16px;font-style:normal;line-height:20px}.fxs-related-module-related-link a:hover,.fxs-related-module-related-link:hover,.fxs-related-module-related-link:hover a{color:#e4871b}.fxs-related-module-related-link a:hover{text-decoration:none}@media (min-width:680px){.fxs-related-module-title{font-size:19.2px;line-height:27.2px}.fxs-related-module-related-link a{font-size:19.2px;line-height:25.92px}}AUD/USD clings to gains above 0.6900 ahead of Fed Powell’s speech.An expected acceleration in the US core PCE inflation has weighed on market expectations for the Fed's large rate cut in November.The Australian Dollar outperforms its major peers on China’s massive stimulus to uplift the economic growth.The AUD/USD holds gains above the key level of 0.6900 in Monday’s European session. The Aussie asset strengthens as the Australian Dollar (AUD) performs strongly on the announcement of China’s fiscal support to revive their economic prospects. Australian Dollar PRICE Today The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Swiss Franc.   USD EUR GBP JPY CAD AUD NZD CHF USD   -0.19% -0.09% 0.26% 0.11% -0.23% -0.19% 0.35% EUR 0.19%   0.11% 0.46% 0.33% 0.03% 0.03% 0.62% GBP 0.09% -0.11%   0.48% 0.22% -0.08% -0.08% 0.51% JPY -0.26% -0.46% -0.48%   -0.10% -0.55% -0.42% 0.14% CAD -0.11% -0.33% -0.22% 0.10%   -0.29% -0.30% 0.29% AUD 0.23% -0.03% 0.08% 0.55% 0.29%   0.00% 0.59% NZD 0.19% -0.03% 0.08% 0.42% 0.30% -0.00%   0.56% CHF -0.35% -0.62% -0.51% -0.14% -0.29% -0.59% -0.56%   The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote). Their cabinet reported on Sunday that it will focus on solving outstanding economic problems and strive to complete annual economic and social development goal, Reuters reported. It is worth noting that Australia is the leading trading partner of China and signs of an improvement in the latter’s economic performance strengthens the appeal of the Aussie Dollar. However, the Caixin Manufacturing PMI sank in September to 49.3 from the former reading of 50.4. A figure below the 50.0 threshold is itself considered as contraction in activities in the manufacturing sector. Meanwhile, the US Dollar (USD) exhibits a weak performance ahead of the Federal Reserve’s (Fed) Chair Jerome Powell’s speech, which is scheduled at 17:00 GMT. Investors would look for fresh cues about the likely monetary policy action from the Fed in November. According to the CME FedWatch tool, the probability of the Fed to reduce interest rates by 50 basis points (bps) to 4.25%-4.50% in November has eased sharply to 38.3% from 53% last week. Market speculation for Fed large rate cuts eased after the release of the United States (US) core Personal Consumption Expenditure Price Index (PCE) data on Friday, which rose expectedly to 2.7% in August from 2.6% in July. Related newsAustralian Dollar reaches 19-month high boosted by Chinese economic stimulus and weaker US DollarChina's September Caixin Manufacturing PMI contracts to 49.3, Services PMI drops to 50.3US Dollar Weekly Forecast: Powell and NFP take centre stage 

The Euro (EUR) has been somewhat resilient lately despite the poor prints on Euro-area PMIs as well as increased bets on ECB to cut in October.

The Euro (EUR) has been somewhat resilient lately despite the poor prints on Euro-area PMIs as well as increased bets on ECB to cut in October. Pair was last at 1.1187 levels, OCBC FX analysts Frances Cheung and Christopher Wong note.   Double-top at 1.12 awaits “OIS shows 82% probability for 25bp cut priced (vs. 46% probability 2 weeks ago). And EUR’s relative resilience can be attributed to optimism with China’s recovery after policymakers unleashed a big package of support measures. This week, focus shifts to German CPI (Mon), Euro-area CPI estimate (Tue).” “Softer-than-expected prints should see a 25bp cut at 17 Oct meeting more or less fully priced. This may weigh on EUR. Elsewhere, there is plenty of ECBspeaks this week (about 17 officials scheduled, with Lagarde tonight) – we watch for any shift in tone on policy guidance.” “Daily momentum is not showing a clear bias while RSI turned lower. Risks remain skewed towards the downside. Double-top pattern observed – typically associated with bearish reversal. Resistance at 1.12 (double-top). Support at 1.11 (21 DMA), 1.1030,60 levels (50 DMA, 23.6% fibo retracement of 2024 low to high). Bias to sell rallies.”

Crude Oil edges lower at the start of the week despite intensified attacks by Israel on Lebanon over the weekend. Overall, expectations are that Oil prices should get a lift this week, with Chinese measures boosting the demand for Oil in the region. On

.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}} Crude Oil retraces on Monday yet holds strong above the $67.00 support zone. Geopolitical tensions ramp up further after intensified attacks in Lebanon over the weekend. The US Dollar Index holds near yearly lows ahead of Fed Chairman Powell’s speech later on Monday. Crude Oil edges lower at the start of the week despite intensified attacks by Israel on Lebanon over the weekend. Overall, expectations are that Oil prices should get a lift this week, with Chinese measures boosting the demand for Oil in the region. On Sunday, additional measures were introduced by The People's Bank of China (PBoC) and the National Financial Regulatory Administration, with lower mortgage rates set to boost the housing sector.  The US Dollar Index (DXY), which tracks the performance of the Greenback against six other currencies, gears up for a week full of economic indicators on manufacturing and services activity and employment, ending with the monthly US Nonfarm Payroll release on Friday, although geopolitical tensions are the main theme. Tensions have been building up in Lebanon, where Israel kept bombing several parts of the country and might see Iran starting to get involved in the conflict.  At the time of writing, Crude Oil (WTI) trades at $67.80 and Brent Crude at $71.45.Oil news and market movers: Iran on the brink of stepping inAfter Israel launched airstrikes against Houthi targets in Yemen and Hezbollah targets in Lebanon, the risk of a broad war in the Middle East is starting to pick up, The Wall Street Journal reports.  On Monday, Bloomberg reported that the amount of crude oil held around the world on tankers that have been stationary for at least seven days rose to 60.76 million barrels as of September 27, which is 27% lower than a year ago and could point to a pickup in demand.  Russia is stepping up its attacks on Ukraine’s key energy grid and power plants, with even the nuclear power plant at Zaporizhzhia being under attack, Reuters reports.  Warren Patterson, head of commodities strategy at ING Groep NV in Singapore, has issued concerns about more upside for the Oil market. “The oil market has become increasingly numb to developments in the Middle East,” said Patterson, underlining the lack of impact on supply, Bloomberg reports. Oil Technical Analysis: Iran to hold cards hereCrude Oil prices could still spiral higher, should geopolitical tensions start to spill over and trigger a proxy war in the Middle East. If Iran and Egypt would be pulled into the conflict, it would not take long before several emirate states would start to send military forces to the region as well. In that case, another risk premium would be needed to be priced in with prices set to rally back to $80.00 or higher.  At current levels, $71.46 remains in focus after a brief false break last week. If a supportive catalyst remains present, a return to $75.27 (the January 12 high) could play out. Along the way towards that level, the 55-day Simple Moving Average (SMA) at $73.36 could ease the rally a bit. Once above $75.27, the first resistance to follow is $76.03, with the 100-day SMA in play.  On the downside, $67.11, a triple bottom in the summer of 2023, should support any downturns and trigger a bounce.  Further down, the next level is $64.38, the low from March and May 2023. US WTI Crude Oil: 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 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.  

The Pound Sterling (GBP) is expected to trade in a 1.3340/1.3420 range.

The Pound Sterling (GBP) is expected to trade in a 1.3340/1.3420 range. In the longer run, GBP must break and hold above 1.3455 to resume strength, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note. GBP must break and hold above 1.3455 to resume strength 24-HOUR VIEW: “We expected GBP to edge higher last Friday, but we held the view that ‘any advance is unlikely to break above 1.3455.’ GBP subsequently rose, but less than expected, reaching a high of 1.3428. GBP closed lower by 0.32% at 1.3372. Momentum indicators are turning flat, and the current price movements are likely part of a range trading phase. Expected range for today: 1.3340/1.3420.” 1-3 WEEKS VIEW: “Last Thursday (26 Sep, spot at 1.3325), we indicated that ‘the more than week-long GBP strength has ended.’ We expected GBP to ‘trade in a 1.3200/1.3430 range for the time being.’ After GBP rose to 1.3434, we indicated last Friday (27 Sep, spot at 1.3410) that ‘while upward momentum seems to be building again, it is not enough to indicate the resumption of GBP strength.’ We also indicated that GBP ‘must break and hold above 1.3455 before further advance to 1.3500 can be expected, and the likelihood of it breaking clearly above 1.3455 appears low for now, but it will remain intact as long as 1.3310 is not breached within these few days.’ We continue to hold the same view.”

The US Dollar (USD) traded with a heavy bias this morning as core PCE data came in softer while recent Fedspeaks were mostly dovish.

The US Dollar (USD) traded with a heavy bias this morning as core PCE data came in softer while recent Fedspeaks were mostly dovish. DXY was last at 100.29, OCBC FX strategists Frances Cheung and Christopher Wong note. Daily momentum is flat “Musalem said he sees more than one additional 25bp cut for rest of 2024. He also said that a faster pace of rate reduction might be appropriate if economy and labour market weaken more than he expects. As of this morning, 30d Fed fund futures still implied 75bp cut for rest of 2024, despite Fed guiding for 50bp cut.” “This week’s JOLTS job openings (Tue), initial jobless claims (Thu) and payrolls report (Fri) will be of interest. Dovish bets may be reduced if labour-related data comes in hotter, and this may have rebound impact on USD in the near term. Elsewhere, Fedspeaks will also be watched. About 13 officials are scheduled to speak this week, of which Fed Chair Powell’s speech at NABE tonight will the highlight.” “Daily momentum is flat while RSI fell. Risks are somewhat skewed to the downside. Near term support at 100.20 (recent low). Break-out puts next support at 99.60, 99.20 levels. Resistance at 101.10 (21 DMA), 101.90 levels.”

Ireland Retail Sales (YoY) fell from previous 0.4% to -2.5% in August

Ireland Retail Sales (MoM) declined to -1.5% in August from previous 0.1%

Silver price (XAG/USD) falls sharply to near $31.50 in Monday’s European session.

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The white metal weakens even though the US Dollar (USD) has dropped to near its yearly lows ahead of Federal Reserve (Fed) Chair Jerome Powell’s speech, which is scheduled at 17:00 GMT. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, appears as vulnerable near 100.20. 10-year US Treasury yields climb to near 3.77%. Higher yields on interest-bearing assets increase the opportunity cost of holding an investment in non-yielding assets, such as Silver. Investors will pay close attention to Fed Powell’s speech as he is expected to provide fresh interest rate guidance. Market participants want to know whether the Fed will reduce interest rates again by a larger-than-usual cut of 50 basis points (bps) in the November meeting. According to the CME FedWatch tool, traders are almost equally split for a 25 or 50 bps interest rate cut in November. The tool also shows that the Fed will reduce interest rates collectively by 75 bps in the remainder of the year. This week, investors will focus on a slew of the United States (US) economic data, such as JOLTS Job Openings for August and the ADP Employment Change and Nonfarm Payrolls (NFP) data for September. Silver technical analysis:Silver price struggles to extend its upside above the horizontal resistance plotted from the May 21 high of $32.50 on a daily timeframe. The near-term outlook of the white metal remains firm as the 20-day Exponential Moving Average (EMA) at $30.55 is sloping higher. The 14-day Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, suggesting that a bullish momentum is intact. Silver daily 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.  

Both the official and Caixin PMIs showed that manufacturing activity contracted in September.

Both the official and Caixin PMIs showed that manufacturing activity contracted in September. The two PMI gauges also indicated that the non-manufacturing activity has slowed and is at or near the expansion/ contraction threshold of 50. The deflationary pressure has persisted and likely worsened for the non-manufacturing sector in September, UOB Group economist Ho Woei Chen notes. Manufacturing in contraction while non-manufacturing slowed in September The official and Caixin PMIs indicate that economic activities have likely slowed further in September. Weaker employment and increased deflationary pressure in the nonmanufacturing sector warrant concerns. Without the aggressive stimulus package that was announced last week, the economy is likely to continue to head lower. We now expect some stabilization in the near-term with any positive impact to take time to be translated to the economy which continues to confront structural challenges that reduce its growth potential.

The Euro (EUR) is expected to trade in a range, likely between 1.1130 and 1.1195.

The Euro (EUR) is expected to trade in a range, likely between 1.1130 and 1.1195. In the longer run, EUR has likely entered a range trading phase, probably between 1.1060 and 1.1215, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note. Has to break above 1.1230 for a sustained rise towards 1.1275 24-HOUR VIEW: “We indicated last Friday, that the ‘slight increase in momentum is likely to result in a higher trading range of 1.1140/1.1205 instead of a sustained advance.’ EUR subsequently traded in a wider range than expected (1.1123/1.1202), closing slightly lower by 0.12% (1.1163). There has been no increase in either downward or upward momentum. In other words, we continue to expect EUR to trade in a range, likely between 1.1130 and 1.1195.” 1-3 WEEKS VIEW: “Our update from last Thursday (26 Sep, spot at 1.1130) is still valid. As highlighted, EUR ‘has likely entered a range trading phase, probably between 1.1060 and 1.1215.’ Looking ahead, EUR not only has to break above 1.1215 but also 1.1230 before a sustained rise towards 1.1275 can be expected.”

EUR/USD moves higher to near 1.1200 in Monday’s European trading session.

.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 aims to reclaim 1.1200 despite a further slowdown in price pressures in six states of Germany in September.ECB’s Lagarde could suggest whether the central bank will cut interest rates again in October.Fed’s Powell would guide about the likely interest rate cut size in November.EUR/USD moves higher to near 1.1200 in Monday’s European trading session. The major currency pair rises despite the flash annual Consumer Price Index (CPI) data of six German states showing that price pressures have decelerated further in September. The month-on-month inflation rose at a faster pace than what market participants saw in August but was within the 0.2% bracket. On Friday, the flash French Consumer Price Index (EU Norm) and the Spanish Harmonized Index of Consumer Prices (HICP) data also showed that price pressures grew at a slower-than-expected pace in September. A further slowdown in inflationary pressures has prompted market expectations of the European Central Bank (ECB) to cut interest rates again in the October meeting. Investors raised their bets on Friday on another rate cut on October 17 and have now priced in about a 75% chance of a move compared with only about a 25% chance seen last week, Reuters reported. The ECB also reduced its Rate on Deposit Facility by 25 basis points (bps) to 3.5% in its policy meeting on September 12. Going forward, the Euro (EUR) is expected to remain highly volatile as investors await the preliminary HICP data of Germany and the Eurozone for September, which will be published on Monday and Tuesday, respectively. In today’s session, investors will also pay close attention to ECB President Christine Lagarde’s speech at 13:00 GMT, in which she is expected to provide cues about the likely interest rate cut path for the remainder of the year.  Daily digest market movers: EUR/USD moves higher despite inflation in six states of Germany decelerating further EUR/USD edges higher on Monday as the US Dollar (USD) remains under pressure ahead of the Federal Reserve (Fed) Chair Jerome Powell’s speech, which is scheduled at 17:00 GMT. Investors expect Powell to provide fresh cues about the likely interest rate cut size by the Fed in the November monetary policy meeting. According to the CME FedWatch tool, the probability of the Fed reducing interest rates by 50 basis points (bps) in the November meeting to the range of 4.25%-4.50% is 41.6% at the time of writing. The likelihood has decreased from nearly 53.0% on Friday after the release of the United States (US) Personal Consumption Expenditures Price Index (PCE) report for August. The PCE price index report showed on Friday that the annual inflation decelerated at a faster pace to 2.2% from the estimates of 2.3% and July’s reading of 2.5%. This was the lowest reading since February 2021. However, its impact appeared to be offset by the annual core PCE inflation – which excludes volatile food and energy prices – that accelerated to 2.7% from the former release of 2.6%, as expected, diminishing the odds of a double-dose rate cut in the next meeting. Lately, Fed policymakers have become more focused on preventing job losses and an economic slowdown, with growing confidence that inflation will return to the bank’s target of 2%. To get fresh insights about the current status of the labor market health, investors will focus on a string of economic data such as JOLTS Job Openings for August, and the ADP Employment Change and Nonfarm Payrolls (NFP) data for September, which will be published this week. Technical Analysis: EUR/USD is poised to reclaim 1.1200EUR/USD gathers strength to recapture 1.1200 in European trading hours on Monday. The major currency pair remains firm as it holds the breakout of the Rising Channel chart pattern formed on a daily time frame near the psychological level of 1.1000.  The upward-sloping 20-day Exponential Moving Average (EMA) near 1.1110 suggests that the near-term trend is bullish. The 14-day Relative Strength Index (RSI) hovers near 60.00. A bullish momentum would trigger if the oscillator remains above this level. Looking up, a decisive break above the round-level resistance of 1.1200 will result in further appreciation toward the July 2023 high of 1.1276. On the downside, the psychological level of 1.1000 and the July 17 high near 1.0950 will be major support zones. Euro FAQs What is the Euro? The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%). 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.  

Silver prices (XAG/USD) fell on Monday, according to FXStreet data.

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The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 84.26 on Monday, up from 84.03 on Friday. 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. (An automation tool was used in creating this post.)

Gold (XAU/USD) pulls back to trade in the $2,650s per troy ounce on Monday, as traders take profit after last week’s almost 1.4% rally to new all time highs.

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“A pause in the strong move up is overdue and could come now that the Federal Reserve’s first rate cut is in the rear mirror,” he said. “Over the next six and 12 months, I could not be more bullish as Western investors finally start to buy Gold,” he added. “But markets do not go straight up forever.” Technical Analysis: Gold extends pullback from new all-time highs Gold extends its pullback after hitting record highs. The precious metal is still in an uptrend on a short, medium and long-term basis, however, and since it is a foundational principle of technical analysis that “the trend is your friend,” the odds favor even more upside for the yellow metal. XAU/USD Daily Chart
  Gold remains overbought, according to the Relative Strength Index (RSI) momentum indicator. It has now also almost fallen back down into neutral territory (below 70) and if it closes (on a daily basis) back inside neutral it will be a sign for traders to close their long positions and open shorts. As is it, simply by being overbought it advises traders not to add to their long positions.  If a deeper correction evolves – as now looks likely – firm support lies at $2,600 (September 18 high), $2,550 and $2,544 (0.382 Fibonacci retracement of the September rally).   Given the precious metal’s entrenched uptrend, however, there is a good chance any correction will run out of steam and bulls will resume pushing the price higher. If Gold breaks to higher highs, it will further reconfirm the metal’s uptrending bias. The next targets to the upside are the round numbers $2,700 and then $2,750. 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.  

Italy Consumer Price Index (EU Norm) (YoY) fell from previous 1.2% to 0.8% in September

Italy Consumer Price Index (MoM) meets forecasts (-0.2%) in September

Italy Consumer Price Index (EU Norm) (MoM) increased to 1.2% in September from previous -0.2%

Italy Consumer Price Index (YoY) came in at 0.7%, below expectations (0.8%) in September

Greece Retail Sales (YoY): -2.8% (July) vs previous 5.8%

Greece Producer Price Index (YoY) down to -2.4% in August from previous 0.1%

The USD/CAD pair struggles to capitalize on last week's goodish recovery from its lowest level since March 8, albeit manages to hold above the 1.3500 psychological mark through the first half of the European 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}}USD/CAD struggles to gain any meaningful traction and is influenced by a combination of diverging forces.Dovish Fed expectations weigh on the USD; bets for a larger BoC rate cut keep the CAD bulls on the sidelines. The setup warrants caution before positioning for an extension of last week’s recovery from a multi-month low.The USD/CAD pair struggles to capitalize on last week's goodish recovery from its lowest level since March 8, albeit manages to hold above the 1.3500 psychological mark through the first half of the European session on Monday.  The US Dollar (USD) selling bias remains unabated for the third straight day amid rising bets for a more aggressive policy easing by the Federal Reserve (Fed), which, in turn, is seen acting as a headwind for the USD/CAD pair. Meanwhile, rising geopolitical risks in the Middle East lend some support to Crude Oil prices and underpin the commodity-linked Loonie, further contributing to capping the currency pair. That said, expectations for a larger rate cut by the Bank of Canada (BoC) keep a lid on the Canadian Dollar (CAD) and limit the downside for spot prices.  From a technical perspective, oscillators on the daily chart – though have been recovering from lower levels – are yet to confirm a positive bias and warrant some caution before positioning for any meaningful upside. Meanwhile, the USD/CAD pair now seems to have found acceptance above the 38.2% Fibonacci retracement level of the recent downfall from the monthly peak and is currently placed around the 200-hour Simple Moving Average (SMA). Any subsequent move-up is likely to attract fresh sellers near the 50% Fibo. level, around the 1.3535 area region. The next relevant hurdle is pegged near the 1.3555-1.3560 area, or the 61.8% Fibo. level, and the very important 200-day SMA, currently pegged just ahead of the 1.3600 mark. The latter should act as a key pivotal point, which if cleared decisively should lift the USD/CAD pair to the monthly peak, around the 1.3645-1.3650 region. Some follow-through buying will be seen as a fresh trigger for bullish traders and pave the way for a further appreciating move in the near term.  On the flip side, a sustained break below the 1.3500 mark is likely to find some support near the 1.3465 region, below which the USD/CAD pair could retest the multi-month low, around the 1.3420 region. Some follow-through selling below the 1.3400 mark will pave the way for the resumption of the recent well-established downtrend witnessed over the past two months or so. USD/CAD 1-hour chartCanadian 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.  

AUD/JPY gains ground, trading around 98.70 during the European 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}}AUD/JPY receives support from the hawkish sentiment surrounding the RBA’s policy outlook.The risk-sensitive AUD appreciates due to improved market sentiment amid dovish sentiment surrounding the Fed's interest rates trajectory.The Japanese Yen struggles as upcoming PM Shigeru Ishiba says that the monetary policy should continue to be accommodative.AUD/JPY gains ground, trading around 98.70 during the European session on Monday. This upside of the AUD/JPY cross is attributed to the Reserve Bank of Australia’s (RBA) hawkish stance contributing support to the Australian Dollar (AUD). The RBA kept its cash rate at 4.35% for a seventh consecutive meeting and stated that the policy would need to stay restrictive to ensure inflation slowed. The AUD remains stronger despite the mixed Manufacturing Purchasing Managers’ Index (PMI) data from China, Australia’s largest trading partner. China's Caixin Manufacturing PMI fell to 49.3 in September, indicating contraction, down from 50.4 in August. Meanwhile, China’s NBS Manufacturing PMI improved to 49.8, up from 49.1 in the previous month and surpassing the market consensus of 49.5. Additionally, the rising expectations that the US Federal Reserve (Fed) may continue its policy easing in November is improving the market sentiment and contributing support for the risk-sensitive Australian Dollar. The CME FedWatch Tool indicates that markets are assigning a 55.9% probability to a 25 basis point rate cut by the Federal Reserve in November. The Japanese Yen (JPY) receives downward pressure due to the dovish comments from Japan's upcoming Prime Minister, former Defense Chief Shigeru Ishiba. Ishiba stated on Sunday that the country's monetary policy should continue to be accommodative, indicating the necessity of maintaining low borrowing costs to support a fragile economic recovery, according to The Japan Times. On Monday, Japan's Retail Trade increased by 2.8% year-on-year in August, surpassing market expectations of 2.3% and slightly exceeding the upwardly revised 2.7% rise from the previous month. On a month-over-month basis, seasonally adjusted Retail Trade rose by 0.8%, marking the largest increase in three months, following a 0.2% gain in July. Japan's Chief Cabinet Secretary, Yoshimasa Hayashi, refrained from commenting on Monday's daily stock market fluctuations. Hayashi emphasized the importance of closely monitoring the economic and financial situation both domestically and internationally with a sense of urgency. He also noted the need for ongoing collaboration with the Bank of Japan. 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.

United Kingdom M4 Money Supply (YoY) dipped from previous 2.1% to 1.7% in August

United Kingdom Net Lending to Individuals (MoM) came in at £4.2B, above forecasts (£4.1B) in August

The Mexican Peso (MXN) seesaws between tepid gains and losses on Monday after falling an average of 1.5% in its major pairs last week.

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The Bank of Mexico’s (Banxico) decision to cut interest rates by 25 basis points (0.25%) at its September meeting on Thursday, bringing the official cash rate down to 10.50%, as well as a downward revision to its forecasts for the economy, contributed to the Peso’s devaluation across the board.  Data showing a widening trade deficit added to the negativity surrounding the Mexican Peso after official figures showed it widened to $4.868 billion in August from $1.278 billion a year ago. These figures significantly exceeded market expectations of a $0.500 billion gap and reached a new two-year high.  The proximity of the United States (US) election and prospects of former President Donald Trump winning and then imposing an “America First” agenda, with negative implications for trade with Mexico, further add to the concerns regarding Mexico’s persistent trade deficit, which amounts to $10.438 billion for the first eight months of 2024. Mexican Peso traders prepare for data-heavy week The Mexican Peso oscillates between mild gains and losses on Monday ahead of a busy week of macroeconomic data releases and key events for its major peers – the US Dollar (USD), Euro (EUR) and Pound Sterling (GBP).  On Monday, speeches by European Central Bank (ECB) President Christine Lagarde and Chairman of the Federal Reserve (Fed) Jerome Powell could impact the EUR and USD, respectively. Recent weak data from the Eurozone, in particular, is leading to speculation in markets that the ECB will have to be more aggressive about cutting interest rates to aid growth, potentially weakening the Euro. In Mexico, Fiscal Balance data for August will be released, revealing the government’s spending shortfall.   On Tuesday, preliminary Eurozone inflation data for September, and then the Nonfarm Payrolls (NFP) on Friday, are further key data releases relating to key Peso pairs. The NFP release will be watched closely for signs of a slowdown in the labor market after the Fed made it clear it is now taking into account its mandate to provide full employment as part of its decision-making on interest rates.  Technical Analysis: USD/MXN trends higher within channel USD/MXN climbs steadily higher within its rising channel as it continues its short, medium and long-term bullish trend.  USD/MXN Daily Chart Friday’s close above 19.68 (September 25 high) provided more bullish certainty of the pair’s near-term upside bias towards a target at 20.15, the high of the year reached in early September. A further break above 19.76 (the September 27 high) would create a higher high and provide yet more proof of an extension of the uptrend. Mexican Peso FAQs What key factors drive the Mexican Peso? The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity. How do decisions of the Banxico impact the Mexican Peso? The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN. How does economic data influence the value of the Mexican Peso? Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate. How does broader risk sentiment impact the Mexican Peso? As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.  

United Kingdom M4 Money Supply (MoM) declined to -0.1% in August from previous 0.3%

United Kingdom Consumer Credit climbed from previous £1.215B to £1.295B in August

United Kingdom Mortgage Approvals came in at 64.858K, above forecasts (63.8K) in August

Spain Current Account Balance: €5.79B (July) vs €5.02B

NZD/USD extends its winning streak for the third successive day, trading around 0.6360 during the early European hours on Monday.

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Italy Trade Balance non-EU down to €2.69B in August from previous €6.036B

The GBP/JPY cross attracts some dip-buyers in the vicinity of mid-189.00s, or a one-week low and for now, seems to have stalled its retracement slide from a nearly two-month peak touched on Friday.

.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}}GBP/JPY stages a solid intraday recovery from over a one-week trough touched earlier this Monday.A combination of factors weighs on the JPY and lends support to the cross amid a modest GBP uptick.The divergent BoJ-BoE policy expectations warrant caution before placing aggressive bullish bets.The GBP/JPY cross attracts some dip-buyers in the vicinity of mid-189.00s, or a one-week low and for now, seems to have stalled its retracement slide from a nearly two-month peak touched on Friday. The move up lifts spot prices to the 191.00 neighborhood, back closer to the daily peak during the early European session, though the fundamental backdrop warrants some caution for bullish traders.  The Japanese Yen (JPY) weakens in reaction to comments from Japan's incoming Prime Minister (PM) Shigeru Ishiba, saying that the Bank of Japan's (BoJ) monetary policy must remain accommodative to underpin a fragile economic recovery. This, along with news that the new PM is planning a general election for October 27 and mixed Japanese economic data, continues to undermine the JPY and lends support to the GBP/JPY cross.  Meanwhile, the British Pound (GBP) draws support from a subdued US Dollar (USD) demand and expectations that the Bank of England's (BoE) rate-cutting cycle is likely to be slower than in the US. This turns out to be another factor acting as a tailwind for the GBP/JPY cross. That said, the growing market conviction that the BoJ will hike interest rates again by the end of this year should help limit any meaningful JPY losses. Apart from this, the risk of a further escalation of geopolitical tensions in the Middle East should benefit the safe-haven JPY and contribute to capping the GBP/JPY cross. Israel expanded its confrontation with Iran's allies and launched aggressive aerial assaults on Sunday against Houthis in Yemen and Hezbollah in Lebanon. This, in turn, fuels concerns that the fighting could spin out of control and trigger an all-out war in the region. From a technical perspective, the 50-day Simple Moving Average (SMA) crossed below the very important 200-day SMA earlier this month, forming a bearish 'Death Cross' on the daily chart. This further makes it prudent to wait for strong follow-through buying before positioning for the resumption of the recent goodish recovery from the monthly low in the absence of any relevant market-moving economic releases on Monday. Bank of Japan FAQs What is the Bank of Japan? The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%. What has been the Bank of Japan’s policy? The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance. How do Bank of Japan’s decisions influence the Japanese Yen? The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance. Why did the Bank of Japan decide to start unwinding its ultra-loose policy? A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.  

Germany Brandenburg CPI (MoM): 0% (September) vs -0.2%

Germany Baden-Wuerttemberg CPI (MoM): 0.1% (September) vs -0.3%

Germany Hesse CPI (MoM): 0% (September) vs -0.1%

Germany Hesse CPI (YoY) dipped from previous 1.5% to 1.2% in September

Germany Saxony CPI (YoY) fell from previous 2.6% to 2.4% in September

Germany Saxony CPI (MoM): 0.2% (September) vs -0.2%

Germany Baden-Wuerttemberg CPI (YoY) dipped from previous 1.5% to 1.4% in September

Germany North Rhine-Westphalia CPI (MoM) up to 0% in September from previous -0.1%

Germany North Rhine-Westphalia CPI (YoY): 1.5% (September) vs previous 1.7%

Germany Brandenburg CPI (YoY) fell from previous 1.7% to 1.4% in September

Germany Brandenburg CPI (MoM) increased to 0.3% in September from previous -0.2%

Germany Bavaria CPI (YoY) down to 1.9% in September from previous 2.1%

Germany Bavaria CPI (MoM) up to 0.1% in September from previous -0.1%

The Pound Sterling (GBP) continues to hold gains near the round-level resistance of 1.3400 against the US Dollar (USD) in Monday’s London session.

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The outlook for the GBP/USD pair remains firm as the Greenback trades near yearly lows after data released on Friday showed that US inflation decelerated further in August. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, hovers near the key support of 100.20. The Personal Consumption Expenditure Price Index (PCE) report showed that the annual inflation grew by 2.2%, slower than estimates of 2.3% and July’s reading of 2.5%. This slowdown in price pressures is likely welcome news for Federal Reserve (Fed) Chair Jerome Powell and his colleagues. However, a victory over inflation is still not a given as the core PCE price index – which excludes volatile food and energy prices and is the Federal Reserve’s (Fed) preferred inflation measure – rose accelerated to 2.7% from the prior release of 2.6%. The decline in US inflation has increased market expectations for more interest rate cuts, but it appears insufficient to cement another 50 basis points (bps) decline as the Fed is now more vigilant to growing labor market risks and an economic slowdown. This week, investors will focus on a slew of US economic data such as the ISM Manufacturing and Services PMIs, ADP Employment, and Nonfarm Payrolls (NFP) data for September and JOLTS Job Openings data for August, which will provide fresh cues on the current health of job market and the economy. In Monday’s session, investors will pay attention to Jerome Powell’s speech at 17:00 GMT, who is expected to provide fresh interest rate guidance. Powell’s commentary could indicate whether the Fed will cut interest rates again by a larger-than-usual cut of 50 bps, as it did on September 18, or will shift to a gradual reduction of 25 bps. Daily digest market movers: Pound Sterling underperforms against Asia-Pacific peers The Pound Sterling exhibits strength against its major peers, except Asia-Pacific currencies, at the start of the week. The British currency gains as investors expect that the pace and the depth of interest rate cuts by the Bank of England (BoE) to be lower than that of other central banks from Group of Seven (G-7) nations.  Asia-Pacific currencies, such as the Australian Dollar (AUD) and the New Zealand Dollar (NZD), perform strongly after China’s cabinet announced on Sunday that they will focus on solving outstanding economic problems and strive to complete annual economic and social development goals, Reuters reported. The likelihood of an improvement in China’s economic prospects improves the appeal of Asia-Pacific currencies given that their nations are major trading partners of China. Financial market participants expect the BoE to cut interest rates one more time by 25 bps in one of the remaining two meetings this year. For fresh cues, investors will focus on BoE Megan Greene’s speech at 20:10 GMT, who is an external member of the nine-member-led Monetary Policy Committee (MPC). Greene voted to leave interest rates unchanged in the monetary policy meetings on September 19 and August 1.  On the economic front, revised estimates of Q2 Gross Domestic Product (GDP) showed that the United Kingdom (UK) economy grew by 0.5%, slower than the flash reading of 0.6% on a quarterly basis. The annual Q2 GDP growth also came in lower at 0.7% from the preliminary estimate of 0.9%. Technical Analysis: Pound Sterling turns sideways near 1.3400The Pound Sterling consolidates near the key resistance of 1.3400 against the US Dollar in European trading hours. The near-term outlook of the GBP/USD pair remains firm as the 20-day Exponential Moving Average (EMA) near 1.3250 is sloping higher. Earlier in September, the Cable strengthened after recovering from a corrective move to near the trendline plotted from the December 28, 2023, high of 1.2828, from where it delivered a sharp increase after a breakout on August 21.  The 14-day Relative Strength Index (RSI) remains above 60.00, suggesting an active bullish momentum.  Looking up, the Cable will face resistance near the psychological level of 1.3500. On the downside, the 20-day EMA near 1.3235 will be the key support for Pound Sterling bulls. 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, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE). 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.  

Asian stock markets trade mixed on Monday. The Chinese stocks lead gains on more policy measures in China, while the concerns Japan's new Prime Minister favores normalizing interest rates weigh on Japanese stocks.

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Traders continue to react to the additional stimulus measures from the People's Bank of China (PBoC) to spur growth in the world's second-largest economy. Meanwhile, China’s Shanghai Composite rose by 8.75% to 3,357.20. Meanwhile, the Shenzhen Component climbed by 10.88% to 10,550, and the Hang Seng Index was up by 3.97% to 21,450. 

Data released on Monday showed that China’s NBS Manufacturing Purchasing Managers' Index (PMI) rose to 49.8 in September from 49.1 in August, above the market consensus of 49.5 in the reported month. The Non-Manufacturing PMI declined to 50.0 in September versus August’s 50.3 figure and the estimates of 50.4. Additionally, Caixin Manufacturing PMI declined to 49.3 in September after reporting 50.4 in August. Finally, Chinese Caixin Services PMI dropped sharply to 50.3 in September from 51.6 in August. 

Japan’s major indices face a sell-off on the day after the prime minister election, with the Nikkei 225 falling by 4.80% to 37,919, while the broad-based Topix was down 3.63% to 2,641. Shigeru Ishiba said Japan's monetary policy needs to be normalized and that financial income tax should be increased.

On the Indian front, the Nifty 50 index declined by 1.02% to 25,912 and the BSE Sensex 30 fell 1.12% to 84,630. The Indian rupee has remained largely stable against the USD in the current calendar year (CY 2024), depreciating by just 0.59% so far.

On Friday, Chief Economic Advisor (CEA) V Anantha Nageswaran noted that the Indian economy is projected to grow at a rate of 6.5-7.0% in the current financial year on a steady-state basis. AsianStocks FAQs Which are the main stock market indices in Asia? Asia contributes around 70% of global economic growth and hosts several key stock market indices. Among the region’s developed economies, the Japanese Nikkei – which represents 225 companies on the Tokyo stock exchange – and the South Korean Kospi stand out. China has three important indices: the Hong Kong Hang Seng, the Shanghai Composite and the Shenzhen Composite. As a big emerging economy, Indian equities are also catching the attention of investors, who increasingly invest in companies in the Sensex and Nifty indices. What are the main sectors represented in Asian stock markets? Asia’s main economies are different, and each has specific sectors to pay attention to. Technology companies dominate in indices in Japan, South Korea, and increasingly, China. Financial services are leading stock markets such as Hong Kong or Singapore, considered key hubs for the sector. Manufacturing is also big in China and Japan, with a strong focus on automobile production or electronics. The growing middle class in countries like China and India is also giving more and more prominence to companies focused on retail and e-commerce. What factors drive Asian stock markets? Many different factors drive Asian stock market indices, but the main factor behind their performance is the aggregate results of the component companies revealed in their quarterly and annual earnings reports. The economic fundamentals of each country, as well as their central bank decisions or their government’s fiscal policies, are also important factors. More broadly, political stability, technological progress or the rule of law can also impact equity markets. The performance of US equity indices is also a factor as, more often than not, Asian markets take the lead from Wall Street stocks overnight. Finally, the broader risk sentiment in markets also plays a role as equities are considered a risky investment compared to other investment options such as fixed-income securities. What are the risks of investing in Asia stock markets? Investing in equities is risky by itself, but investing in Asian stocks comes along with region-specific risks to be taken into account. Asian countries have a wide range of political systems, from full democracies to dictatorships, so their political stability, transparency, rule of law or corporate governance requirements may diverge considerably. Geopolitical events such as trade disputes or territorial conflicts can lead to volatility in stock markets, as can natural disasters. Moreover, currency fluctuations can also have an impact on the valuation of Asian stock markets. This is particularly true in export-oriented economies, which tend to suffer from a stronger currency and benefit from a weaker one as their products become cheaper abroad.  

Austria Producer Price Index (YoY) dipped from previous -1.8% to -2% in August

Austria Producer Price Index (MoM): 0.2% (August) vs 0%

Here is what you need to know on Monday, September 30: The US Dollar (USD) struggles to find demand to start the last trading day of the third quarter.

.fxs-major-currency-prices-wrapper{border:1px solid #dddedf;background:#fff;margin-bottom:32px;width:100%;float:left}.fxs-major-currency-prices-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-major-currency-prices-content{color:#49494f;font-weight:300;padding:0;font-size:14.72px;line-height:20px;margin:8px 16px}table.fxs-major-currency-prices-currency-prices-table{width:100%;text-align:center;border-collapse:collapse;font-size:1.8svh}table.fxs-major-currency-prices-currency-prices-table th{background-color:#f2f2f2}table.fxs-major-currency-prices-currency-prices-table td{color:#fff}table.fxs-major-currency-prices-currency-prices-table td.green{background-color:#9cd6cd}table.fxs-major-currency-prices-currency-prices-table td.red{background-color:#faafb5}table.fxs-major-currency-prices-currency-prices-table td.blue-grey{background-color:#888a93}.fxs-major-currency-prices-currency-prices-legend{font-size:11px;margin:8px;color:#49494f}@media (min-width:680px){.fxs-major-currency-prices-content{font-size:16px;line-height:21.6px}.fxs-major-currency-prices-title{font-size:19.2px;line-height:27.2px}}.fxs-major-currency-prices-currency-price td.dark-green{background-color:#39ad9a}.fxs-major-currency-prices-currency-price td.light-green{background-color:#9cd6cd}.fxs-major-currency-prices-currency-price td.gray{background-color:#888a93}.fxs-major-currency-prices-currency-price td.light-red{background-color:#faafb5}.fxs-major-currency-prices-currency-price td.strong-red{background-color:#f55e6a} .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}} Here is what you need to know on Monday, September 30: The US Dollar (USD) struggles to find demand to start the last trading day of the third quarter. In the first half of the day on Monday, investors will pay close attention to Consumer Price Index data from Germany. Later in the American session, several Federal Reserve policymakers, including Chairman Jerome Powell, will be delivering speeches. The USD Index turned south on Friday and touched its weakest level in over a year at 100.15, before staging a technical correction toward the end of the week. The US Bureau of Economic Analysis reported that the core Personal Consumption Expenditures (PCE) Price Index rose 0.1% on a monthly basis in August, at a softer pace than the market expectation of 0.2%. Early Monday, the USD Index stays below 100.50. Powell will participate in a moderated discussion titled "A View from the Federal Reserve Board" at the National Association for Business Economics Annual Meeting, in Nashville, starting at 17:00 GMT. Fed Governor Michelle Bowman is also scheduled to speak in the early American session. Meanwhile, US stock index futures trade marginally lower on the day. US Dollar PRICE Last 7 days The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the weakest against the New Zealand Dollar.   USD EUR GBP JPY CAD AUD NZD CHF USD   -0.01% -0.50% -1.38% -0.40% -1.84% -2.08% -0.95% EUR 0.01%   -0.55% -1.33% -0.37% -1.88% -2.05% -0.95% GBP 0.50% 0.55%   -0.72% 0.17% -1.34% -1.52% -0.41% JPY 1.38% 1.33% 0.72%   1.00% -0.55% -0.69% 0.32% CAD 0.40% 0.37% -0.17% -1.00%   -1.40% -1.69% -0.58% AUD 1.84% 1.88% 1.34% 0.55% 1.40%   -0.16% 0.95% NZD 2.08% 2.05% 1.52% 0.69% 1.69% 0.16%   1.12% CHF 0.95% 0.95% 0.41% -0.32% 0.58% -0.95% -1.12%   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 data from China showed on Monday that the Caixin Manufacturing PMI declined to 49.3 in September from 50.4 in August, while the Caixin Services PMI edged lower to 50.3 from 51.6. Over the weekend, Bloomberg reported that the People's Bank of China (PBOC) is planning to tell banks to lower mortgage rates for existing home loans before October 31 in its latest attempt to shore up the troubled property sector as the economy slows. In the meantime, ANZ Business Confidence Index in Australia improved to 60.9 in September from 50.6 in August. AUD/USD edged higher to start the new week and the pair was last seen trading at its highest level since February 2023 above 0.6900. The UK's Office for National Statistics announced early Monday that it revised the annualized Gross Domestic Product (GDP) growth for the second quarter lower to 0.7% from the 0.9% reported in the advanced estimate. GBP/USD clings to modest daily gains, slightly below 1.3400 after this data. After declining sharply and losing more than 1.5% on a daily basis on Friday, USD/JPY continues to inch lower toward 142.00 early Monday. Following reports from various Japanese media outlets over the weekend, Japan’s incoming Prime Minister (PM) Shigeru Ishiba proposed October 27 for a snap election. If a snap election is confirmed by end-October, the parliament will likely be dissolved by October 9.EUR/USD stays relatively quiet in the early European session and fluctuates in a narrow channel above 1.1150.  After setting a new all-time high above $2,680 on Thursday, Gold registered modest losses on Friday. XAU/USD holds steady and trades in a tight range above $2,650 early Monday. Fed FAQs What does the Federal Reserve do, how does it impact the US Dollar? Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback. How often does the Fed hold monetary policy meetings? The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis. What is Quantitative Easing (QE) and how does it impact USD? In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar. What is Quantitative Tightening (QT) and how does it impact the US Dollar? Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.  

FX option expiries for Sept 30 NY cut at 10:00 Eastern Time, via DTCC, can be found below.

FX option expiries for Sept 30 NY cut at 10:00 Eastern Time, via DTCC, can be found below. EUR/USD: EUR amounts 1.1125 813m 1.1200 1.1b 1.1260 780m 1.1300 761m GBP/USD: GBP amounts      1.3220 528m 1.3370 824m USD/JPY: USD amounts                      144.00 1b 144.68 800m 145.00 1.7b USD/CHF: USD amounts      0.8450 540m 0.8600 477m AUD/USD: AUD amounts 0.6990 1.8b EUR/GBP: EUR amounts         0.8300 575m

EUR/GBP retraces its recent gains from the previous session, trading around 0.8340 during the Asian hours on Monday.

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The currency cross remians tepid following the release of the Gross Domestic Product (GDP) data for the second quater from the United Kingdom (UK). The UK Gross Domestic Product (GDP) grew by 0.5% quarter-over-quarter in the second quarter, slightly below the expected and previous increase of 0.6%. On an annual basis, GDP rose by 0.7%, also falling short of the forecasted and prior growth rate of 0.9%. The EUR/GBP cross recieved downward pressure from the increasing odds of the European Central Bank (ECB) implementing another interest rate cut in October. Traders would likely observe a slew of economic releases from Germany scheduled to be released later in the day, including preliminary Consumer Price Index (CPI) data for September. Additionally, lower-than-expected inflation in France and Spain has reinforced the likelihood of the third cut in the ECB's ongoing policy-easing cycle, which began in June. The ECB resumed cutting rates in September after holding them steady in July. France's inflation grew by 1.5% year-over-year in September, significantly below the estimated 1.9% and down from the previous release of 2.2%. On a monthly basis, price pressures deflated at a sharp rate of 1.2%, exceeding expectations of a 0.8% decline. In Spain, the annual Harmonized Index of Consumer Prices (HICP) increased by 1.7% in September, lower than the forecasted 1.9% and a drop from August’s 2.4%. Month-on-month, the HICP fell by 0.1%, contrary to expectations for no change. 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.  

United Kingdom Current Account came in at £-28.397B, above forecasts (£-32.2B) in 2Q

Germany Import Price Index (MoM) below expectations (-0.3%) in August: Actual (-0.4%)

South Africa Private Sector Credit rose from previous 3.5% to 4.95% in August

United Kingdom Gross Domestic Product (YoY) came in at 0.7%, below expectations (0.9%) in 2Q

Germany Import Price Index (YoY) dipped from previous 0.9% to 0.2% in August

United Kingdom Current Account came in at £-28.4B, above forecasts (£-32.2B) in 2Q

The USD/CHF pair recovers to around 0.8415, snapping the two-day losing streak during the early European session on Monday.

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Slowing Personal Consumption Expenditures (PCE) Price Index inflation data in August has prompted traders to bet the Fed to continue a fast pace of rate cuts as price pressures ease toward its 2% target. This, in turn, is likely to undermine the US Dollar (USD) in the near term. The CME FedWatch Tool showed that markets are pricing in nearly a 54% chance of a half-point cut in November, while the likelihood of a quarter-point cut stands at 46%.

Meanwhile, Israel expanded its attacks on Hezbollah in Lebanon and the Houthis in Yemen, raising fears of a regional war, as Hezbollah said it will continue to fight even as it faces growing losses in its senior ranks. Traders will closely watch the development surrounding geopolitical risks. Any signs of escalating tensions in the Middle East could boost the demand for safe-haven flows, benefitting the Swiss Franc (CHF). 

The Swiss National Bank (SNB) decided to lower its borrowing costs last week, bringing its key interest rate down by 25 bps to 1.0%. “I expect another two 25bp moves in December and March at the very least, primarily because I don’t see any near-term sources of depreciation for the franc without a stronger stance on intervention from the SNB. We are heading back towards zero relatively quickly,” said Adrian Prettejohn, Europe economist at Capital Economics.  Swiss Franc FAQs What key factors drive the Swiss Franc? The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone. Why is the Swiss Franc considered a safe-haven currency? The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in. How do decisions of the Swiss National Bank impact the Swiss Franc? The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF. How does economic data influence the value of the Swiss Franc? Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate. How does the Eurozone monetary policy affect the Swiss Franc? As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.

 

 

United Kingdom Gross Domestic Product (QoQ) below expectations (0.6%) in 2Q: Actual (0.5%)

United Kingdom Total Business Investment (QoQ) above forecasts (-0.1%) in 2Q: Actual (1.4%)

United Kingdom Total Business Investment (YoY) above expectations (-1.1%) in 2Q: Actual (0.2%)

Following reports from various Japanese media outlets over the weekend, Japan’s incoming Prime Minister (PM) Shigeru Ishiba proposed October 27 for a snap election.

Following reports from various Japanese media outlets over the weekend, Japan’s incoming Prime Minister (PM) Shigeru Ishiba proposed October 27 for a snap election. If a snap election is confirmed by end-October, the parliament will likely be dissolved by October 9. Ishiba will be sworn in as prime minister on Tuesday and is expected to reshuffle the Cabinet positions ahead of the snap election.

The Japanese Yen (JPY) edges lower against the US Dollar (USD) on Monday after dovish comments from Japan's upcoming Prime Minister, former Defense Chief Shigeru Ishiba.

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Ishiba stated on Sunday that the country's monetary policy should continue to be accommodative, indicating the necessity of maintaining low borrowing costs to support a fragile economic recovery, according to The Japan Times. Japan's Retail Trade increased by 2.8% year-on-year in August, surpassing market expectations of 2.3% and slightly exceeding the upwardly revised 2.7% rise from the previous month. On a month-over-month basis, seasonally adjusted Retail Trade rose by 0.8%, marking the largest increase in three months, following a 0.2% gain in July. The US Dollar received downward pressure following Friday’s US Core Personal Consumption Expenditures (PCE) Price Index data for August, which aligns with the US Federal Reserve's (Fed) inflation outlook. This has reinforced the possibility of an aggressive rate-cutting cycle by the central bank. The CME FedWatch Tool indicates that markets are assigning a 42.9% probability to a 25 basis point rate cut by the Federal Reserve in November, while the likelihood of a 50-basis-point increased to 57.1%, up from 50.4% a week ago. Daily Digest Market Movers: Japanese Yen receives downward pressure from doubts over BoJ policy outlook Japan's Chief Cabinet Secretary, Yoshimasa Hayashi, refrained from commenting on Monday's daily stock market fluctuations. Hayashi emphasized the importance of closely monitoring the economic and financial situation both domestically and internationally with a sense of urgency. He also noted the need for ongoing collaboration with the Bank of Japan. St. Louis Federal Reserve President Alberto Musalem stated on Friday, according to the Financial Times, that the Fed should begin cutting interest rates "gradually" following a larger-than-usual half-point reduction at the September meeting. Musalem acknowledged the possibility of the economy weakening more than anticipated, saying, "If that were the case, then a faster pace of rate reductions might be appropriate." The US Core Personal Consumption Expenditures (PCE) Price Index for August increased by 0.1% month-over-month, falling short of market expectations of a 0.2% rise and lower than the previous 0.2% increase. Meanwhile, the Core PCE on a year-over-year basis rose by 2.7%, matching expectations and slightly above the prior reading of 2.6%. The Tokyo Consumer Price Index (CPI) increased 2.2% year-over-year in September, down from a 2.6% rise in August. Meanwhile, the CPI excluding fresh food and energy climbed 1.6% YoY in September, unchanged from the previous reading. The CPI excluding fresh food increased 2.0% as expected, compared to the previous rise of 2.4%. US Gross Domestic Product Annualized increased at a rate of 3.0% in the second quarter, as previously estimated, according to the US Bureau of Economic Analysis (BEA) on Thursday. Meanwhile, the GDP Price Index rose 2.5% in the second quarter. On Thursday, the BoJ Monetary Policy Meeting Minutes expressed the members’ consensus on the importance of remaining vigilant regarding the risks of inflation exceeding targets. Several members indicated that raising rates to 0.25% would be suitable as a way to adjust the level of monetary support. A few others suggested that a moderate adjustment to monetary support would also be appropriate. Last week, BoJ Governor Kazuo Ueda indicated that the central bank has time to evaluate market and economic conditions before making any policy adjustments, signaling that there is no urgency to raise interest rates again. Ueda also noted that Japan's real interest rate remains deeply negative, which is helping to stimulate the economy and drive up prices. Technical Analysis: USD/JPY remains above 142.00 after breaking below the ascending channel USD/JPY trades around 142.20 on Monday. Analysis of the daily chart indicates that the pair has broken below the ascending channel pattern, signaling a momentum shift from a bullish to a bearish bias. Furthermore, the 14-day Relative Strength Index (RSI) is situated below the 50 level, indicating a bearish sentiment is in play. In terms of support, the USD/JPY pair may navigate around the 139.58 region, the lowest point since June 2023. On the upside, a return to the ascending channel could weaken the bearish case and lead the USD/JPY pair to test the nine-day Exponential Moving Average (EMA) at the 143.10 level. A break above this level could support the pair to test the upper boundary of the ascending channel at 146.20 level, followed by its five-week high of 147.21 level, which was recorded on September 3. USD/JPY: Daily ChartJapanese Yen PRICE Today The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Australian Dollar.   USD EUR GBP JPY CAD AUD NZD CHF USD   0.01% -0.13% -0.16% -0.04% -0.51% -0.60% -0.04% EUR -0.01%   -0.13% -0.16% -0.03% -0.46% -0.58% 0.03% GBP 0.13% 0.13%   0.10% 0.10% -0.33% -0.45% 0.15% JPY 0.16% 0.16% -0.10%   0.15% -0.43% -0.43% 0.15% CAD 0.04% 0.03% -0.10% -0.15%   -0.42% -0.55% 0.05% AUD 0.51% 0.46% 0.33% 0.43% 0.42%   -0.12% 0.48% NZD 0.60% 0.58% 0.45% 0.43% 0.55% 0.12%   0.58% CHF 0.04% -0.03% -0.15% -0.15% -0.05% -0.48% -0.58%   The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote). 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.

Silver Price (XAG/USD) attracts some sellers to near $31.55 during the early Asian session on Monday.

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The upbeat mood could exert some selling pressure on the white metal as traders await the fresh catalysts. The Fed Chair Jerome Powell's speech might offer some hints about the US interest rate outlook for this year. 

The People's Bank of China (PBoC) Governor Pan Gongsheng announced new stimulus measures to revive a flagging property sector and low domestic demand in the country. Also, the PBoC stated the central bank would reduce the amount of reserves banks are required to keep. “Silver is going to continue to rally over the coming quarters because of the consecutive rate cuts and as China’s stimulus could continue for some time,” said Amelia Xiao Fu, head of commodity markets at BOCI.

Additionally, hopes of another large US rate cut provide some support to the Silver price. According to the CME FedWatch Tool, Interest rate futures contracts have priced in a nearly 54% odds of a half-point cut in November, while the possibility of a quarter-point cut stands at 46%. 

Meanwhile, Israel’s killing of Hezbollah leader Hassan Nasrallah has further fuelled geopolitical tensions in the Middle East and intensified the war at its border with Lebanon. The Iran-backed militant group says it will continue to fight, even as a growing number of senior Hezbollah figures have been killed, per CNN. The rising geopolitical tensions in the Middle East could boost XAG/USD. 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.  
 

Japan Housing Starts (YoY) fell from previous -0.2% to -5.1% in August

Japan Annualized Housing Starts climbed from previous 0.773M to 0.777M in August

Japan Construction Orders (YoY): 8.7% (August) vs previous 62.8%

The EUR/USD pair struggles to capitalize on Friday's modest rebound from the 1.1125-1.1120 support area and kicks off the new week on a subdued note.

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Spot prices currently trade around the 1.1160 area, nearly unchanged for the day, as traders keenly await the release of the flash German consumer inflation figures and the Federal Reserve (Fed) Chair Jerome Powell's speech for some fresh impetus.  From a technical perspective, the EUR/USD pair remains confined in a multi-day-old trading band. Against the backdrop of the recovery from the 1.1000 psychological mark, or the monthly low, this range-bounce price action might be categorized as a bullish consolidation phase. This, along with positive oscillators on the daily chart, suggests that the path of least resistance for spot prices remains to the upside.  That said, the recent repeated failures to build on the momentum or find acceptance above the 1.1200 round figure constitute the formation of a bearish double-top pattern and warrant some caution for bullish traders. This makes it prudent to wait for a sustained breakout through the aforementioned short-term trading range before confirming and positioning for the next leg of a directional move for the EUR/USD pair.  In the meantime, the 1.1200 mark might continue to act as an immediate hurdle ahead of the 1.1215 region, or a 14-month peak touched last Wednesday. Some follow-through buying will be seen as a fresh trigger for bulls and lift the EUR/USD pair to the 1.1275 region, or the July 2023 high. The momentum could extend beyond the 1.1300 mark, towards the 1.1335 region en route to the 1.1375 area and the 1.1400 round figure. On the flip side, weakness below the 1.1125-1.1120 immediate support could drag the EUR/USD pair below the 1.1100 mark, towards testing last week's swing low, around the 1.1085-1.1080 zone. The subsequent fall could expose the 50-day Simple Moving Average (SMA), near the 1.1030 zone before spot prices eventually drop to the 1.1000 mark, which if broken will shift the near-term bias in favor of bearish traders. EUR/USD daily chartEconomic Indicator Consumer Price Index (YoY) The Consumer Price Index (CPI), released by the German statistics office Destatis on a monthly basis, measures the average price change for all goods and services purchased by households for consumption purposes. The CPI is the main indicator to measure inflation and changes in purchasing trends. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is bullish for the Euro (EUR), while a low reading is bearish. Read more. Next release: Mon Sep 30, 2024 12:00 (Prel)Frequency: MonthlyConsensus: -Previous: 1.9%Source: Federal Statistics Office of Germany  

Gold prices fell in India on Monday, 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.)

The USD/CAD pair kicks off the new week on a subdued note and oscillates in a narrow band, above the 1.3500 psychological mark through the Asian session.

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The mixed fundamental backdrop, meanwhile, warrants some caution before positioning for a firm near-term direction and extension of the pair's goodish rebound from the 1.3420 area, or the lowest level since March 8 touched last week.  The US Dollar (USD) attracts some haven flows amid the risk of a further escalation of geopolitical tensions in the Middle East. The Canadian Dollar (CAD), on the other hand, is weighed down by bet for a bigger interest rate cut by the Bank of Canada (BoC). This, in turn, acts as a tailwind for the USD/CAD pair, though a combination of factors hold back traders from placing fresh bullish bets and caps the upside.  The global risk sentiment gets an additional boost in reaction to more stimulus announced by China over the weekend. This, along with expectations for a more aggressive policy easing by the Federal Reserve (Fed), keeps a lid on any meaningful upside for the safe-haven buck and the USD/CAD pair. In fact, the markets are pricing in a greater chance of another oversized rate cut by the Fed at its November meeting. Meanwhile,  the possibility of a widening Middle East conflict, to a larger extent, overshadows worries about slowing demand in China – the world's top oil importer – and lends support to Crude Oil prices. This, in turn, is seen underpinning the commodity-linked Loonie and contributing to capping the USD/CAD pair as traders now look to Fed Chair Jerome Powell's speech for a fresh impetus later during the US session. 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.  

West Texas Intermediate (WTI) Oil price holds its position around $69.20 per barrel during Monday’s Asian hours.

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However, crude Oil prices could appreciate amid growing concerns about potential supply disruptions from the Middle East following Israel's intensified attacks on Iranian-backed militant groups Hezbollah and the Houthis. These geopolitical tensions may lead to fears of instability in the region, potentially impacting Oil supply and driving prices higher. Reuters reports that ANZ Research has noted that the recent escalation of attacks in the Middle East is raising the likelihood of Iran, a significant producer and member of the Organization of the Petroleum Exporting Countries (OPEC), becoming directly involved in the conflict. Israel announced it bombed Houthi targets in Yemen on Sunday, broadening its confrontation with Iran's allies. This action follows the killing of Hezbollah leader Sayyed Hassan Nasrallah two days earlier, intensifying the ongoing conflict in Lebanon. Oil prices might have received downward pressure following the mixed Manufacturing Purchasing Managers’ Index (PMI) data from the world’s largest crude importer China. China's Caixin Manufacturing Purchasing Managers' Index (PMI) fell to 49.3 in September, indicating contraction, down from 50.4 in August. China’s NBS Manufacturing Purchasing Managers' Index (PMI) improved to 49.8 in September, up from 49.1 in the previous month and surpassing the market consensus of 49.5. Additionally, Oil traders are closely monitoring recent monetary measures in China aimed at stimulating economic activity and boosting energy demand. Last week, China announced to inject over CNY 1 trillion in capital into its largest state banks, facing multiple challenges. This substantial capital infusion would mark the first of its kind since the 2008 global financial crisis. However, crude Oil prices may face challenges from Saudi Arabia's plans to increase production later this year, alongside OPEC+'s decision to raise output by 180,000 barrels per day in December. A report from the Financial Times, citing unnamed sources familiar with the country's plans, indicated that Saudi Arabia is committed to resuming production on December 1, even if it results in a period of lower prices. 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 NZD/USD pair attracts some buyers for the third successive day and climbs to a fresh year-to-date (YTD) peak, around the 0.6375 region during the Asian session on Monday.

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The move provides an additional boost to the already upbeat market mood and turns out to be a key factor benefiting the risk-sensitive Kiwi. Apart from this, subdued US Dollar (USD) price action, amid dovish Federal Reserve (Fed) expectations, further seems to act as a tailwind for the NZD/USD pair.  According to the CME Group's FedWatch Tool, the markets are currently pricing in over a 50% chance of another oversized interest rate cut by the US central bank in November. This keeps the USD Index (DXY), which tracks the Greenback against a basket of currencies, near its lowest level since July 2023 touched last week. That said, the risk of a further escalation of conflict in the Middle East and an out-out war in the region seems to underpin the safe-haven buck, capping the upside for the NZD/USD pair.  Meanwhile, the mixed PMI prints released from China earlier today do little to impress bulls or provide any impetus. In fact, China’s official Manufacturing PMI improved to 49.8 in September from 49.1, beating estimates of 49.5, while the NBS Non-Manufacturing PMI unexpectedly fell to 50.0 from August’s 50.3 figure. China's Caixin Manufacturing PMI contracted to 49.3 in September, from 50.4 in the previous month, and the Caixin Services PMI dropped to 50.3 during the reported month from 51.6 in August. Nevertheless, the fundamental backdrop suggests that the path of least resistance for spot prices is to the upside and supports prospects for an extension of a three-week-old uptrend. Investors now look to the release of the Chicago PMI, due later during the early North American session, though the focus will remain glued to Fed Chair Jerome Powell's speech. This, along with the broader risk sentiment, will drive the USD demand and allow traders to grab short-term opportunities around the NZD/USD pair. Economic Indicator Caixin Manufacturing PMI The Caixin Manufacturing Purchasing Managers Index (PMI), released on a monthly basis by Caixin Insight Group and S&P Global, is a leading indicator gauging business activity in China’s manufacturing sector. The data is derived from surveys of senior executives at both private-sector and state-owned companies. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), industrial production, employment and inflation.The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the manufacturing economy is generally expanding, a bullish sign for the Renminbi (CNY). Meanwhile, a reading below 50 signals that activity among goods producers is generally declining, which is seen as bearish for CNY. Read more. Last release: Mon Sep 30, 2024 01:45 Frequency: MonthlyActual: 49.3Consensus: -Previous: 50.4Source: IHS Markit  

The Indian Rupee (INR) weakens on Monday, pressured by month-end US Dollar (USD) demand from importers and likely interventions by the Reserve Bank of India (RBI).

.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}}Indian Rupee trades in negative territory in Monday’s Asian session.The USD month-end flows and potential RBI intervention underpin the pair. Investors will monitor the Fed's Bowman speech on Monday.The Indian Rupee (INR) weakens on Monday, pressured by month-end US Dollar (USD) demand from importers and likely interventions by the Reserve Bank of India (RBI). However, strong inflows and lower crude oil prices might help limit the INR’s losses. 

Investors will focus on Fed Governor Michelle Bowman's speech on Monday, which might offer some insight and outlook on the US interest rate. Also, the Chicago Purchasing Managers' Index (PMI) and Dallas Fed Manufacturing Business Index will be released. On the Indian docket, the August Federal Fiscal Deficit is due later in the day Daily Digest Market Movers: Indian Rupee softens as USD demand weighs heavily The Indian rupee has remained largely stable against the USD in the current calendar year (CY 2024), depreciating by just 0.59% so far. Chief Economic Advisor (CEA) V Anantha Nageswaran said on Friday that the Indian economy is estimated to grow at a rate of 6.5-7% in the current financial year on a steady-state basis. The Personal Consumption Expenditures (PCE) Price Index rose by 2.2% year-over-year in August, compared to 2.5% in July, the US Bureau of Economic Analysis (BEA) showed on Friday. This figure was softer than the estimates of 2.3%.  The core PCE, which excludes the more volatile food and energy prices, climbed 2.7% YoY in August, compared to the previous reading of 2.6%,  in line with the consensus of 2.7%. On a monthly basis, the core PCE Price Index increased by 0.1% in the same report period versus 0.2% prior.  University of Michigan's Consumer Sentiment Index rose to 70.1 in September from 66.0 in August, better than the estimates of 69.3.  Interest rate futures contracts have priced in a nearly 54% chance of a half-point cut in November, versus a 46% possibility of a quarter-point cut, according to the CME FedWatch Tool. Technical Analysis: USD/INR tests rectangle pullback, success could see upward resumption The Indian Rupee trades softer on the day. According to the daily chart, the constructive bias of the USD/INR pair persists as the price holds above the key 100-day Exponential Moving Average (EMA). However, further downside looks favorable as the RSI is located below the midline near 46.60. 

The support-turned-resistance level at 83.75 acts as an immediate resistance level for USD/INR. Further north, the next upside barrier emerges at the 84.00 psychological mark. 

The potential support level is located at the 100-period EMA at 83.62. Any follow-through selling below this level will see a drop to 83.00, representing the psychological level and the low of May 24.  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) kicks off the new week on a softer note, albeit it remains confined in a multi-day-old range and within striking distance of the all-time peak touched last Thursday.

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Israel intensified the war at its border with Lebanon, raising the risk of a further escalation of geopolitical tensions in the Middle East. Apart from this, news that Japan's new Prime Minister Shigeru Ishiba is planning a general election for October 27, along with the US political uncertainty, should lend support to the safe-haven precious metal. Furthermore, dovish Federal Reserve (Fed) expectations keep the US Dollar (USD) bulls on the defensive, near the lowest level since July 2023 touched on Friday, and might turn out to be another factor acting as a tailwind for the non-yielding Gold price. That said, the risk-on environment, bolstered by additional stimulus announced by China over the weekend, is seen exerting some pressure on the XAU/USD for the second straight day. Nevertheless, the fundamental backdrop supports prospects for the emergence of some dip-buying.  Daily Digest Market Movers: Gold price is undermined by the risk-on mood, Fed rate cut bets and geopolitics could limit deeper losses Israel expanded its confrontation with Iran's allies – Houthis in Yemen and Hezbollah in Lebanon – and launched aggressive aerial assaults on Sunday, fueling fears about an all-out war in the Middle East. According to a statement by the Israeli Defence Forces dozens of aircraft, including fighter jets, power plants and a seaport at the Ras Issa and Hodeidah ports in Yemen were targeted in the airstrikes. Israeli airstrikes across Lebanon killed the deputy head of the militant group Hezbollah's Central Council, Nabil Kaouk, making him the seventh leader slain in Israeli attacks in a little over a week.  Investors now seem concerned that the fighting could spin out of control and draw in Iran and the United States, Israel's main ally, which, in turn, should act as a tailwind for the safe-haven Gold price.  The current market pricing indicates a greater chance that the US Federal Reserve will again lower borrowing costs by 50 basis points for the second straight monetary policy meeting in November.  Dovish Fed expectations fail to assist the US Dollar to register any meaningful recovery from its lowest level since July 2023 and should contribute to limiting losses for the non-yielding yellow metal.  St. Louis Fed President Alberto Musalem said on Friday that the US central bank should revert to cutting interest rates gradually after a larger-than-usual half-point reduction in the September meeting. The global risk sentiment gets an additional boost after the People's Bank of China announced on Sunday that it would tell banks to lower mortgage rates for existing home loans by October 31. This comes on top of last week's slew of monetary, fiscal and liquidity support measures – China's biggest stimulus package since the pandemic – and remains supportive of the upbeat mood.  China’s official Manufacturing PMI improved to 49.8 in September from 49.1, beating estimates of 49.5, while the NBS Non-Manufacturing PMI unexpectedly fell to 50.0 from August’s 50.3 figure. China's Caixin Manufacturing PMI contracted to 49.3 in September, from 50.4 in the previous month, and the Caixin Services PMI dropped to 50.3 during the reported month from 51.6 in August. Meanwhile, the upbeat mood is seen exerting some downward pressure on the safe-haven precious metal as traders now look to Fed Chair Jerome Powell's speech for some meaningful impetus. Technical Outlook: Gold price could attract dip-buyers near an ascending trend-channel throwback From a technical perspective, any subsequent fall is likely to find decent support near a short-term ascending trend-channel resistance breakpoint, around the $2,625 region. This is followed by the $2,600 mark, which if broken decisively could pave the way for some meaningful downside in the near term. Given that the Relative Strength Index (RSI) on the daily chart is still hovering near the overbought zone, the Gold price might then accelerate the slide towards the $2,560 intermediate support en route to the $2,535-2,530 region. On the flip side, the $2,670-2,671 area now seems to act as an immediate hurdle ahead of the $2,685-2,686 zone, or the record high touched last Thursday. This is closely followed by the $2,700 round figure, which if conquered will be seen as a fresh trigger for bullish traders and set the stage for an extension of a multi-month-old uptrend. 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 its winning streak for the third consecutive session on Monday.

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This upside follows the Purchasing Managers’ Index (PMI) data from China, Australia’s largest trading partner. Additionally, the rising expectations that the US Federal Reserve (Fed) may continue its policy easing in November is weakening the US Dollar and underpinning the AUD/USD pair. China's Caixin Manufacturing Purchasing Managers' Index (PMI) fell to 49.3 in September, indicating contraction, down from 50.4 in August. Meanwhile, the Caixin Services PMI saw a significant decline, dropping to 50.3 from August’s 51.6 reading, reflecting a slowdown in the services sector. The US Dollar received downward pressure following Friday’s US Core Personal Consumption Expenditures (PCE) Price Index data for August. The monthly index increased by 0.1% MoM, falling short of the expected 0.2% rise, aligning with the Federal Reserve's outlook that inflation is easing in the US economy. This has reinforced the possibility of an aggressive rate-cutting cycle by the Fed. The CME FedWatch Tool indicates that markets are assigning a 42.9% probability to a 25 basis point rate cut by the Federal Reserve in November, while the likelihood of a 50-basis-point increase to 57.1%, up from 50.4% a week ago. Daily Digest Market Movers: Australian Dollar rises due to RBA’s hawkish stance China’s NBS Manufacturing Purchasing Managers' Index (PMI) improved to 49.8 in September, up from 49.1 in the previous month and surpassing the market consensus of 49.5. However, the Non-Manufacturing PMI declined to 50.0 in September, compared to 50.3 in August and below the expected 50.4. The Reserve Bank of Australia’s (RBA) hawkish stance contributes to the upside of the Australian Dollar. The RBA kept its cash rate at 4.35% for a seventh consecutive meeting and stated that the policy would need to stay restrictive to ensure inflation slowed. St. Louis Federal Reserve President Alberto Musalem stated on Friday, according to the Financial Times, that the Fed should begin cutting interest rates "gradually" following a larger-than-usual half-point reduction at the September meeting. Musalem acknowledged the possibility of the economy weakening more than anticipated, saying, "If that were the case, then a faster pace of rate reductions might be appropriate." During his China visit, Australian Treasurer Jim Chalmers had candid and productive discussions with the National Development and Reform Commission (NDRC). Chalmers highlighted China's economic slowdown as a key factor in weaker global growth while welcoming the country's new stimulus measures as a "really welcome development." US Gross Domestic Product Annualized increased at a rate of 3.0% in the second quarter, as previously estimated, according to the US Bureau of Economic Analysis (BEA) on Thursday. Meanwhile, the GDP Price Index rose 2.5% in the second quarter. China plans to inject over CNY 1 trillion in capital into its largest state banks, facing challenges such as shrinking margins, declining profits, and increasing bad loans. This substantial capital infusion would mark the first of its kind since the 2008 global financial crisis. According to the Reserve Bank of Australia's Financial Stability Review from September 2024, the Australian financial system remains resilient, with risks largely contained. However, notable concerns include stress in China's financial sector and the limited response from Beijing to address these issues. Domestically, a small but growing portion of Australian home borrowers are falling behind on their payments, though only about 2% of owner-occupier borrowers are at serious risk of default. The Commonwealth Bank of Australia (CBA) anticipates that the RBA must revise its consumption forecasts downward in November. The RBA has already acknowledged downside risks to its current outlook. This potential revision, combined with expectations of a further rise in unemployment and trimmed mean inflation aligning with CBA's forecasts, could position the RBA to implement rate cuts before the end of the year. Technical Analysis: Australian Dollar remains above 0.6920, lower boundary of an ascending channel The AUD/USD pair trades near 0.6920 on Monday. Technical analysis of the daily chart shows that the pair is trekking along the lower boundary of an ascending channel pattern. The AUD/USD pair stays above the boundary, indicating continued bullish momentum. Additionally, the 14-day Relative Strength Index (RSI) remains above the 50 level, confirming the bullish sentiment. In terms of resistance, the AUD/USD pair could target the region near the upper boundary of the ascending channel, which is around the 0.7000 level. If the pair successfully breaks above this level, it could signal further bullish potential. However, failure to break through could result in a pullback within the channel. On the downside, a break below the lower boundary of the ascending channel could weaken the bullish bias and lead the AUD/USD pair to test the nine-day Exponential Moving Average (EMA) at the 0.6853 level. A break below this level could cause the emergence of the bearish bias and lead the pair to navigate the region around its six-week low of 0.6622. AUD/USD: Daily ChartAustralian Dollar PRICE Today The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.   USD EUR GBP JPY CAD AUD NZD CHF USD   0.06% -0.02% 0.03% 0.05% -0.21% -0.32% -0.06% EUR -0.06%   -0.07% -0.02% 0.03% -0.20% -0.35% -0.03% GBP 0.02% 0.07%   0.15% 0.09% -0.13% -0.28% 0.03% JPY -0.03% 0.02% -0.15%   0.09% -0.29% -0.32% -0.02% CAD -0.05% -0.03% -0.09% -0.09%   -0.22% -0.38% -0.06% AUD 0.21% 0.20% 0.13% 0.29% 0.22%   -0.15% 0.17% NZD 0.32% 0.35% 0.28% 0.32% 0.38% 0.15%   0.29% CHF 0.06% 0.03% -0.03% 0.02% 0.06% -0.17% -0.29%   The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote). Australian Dollar FAQs 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.

Japan’s Chief Cabinet Secretary Yoshimasa Hayashi declined to comment on the daily stock market moves on Monday.

Japan’s Chief Cabinet Secretary Yoshimasa Hayashi declined to comment on the daily stock market moves on Monday. Additional comments No comment on daily share moves. Continue to monitor economic and financial situation in japan and overseas with a sense of urgency. Continue to work closely with the Bank of Japan (BoJ). Market reaction At press time, USD/JPY is trading 0.14% higher on the day, paring back gains to hover around 142.35.

China's Caixin Manufacturing Purchasing Managers' Index (PMI) contracted to 49.3 in September after reporting 50.4 in August, the latest data showed 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}} China's Caixin Manufacturing Purchasing Managers' Index (PMI) contracted to 49.3 in September after reporting 50.4 in August, the latest data showed on Monday. Meanwhile, the Chinese Caixin Services PMI dropped sharply to 50.3 in September from August’s 51.6. AUD/USD reaction to China’s Caixin PMI data At the time of writing, the AUD/USD pair is paring back gains to trade near 0.6920, still up 0.27% on the day. 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.  

China Caixin Services PMI declined to 50.3 in September from previous 51.6

China Caixin Manufacturing PMI declined to 49.3 in September from previous 50.4

The GBP/USD pair holds positive ground near 1.3385 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}}GBP/USD remains firm around 1.3385 in Monday’s early Asian session. August US PCE inflation eased to within reach of the Fed target. The BoE is expected to cut interest rates once by the year-end.The GBP/USD pair holds positive ground near 1.3385 during the early Asian session on Monday. Expectations of further interest rate cuts by the Federal Reserve (Fed) and the less dovish stance of the Bank of England's (BoE) less dovish rate cut bets provide some support to the major pair. Fed Governor Michelle Bowman is scheduled to speak later on Monday. 

US inflation has cooled to a pace nearer to the Fed's 2% target. The headline Personal Consumption Expenditures (PCE) Price Index rose by 2.2% year-over-year in August, compared to 2.5% in July, the US Bureau of Economic Analysis (BEA) showed on Friday. This figure was softer than the estimations of 2.3%. The core PCE climbed 2.7% in August, in line with the consensus. On a monthly basis, the PCE Price Index increased by 0.1% in the same report period. Interest rate futures contracts have priced in a nearly 54% chance of a half-point cut in November, versus a 46% possibility of a quarter-point cut, according to the CME FedWatch Tool. 

The upside of the Pound Sterling (GBP) is supported by the anticipation that the BoE rate-cutting cycle is likely to be slower than in the United States (US). This, in turn, acts as a tailwind for GBP/USD. Amid the lack of top-tier UK economic data released from the UK docket this week, the GBP will be influenced by market expectations for the BoE monetary policy action for the remainder of the year. BoE FAQs What does the Bank of England do and how does it impact the Pound? The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP). How does the Bank of England’s monetary policy influence Sterling? When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling. What is Quantitative Easing (QE) and how does it affect the Pound? In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling. What is Quantitative tightening (QT) and how does it affect the Pound Sterling? Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.  

Australia Private Sector Credit (MoM) in line with forecasts (0.5%) in August

Australia Private Sector Credit (YoY) remains unchanged at 5.7% in August

China’s official Manufacturing Purchasing Managers' Index (PMI) improved to 49.8 in September, compared to 49.1 in the previous reading.

.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}} China’s official Manufacturing Purchasing Managers' Index (PMI) improved to 49.8 in September, compared to 49.1 in the previous reading. The reading beated the market consensus of 49.5 in the reported month. 

The NBS Non-Manufacturing PMI dropped to 50.0 in September versus August’s 50.3 figure and the estimates of 50.4. Market reaction At the time of writing, the AUD/USD pair is trading around 0.6928, up 0.39% on the day.  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.  

China NBS Non-Manufacturing PMI below expectations (50.4) in September: Actual (50)

China NBS Manufacturing PMI came in at 49.8, above forecasts (49.5) in September

EUR/USD kicks off the week by edging higher, trading around 1.1170 during the 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}}EUR/USD gains ground as the Fed is expected to continue its policy easing in November.CME FedWatch Tool suggests 42.9% odds of a 25 basis point rate cut and 57.1% odds of a 50 basis point cut in November.Lower inflation in France and Spain has increased the likelihood of the ECB’s rate cut in October.EUR/USD kicks off the week by edging higher, trading around 1.1170 during the Asian session on Monday. This upside is attributed to the tepid US Dollar (USD), which could be attributed to rising expectations that the US Federal Reserve (Fed) may continue its policy easing in November. On Friday, the US Core Personal Consumption Expenditures (PCE) Price Index for August increased by 0.1% month-over-month, falling short of market expectations of a 0.2% rise and lower than the previous 0.2% increase. This result aligns with the Federal Reserve's outlook that inflation is easing in the US economy, reinforcing the possibility of an aggressive rate-cutting cycle by the central bank. Meanwhile, the Core PCE on a year-over-year basis rose by 2.7%, matching expectations and slightly above the prior reading of 2.6%. The CME FedWatch Tool indicates that markets are assigning a 42.9% probability to a 25 basis point rate cut by the Federal Reserve in November, while the likelihood of a 50-basis-point increased to 57.1%, up from 50.4% a week ago. St. Louis Federal Reserve President Alberto Musalem stated on Friday, according to the Financial Times, that the Fed should begin cutting interest rates "gradually" following a larger-than-usual half-point reduction at the September meeting. Musalem acknowledged the possibility of the economy weakening more than anticipated, saying, "If that were the case, then a faster pace of rate reductions might be appropriate." Lower-than-expected inflation in France and Spain has increased speculation that the European Central Bank (ECB) may implement another interest rate cut in October. If it occurs, this would mark the third cut in the ECB's ongoing policy-easing cycle, which began in June. The ECB resumed cutting rates in September after holding them steady in July. Furthermore, traders would likely observe a slew of economic releases from Germany scheduled for Monday, including preliminary Consumer Price Index (CPI) data for September. 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.

On Monday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.0074, as compared to Friday's fix of 7.0101 and 7.0098 Reuters estimates.

On Monday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.0074, as compared to Friday's fix of 7.0101 and 7.0098 Reuters estimates.

Japan Large Retailer Sales increased to 5% in August from previous 1%

The USD/JPY pair attracts some dip-buyers at the start of a new week and reverses a part of Friday's sharp retracement slide from the 146.50 area or over a three-week high.

.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/JPY kicks off the new week on a positive note and stalls Friday’s pullback from a multi-week top.The upbeat market mood, Japan's politics and mixed data from Japan undermine the safe-haven JPY. The divergent BoJ-Fed policy expectations keep a lid on any further appreciating move for the pair. The USD/JPY pair attracts some dip-buyers at the start of a new week and reverses a part of Friday's sharp retracement slide from the 146.50 area or over a three-week high. Spot prices, however, retreat a few pips in the last hour and currently trade around mid-142.00s, up less than 0.25% for the day. The already upbeat market mood gets an additional boost in reaction to more stimulus announced by China over the weekend. In fact, the People's Bank of China (PBOC) on Sunday said it would tell banks to lower mortgage rates for existing home loans. Furthermore, Japan's incoming Prime Minister (PM) Shigeru Ishiba said that the Bank of Japan's (BoJ) monetary policy must remain accommodative to underpin a fragile economic recovery. This, along with news that the new PMI is planning a general election for October 27 and mixed Japanese economic data, undermines the Japanese Yen (JPY) and is seen lending support to the USD/JPY pair.  A government report published earlier today showed that Japan's Retail Sales rose 2.8% in August from a year earlier as compared to market expectations for an increase of 2.3% and the 2.7% growth registered in the previous month. This, however, was offset by dismal Industrial Production data, which contracted more than anticipated, by 3.3% during the reported month and did little to impress the JPY bulls. That said, the growing market conviction that the BoJ will hike interest rates again by the end of this year helps limit any meaningful JPY losses. Apart from this, subdued US Dollar (USD) price action contributes to capping the USD/JPY pair.  The USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near its lowest level since July 2023 touched on Friday amid bets for a more aggressive policy easing by the Federal Reserve (Fed). This, in turn, warrants some caution before positioning for a further intraday appreciating move for the USD/JPY pair. Traders now look to the release of the official Chinese PMI prints for some impetus. The focus, however, will be on Fed Chair Jerome Powell's speech later during the US session. 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 People's Bank of China (PBOC) said on Sunday that it would tell banks to lower mortgage rates for existing home loans before October 31 in its latest attempt to shore up the troubled property sector as the economy slows, per Bloomberg.

The People's Bank of China (PBOC) said on Sunday that it would tell banks to lower mortgage rates for existing home loans before October 31 in its latest attempt to shore up the troubled property sector as the economy slows, per Bloomberg. 

Commercial banks should reduce interest rates on existing mortgages to no less than 30 basis points (bps) below the Loan Prime Rate (LPR), according to a statement released by the People's Bank of China (PBOC). It is estimated to cut existing mortgage rates by about 50 bps on average.  

Israel’s killing of Hezbollah leader Hassan Nasrallah has further fuelled geopolitical tensions in the Middle East and intensified the war at its border with Lebanon.

.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}} Israel’s killing of Hezbollah leader Hassan Nasrallah has further fuelled geopolitical tensions in the Middle East and intensified the war at its border with Lebanon. The Iran-backed militant group says it will continue to fight, even as a growing number of senior Hezbollah figures have been killed, per CNN.

Airstrikes hit Beirut in the early hours of Monday morning, marking the first time attacks landed within the city limits of the Lebanese capital since the war started in October last year. Market reaction At the time of press, the Gold price was up 0.23% on the day at $2,664. Risk sentiment FAQs What do the terms'risk-on' and 'risk-off' mean when referring to sentiment in financial markets? In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest. What are the key assets to track to understand risk sentiment dynamics? Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit. Which currencies strengthen when sentiment is 'risk-on'? The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity. Which currencies strengthen when sentiment is 'risk-off'? The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.  

Gold price (XAU/USD) recovers to near $2,665 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}}Gold price drifts higher to $2,665 in Monday’s early Asian session. Escalating geopolitical tensions in the Middle East and Fed rate cuts support the Gold price. Investors await the Chinese PMI, which is due on Monday. Gold price (XAU/USD) recovers to near $2,665 during the early Asian session on Monday. The geopolitical risks and firmer expectation of another oversized interest rate cut by the Federal Reserve (Fed) in November lift the precious metal. 

Israel continues to launch airstrikes on Hezbollah targets in Lebanon, killing more than 100 people and wounding over 350 others Sunday, per CNN. Israel’s assassination of Hezbollah leader Hassan Nasrallah has fuelled tensions in the Middle East and escalated the conflict along the border with Lebanon, which might boost the safe-have flows, benefiting the Gold price. 

Data released by the US Bureau of Economic Analysis (BEA) on Friday showed the headline Personal Consumption Expenditures (PCE) Price Index rose by 2.2% year-over-year in August, compared to 2.5% in July, softer than the expectations of 2.3%. Meanwhile, the core PCE jumped 2.7% over the same period, matching market estimations. On a monthly basis, the PCE Price Index increased by 0.1%, aligning with analysts' predictions.

The PCE data provided the latest sign that price pressures are easing in the US and triggered the expectation that the Fed will further cut the interest rate this year. A rate cut by the US Fed is likely to boost the appeal of the non-interest-bearing Gold price. 

Gold traders will monitor the Chinese Purchasing Managers Index (PMI) for fresh impetus. The NBS Manufacturing PMI is expected to improve to 49.5 in September from 49.1, while the Services PMI is estimated to rise to 50.4 in September from 50.3 in the previous reading. The weaker-than-expected data might weigh on the yellow metal as China's largest gold importer.  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.
 

 

New Zealand ANZ Business Confidence increased to 60.9 in September from previous 50.6

Japan Large Retailer Sales increased to 4.4% in August from previous 1%

Japan Retail Trade s.a (MoM) rose from previous 0.2% to 0.8% in August

Japan Industrial Production (MoM) came in at -3.3%, below expectations (-0.9%) in August

Japan Industrial Production (YoY) declined to -4.9% in August from previous 2.9%

Japan Retail Trade (YoY) registered at 2.8% above expectations (2.3%) in August

St Louis Federal Reserve (Fed) President Alberto Musalem said on Friday that the Fed should revert to cutting interest rates “gradually”, after a larger than usual half-point reduction in the September meeting, per Financial Times.

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“I’m attuned to the fact that the economy could weaken more than I currently expect.

“If that were the case, then a faster pace of rate reductions might be appropriate.”  Market reaction The US Dollar Index (DXY) is trading 0.02% higher on the day at 100.43, as of writing. Fed FAQs What does the Federal Reserve do, how does it impact the US Dollar? Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback. How often does the Fed hold monetary policy meetings? The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis. What is Quantitative Easing (QE) and how does it impact USD? In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar. What is Quantitative Tightening (QT) and how does it impact the US Dollar? Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.  

The AUD/USD pair extends its upside to around 0.6910 during the early Asian session on Monday.

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The US inflation data, as measured by the Personal Consumption Expenditures (PCE) Price Index, eased more than expected to 2.2% YoY in August, paving the way for the US central bank to cut interest rates again in November, which drags the US Dollar (USD) lower broadly. On a monthly basis, the PCE Price Index increased by 0.1%, in line with the consensus. Meanwhile, the core PCE Price Index, which excludes the more volatile categories of food and energy, climbed by 2.7% YoY in the same period, matching market expectations. 

University of Michigan's Consumer Sentiment Index came in better than the estimations, rising to 70.1 in September from 66.0 in August. Investors are now pricing in nearly 52.8% odds of a 50 basis points (bps) interest rate cut in November, while the chance of a smaller quarter-point move stands at 47.2%, according to the CME FedWatch Tool. 

On the other hand, fresh China’s stimulus measures continue to fuel the risk-on rally and boost the China-proxy Australian Dollar (AUD). Additionally, the hawkish stance of the Reserve Bank of Australia (RBA) contributes to the Aussie’s upside. The RBA kept its cash rate at 4.35% for a seventh consecutive meeting and stated that the policy would need to stay restrictive to ensure inflation slowed.

  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.

 

South Korea Industrial Output (YoY) declined to 3.8% in August from previous 5.5%

South Korea Service Sector Output down to 0.2% in August from previous 0.7%

South Korea Industrial Output Growth: 4.1% (August) vs -3.6%

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