Month-long Australian Dollar (AUD) weakness has stabilised; AUD is expected to trade in a 0.6535/0.6655 range for now, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “While we expected AUD to ‘trade with an upward bias’ yesterday, we pointed out that “any advance is expected to face strong resistance at 0.6620. Our view was not wrong, as AUD subsequently rose to 0.6619 and then pulled back to trade mostly sideways. The upward pressure has faded, and instead of trading with an upward bias today, AUD is more likely to trade in a sideways range of 0.6565/0.6605.”
1-3 WEEKS VIEW: “After holding a negative view in AUD since early last month, we highlighted yesterday (04 Nov, spot at 0.6585) that ‘the month-long AUD weakness has stabilised.’ We expected AUD to ‘trade in a 0.6535/0.6655 range for now.’ We continue to hold the same view.”
USD/CAD extends its losses for the second successive session, trading around 1.3880 during European hours on Tuesday. The commodity-linked Canadian Dollar (CAD) might have received support from the steady Oil prices as Canada is the largest Oil exporter to the United States (USD).
West Texas Intermediate (WTI) Oil price maintains its position around $71.50 per barrel at the time of writing. Crude Oil prices remain steady as traders adopt caution amid increased uncertainties surrounding the results of the US presidential election on Tuesday.
Former President Donald Trump and Vice President Kamala Harris both predicted victory as they campaigned across Pennsylvania on Monday in the final, frantic day of an exceptionally close US presidential election.
The opinion polls show that Trump and Harris are virtually even. The final winner may not be known for days after Tuesday’s vote. Trump has already indicated he may challenge any unfavorable result, as he did in 2020.
The US Dollar (USD) receives downward pressure ahead of the US election. However, improved US Treasury yields may limit the downside risk of the Greenback. The US Dollar Index (DXY), which measures the value of the US Dollar against its six major peers, trades around 103.80 with 2-year and 10-year yields on US Treasury bonds standing at 4.17% and 4.30%, respectively, at the time of writing.
On the CAD front, the Bank of Canada (BoC) is anticipated to implement a substantial rate cut at its final monetary policy meeting of the year in December. BoC Governor Tiff Macklem has indicated the possibility of another 50 basis points (bps) rate reduction.
Traders are expected to focus on Canada’s International Merchandise Trade data, including Imports and Exports, scheduled for release on Tuesday. On Wednesday, attention will shift to the BoC Summary of Deliberations and the Ivey Purchasing Managers Index (PMI) data.
The U.S. Presidential Election released by the USA.gov is the consecutive quadrennial United States presidential election and decides the President and the Vice President of the United States. It is a significant event to determine the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. Also holding congressional elections: voters will elect all 435 members to the US House of Representatives and 33 members to the Senate. The election might affect the USD volatility.
Read more.EUR/USD is just about holding onto gains made over the last few days. Remember these gains have been delivered on the back of, i) some ECB pushback against a 50bp cut in December, ii) Friday's soft US jobs report and iii) yesterday's poll result in Iowa which suggested Harris might be performing better than expected, ING’s FX analyst Chris Turner notes.
“And assuming that a clear election result emerges this week, we are primed to deliver new multi-quarter EUR/USD forecasts – having kept a multi-quarter profile from the fourth quarter onwards flat at 1.10 from April this year.”
“The threat of Trump and protectionism has sharpened the senses in European political circles and may be hurrying German political leaders to compromise on the budget side. But for this week, expect the fall-out from US elections to dominate.”
“Ultimately, a Trump win without the House could be the worst scenario for EUR/USD by late 2025, where global growth would be finding no insulation from US tax cuts and the ECB might be forced to cut rates deeper into accommodative territory. It is after the European close tonight, but let's see whether the ECB's Isabel Schabel again pushes back against a 50bp ECB cut in December. Currently the market prices 29bp of cuts.”
The EUR/GBP cross struggles to gain any meaningful traction and oscillates in a narrow trading band below the 0.8400 round-figure mark through the first half of the European session on Tuesday. Investors seem reluctant to place aggressive directional bets and opt to wait on the sidelines ahead of the pivotal Bank of England (BoE) policy decision on Thursday.
The UK central bank is widely expected to focus on a longer-term picture of slowing inflation and vote to cut interest rates for the second time this year. That said, expectations that UK Finance Minister Rachel Reeves' first budget would boost inflation and cause the BoE to cut interest rates more slowly turn out to be a key factor acting as a headwind for the EUR/GBP cross. The downside, however, remains cushioned in the wake of bets for a less dovish European Central Bank (ECB).
Data released last week showed that inflation in the Eurozone rose to 2% in October. Furthermore, the better-than-expected GDP growth figures from the Eurozone's largest economies suggest that the ECB will stick to a 25 basis points (bps) interest rate cut at its next policy meeting in December. This, in turn, continues to underpin the shared currency and fails to assist the EUR/GBP cross to build on last week's breakout momentum beyond the 50-day Simple Moving Average (SMA).
Investors also prefer to wait on the sidelines amid the uncertainty surrounding the US presidential election and ahead of ECB President Christine Lagarde's speech on Wednesday. Hence, it will be prudent to wait for strong follow-through buying before positioning for an extension of the EUR/GBP pair's recent bounce from sub-0.8300 levels.
The Bank of England (BoE) announces its interest rate decision at the end of its eight scheduled meetings per year. If the BoE is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Pound Sterling (GBP). Likewise, if the BoE adopts a dovish view on the UK economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for GBP.
Read more.Next release: Thu Nov 07, 2024 12:00
Frequency: Irregular
Consensus: 4.75%
Previous: 5%
Source: Bank of England
The Pound Sterling (GBP) is expected to trade in a range between 1.2920 and 1.3000. In the longer run, for the time being, GBP is expected to trade in a 1.2900/1.3030 range, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “We expected GBP to trade in a range between 1.2890 and 1.2980 yesterday. GBP then traded in a narrower and higher range of 1.2935/1.2999. The price action appears be consolidative, and we continue to expect GBP to trade in a range, likely between 1.2920 and 1.3000.”
1-3 WEEKS VIEW: “Last Thursday, GBP plummeted to a low of 1.2845. In our update from Friday (01 Nov, spot at 1.2900), we indicated that ‘While there has been a buildup in momentum, GBP must break and remain below 1.2845 before further sustained decline can be expected.’ We added, ‘The likelihood of GBP breaking clearly below 1.2845 will remain intact, provided that 1.2985 is not breached.’ Yesterday, GBP broke above 1.2985, reaching a high of 1.2999. Downward momentum has faded, and for the time being, GBP is expected to trade in a 1.2900/1.3030 range.”
With an exceptionally close US election upon us, plus the outcome likely to deliver a binary impact on currency markets, the FX options market is trading at a respectful level of volatility, ING's FX analyst Chris Turner notes.
“Polls in the seven swing US states close around 03/0400 CET tomorrow morning and we would expect markets to be moving around that time. Given the run-up in the dollar in October, we think we need to see a Red Sweep for the dollar to push on much further. A Harris win would seem a benign outcome and prove a dollar negative – those three currencies: the euro, the Canadian and the Australian dollars could do well here.”
“The more difficult outcome for the market would be Trump without the House of Representatives or a contested election. IMF analysis in its recent World Economic Outlook warned that the US economy could be 1% weaker than baseline in 2026 if Trump delivers on tariffs but could not offset it with tax cuts. For this reason, and given market positioning into the election, we think the dollar could come lower unless there is a Red Sweep.”
“Ahead of the election, today's US data calendar has ISM services for October. This is expected to soften a little. And were it not for the election, we believe this week's Fed meeting would also prove dollar negative too.”
As expected, the Reserve Bank of Australia (RBA) decided to leave its cash rate target unchanged at a 13-year high of 4.35%, UOB Group’s economist Lee Sue Ann notes.
“The Reserve Bank of Australia (RBA) kept rates at a 13-year high of 4.35% earlier today (5 November), as expected, and continued to emphasize ‘the need to remain vigilant to upside risks to inflation’.”
“The trimmed mean measure of inflation that the RBA pays most attention to will ease slightly faster than predicted, touching the top end of its 2%-3% band by Jun 2025 and reach the mid-point of 2.5% by the end of 2026.”
“There is still the possibility that the first rate cut will not arrive until its February meeting in 2025, if the RBA chooses to wait for the 4Q24 CPI print, due for release on 29 January 2025. In the meantime, we will continue to keep watch on upcoming data releases, including 3Q24 wage data (13 November); October labour market data (14 November), as well as monthly inflation readings for Oct (27 November).”
The Euro (EUR) is expected to consolidate between 1.0850 and 1.0905. In the longer run, upward momentum is beginning to build, but any advance in EUR is likely to face significant resistance at 1.0935, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
24-HOUR VIEW: “We noted yesterday that ‘the outlook for EUR is mixed.’ We expected it to ‘trade sideways, likely staying within last Friday’s range of 1.0831/1.0905.’ EUR subsequently traded in a narrower and higher range of 1.0870/1.0914, closing at 1.0877 (+0.40%). The price movements did not result in any increase in either downward or upward momentum. The current price movements are likely part of a consolidation phase. Today, we expect EUR to trade between 1.0850 and 1.0905.”
1-3 WEEKS VIEW: “Our most recent narrative was from last Friday (01 Nov, spot at 1.0885), wherein ‘upward momentum is beginning to build, but any advance in EUR is likely to face significant resistance at 1.0935.’ Yesterday, EUR gapped higher upon opening. During London trade, it rose briefly to a fresh 3-week high of 1.0914 before pulling back to close at 1.0877. While we continue to expect EUR to advance, there has been no further increase in momentum, and it remains to be seen if it can break above 1.0935 in a sustained manner. On the downside, a breach of 1.0830 (‘strong support’ level previously at 1.0815) would mean that the current upward pressure has faded.”
The NZD/USD pair halts its two days of losses, trading around 0.5990 during Tuesday's early European session. Daily chart analysis indicates a bearish bias, with the pair moving within a descending channel. The 14-day Relative Strength Index (RSI), a key momentum indicator, remains below the 50 level, confirming the ongoing bearish sentiment.
Adding to this outlook, the nine-day Exponential Moving Average (EMA) remains below the 14-day EMA, reinforcing bearish sentiment for the NZD/USD pair. Short-term momentum remains weak, suggesting sustained downward pressure.
On the downside, NZD/USD may find its support around a three-month low at the 0.5939 level. A break below this level could lead the pair to test the lower boundary of the descending channel near 0.5910, followed by the psychological level of 0.5900 level.
On the resistance side, the NZD/USD tests the nine-day EMA at 0.5990 level, followed by the upper boundary of the descending channel near the 14-day EMA at 0.6010 level. A breakthrough above this level could support the pair to explore the region around the psychological level of 0.6100.
The table below shows the percentage change of New Zealand Dollar (NZD) against listed major currencies today. New Zealand Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.11% | -0.18% | 0.06% | -0.09% | -0.38% | -0.35% | -0.04% | |
| EUR | 0.11% | -0.07% | 0.20% | 0.02% | -0.29% | -0.23% | 0.07% | |
| GBP | 0.18% | 0.07% | 0.24% | 0.07% | -0.22% | -0.17% | 0.14% | |
| JPY | -0.06% | -0.20% | -0.24% | -0.16% | -0.45% | -0.44% | -0.11% | |
| CAD | 0.09% | -0.02% | -0.07% | 0.16% | -0.29% | -0.26% | 0.05% | |
| AUD | 0.38% | 0.29% | 0.22% | 0.45% | 0.29% | 0.02% | 0.33% | |
| NZD | 0.35% | 0.23% | 0.17% | 0.44% | 0.26% | -0.02% | 0.30% | |
| CHF | 0.04% | -0.07% | -0.14% | 0.11% | -0.05% | -0.33% | -0.30% |
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 New Zealand Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent NZD (base)/USD (quote).
The Pound Sterling (GBP) trades in a very tight range around 1.2950 against the US Dollar (USD) in Tuesday’s London session. The GBP/USD pair consolidates ahead of the United States (US) presidential election, which will start in the North American session. The US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, also steadies near 103.80 after a sharp sell-off on Monday.
The Greenback went through a significant unwinding of long positions after the Des Moines Register/Mediacom Poll showed that current Vice President Kamala Harris leads former President Donald Trump by three points in Iowa, the state where Trump won clearly in 2016 and 2020. The US Dollar had a strong run-up in October as traders were pricing in Trump’s victory, given his preference for protectionist policies is expected to support the Greenback’s valuation.
Trump has vowed to levy a universal 10% tariff on all economies, except China – which is expected to face much higher duties – if he wins the presidential election. In addition to that, he also promised to lower corporate taxes, which would likely result in a high inflationary environment.
The US presidential election is the main event this week. However, investors will also focus on the Federal Reserve’s (Fed) monetary policy decision, which will be announced on Thursday. According to the CME FedWatch tool, the central bank is widely anticipated to cut interest rates by 25 basis points (bps) to 4.50%-4.75%. This will be the second interest rate cut by the Fed in a row. However, the size of the cut will be smaller after policymakers voted for a 50 bps rate cut in September.
The Pound Sterling trades sideways against the US Dollar near 1.2950. The GBP/USD pair consolidates inside Monday’s range ahead of the opening of the polls in the US. The near-term trend of the GBP/USD pair remains bearish as it stays below the 50-day EMA at 1.3060 but has found a cushion near the 200-day EMA around 1.2850.
The pair struggles to hold near the lower boundary of the rising channel formation on the daily time frame. A decisive break below this boundary could trigger further declines.
The 14-day Relative Strength Index (RSI) holds above 40.00, signaling a buying interest at lower levels.
Looking down, the round-level support of 1.2800 will be a major cushion for Pound Sterling bulls. On the upside, the Cable will face resistance near the 50-day EMA around 1.3060.
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The EUR/JPY cross attracts some buyers to near 165.75 during the early European session on Tuesday. The Euro (EUR) edges higher as the recent Eurozone economic data has diminished expectations for the European Central Bank (ECB) to cut larger interest rates in December.
The stronger-than-expected Eurozone Gross Domestic Product (GDP) data prompted traders to pare bets supporting a larger-than-usual interest rate cut in the December policy meeting. Money markets are currently pricing in a 34 basis points (bps) rate cut, down from a 42 bps reduction the previous day.
The ECB Executive Board member Isabel Schnabel said last week that a “gradual” approach to monetary easing remains appropriate, while Bundesbank President Joachim Nagel said officials mustn’t rush further steps on rate cuts. Traders will take more cues from the Eurozone November inflation report, which might offer some hints about the pace and size of ECB interest rate reduction.
The upside for the cross might be limited amid the uncertainty surrounding the US presidential election and the ongoing geopolitical tensions in the Middle East, which boost the safe-haven assets like the Japanese Yen (JPY).
Additionally, less dovish remarks from BoJ Governor Kazuo Ueda could lift the JPY in the near term. BoJ’s Ueda said last week that Japan faces smaller risks from the US and global economies, hinting that the Japanese central bank is closer to an additional interest rate hike, possibly in the coming months.
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
Here is what you need to know on Tuesday, November 5:
Financial markets remain on edge as the US presidential election takes center stage, with latest polls pointing to a tight race. On Tuesday, the US economic calendar will feature Goods Trade Balance data for September and the ISM Services PMI report for October. Later in the day, the US Treasury will hold a 10-year note auction.
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.41% | -0.35% | 0.17% | -0.23% | -0.67% | -0.05% | -0.35% | |
| EUR | 0.41% | 0.02% | 0.15% | -0.22% | 0.05% | -0.04% | -0.33% | |
| GBP | 0.35% | -0.02% | -0.14% | -0.24% | 0.02% | -0.06% | -0.36% | |
| JPY | -0.17% | -0.15% | 0.14% | -0.39% | -0.28% | -0.01% | -0.21% | |
| CAD | 0.23% | 0.22% | 0.24% | 0.39% | -0.23% | 0.16% | -0.12% | |
| AUD | 0.67% | -0.05% | -0.02% | 0.28% | 0.23% | -0.09% | -0.38% | |
| NZD | 0.05% | 0.04% | 0.06% | 0.01% | -0.16% | 0.09% | -0.29% | |
| CHF | 0.35% | 0.33% | 0.36% | 0.21% | 0.12% | 0.38% | 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 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 TIPP poll has Donald Trump and Kamala Harris tied at 48, the Ipsos poll has Harris leading by 2 points, 50 vs 48, and the Atlas Intel poll has Trump having a one point lead, 50 vs 49, as per RealClearPolling. In some swing states, such as Arizona and North Carolina, Trump seems to be staying on top, while Harris seems to have closed the gap in others, such as Nevada, Georgia and Pennsylvania. Experts think that it might take at least a few days before there is a clear winner. In the meantime, US stock index futures trade marginally higher in the European morning and the US Dollar Index fluctuates in a tight range slightly below 104.00 after closing deep in negative territory on Monday.
The Reserve Bank of Australia (RBA) announced on Tuesday that it left the policy rate unchanged at 4.35%, as expected. In its policy statement, the RBA reiterated that the policy will need to be sufficiently restrictive until the board is confident that inflation is moving sustainably towards the target range and added that they do not see inflation returning sustainably to the midpoint of the target until 2026. In the post-meeting press conference, RBA Governor Michele Bullock noted that they remain ready to act if the economy were to turn down more than expected. AUD/USD gained traction following the RBA event and was last seen trading in positive territory at around 0.6600.
During the Asian trading hours, the data from China showed the Caixin Services PMI improved to 52 in October from 50.3 in September. This reading came in better than the market expectation of 50.5.
EUR/USD climbed to its highest level in over two weeks above 1.0900 on Monday but erased its gains to close the day flat. Early Tuesday, the pair moves sideways near 1.0880.
GBP/USD met resistance near 1.3000 after opening the week with a bullish gap and went into a consolidation phase. At the time of press, the pair was fluctuating in a narrow channel slightly above 1.2950.
USD/JPY holds steady above 152.00 in the European morning on Tuesday after posting losses on Monday.
Gold failed to make a decisive move in either direction and ended the day virtually unchanged on Monday. XAU/USD stays relatively quiet to begin the European session and remains below $2,750.
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
The EUR/USD pair remains firmer near 1.0880 during the early European session on Tuesday. The uncertainty surrounding the US presidential election outcome weighs on the Greenback and provides some support to the pair.
“A Republican clean sweep can send the dollar higher, but probably by less than how much a Harris win could hit USD. The dollar might not rally at all if Trump wins but Democrats secure the (U.S. House of Representatives),” noted ING Bank analysts.
Technically, the EUR/USD pair keeps the bearish vibe on the daily chart as the major pair holds below the key 100-day Exponential Moving Averages (EMA). Additionally, the downward momentum is supported by the Relative Strength Index (RSI), which stands below the midline near 47.25, suggesting that the path of least resistance is to the downside.
The 1.0800 psychological level acts as an initial support level for EUR/USD. Further south, the next contention level is seen at the 1.0770-1.0760 region, representing the low of October 24 and the lower limit of the Bollinger Band. A breach of the mentioned level could expose 1.0666, the low of June 26.
On the bright side, the first upside barrier for the major pair emerges near 1.0931, the 100-day EMA. The additional upside filter to watch is 1.0951, the upper boundary of the Bollinger Band. The crucial resistance level is located at the 1.1000 round mark.
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
USD/CHF holds ground after registering losses in the previous session, trading around 0.8640 during the Asian hours on Tuesday. The US Dollar (USD) remains steady as traders adopt market caution amid increased uncertainty surrounding the US presidential election. Additionally, improved US Treasury yields also provide support for the Greenback.
The opinion polls indicate that former President Donald Trump and Vice President Kamala Harris are nearly tied. The outcome may remain unknown for several days following Tuesday’s vote. Both Trump and Harris expressed confidence in their chances as they campaigned across Pennsylvania on the last frantic day of this exceptionally close presidential race.
The US Dollar Index (DXY), which measures the value of US Dollar against its six major peers, trades around 103.90 with 2-year and 10-year yields on US Treasury bonds standing at 4.16% and 4.29%, respectively, at the time of writing.
The Swiss Franc (CHF) may encounter difficulties as the likelihood of significant rate cuts by the Swiss National Bank (SNB) increases. This shift is driven by a continued slowdown in inflation in Switzerland, evidenced by the Consumer Price Index (CPI), which declined by 0.6% year-over-year in October. This CPI figure was notably below the SNB’s inflation forecast of 1% for the fourth quarter, raising the chances that the SNB could implement a more substantial rate cut in December to keep inflation within its target range of 0-2%.
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
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EUR/USD: EUR amounts
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USD/CAD: USD amounts
NZD/USD: NZD amounts
EUR/GBP: EUR amounts
Silver price (XAG/USD) maintains its position around 32.50 during Asian trading hours on Tuesday as traders adopt caution ahead of the US presidential election. However, the heightened uncertainty surrounding the election has led to increased demand for safe-haven assets like Silver.
The risk aversion sentiment has been amplified by speculation that a potential presidency under Republican nominee Donald Trump could lead to higher inflation, given his pledge to significantly raise trade tariffs. This has prompted investors to seek safe-haven assets as a hedge against long-term inflation risks.
However, the opinion polls indicate that former President Donald Trump and Vice President Kamala Harris are nearly tied. The final outcome may remain unknown for several days following Tuesday’s vote. Both Trump and Harris expressed confidence in their chances as they campaigned across Pennsylvania on the last frantic day of this exceptionally close presidential race.
US Federal Reserve’s (Fed) policy decision will be eyed on Thursday. Markets expect a modest 25 basis point rate cut this week. The CME FedWatch Tool shows a 99.5% probability of a quarter-point rate cut by the Fed in November. This could provide support for Silver as lower interest rates reduce the opportunity cost of holding non-interest-bearing assets.
Expectations for additional stimulus measures from China could bolster Silver demand as the Standing Committee of the National People's Congress (NPC) holds a five-day meeting from November 4 to 8. Chinese authorities are anticipated to approve a potential stimulus package exceeding 10 trillion yuan to support the country's economy. Given China’s position as one of the world’s largest manufacturing hubs for electronics, solar panels, and automotive components, this could lead to increased demand for 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.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
The AUD/NZD cross reverses an Asian session dip to the 1.0990 region and rallies to a one-week top on Tuesday in reaction to the upbeat Chinese data. Spot prices stick to modest intraday gains around the 1.1030 area and move little after the Reserve Bank of Australia (RBA) announced its policy decisions.
Data published earlier this Tuesday showed that business activity in China's services sector expanded at the fastest pace in three months during October and the Caixin/S&P Global Services PMI rose from 50.3 in September to 52. This was consistent with the official PMIs released last week and could be seen as an early sign that China's big stimulus push is helping improve business conditions, which, in turn, provides a goodish lift to the Australian Dollar (AUD).
The New Zealand Dollar (NZD), on the other hand, continues with its relative underperformance in the wake of rising bets for more aggressive interest rate cuts by the Reserve Bank of New Zealand (RBNZ). The expectations were reaffirmed by RBNZ's semi-annual Financial Stability Report, which indicated that the economic conditions remain challenging and also warned about the impact of geopolitical tensions on the economy.
The report further stated that rising unemployment is starting to create acute financial difficulties for some households. Adding to this, RBNZ Governor Adrian Orr said that the real economy is lagging reduction in interest rates. Meanwhile, the RBA's widely anticipated decision to leave the cash rate unchanged at 4.35% and hawkish outlook did little to impress the AUD bulls or provide any meaningful impetus to the AUD/NZD cross.
In the post-meeting press conference, RBA Governor Michele Bullock reiterated that there are still risks on the upside for inflation and that rates need to stay restrictive for the time being. This, in turn, suggests that the path of least resistance for the AUD/NZD cross remains to the upside. Investors now look forward to the release of the quarterly employment report on Wednesday, which could determine the near-term trajectory for the currency pair.
The Reserve Bank of Australia (RBA) announces its interest rate decision at the end of its eight scheduled meetings per year. If the RBA is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Australian Dollar (AUD). Likewise, if the RBA has a dovish view on the Australian economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for AUD.
Read more.Last release: Tue Nov 05, 2024 03:30
Frequency: Irregular
Actual: 4.35%
Consensus: 4.35%
Previous: 4.35%
Source: Reserve Bank of Australia
Gold prices fell in India on Tuesday, according to data compiled by FXStreet.
The price for Gold stood at 7,393.81 Indian Rupees (INR) per gram, down compared with the INR 7,403.41 it cost on Monday.
The price for Gold decreased to INR 86,243.14 per tola from INR 86,351.97 per tola a day earlier.
| Unit measure | Gold Price in INR |
|---|---|
| 1 Gram | 7,393.81 |
| 10 Grams | 73,939.48 |
| Tola | 86,243.14 |
| Troy Ounce | 229,965.90 |
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
(An automation tool was used in creating this post.)
Reserve Bank of Australia (RBA) Governor Michele Bullock is speaking at the press conference, following the announcement of the November monetary policy decision on Tuesday.
Bullock is responding to questions from the media, as part of a new reporting format for the central bank starting this year.
The RBA maintained the benchmark interest rate at 4.35% for the eighth straight meeting earlier this Tuesday.
Labor market remains tight.
Wage growth continue to ease.
Policy settings are restrictive.
Believe rates need to stay restrictive for time being.
Think there are still risks on upside for inflation.
Rises of 0.8% in core inflation would not take us back into the band.
Have right settings at moment.
developing story ...
AUD/USD is holding gains near 0.6600 on the above comments, up 0.11% on the day, as of writing.
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Gold price (XAU/USD) attracts fresh sellers during the Asian session on Tuesday and drops to over a one-week low, around the $2,725-2,724 region, though the downside seems cushioned. The uncertainty surrounding the closely contested US presidential election, along with the risk of a further escalation of geopolitical tensions in the Middle East, might continue to offer support to the safe-haven precious metal.
Meanwhile, the unwinding of the "Trump trade" and bets the Federal Reserve (Fed) will lower interest rates further amid signs of a cooling US labor market lead to a further decline in the US Treasury bond yields. This fails to assist the US Dollar (USD) to build on the overnight bounce from a two-week low and should further contribute to limiting any meaningful depreciating move for the non-yielding Gold price.
From a technical perspective, last week's failure near the top boundary of an ascending channel extending from late July and the subsequent pullback from the all-time peak could be seen as a sign of bullish exhaustion. However, mixed oscillators on the daily chart warrant some caution before positioning for further losses. Hence, any further decline is more likely to find some support near the $2,720-2,715 horizontal zone, below which the Gold price could aim to challenge the trend-channel support, currently pegged near the $2,690 region. Some follow-through selling would mark a bearish breakdown and pave the way for some meaningful corrective fall in the near term.
On the flip side, the $2,748-2,750 area now seems to act as an immediate hurdle ahead of the $2,790 region, or the record high touched last Thursday. This is followed by the $2,800 round figure and the ascending channel resistance, around the $2,820 zone. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders and allow the Gold price to prolong its recent well-established uptrend.
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
The AUD/JPY cross gains traction to near 100.40 during the Asian trading hours on Tuesday. The Australian Dollar (AUD) edges higher after the Reserve Bank of Australia (RBA) interest rate decision.
The RBA kept the Official Cash Rate (OCR) on hold at 4.35% following the conclusion of its November policy meeting. The decision came in line with market expectations. The Aussie remains firm following the RBA rate decision.
According to the RBA Monetary Policy Statement, the board members will continue to rely upon the upcoming data and the evolving assessment of risks. The policymaker further stated that the monetary policy will need to be sufficiently restrictive until the central bank is confident that inflation is moving sustainably toward the target range.
Traders will take more cues from the RBA’s updated economic forecasts and Governor Michele Bullock’s press conference, which might offer some insight into the interest rate outlook.
On the other hand, the uncertainty surrounding the US presidential election could boost the safe-haven currency like the Japanese Yen (JPY) and cap the upside for the cross. Additionally, less dovish remarks from BoJ Governor Kazuo Ueda could underpin the JPY in the near term. "Many market players had bet that the next rate hike will come in the January-March quarter next year. But he sounded as if he left open the chance of a December hike," said Hiroshi Watanabe, senior economist at Sony Financial Group.
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
The USD/CAD pair maintains its position around 1.3900 during Tuesday’s Asian session, as traders exercise caution amid heightened uncertainty over the US presidential election outcome. However, a lower-than-expected US Nonfarm Payrolls report for October, showing an increase of only 12,000 compared to the previous 223,000, has put downward pressure on the US Dollar (USD).
The opinion polls show that Former President Donald Trump and Vice President Kamala Harris are virtually even. The final winner may not be known for days after Tuesday’s vote. Trump and Harris both predicted victory as they campaigned across Pennsylvania on Monday in the final, frantic day of an exceptionally close US presidential election. Trump has already indicated he may challenge any unfavorable result, as he did in 2020.
Traders await the US Federal Reserve’s (Fed) policy decision, which is scheduled for Thursday. Markets expect a modest 25 basis point rate cut this week. The CME FedWatch Tool shows a 99.5% probability of a quarter-point rate cut by the Fed in November.
The downside of the USD/CAD pair could be restrained, as the commodity-linked Canadian Dollar (CAD) could face challenges from a cooling WTI price, despite a more than 3% increase on Monday after the OPEC+ coalition announced a delay in its December production hike. West Texas Intermediate (WTI) Oil price trades around $71.20 per barrel at the time of writing.
The Canadian Dollar may weaken as the Bank of Canada (BoC) is anticipated to implement additional rate cuts at its final monetary policy meeting of the year in December. BoC Governor Tiff Macklem has indicated the possibility of another 50 basis points (bps) rate reduction.
Last week, Governor Macklem told to Senate Committee “We’ve demonstrated we’re prepared to do a 50-basis-points cut if we think that’s appropriate. And if we think it’s appropriate to do it again, we’ll do it again.”
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
The Indian Rupee (INR) extends its downside on Tuesday after closing at a new all-time low in the previous session. The downtick movement of the local currency is pressured by continuous foreign outflows from the equity markets due to jitters amid institutional players ahead of the outcome of the US presidential election and the US Federal Reserve (Fed) interest rate decision on Thursday.
Nonetheless, the likely foreign exchange intervention from the Reserve Bank of India (RBI) by selling US Dollar (USD) could help limit the INR’s losses. Looking ahead, investors brace for the winner of the US presidential election, which may not be known for days after voting ends. On Thursday, the Fed monetary policy meeting will be closely watched.
The Indian Rupee softens on the day. According to the daily chart, the constructive outlook of the USD/INR pair remains unchanged as the pair is well-supported above the key 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) holds above the midline near 65.20, indicating that further upside looks favorable.
The upper boundary of the ascending trend channel of 84.25 acts as an immediate resistance level for USD/INR. A clear bullish candlestick above this level could pave the way to 84.50, en route to the 85.00 psychological level.
On the flip side, a breach of the lower limit of the trend channel near 84.05 could attract enough bearish pressure to 83.78, the 100-day EMA.
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
West Texas Intermediate (WTI) Oil price edges lower due to uncertainties surrounding the results of the US presidential election on Tuesday. The WTI price trades around $71.20 during the Asian hours after rising more than 3% on Monday, which could be attributed to OPEC+ coalition, delaying plans to hike production in December.
On Sunday, the OPEC+ alliance—which includes the Organization of the Petroleum Exporting Countries and its allies like Russia—agreed to extend its production cut of 2.2 million barrels per day (bpd) through December 2024, citing weak demand and rising supply outside the group.
Regarding the US presidential election, former President Donald Trump and Vice President Kamala Harris both predicted victory as they campaigned across Pennsylvania on Monday in the final, frantic day of an exceptionally close US presidential election.
The opinion polls show that Trump and Harris are virtually even. The final winner may not be known for days after Tuesday’s vote. Trump has already indicated he may challenge any unfavorable result, as he did in 2020.
The Standing Committee of the National People's Congress (NPC) is meeting in China from November 4 to 8 and is expected to approve additional stimulus measures to support the slowing economy. Media reports suggest that the potential stimulus package could exceed 10 trillion yuan. Any new measures could positively impact Oil prices, as China is the world’s largest Oil importer.
Oil prices may have struggled due to the fading likelihood of a significant rate cut by the Federal Reserve (Fed) in November. Lower borrowing costs could stimulate economic activity in the United States (US), the world’s largest Oil consumer, potentially boosting oil demand and prices. However, markets expect a modest 25 basis point rate cut this week. The CME FedWatch Tool shows a 99.5% probability of a quarter-point rate cut by the Fed in November.
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
China's Premier Li Qiang said at an Import Expo in Shanghai on Tuesday that he is “confident of meeting this year’s growth target.”
Must build a stronger consensus for opening up.
China will upgrade free trade zones.
China will explore free trade and investment agreements with other countries.
China will continue to open telecommunications, internet, healthcare, and other sectors for investment.
China stands ready to work with all sides to enhance coordination and collaboration.
Many positive developments in China's economy indicate a favourable outlook.
China has both fiscal and monetary tools at its disposal.
Optimistic about economic prospects in the coming years.
China can increase counter-cyclical adjustment.
Gold price is miring in five-day lows near $2,730 in Asian trading on Tuesday, lacking a clear direction. Traders remain wary and refrain from placing fresh bets on Gold price on the US presidential election day.
Gold price has entered a phase of downside consolidation, following its slump from all-time highs of $2,790 reached last Thursday, in the face of resurgent US Dollar (USD) demand. The Greenback jumped back into the bid, capitalizing on the Trump trade optimism.
Until last week, markets were pricing in a Republican nominee Donald Trump victory in the presidential race. They believed Trump's policies on immigration, tax cuts and tariffs would put upward pressure on inflation, bond yields and the USD while a policy continuity is seen on a Harrish win.
However, the tide turned against the USD on Monday as traders resorted to the unwinding of the Trump trade, as the latest polls released over the weekend showed that US Democratic presidential candidate Kamala Harris surpassed Donald Trump in a new poll in Iowa, marking a notable turnaround.
Harris and Trump are seen locked in a tight race for the White House.
Early Tuesday, the latest developments around the US election show that former president Donald Trump is leading Vice President Harris in each of the seven swing states though the margin is narrow. The AtlasIntel survey said Trump is holding the widest margin in Arizona, with a 52.3% to Harris' 45.8%.
This update seems to have helped the Greenback pause its downside, keeping the USD-denominated Gold price on the edge. Further, expectations of a less aggressive easing cycle by the US Federal Reserve (Fed) also lend support to the USD.
Besides, the uncertainty surrounding the US election outcome, markets also take account of the ongoing Middle East conflict between Israel and Iran.
The Israeli military said that it had killed a commander of Hezbollah's Nasser Brigade rocket unit in southern Lebanon. In response, Hezbollah announced it launched a “large rocket salvo” targeting the northern Israeli city of Safed, marking an escalation in cross-border tensions.
If the geopolitical tensions escalate further, investors are likely to scurry to the traditional safe-haven Gold price, cushioning its downside.
However, the sentiment around the US election is expected to play a pivotal role in the Gold price action in the upcoming days.
As observed on the daily chart, Gold price challenges the key $2,730 demand area as sellers retain control.
The 14-day Relative Strength Index (RSI) is edging slightly lower to near 59, justifying the latest downtick in Gold price.
However, the leading indicator continues to hold above the 50 level, keeping the buying interest somewhat alive.
Gold buyers need to reclaim the $2,746 resistance on a daily closing basis to resume its uptrend. That level is the 23.6% Fibonacci Retracement (Fibo) level of the latest record rally from the October 10 low of $2,604 to the new all-time high of $2,790.
The next bullish target is seen at the record high of $2,790.
Conversely, a sustained move below $2,730 will expose the 38.2% Fibo support at $2,718.
Acceptance below that level on a daily candlestick closing basis could challenge the $2,700 confluence zone, where the 50% Fibo level of the same ascent and the 21-day Simple Moving Average (SMA) close in.
Additional declines will call for a test of the 61.8% Fibo support at $2,673.
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
The Japanese Yen (JPY) ticks lower against its American counterpart during the Asian session on Tuesday and moves away from a one-week high touched the previous day. The downside for the JPY, however, seems limited as traders might refrain from placing aggressive directional bets amid the uncertainty surrounding the US presidential election. Moreover, bets for a potential interest rate hike at the next Bank of Japan (BoJ) policy meeting in December could also offer some support to the JPY.
Meanwhile, the "Trump trade" unwinding, along with expectations that the Federal Reserve (Fed) will lower interest rates later this week, leads to a further decline in the US Treasury bond yields, resulting in the narrowing of the US-Japan rate differential. This keeps the US Dollar (USD) bulls on the defensive and should act as a tailwind for the JPY. Furthermore, a weaker risk tone could benefit the JPY and contribute to keeping a lid on any meaningful appreciating move for the USD/JPY pair.
From a technical perspective, the 152.00 round figure now seems to protect the immediate downside ahead of the overnight swing low, around the 151.55-151.50 region. Some follow-through selling could drag the USD/JPY pair further below the 151.00 mark, toward testing the 100-day Simple Moving Average (SMA) resistance breakpoint, currently pegged near the 150.30 region. This is followed by the 150.00 psychological mark, which if broken decisively will set the stage for deeper losses.
On the flip side, momentum beyond the overnight swing high, around the 152.55-152.60 area, could extend further toward the 153.00 mark. The subsequent move up has the potential to lift the USD/JPY pair to the 153.35-153.40 supply zone en route to the 153.85-153.90 region, or a three-month peak touched last week. A sustained strength beyond the latter will be seen as a fresh trigger for bullish traders. Given that oscillators on the daily chart are holding in the positive territory, spot prices might then climb to the next relevant hurdle near the 154.60-154.70 area before aiming to reclaim the 155.00 psychological mark.
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.
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 BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, 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 supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
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 Australian Dollar (AUD) maintains its position after registering gains in the previous session following improved Purchasing Managers Index (PMI) data released on Tuesday. Traders await the Reserve Bank of Australia’s (RBA) interest rate decision scheduled to be released later in the day.
The final reading of Australia's Judo Bank Services PMI improved to 51.0 in October from 50.6 in the previous reading. This figure was above the market consensus of 50.6. The Composite PMI climbed to 50.2 in October versus 49.8 prior. Additionally, Caixin China Services PMI rose to 52.0 in October from 50.3 in September.
The Reserve Bank of Australia is anticipated to keep the Official Cash Rate (OCR) steady at 4.35%, marking an eighth consecutive pause in November. The central bank is expected to hold current rates following its policy meeting.
Traders will likely focus on the RBA’s updated economic forecasts and Governor Michele Bullock’s press conference for new insights on the potential timing of the bank’s first rate cut since its post-COVID tightening cycle.
Investors will closely monitor the outcome of the US presidential election. Former President Donald Trump and Vice President Kamala Harris both predicted victory as they campaigned across Pennsylvania on Monday in the final, frantic day of an exceptionally close US presidential election.
AUD/USD trades near 0.6590 on Tuesday, with the daily chart hinting at a potential easing of the bearish trend as the pair tests the nine-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) remains below 50, indicating that the bearish outlook persists.
On the resistance side, AUD/USD faces the nine-day EMA at 0.6596, with further resistance at the 14-day EMA at 0.6618. A break above these levels could strengthen the pair, possibly aiming for a psychological level of 0.6700.
In terms of support, immediate support is around the three-month low at 0.6536. A drop below this level could drive the pair toward the key psychological support at 0.6500.
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 | -0.03% | -0.03% | 0.03% | -0.01% | -0.10% | -0.10% | -0.01% | |
| EUR | 0.03% | 0.00% | 0.07% | 0.01% | -0.10% | -0.07% | 0.02% | |
| GBP | 0.03% | -0.00% | 0.04% | -0.01% | -0.11% | -0.08% | 0.02% | |
| JPY | -0.03% | -0.07% | -0.04% | -0.05% | -0.15% | -0.17% | -0.05% | |
| CAD | 0.01% | -0.01% | 0.00% | 0.05% | -0.09% | -0.09% | 0.00% | |
| AUD | 0.10% | 0.10% | 0.11% | 0.15% | 0.09% | -0.00% | 0.10% | |
| NZD | 0.10% | 0.07% | 0.08% | 0.17% | 0.09% | 0.00% | 0.10% | |
| CHF | 0.00% | -0.02% | -0.02% | 0.05% | -0.01% | -0.10% | -0.10% |
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).
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
China's Services Purchasing Managers' Index (PMI) rose to 52.0 in October from 50.3 in September, the latest data published by Caixin showed on Tuesday.
The market consensus was for 50.5 in the reported period.
The NZD/USD pair weakens to near 0.5970 on Tuesday during the Asian trading hours. The modest recovery of the US Dollar (USD) and the remarks from the Reserve Bank of New Zealand (RBNZ) weigh on the pair. Investors brace for the outcome of the US presidential election, which might trigger the volatility in the financial markets.
The decline in the Greenback is likely due to a poll released over the weekend that reduced the probability of Republican Donald Trump winning the elections. Analysts said a Harris win might benefit the riskier currencies like the New Zealand Dollar (NZD), while a Trump victory could support the USD due to expected protectionist policies and higher inflation.
On Thursday, the Federal Reserve will announce its latest policy decision, with markets widely anticipating that the US central bank will cut interest rates by a quarter percentage point. Financial markets are now pricing in nearly a 98% possibility of a quarter point reduction and a near 80% odds of a similar-sized move in December, according to CME's FedWatch tool.
On the Kiwi front, the RBNZ noted on Tuesday that the economic conditions remain challenging and business is doing it tough, adding that geopolitical tensions are the key risk for the economy. The RBNZ began cutting the Official Cash Rate (OCR) in August and stepped up the pace last month when it lowered the OCR by 50 bps to 4.75%. Most economists expect another 50 bps reduction on November 27.
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
On Tuesday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1016, as compared to the previous day's fix of 7.1203 and 7.1019 Reuters estimates.
The Reserve Bank of New Zealand (RBNZ) stated on Tuesday that the economic conditions remain challenging and business is doing it tough. The New Zealand central bank also warns of the impact of geopolitical tensions on the economy.
Economic conditions remain challenging, business is doing it tough.
Geopolitical tensions do really matter, key risk for the economy.
RBNS Orr concerned as reduction in interest rates lags real economy.
Climate change poses existential threat.
At the press time, the NZD/USD pair was down 0.06% on the day to trade at 0.5968.
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
The GBP/USD pair trades flat near 1.2950 during the early Asian session on Tuesday. Traders will closely monitor the outcome of the US presidential election. On Thursday, the attention will shift to the Bank of England (BoE) and the US Federal Reserve (Fed) monetary policy decisions.
Meanwhile, the US Dollar Index (DXY), which tracks the USD’s value against six major currencies, broke below the 104.00 support and reached fresh two-week lows near 103.60 in response to improved polling for Democratic candidate Kamala Harris.
Strategists said the USD weakness was linked to a poll by the Des Moines Register and Mediacom that showed Harris with a 47-44% lead over Trump in Iowa.
The Fed's rate decision will take center stage on Thursday, which is widely expected to cut rates by a standard 25 basis points (bps) at the November meeting, rather than repeat the large 50 bps easing of its last decision. Fed Funds futures are pricing in over 80% chance of a December cut, while the swaps market is pricing in close to 50% possibility.
On the GBP’s front, economists polled by Reuters forecast a quarter-point reduction in the benchmark rate to 4.75% at its BoE’s rate decision on Thursday. However, the longer-term outlook is less clear, with BoE governor Andrew Bailey unlikely to raise hope of another rate cut before the end of the year.
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The final reading of Australia's Judo Bank Services Purchasing Managers Index (PMI) improved to 51.0 in October from 50.6 in the previous reading. This figure was above the market consensus of 50.6, the latest data published by Judo Bank and S&P Global showed on Tuesday.
The Composite PMI climbed to 50.2 in October versus 49.8 prior.
At the press time, the AUD/USD pair was up 0.03% on the day to trade at 0.6585.
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
The EUR/USD pair trades with mild gains near 1.0880 during the early Asian session on Tuesday. The US Dollar (USD) edges lower as traders brace for the outcome of the US presidential election and a likely interest rate cut from the Federal Reserve (Fed), which supports some support for the major pair.
Democratic candidate Kamala Harris and Republican Donald Trump remain almost tied in opinion polls, and the results will be announced for days after voting ends. "The polls suggesting that Harris may have her nose in front in a couple of swing states is causing a bit of profit-taking in the Trump trade,” noted Kenneth Broux, head of corporate research FX and rates at Societe Generale.
Furthermore, the rising expectation that the Fed will cut the interest rate at its November meeting drags the Greenback lower. The US central bank is widely anticipated to cut rates by the usual 25 basis points (bps) on Thursday, rather than the outsized half-point easing of its last decision. According to CME's FedWatch tool, financial markets are now pricing in nearly a 98% odds of a quarter-point reduction and a near 80% chance of a similar-sized move in December.
Across the pond, the Euro gathers strength as the recent Eurozone economic data has diminished expectations for the European Central Bank (ECB) to lower larger interest rates in December. Money markets are currently pricing in a 34 bps rate cut, down from a 42 bps reduction the previous day, indicating that the odds of a deeper 0.5% reduction are diminishing. During the October meeting, the central bank reiterated its commitment to a "data-dependent and meeting-by-meeting" approach to future policy decisions. However, the Eurozone November inflation report might offer some hints about the ECB interest rate outlook.
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Gold prices remained choppy during Monday’s session as the US presidential election continued amid uncertainty about who would win the White House. Additionally, this week, the US Federal Reserve (Fed) is expected to lower rates at the November 6-7 meeting.
The XAU/USD trades at $2,736, virtually unchanged. Yields in the US 10-year benchmark note have fallen eight basis points, after hitting 4.388% last week, sitting at 4.30% at the time of writing. In the meantime, the Greenback, as measured by the US Dollar Index (DXY) performance, tumbled over 0.40%, down to 103.90.
Wall Street is focused on the outcome of the US presidential election. Opinion polls show Democratic candidate Kamala Harris and Republican Donald Trump in a technical tie. A Reuters poll showed concerns that the US could face a similar election crisis post-Trump’s 2020 election defeat.
By Thursday, the Federal Reserve is expected to lower borrowing costs by 25 basis points to the 4.50%-4.75% range. October’s US economic data revealed that the US jobs market remains solid, lowering the odds of the US hitting a recession.
Analysts at TD Securities said “If Trump wins, I think, Gold does well here. We're probably worried a little bit more about inflation with all the tariffs that he's talking about.” Bullion is a hedge in tough and uncertain economic and political times.
The golden metal has enjoyed a rally of over 30% in 2024, and has recorded all-time highs, which sits at $2,790 at the time of writing.
Gold prices remain consolidated. The XAU/USD fluctuated between $2,730 and $2,748 during the trading day, with no catalyst for moving it outside of those boundaries.
Momentum remains bullish, as depicted by the Relative Strength Index (RSI), though buyers seem to have lost a step as the RSI edges lower in bullish territory.
Gold buyers need to reclaim the psychological $2,750 figure for a bullish continuation. Once cleared, the next stop would be the record high at $2,790. Conversely, if XAU/USD registers a daily close below $2,750, further weakness lies ahead.
The first support would be the October 23 low at $2,708. Once surpassed, the next stop would be $2,700, followed by the September 26 swing high, which turned support at $2,685, and by the 50-day Simple Moving Average (SMA) at $2,628.
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Pinagmulan ng datos: FX Street
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