Category: Forex News

  • Gold Extends Losses Amid Rising US Yields and a Strong Dollar

    Gold Extends Losses Amid Rising US Yields and a Strong Dollar

    Key Highlights:

    • Gold struggles below $2,665, resuming its bearish momentum.
    • Strengthening US Treasury yields and the US Dollar (USD) weigh on prices.
    • Market expectations for a “hawkish rate cut” by the Federal Reserve (Fed) keep Gold under pressure.
    • Gold (XAU/USD) approaches a key support zone near $2,630.

    Market Drivers

    1. Rising Yields and Strong US Dollar
      • Gold’s downside persists as rallying US Treasury yields and a robust Dollar continue to pressure non-yielding assets like Gold.
    2. Economic Resilience and Fed Expectations
      • Stronger-than-expected US preliminary PMI data points to steady economic growth in Q4, signaling a slower Fed easing cycle in 2025.
      • Upcoming Retail Sales data for November is expected to show a 0.5% growth, reinforcing the narrative of resilient US consumption.
    3. Hawkish Fed Speculation
      • Futures markets are pricing in a 25 basis-point rate cut by the Fed on Wednesday, but investors anticipate cautious forward guidance, limiting expectations for aggressive cuts in 2025.
    4. Easing Geopolitical Concerns
      • Reduced tensions in the Middle East conflict have shifted market focus to US monetary policy, further dampening Gold’s appeal.

    Technical Analysis

    • Bearish Indicators:
      • Gold continues to retreat after being rejected at the $2,720 resistance last week.
      • A potential double top and last Thursday’s bearish engulfing candle have strengthened bearish sentiment.
      • The 4-hour chart shows increasing bearish momentum, with a negative candle supporting the downtrend.
    • Key Levels to Watch:
      • Support:
        • Immediate support lies near $2,630 (December 9 low).
        • Deeper support is at $2,610, marked by lows from November 25, 26, and December 6.
      • Resistance:
        • Upside resistance is at $2,665 (Monday’s high).
        • Additional resistance is near $2,690 (Friday’s intraday level).

    Conclusion

    Gold remains under pressure, with rising US Treasury yields, a strong Dollar, and expectations of a cautious Fed outlook driving the bearish trend. Traders should watch the $2,630 support level, as a break lower could open the door to $2,610. Conversely, a rebound above $2,665 could challenge bearish momentum in the short term.

    XAU/USD 4-Hour Chart

    XAUUSD Chart

    Interest rates FAQs

    What are interest rates?

    Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.

    How do interest rates impact currencies?

    Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.

    How do interest rates influence the price of Gold?

    Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.

    What is the Fed Funds rate?

    The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.

  • GBP outperforms modestly – Scotiabank

    GBP outperforms modestly – Scotiabank


    Despite some sloppy GDP data for October reported Friday and today’s less than stellar December PMIs, there is little anticipation of any BoE rate action this week. Markets have priced in just 2bps of easing risk for the decision Thursday, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

    GBP trades off early high

    “The Pound Sterling (GBP) picked up a little ground on the US Dollar (USD) from the start of trade in Asia and gains accelerated a little around this morning’s data, which saw a small beat on the Services PMI. EURGBP edged back under 0.83.”

    “GBP/USD has recovered a little of last week’s drop in trade so far today but the intraday look of price action suggests a short-term block at least on gains through the upper 1.26s that may undermine a further rebound. Some sideways trading between support at 1.2600/10 and 1.2670/75 may result.”

  • EUR/GBP Steady Above 0.8300 as Markets Await Eurozone and UK PMI Data

    EUR/GBP Steady Above 0.8300 as Markets Await Eurozone and UK PMI Data

    Key Highlights:

    • EUR/GBP consolidates above 0.8300 ahead of crucial PMI releases for manufacturing and services sectors.
    • The Euro finds support following French President Emmanuel Macron’s appointment of centrist ally François Bayrou as Prime Minister.
    • Expectations of cautious monetary easing by the Bank of England (BoE) could cap gains for the Pound Sterling (GBP).

    EUR/GBP trades near 0.8320 during Monday’s European session, stabilizing after two days of gains. Investors are closely monitoring the upcoming Purchasing Managers Index (PMI) figures from the Eurozone and the UK, which will provide fresh insights into private sector activity in both regions.

    Eurozone Strength Amid Political Developments
    The Euro strengthened after French President Emmanuel Macron appointed François Bayrou, a centrist ally, as Prime Minister. The move is seen as a step toward political stability after Michel Barnier’s resignation following a parliamentary confidence vote.

    Additionally, European Central Bank (ECB) Governing Council member Robert Holzmann reiterated the central bank’s commitment to price stability, emphasizing that rate cuts aimed solely at stimulating economic growth would contradict the ECB’s current stance. Holzmann’s remarks underscore the ECB’s hawkish approach amid ongoing economic challenges.

    BoE Caution Limits Pound Upside
    The Pound faces mixed sentiment as the Bank of England (BoE) is expected to adopt a measured pace in monetary policy easing, contrasting with faster moves by other central banks. UK inflation is projected to rise next year, partly driven by fiscal stimulus measures from Finance Minister Rachel Reeves’ expansive budget.

    However, BoE Governor Andrew Bailey has hinted at the possibility of four rate cuts in 2025, which may weigh on GBP strength. This cautious outlook on the BoE’s policy trajectory could provide underlying support for the EUR/GBP pair.


    FAQs: Interest Rates and Their Market Impact

    What are interest rates?
    Interest rates are charges applied by financial institutions on loans and payments made to savers. Central banks set base lending rates, influencing broader economic conditions. Rates are adjusted to maintain inflation targets, typically around 2%. Lower rates stimulate economic activity, while higher rates aim to curb inflation.

    How do interest rates affect currencies?
    Higher interest rates generally strengthen a currency, as they attract global investors seeking higher returns.

    How do interest rates impact Gold prices?
    Higher interest rates tend to lower Gold prices by increasing the opportunity cost of holding non-interest-bearing assets like Gold. Rising interest rates also boost the US Dollar, further pressuring Gold prices, which are denominated in USD.

    What is the Fed Funds rate?
    The Fed Funds rate is the overnight lending rate between US banks, set by the Federal Reserve. It is a key benchmark for monetary policy and is expressed as a range (e.g., 4.75%-5.00%), with the upper limit being the commonly cited figure. Future rate expectations are tracked via tools like the CME FedWatch, influencing financial market trends.

  • Forex Today: Major Central Bank Week Kicks Off with Flash PMIs

    Forex Today: Major Central Bank Week Kicks Off with Flash PMIs

    Key Highlights for Monday, December 16:

    Markets are bracing for a pivotal week featuring the year-end policy decisions of several major central banks. Ahead of these announcements, flash Manufacturing and Services PMI data for December from Germany, the Eurozone, the UK, and the US are set to grab investors’ attention on Monday.

    Market Overview

    • US Dollar (USD): The USD Index advanced nearly 1% last week, driven by rising Treasury yields and a cautious market sentiment. Early Monday, the index consolidates below 107.00 as investors await the NY Empire State Manufacturing Index for December. The Federal Reserve (Fed) will announce its monetary policy decisions and release its updated Summary of Economic Projections (SEP) on Wednesday following its two-day meeting.

    US Dollar PRICE Last 7 days

    The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the Japanese Yen.

     USDEURGBPJPYCADAUDNZDCHF
    USD 0.51%0.85%2.52%0.49%0.30%1.09%1.40%
    EUR-0.51% 0.36%2.15%0.07%-0.12%0.66%0.97%
    GBP-0.85%-0.36% 1.59%-0.28%-0.47%0.31%0.60%
    JPY-2.52%-2.15%-1.59% -2.01%-2.09%-1.52%-1.03%
    CAD-0.49%-0.07%0.28%2.01% -0.15%0.59%0.89%
    AUD-0.30%0.12%0.47%2.09%0.15% 0.79%1.08%
    NZD-1.09%-0.66%-0.31%1.52%-0.59%-0.79% 0.28%
    CHF-1.40%-0.97%-0.60%1.03%-0.89%-1.08%-0.28% 

    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).

    • Asia-Pacific:
      • Australia: The Judo Bank Composite PMI dipped to 49.9 in December from 50.2 in November, signaling a contraction in business activity.
      • China: Retail Sales rose 3% year-over-year in November, falling short of the 4.6% growth expected by markets. Despite last week’s small losses, AUD/USD remains steady above 0.6350 in early Monday trading.
    • Europe:
      • EUR/USD: The Euro reversed its five-day losing streak on Friday and is holding modest gains above 1.0500 on Monday. ECB President Christine Lagarde’s speech during European trading hours will be closely monitored for insights into the central bank’s policy outlook.
      • GBP/USD: After hitting its lowest level since late November near 1.2600 on Friday, GBP/USD is staging a technical rebound toward 1.2650 early Monday.
    • Japan: USD/JPY maintained its bullish momentum, gaining over 2% last week. The pair is consolidating around 153.50 on Monday. Jibun Bank data showed an improvement in both Manufacturing PMI (49.5 vs. 49.0) and Services PMI (51.4 vs. 50.5) in December.

    Commodities

    • Gold (XAU/USD): Gold faced significant selling pressure late last week, registering sharp losses on Thursday and Friday. On Monday, it is trading slightly above $2,650, holding steady as investors await key economic data and central bank decisions.

    Looking Ahead

    This week’s focus will center on central bank actions:

    • Federal Reserve: Monetary policy decisions and the SEP release on Wednesday.
    • ECB, Bank of England (BoE), and Bank of Japan (BoJ): Policy meetings and updates later in the week.
    • Key Data Releases: Flash PMIs from the US, Eurozone, UK, and Germany on Monday, offering an early glimpse into December’s economic activity.

    Markets remain on edge as traders prepare for potential surprises from these critical events, which will likely set the tone for currency and commodity trends heading into the end of the year.

  • NZD/USD Price Analysis: Pair Slides to 0.5760 as Selling Pressure Intensifies

    NZD/USD Price Analysis: Pair Slides to 0.5760 as Selling Pressure Intensifies

    NZD/USD dropped on Friday, settling at 0.5760 after briefly rising to 0.5850 earlier in the session. The pair remains capped by the 20-day Simple Moving Average (SMA), with any upward moves hindered by persistent selling pressure.

    Technical indicators signal a continued bearish trend. The Relative Strength Index (RSI) sits near 34, approaching oversold levels, while still pointing downward, indicating sustained weakness. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram is showing rising red bars, reinforcing the intensifying bearish momentum.

    The immediate support for NZD/USD is around the 0.5750 level, followed by the key psychological level at 0.5700 if the selling pressure continues. To shift the current bearish outlook, the pair would need to break decisively above the 20-day SMA, currently near 0.5890, allowing bulls a potential opportunity to regain control.

    NZD/USD daily chart