Forex News
- The Japanese Yen remains depressed as Takaichi flags a looser fiscal goal, urges BoJ rate hike caution.
- A positive development to end the US government shutdown also undermines the safe-haven JPY.
- Dovish Fed expectations and economic concerns weigh on the USD, and might cap the USD/JPY pair.
The Japanese Yen (JPY) continues its struggle to attract any meaningful buyers during the Asian session on Wednesday and languishes near the lowest level since February 13, touched against its American counterpart the previous day. The Bank of Japan (BoJ) has been reluctant to commit to further interest rate hikes on the back of Japan's Prime Minister Sanae Takaichi's pro-stimulus stance. This, along with the optimism over a potential deal to end the US government shutdown, turns out to be a key factor undermining the safe-haven JPY.
Meanwhile, a summary of BoJ policymakers' opinions at the October meeting released on Monday indicated a chance of a rate hike in December. Adding to this, speculation that Japanese authorities may step into the market to stem further weakness in the domestic currency might hold back the JPY bears from placing aggressive bets. Moreover, a broadly weaker US Dollar (USD), undermined by bets for more rate cuts by the US Federal Reserve (Fed) and concerns about an economic fallout from the US government closure, could cap gains for the USD/JPY pair.
Japanese Yen bears retain control amid uncertainty over the timing for the next BoJ rate hike
- Takuji Aida – an economist chosen to join Premier Sanae Takaichi's panel to debate her administration's growth strategy – told the Nikkei newspaper that the Bank of Japan should avoid raising interest rates in December. Aida added that the central bank should wait at least until January next year as Japan's economy likely contracted in the third quarter.
- The Japanese government is expected to finalise an economic stimulus package on November 21. According to a draft outline, the package will urge the BoJ to focus on achieving strong economic growth accompanied by stable prices, underscoring Prime Minister Sanae Takaichi’s preference for keeping interest rates low to support a fragile recovery.
- The US Senate voted to pass legislation to reopen the federal government and end the longest government shutdown in the nation’s history. The positive development triggers a fresh wave of the global risk-on trade, which, along with the BoJ rate hike uncertainties, continues to undermine the safe-haven Japanese Yen during the Asian session on Wednesday.
- Meanwhile, economists estimate that the prolonged US government closure might have already shaved approximately 1.5 to 2.0% off quarterly GDP growth. Moreover, investors seem tilted towards a more dovish US Federal Reserve and have been pricing in a greater chance of another rate cut in December. This, in turn, keeps the US Dollar depressed.
- In contrast, a summary of BoJ policymakers' opinions at their October meeting released on Monday reflected a view that the time for another interest-rate hike is approaching. Adding to this, the risk of a government intervention to stem further JPY weakness warrants caution for bears, and before positioning for further upside for the USD/JPY pair.
- In the absence of any relevant market-moving US economic releases on Wednesday, traders will look forward to speeches from a slew of influential FOMC members for cues about the Fed's future rate-cut path. This will drive the USD demand, which, along with the broader risk sentiment, should provide short-term impetus to the currency pair.
USD/JPY awaits a move beyond the 154.45-154.50 supply zone before extending the recent move up
From a technical perspective, the USD/JPY bulls need to wait for a sustained strength beyond the 154.45-154.50 pivotal hurdle before placing fresh bets. Given that oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone, spot prices might then aim to conquer the 155.00 psychological mark. The momentum could extend further towards the 155.60-155.65 intermediate barrier en route to the 156.00 round figure.
On the flip side, any corrective pullback below the 154.00 mark could be seen as a buying opportunity near the overnight swing low, around the 153.65 region. This should help limit the downside for the USD/JPY pair near the 153.00 mark. A convincing break below, however, could pave the way for deeper losses and drag spot prices to the 152.15-152.10 region. The latter should now act as a strong near-term base for the currency pair, which, if broken decisively, might shift the near-term bias in favor of bearish traders.
Japanese Yen FAQs
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.
- US Dollar Index trades with mild gains near 99.55 in Wednesday’s early Asian session.
- Traders are concerned that the reopening will unleash a flood of data, which may show some weakening economic numbers.
- ADP showed US private employers shed more jobs than they created in the four weeks ending October 25.
The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, trades on a positive note around 99.55 during the Asian trading hours on Wednesday. The DXY edges higher amid hopes for the end of the US government shutdown. Traders will keep an eye on the Fedspeak later on Wednesday for more cues about the US interest rate.
The US Senate approved a compromise on Monday that would end the longest government shutdown in US history. The funding bill is headed to the House for a final vote as soon as Wednesday. If it passes in both chambers of Congress, it will head to US President Donald Trump to be signed into law. A potential end to the US government shutdown lifts the US Dollar against its rivals.
Nonetheless, traders believe that the resumption of economic data will point to a slowing economy and that would prompt the Federal Reserve (Fed) to reduce interest rates in December. This, in turn, might cap the upside for the DXY in the near term.
“When the government is closed, the news stream is non-existent. With the government going to reopen, I think we're going to begin seeing more cracks,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
Data last week showed the US consumer sentiment slumped to its lowest level in three and a half years in early November. Additionally, private employers shed an average of 11,250 jobs per week on average in the four weeks ended October 25, the Automatic Data Processing (ADP) showed on Tuesday.
Traders will take more cues from Fed policymakers later in the day. The Fed’s John Williams, Anna Paulson, Christopher Waller, Raphael Bostic, Stephen Miran and Susan Collins are set to speak. Any hawkish remarks could boost the USD, while dovish comments could drag the DXY lower.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- Australian Dollar extends its losses despite a cautious RBA policy stance.
- The AUD could regain its ground as RBA’s Hauser highlighted the need to maintain tight monetary conditions.
- The US Dollar edges higher on the ongoing process of the government shutdown ending.
The Australian Dollar (AUD) weakens against the US Dollar (USD) on Wednesday, extending its losses for the second successive session. The AUD/USD pair declines as the US Dollar (USD) gains support from the ongoing process to reopen the United States (US) government.
The AUD may regain support from cautious sentiment surrounding the Reserve Bank of Australia (RBA) policy outlook. On Monday, RBA Deputy Governor Andrew Hauser mentioned the unusual challenges facing monetary policy and stressed the need to maintain tight conditions to curb inflation. Hauser noted that Australia’s monetary policy is navigating a tricky phase, as the economic recovery began with demand already exceeding potential output, leaving limited room for near-term easing.
RBA Assistant Governor (Financial System) Brad Jones delivered a speech on Wednesday at the Association of Superannuation Funds of Australia (ASFA) Conference in Broadbeach. Jones noted that markets are underestimating geopolitical risks and that global valuations remain complacent. He also highlighted early signs of fragmentation appearing in central bank Gold reserves.
US Dollar receives support as government shutdown nears end
- The US Dollar Index (DXY), which measures the value of the US Dollar against six major currencies, is halting its five-day losing streak and trading around 99.50 at the time of writing. Traders will likely observe the upcoming speeches from Federal Reserve (Fed) officials, including Christopher Waller, Raphael Bostic, and Stephen Miran, later in the day.
- The US Senate completed its job and passed the bill that would end the government shutdown. The House will vote on the bill on Wednesday, sending it to President Donald Trump for signature. That would reopen the government, sending paychecks and unleashing economic data releases.
- US President Donald Trump, on Monday, backed a bipartisan deal to end the US government shutdown, signaling a likely reopening within days. Senate Majority Leader John Thune said he expects Trump to sign the bill once Congress passes it.
- President Trump issued a premonition that inflation will reach 1.5% "pretty soon", a level of inflation that has evaded the US economy for nearly four years after shooting above that level in February of 2021. 1.5% inflation is also well below the long-run average for US inflation over ten years.
- US Treasury Secretary Scott Bessent said on Monday that the US federal shutdown's impact is getting worse for the economy. Making substantial progress on inflation and expecting prices to come down over the coming months, Bessent added.
- Job losses in October, mainly in the government and retail sectors, and a drop in consumer sentiment to a three-and-a-half-year low in early November have reinforced expectations of policy easing. The CME FedWatch Tool shows markets pricing in a 68% chance of a 25 bps rate cut in December.
- China's Ministry of Commerce said on Monday that it would temporarily lift its ban on approving exports of “dual-use items” related to gallium, germanium, antimony, and super-hard materials to the US. The suspension takes effect from Sunday until November 27, 2026. Any change in the Chinese economy could impact the AUD as China is a major trading partner for Australia.
- National Bureau of Statistics of China reported on Sunday that the Consumer Price Index (CPI) climbed 0.2% year-over-year in October, recovering after a decline of 0.3% in September. The market consensus was for 0% in the reported period. CPI inflation increased 0.2% MoM in October, against 0.1% prior. Producer Price Index (PPI) dropped 2.1% YoY in October, following a 2.3% fall in September. The data came in above the market consensus of -2.2%.
- University of Melbourne released on Tuesday that Australia’s Westpac Consumer Confidence jumped 12.8% in November to 103.8, surpassing 100 for the first time since February 2022. The rebound follows a 3.5% decline in October and marks the strongest non-pandemic reading in seven years, driven by improving economic conditions and easing external risks.
Australian Dollar tests nine-day EMA support near 0.6500
The AUD/USD pair is trading around 0.6520 on Wednesday. Technical analysis of the daily chart shows the pair consolidating within a rectangle pattern, trading sideways. However, the pair is positioned close to the nine-day Exponential Moving Average (EMA), indicating an unbiased short-term momentum.
A successful break below the nine-day EMA of 0.6520, followed by the psychological level of 0.6500, could weaken the short-term price momentum and prompt the AUD/USD pair to approach the lower boundary of the rectangle around 0.6470 and the five-month low of 0.6414, which was recorded on August 21.
On the upside, the AUD/USD pair could target the 50-day EMA of 0.6536. A break above this level would improve the medium-term price momentum and support the AUD/USD pair to explore the region around the rectangle’s upper boundary, around 0.6630. Further advances would support the pair to target the 13-month high of 0.6707, recorded on September 17.
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | 0.16% | 0.11% | 0.06% | 0.10% | -0.01% | 0.07% | |
| EUR | -0.04% | 0.11% | 0.07% | 0.02% | 0.06% | -0.05% | 0.02% | |
| GBP | -0.16% | -0.11% | -0.02% | -0.09% | -0.06% | -0.16% | -0.09% | |
| JPY | -0.11% | -0.07% | 0.02% | -0.06% | -0.02% | -0.14% | -0.06% | |
| CAD | -0.06% | -0.02% | 0.09% | 0.06% | 0.04% | -0.08% | 0.00% | |
| AUD | -0.10% | -0.06% | 0.06% | 0.02% | -0.04% | -0.11% | -0.03% | |
| NZD | 0.00% | 0.05% | 0.16% | 0.14% | 0.08% | 0.11% | 0.08% | |
| CHF | -0.07% | -0.02% | 0.09% | 0.06% | -0.00% | 0.03% | -0.08% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
The People’s Bank of China (PBOC) set the USD/CNY central rate for the trading session ahead on Wednesday at 7.0833 compared to the previous day's fix of 7.0866 and 7.1141 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
- NZD/USD drifts lower to near 0.5655 in Wednesday’s early Asian session.
- The longest US government shutdown could end as soon as Wednesday.
- New Zealand’s two-year-ahead annual inflation expectation was unchanged at 2.28%.
The NZD/USD pair declines to around 0.5655 during the early Asian session on Wednesday. Optimism over a potential deal to end the US government shutdown provides some support to the US Dollar (USD) against the New Zealand Dollar (NZD). Traders will take more cues from the Fedspeak later on Wednesday.
The funding bill that would end a record government shutdown in US history is headed to the House for a final vote as soon as Wednesday, after the Senate approved it in a 60-40 vote on Monday. If it passes in both chambers of Congress, it will head to US President Donald Trump to be signed into law.
Trump on Monday voiced support for a bipartisan agreement to end the US shutdown, a significant step that makes it likely the government will reopen within days. Hopes of reopening the US government underpin the Greenback and create a headwind for the pair.
Nonetheless, further bets of a rate reduction by the US central bank by year-end might cap the upside for the USD. The markets are now pricing in nearly a 68% possibility that the Federal Reserve (Fed) will cut rates in December, according to the CME FedWatch tool.
Data released by the Automatic Data Processing (ADP) on Tuesday showed that for the four weeks ended October 25, private sector job creation was down more than 11,250 on average per week. The data stands in contrast to the October gains that the firm reported last week, indicating some labor market weakening.
In the fourth quarter (Q4) of 2025, the Reserve Bank of New Zealand’s (RBNZ) monetary conditions survey revealed that New Zealand's two-year inflation expectation remained steady at 2.28% versus 2.28% seen in Q3. The NZ average one-year inflation expectations rose to 2.39% in Q4, compared to 2.37% in Q3.
New Zealand Dollar FAQs
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.
Reserve Bank of Australia (RBA) Assistant Governor (Financial System) Brad Jones spoke on Wednesday at the Association of Superannuation Funds of Australia (ASFA) Conference, Broadbeach.
Key quotes
Markets are underpricing geopolitical risks; global valuations remain complacent.
Central bank gold reserves show early signs of fragmentation emerging.
Market reaction
At the time of writing, AUD/USD is holding higher ground near 0.6530, adding 0.01% on the day.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
- Gold price jumps to over a two-week high near $4,140 in Wednesday’s early Asian session.
- US companies shed jobs in late October.
- The reopening of the US government could weigh on the Gold price, a safe-haven asset.
Gold price (XAU/USD) extends the rally to around $4,140 during the early Asian session on Wednesday. The precious metal gains momentum on further bets of a rate cut by the US Federal Reserve (Fed) by year-end. Traders will keep an eye on the Fedspeak later on Wednesday. The Fed’s John Williams, Anna Paulson, Christopher Waller, Raphael Bostic, Stephen Miran and Susan Collins are scheduled to speak.
The Automatic Data Processing (ADP) revealed on Tuesday that for the four weeks ended October 25, private sector job creation was down more than 11,250 on average per week. The data stands in contrast to the October gains that the firm reported last week, indicating some labor market weakening. Weaker-than-expected employment data from the ADP reignited speculation that the Fed could deliver additional easing, which supports the yellow metal.
Markets are currently priced in nearly a 68% chance of a 25 basis points (bps) rate cut by the Fed in December, with odds rising to about 80% by January, according to the CME FedWatch tool. Lower interest rates could reduce the opportunity cost of holding Gold, supporting the non-yielding precious metal.
Traders will closely monitor the developments surrounding a potential deal to end the US government shutdown. Signs that a resolution to the US government shutdown is nearing could undermine safe-haven assets like Gold. A record US government shutdown is on a path to end as soon as Wednesday after the Senate passed a temporary funding measure backed by a group of eight centrist Democrats, Bloomberg reported late Tuesday. The spending package would keep most of the government open through January 30.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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