EUR/JPY falls to near 159.00 amid rising wages in Japan

  • EUR/JPY depreciates as rising wages bolster the odds of the BoJ rate hikes again.
  • Japan’s Labor Cash Earnings jumped 4.8% YoY in December, rising from 3.9% in November.
  • The Euro remains under pressure as investors brace for a potential Trump’s tariff targeting the Eurozone.

EUR/JPY retreats after gains in the previous session, trading near 159.00 during Asian hours on Wednesday. The decline of the EUR/JPY cross is driven by a stronger Japanese Yen (JPY), supported by rising wages in Japan and growing expectations that the Bank of Japan (BoJ) will further hike interest rates.

Japan’s Labor Cash Earnings surged 4.8% year-on-year in December, up from 3.9% in November, exceeding the market forecast of 3.8%. This marks the highest wage growth in nearly three decades. Additionally, inflation-adjusted real wages, which indicate consumer purchasing power, increased by 0.6% in December, recording a second consecutive month of positive growth.

More on data, the Jibun Bank Composite Purchasing Managers’ Index (PMI) rose to 51.1 in January 2025 from 50.5 in December, signaling the third straight month of expansion in private sector activity. Meanwhile, the Services PMI was revised upward to 53.0 from a preliminary estimate of 52.7, following a final reading of 50.9 in the prior month.

EUR/JPY may face further downside as the Japanese Yen finds additional support from safe-haven flows amid escalating US-China trade tensions. On Wednesday, the US Customs and Border Protection announced that new tariffs of 10% would be applied to both Hong Kong and mainland China.

The Euro (EUR) remains under pressure as investors anticipate potential tariff threats from US President Donald Trump against the Eurozone. Over the weekend, Trump stated that he would “definitely” impose tariffs, accusing the bloc of unfair trade practices by not purchasing enough US cars and farm products. He claimed that the EU “takes almost nothing, and we take everything from them.”

In response, French President Emmanuel Macron warned that the European Union (EU) would retaliate if its interests were threatened. “If our commercial interests are attacked, Europe, as a true power, will have to make itself respected and therefore react,” Macron stated, as reported by The Guardian.

Economic Indicator

Labor Cash Earnings (YoY)

This indicator, released by the Ministry of Health, Labor and Welfare, shows the average income, before taxes, per regular employee. It includes overtime pay and bonuses but it doesn’t take into account earnings from holding financial assets nor capital gains. Higher income puts upward pressures on consumption, and is inflationary for the Japanese economy. Generally, a higher-than-expected reading is bullish for the Japanese Yen (JPY), while a below-the-market consensus result is bearish.

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Last release: Tue Feb 04, 2025 23:30

Frequency: Monthly

Actual: 4.8%

Consensus: 3.8%

Previous: 3%

Source: Ministry of Economy, Trade and Industry of Japan

By |2025-02-17T15:18:48+05:30February 17, 2025 3:18 pm|Forex|Comments Off on EUR/JPY falls to near 159.00 amid rising wages in Japan
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EUR/USD lacks firm intraday direction, stuck in a range around 1.0375-1.0380 zone

  • EUR/USD consolidates in a range near the weekly high touched earlier this Wednesday.
  • The USD struggles to lure buyers amid Fed rate cut bets and lends support to the major. 
  • Concerns about Trump’s trade tariffs and dovish ECB weigh on the Euro and cap the pair.

The EUR/USD pair struggles to capitalize on this week’s solid recovery from the 1.0200 neighborhood, or the lowest level since January 13, and oscillates in a range near the weekly top touched earlier this Wednesday. Spot prices currently trade around the 1.0375-1.0380 region, nearly unchanged for the day amid mixed fundamental cues.

The Job Openings and Labor Turnover Survey (JOLTS) published on Tuesday pointed to a slowdown in the US labor market and supports prospects for further policy easing by the Federal Reserve (Fed). In fact, the markets are pricing in the possibility that the US central bank will lower borrowing costs twice this year. Apart from this, the risk-on mood keeps the safe-haven US Dollar (USD) depressed near the weekly low, which, in turn, is seen acting as a tailwind for the EUR/USD pair.

Traders, however, seem reluctant to place aggressive bullish bets in the wake of concerns that US President Donald Trump would slap tariffs on goods from the European Union. Adding to this, the European Central Bank’s (ECB) dovish stance, which overshadowed a rise in the Eurozone Harmonized Index of Consumer Prices (HICP) at an annual rate of 2.5% in January, is seen undermining the Euro and contributing to keeping a lid on any meaningful upside for the EUR/USD pair.

Traders now look forward to the release of the final Eurozone Services PMI. Meanwhile, the US economic docket features the release of the ADP report on private-sector employment and ISM Services PMI. Apart from this, speeches by influential FOMC members will drive the USD demand and provide a fresh impetus to the EUR/USD pair. The focus, however, remains glued to the US monthly employment details – popularly known as the Nonfarm Payrolls (NFP) report on Friday.

Euro FAQs

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.

Tariffs FAQs

Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.

Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.

There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.

During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.

By |2025-02-17T15:18:02+05:30February 17, 2025 3:18 pm|Forex|Comments Off on EUR/USD lacks firm intraday direction, stuck in a range around 1.0375-1.0380 zone
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USD/INR maintains position above 87.00 after HSBC PMI data release

  • USD/INR holds ground amid rising trade tensions between the US and China.
  • India HSBC Composite Purchasing Managers’ Index fell to a 14-month low of 57.7, from the previous 59.2 reading.
  • Traders await Friday’s US Nonfarm Payrolls, which is expected a slight slowdown in job creation for January.

USD/INR continues its upward momentum for the fourth consecutive day, trading around 87.10 during Wednesday’s Asian session. The risk-sensitive Indian Rupee (INR) remains under pressure due to increased risk aversion following rising trade tensions between the US and China.

On the economic front, the seasonally adjusted India HSBC Composite Purchasing Managers’ Index (PMI) dropped from 59.2 in December to a 14-month low of 57.7. Despite the decline, the reading remains above the long-term average, signaling continued economic expansion. Meanwhile, the Services PMI registered at 56.5 in January, reflecting strong growth, though it slipped from 59.3 in December to its lowest level since November 2022.

In response to the new 10% US tariff that took effect on Tuesday, China imposed a 15% tariff on US coal and liquefied natural gas (LNG) imports, along with an additional 10% tariff on crude oil, farm equipment, and certain automobiles.

Despite the escalating trade dispute between the United States and China, traders remain hopeful for a potential resolution, similar to the agreements reached with Mexico and Canada. US President Donald Trump stated on Monday that he expects to speak with China soon but warned, “If we can’t reach a deal with China, the tariffs will be very, very substantial.” However, no further developments have been reported.

Meanwhile, investors anticipate a 25-basis-point rate cut in the Reserve Bank of India’s (RBI) upcoming monetary policy meeting on Friday, amid slowing economic growth. Market optimism has been further buoyed by expectations following the FY2026 Budget.

Looking ahead, traders await Friday’s US Nonfarm Payrolls (NFP) report, which is expected to influence the Federal Reserve’s (Fed) monetary policy direction. Consensus estimates suggest a slight slowdown in job creation for January 2025.

Economic Indicator

HSBC Composite PMI

The Composite Purchasing Managers Index (PMI), released on a monthly basis by S&P Global and HSBC Bank, is a leading indicator gauging business activity in India This d by weighting together comparable manufacturing and services indices using official manufacturing and services annual value added. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the Indian private economy is generally expanding, a bullish sign for the Indian Rupee (INR). Meanwhile, a reading below 50 signals that the activity is generally declining, which is seen as bearish for INR.

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Last release: Wed Feb 05, 2025 05:00

Frequency: Monthly

Actual: 57.7

Consensus: 57.9

Previous: 57.9

Source: S&P Global

By |2025-02-17T15:17:14+05:30February 17, 2025 3:17 pm|Forex|Comments Off on USD/INR maintains position above 87.00 after HSBC PMI data release
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Forex Today: US Dollar retreats, Gold renews record-high as markets await US data

Here is what you need to know on Wednesday, February 5:

After weakening against its major rivals on improving risk mood and disappointing US data on Tuesday, the US Dollar (USD) struggles to hold its ground early Wednesday. Later in the session, the US economic calendar will feature ADP Employment Change and ISM Services Purchasing Managers Index (PMI) data for January. Investors will continue to scrutinize comments from central bank officials throughout the day as well.

US Dollar PRICE This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Canadian Dollar.

USD EUR GBP JPY CAD AUD NZD CHF
USD -0.34% -0.79% -1.07% -2.66% -0.91% -1.35% -1.27%
EUR 0.34% -0.05% 0.59% -1.05% -0.12% 0.29% 0.36%
GBP 0.79% 0.05% -0.46% -1.00% -0.06% 0.34% 0.41%
JPY 1.07% -0.59% 0.46% -1.61% 0.30% 0.65% 0.43%
CAD 2.66% 1.05% 1.00% 1.61% 0.69% 1.35% 1.43%
AUD 0.91% 0.12% 0.06% -0.30% -0.69% 0.40% 0.47%
NZD 1.35% -0.29% -0.34% -0.65% -1.35% -0.40% 0.08%
CHF 1.27% -0.36% -0.41% -0.43% -1.43% -0.47% -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 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 USD Index lost about 0.4% on Tuesday after the US Bureau of Labor Statistics reported that JOLTS Job Openings declined to 7.6 million in December, falling short of the market expectation of 8 million. Additionally, Wall Street’s main indexes gained traction after the opening bell, pointing to a positive shift in market mood that didn’t allow the USD to stage a rebound. Early Wednesday, however, US stock index futures trade in negative territory.

During the Asian trading hours on Wednesday, the US Customs and Border Protection issued a notice on, noting that additional US tariffs of 10% will apply to Hong Kong as well as mainland China. Meanwhile, the data from China showed that the Caixin Services PMI declined to 51 in January from 52.2 in December.

EUR/USD benefited from the broad USD weakness and registered daily gains on Tuesday. The pair clings to small daily gains but stays below 1.0400 in the European morning on Wednesday. Eurostat will publish Producer Price Index data for December later in the session.

Japan’s Economy Minister Ryosei Akazawa noted on Wednesday that the government’s focus is to eradicate Japan’s deflationary mindset. “With an ambitious goal to boost minimum wages, the government is trying to eradicate deflationary mindset,” he added. USD/JPY stays under heavy bearish pressure to begin the European session and trades at its lowest level since mid-December near 153.00.

GBP/USD closed in positive territory for the second consecutive day on Tuesday. The pair stays relatively quiet and fluctuates in a tight channel below 1.2500 in the European morning on Wednesday.

The Unemployment Rate in New Zealand rose to 5.1% in the fourth-quarter from 4.8% in the third quarter, Statistics New Zealand reported on Wednesday. This reading came in line with the market expectation and failed to trigger a noticeable market reaction. At the time of press, NZD/USD was trading marginally higher on the day, above 0.5650.

Gold preserves its bullish momentum and trades at a new all-time high above $2,860. Escalating geopolitical tensions after US President Donald Trump proposed resettling Palestinians in neighboring countries seem to be fuelling XAU/USD’s rally.

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.

By |2025-02-17T15:15:40+05:30February 17, 2025 3:15 pm|Forex|Comments Off on Forex Today: US Dollar retreats, Gold renews record-high as markets await US data
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EUR/USD: Unlikely to break clearly above 1.0425 – UOB Group

Euro (EUR) could continue to rise, but any advance is unlikely to break clearly above 1.0425. In the longer run, outlook is unclear; EUR could trade in a broad range of 1.0250/1.0490 for the time being, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

EUR can trade in a broad range

24-HOUR VIEW: “EUR traded in a volatile manner two days ago, as it whipsawed and traded in a broad range. Yesterday, we pointed out that ‘the volatile price action has resulted in a mixed outlook.’ We also pointed out that EUR ‘could continue to trade in a choppy manner, probably between 1.0255 and 1.0370.’ EUR dipped to 1.0271 before rising to a high of 1.0387. Despite the advance, upward momentum has not increased significantly. However, EUR could continue to rise, but any advance is unlikely to break clearly above 1.0425. The major resistance at 1.0490 is unlikely to come into view. Support is at 1.0335; a breach of 1.0290 would indicate that the current upward pressure has eased.”

1-3 WEEKS VIEW: “Two days ago (03 Feb, spot at 1.0245), we indicated that ‘the risk is for further EUR weakness.’ However, we highlighted that ‘it remains to be seen if it can break and remain below 1.0100.’ Yesterday, EUR rose sharply and broke above our ‘strong resistance’ of 1.0380, invalidating our view. The outlook is unclear for now, and EUR could trade in a broad range of 1.0250/1.0490 for the time being.”

By |2025-02-17T15:13:35+05:30February 17, 2025 3:13 pm|Forex|Comments Off on EUR/USD: Unlikely to break clearly above 1.0425 – UOB Group
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Pound Sterling faces pressure as BoE’s policy decision looms large

  • The Pound Sterling declines against its major peers as traders price in a 25 bps interest rate cut by the BoE on Thursday.
  • Investors should brace for high volatility amid uncertainty over US-China trade relations.
  • The US Dollar will be guided by the US ADP Employment Change and the ISM Services PMI data for January on Wednesday.

The Pound Sterling (GBP) underperforms its major peers, except the US Dollar (USD), on Wednesday as investors turn cautious ahead of the Bank of England’s (BoE) monetary policy decision, which will be announced on Thursday.

The BoE is almost certain to reduce its key borrowing rates by 25 basis points (bps) to 4.50%, with an 8-1 vote split. This would be the third interest rate cut by the BoE in its current policy-easing cycle. Monetary Policy Committee (MPC) member Catherine Mann, who has been an outspoken hawk, is expected to support keeping interest rates steady at 4.75%.

Traders are confident about the BoE cutting interest rates on Thursday as inflationary pressures in the United Kingdom (UK) decelerated at a faster-than-expected pace in December. Inflation in the services sector – which is closely tracked by BoE officials – grew at a moderate pace of 4.4%, compared to 5% growth in November. Also, a sharp decline in the Retail Sales data for December boosted BoE dovish bets.

Market participants are also anticipating that the BoE will cut interest rates by 56 bps this year beyond the policy meeting on Thursday.

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the US Dollar.

USD EUR GBP JPY CAD AUD NZD CHF
USD -0.12% -0.08% -0.74% -0.16% -0.20% -0.39% -0.12%
EUR 0.12% 0.04% -0.61% -0.05% -0.08% -0.28% -0.00%
GBP 0.08% -0.04% -0.63% -0.08% -0.11% -0.31% -0.04%
JPY 0.74% 0.61% 0.63% 0.57% 0.53% 0.32% 0.61%
CAD 0.16% 0.05% 0.08% -0.57% -0.04% -0.24% 0.04%
AUD 0.20% 0.08% 0.11% -0.53% 0.04% -0.20% 0.08%
NZD 0.39% 0.28% 0.31% -0.32% 0.24% 0.20% 0.28%
CHF 0.12% 0.00% 0.04% -0.61% -0.04% -0.08% -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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

Daily digest market movers: Pound Sterling rises against US Dollar ahead of US data

  • The Pound Sterling gains to near 1.2500 against the US Dollar in Wednesday’s European session. The GBP/USD pair advances as the US Dollar gives up its initial weekly gains as it loses risk-premium after United States (US) President Donald Trump postponed tariffs on Canada and Mexico.
  • Market participants have interpreted this scenario as President Trump’s negotiation tactic to close better deals with his major trading partners. Trump called for an immediate suspension of 25% tariff orders on his North American peers after they agreed to cooperate on criminal enforcement.
  • Still, investors are hesitant to go all-in for risky assets as a trade war between two powerhouses, the US and China, is brewing. On Tuesday, China responded swiftly to Trump’s 10% tariffs by imposing levies on various US exports, including farm equipment, some autos, and energy items such as Coal and Liquefied Natural Gas (LNG).
  • On the economic front, the US Dollar will be guided by the US ADP Employment Change for the private sector and the ISM Services Purchasing Managers Index (PMI) data for January, which will be published during North American trading hours.
  • Economists estimate the private sector to have employed 150K new workers, higher than 122K in December. Meanwhile, the Services PMI, which gauges activities in the services sector that account for two-thirds of the US economy, is estimated to have advanced to 54.3 from the former release of 54.1.
  • The economic data will influence market expectations for how long the Federal Reserve (Fed) will keep interest rates at their current levels this year.

Technical Analysis: Pound Sterling rises to near 50-day EMA

By |2025-02-17T15:10:56+05:30February 17, 2025 3:10 pm|Forex|Comments Off on Pound Sterling faces pressure as BoE’s policy decision looms large
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EUR: Still reluctant to chase euro much higher – ING

We stick to our call that EUR/USD will start to lose support once crossing 1.040, as the euro remains broadly unattractive from a macro fundamental perspective and Trump has indicated that the EU should be next on the tariff list. A EUR:USD two-year swap rate gap at -185bp is a mirror of that – via the monetary policy channel – and a key disincentive to chase EUR/USD much higher, ING’s FX analyst Francesco Pesole notes.

EUR/USD to start losing support once crossing 1.040

“Domestically, the eurozone calendar is quite quiet for the remainder of the week. Trade news will dominate in EUR/USD price action, although we’ll be interested to hear whether the slightly hotter-than-expected inflation figures trigger some minor change in the narrative by ECB members. Chief Economist Philip Lane speaks this afternoon.”

“EUR/JPY downside remains interesting. Japanese nominal cash wages accelerated to 4.8% YoY in December, well above the 3.7% consensus. Real earnings were up 0.6% YoY. That reinforces our call for two rate hikes by the Bank of Japan this year and improves the outlook for the yen.”

By |2025-02-12T16:42:31+05:30February 12, 2025 4:42 pm|Forex|Comments Off on EUR: Still reluctant to chase euro much higher – ING
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GBP/USD: A sustained break above 1.2530 is unlikely – UOB Group

The Pound Sterling (GBP) could rise further; overbought conditions suggest a sustained break above 1.2530 is unlikely. In the longer run, for the time being, GBP is expected to trade in a range of 1.2245/1.2530, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

GBP is expected to trade in a range of 1.2245/1.2530

24-HOUR VIEW: “While we indicated yesterday that “the rapid rise in GBP has scope to extend,” we highlighted that “any advance is unlikely to break clearly above 1.2475.” We added, “the major resistance at 1.2530 is not expected to come under threat.” Our view of GBP advancing was not wrong, even though it rose more than expected to 1.2492. Today, GBP could rise further, but given the overbought conditions, a sustained break above 1.2530 appears unlikely. Support levels are at 1.2450 and 1.2420.”

1-3 WEEKS VIEW: “We highlighted yesterday (04 Feb, spot at 1.2430) that “for the time being, we expect GBP to trade in a range of 1.2245/1.2530.” GBP subsequently rose to 1.2492, and while momentum is beginning to build, it is not sufficient to suggest a sustained advance. In other words, our view remains unchanged for now.”

By |2025-02-12T16:40:40+05:30February 12, 2025 4:40 pm|Forex|Comments Off on GBP/USD: A sustained break above 1.2530 is unlikely – UOB Group
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USD/CHF holds losses below 0.9050 as US Dollar undergoes a downward correction

  • USD/CHF loses ground as the US Dollar weakens for the third consecutive session on Wednesday.
  • Safe-haven demand for the Swiss Franc rises due to escalating US-China trade tensions.
  • Traders await Thursday’s Swiss Unemployment Rate to gain further insight into the labor market.

USD/CHF continues its decline for the second straight day, trading near 0.9030 during European hours on Wednesday. This downturn is primarily driven by a weaker US Dollar (USD), which is undergoing a technical correction.

The US Dollar Index (DXY), which tracks the USD against six major currencies, remains under pressure for the third consecutive session, hovering around 107.70 at the time of writing. Meanwhile, market participants await Friday’s US Nonfarm Payrolls (NFP) data, which could influence the Federal Reserve’s (Fed) monetary policy stance.

Adding to the USD’s weakness, US President Donald Trump has agreed to a 30-day suspension of the proposed 25% tariffs on Canadian and Mexican imports. This decision follows commitments from Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum to enhance border security in response to concerns over illegal immigration and drug trafficking.

Further weighing on the USD/CHF pair, safe-haven demand for the Swiss Franc (CHF) could have increased due to escalating US-China trade tensions. In retaliation for the new 10% US tariff imposed on Tuesday, China has implemented a 15% tariff on US coal and liquefied natural gas (LNG) imports, along with an additional 10% tariff on crude Oil, farm equipment, and certain automobiles.

On the Swiss economic front, the SVME Purchasing Managers’ Index (PMI) inched up to 47.5 in January from 47.0 in December, though it fell short of market expectations of 49.0. The rise was tempered by declines in order backlogs and purchasing inventories, data showed on Monday. Investors now turn their attention to Switzerland’s Unemployment Rate, set to be released by the State Secretariat for Economic Affairs (SECO) on Thursday, which will provide further insight into the labor market.

Swiss Franc FAQs

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.

By |2025-02-12T16:38:55+05:30February 12, 2025 4:38 pm|Forex|Comments Off on USD/CHF holds losses below 0.9050 as US Dollar undergoes a downward correction
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AUD/USD: Unlikely to reach the major resistance at 0.6310 – UOB Group

Australian Dollar (AUD) could break above 0.6265; any further advance is unlikely to reach the major resistance at 0.6310. In the longer run, downward momentum has largely faded; AUD is expected to trade in a range between 0.6080 and 0.6310, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Downward momentum has largely faded

24-HOUR VIEW: “Yesterday, when AUD was at 0.6215, we were of view that it ‘could rise, but any advance is likely part of a higher 0.6155/0.6265 range.’ We were also of the view that AUD ‘is not expected to break clearly above 0.6265.’ AUD then dipped briefly to 0.6171, rose to a high of 0.6262 before closing at 0.6257 (+0.47%). There has been an increase in momentum, and today, a break above 0.6265 will not be surprising. However, overbought conditions suggest any further advance is unlikely to reach the major resistance at 0.6310 (there is another resistance level at 0.6285). To maintain the momentum, AUD must remain above 0.6200 (minor support is at 0.6225).” 1-3 WEEKS VIEW: “Our update from yesterday (04 Feb, spot at 0.6215) still stands. As highlighted, the buildup in downward momentum from Monday “has largely faded.” For now, AUD is expected to trade in a range, probably between 0.6080 and 0.6310.”

By |2025-02-12T16:37:52+05:30February 12, 2025 4:37 pm|Forex|Comments Off on AUD/USD: Unlikely to reach the major resistance at 0.6310 – UOB Group
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Sudhakar. Kalyan

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