Forex Today: SNB rate call, US GDP, Japan Tokyo CPI inflation on deck

Joshua Gibson FXStreet

The US Dollar lurched higher on Wednesday, sparked by a fresh round of risk aversion across the broader markets. Central banks worldwide are grappling with two-speed economies of varying degrees, and many are battling a steepening slowdown in economic activity. At the same time, global inflation metrics remain too high for too long, limiting the effectiveness of many standard policy approaches.

The US Dollar Index (DXY) climbed two-thirds of one percent on Wednesday, testing the 98.0 region and touching its highest valuations in nearly two weeks as investors rotate into a near-term risk-off stance. The latest key inflation data from the US, the Personal Consumption Expenditures Price Index (PCE), is due later this week on Friday, but first Greenback flows will need to contest with the latest US Gross Domestic Product (GDP) print, due on Thursday.

EUR/USD fell back into the low end of its latest range, flubbing a technical grab for the 1.1800 handle. European Purchasing Managers Index (PMI) figures broadly came in mixed this week, with services expectations rising strongly. However, manufacturing outlook figures slumped faster than expected, keeping risk appetite subdued.

GBP/USD slid into three-week lows near 1.3450 on Wednesday as the Pound Sterling’s (GBP) technical grip loosens further, stepping into a second straight session of losses after a hard technical rejection from 1.3700. Bank of England (BoE) policymaker Megan Greene broke from standard central bank policy rhetoric on Wednesday during a speech at the University of Glasgow. According to BoE Monetary Policy Committee (MPC) member Greene, global central banks need to pivot into a more cautious stance on interest rates as global supply shocks become the norm rather than the exception.

USD/CHF continues to maintain a tight hold on the 0.7950 level, and Swiss Franc (CHF) traders are set for the latest interest rate call from the Swiss National Bank (SNB) on Thursday. The SNB is expected to keep rates on hold at 0.0% for the time being, but the clock is ticking on how long the SNB can avoid returning to a negative rate environment. Swiss interest rates fell below zero in August of 2011, and despite a comparatively brief pop above 0.0% beginning in 2022, Swiss interest rates have returned to the zero fold after peaking at 1.75% in 2023. The SNB has cut interest rates at the last six consecutive interest rate meetings beginning in March of 2024.

USD/JPY surged back above its 200-day Exponential Moving Average (EMA) near 147.94 on Wednesday, testing 148.80 as Yen traders gear up for the latest Tokyo Consumer Price Index (CPI) inflation print. The Bank of Japan (BoJ) has continued to scrape and claw for any justification to keep interest rates as low as possible, citing concerns that inflation could theoretically fall back into deflationary territory at some point in the future. After a brief dip to 1.6% in mid-2024, core Tokyo CPI inflation has ridden above BoJ inflation targets more often than not since October of 2022. Core Tokyo CPI last clocked in at 3.0% in August.

XAU/USD snapped a three-day winning streak on Wednesday, falling back to $3,730 per ounce after thundering into record highs near $3,800 earlier this week. Soaring Gold prices have highlighted underlying stresses in global financial markets, even as asset prices continue to swell in the face of a still-boiling trade war from the Trump administration. The US government is barreling towards another funding freeze shutdown, and policymakers are struggling to find the necessary middle ground to keep federal operations running, spiking Gold and Treasury yields higher.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

AUD/USD flirts with 0.7000, lowest since early August amid bullish USD

AUD/USD hits a fresh low since early August during the Asian session on Friday and looks vulnerable near 0.7000 after breaking below the 200-day SMA overnight. Against the backdrop of the hawkish Fed, a two-day rally in oil prices revives inflation fears and continues to push US bond yields to multi-year highs. Adding to this, geopolitical risks lift the US Dollar to a two-month high, overshadowing RBA rate hike bets and weighing on the pair.

USD/JPY pulls back from three-week high after failing near 159.00

USD/JPY edges lower during the Asian session on Friday, stalling its recent strong move to a three-week high of 159.00 as Japanese Yen bears turn cautious amid intervention fears. Meanwhile, the US Dollar retains a strong bullish undertone as the Fed's hawkish outlook and oil-driven inflation fears continue to push US bond yields to multi-year peaks. Furthermore, the BoJ's dovish rate hike last week might cap JPY and support spot prices.

Gold treads water below $4,300

Gold grabs some buying attention and advances marginally at the end of the week, partially retracing the weekly decline, although it is still navigating below the key $4,300 mark per troy ounce. The fresh selling bias on the Greenback and the modest decline in US Treasury yields appear to support the humble advance in the precious metal.

Week ahead: Rate hike bets face a crucial data week

Despite the solid drop from the mid-September high, oil prices remained in the driver’s seat for another week, setting the tone in financial markets. Six months have passed since the late-February start of the US-Iran conflict, and there is still no breakthrough in the stalled talks, despite pressure from regional leaders and the rest of the world.

CFTC Report: Defensive currency positioning takes hold

The week in one sentence: Sterling and Euro shorts deepened in the week to September 22, while Yen longs were cut sharply. Oil positioning improved despite a steep price decline, and Gold exposure remained crowded. The main signal was a more defensive currency positioning backdrop.

Fed vs BoJ: Both hiked. The market only believes one of them – and the chart shows which

The Fed and the BoJ have just done something remarkably similar. Both central banks raised interest rates by 25 bps last week, both are confronting inflation risks, and both signal that future decisions will depend on incoming economic data.