GBP/USD struggles to build on the overnight modest bounce from the weekly low and oscillates in a narrow band near 1.3500 in European trading on Friday. The Gorton and Denton by-election, held on February 26, has become a focal point of political drama in the UK, along with the Bank of England (BoE) easing expectations, acts as a headwind for the British Pound and the GBP/USD pair.
NZD/USD rises to near 0.6000 while investors seek fresh cues on Fed’s policy outlook
The NZD/USD pair is up 0.16% to near 0.5990 during the Asian trading session on Friday. The kiwi pair gains as the US Dollar (USD) ticks up, while investors seek fresh cues on the United States (US) interest rate outlook.
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally down to near 97.75.
According to the CME FedWatch tool, traders are confident that the Federal Reserve (Fed) will leave interest rates unchanged in its policy meetings in March and April. The expectation for the Fed to avoid any monetary policy adjustment in the next two meetings has been prompted by inflation remaining above the central bank’s 2% target for a long period.
Chicago Fed President Austan Goolsbee said in an interview with Fox Business on Thursday that there could be several interest rate cuts this year if price pressures return to the 2% target. “I have some confidence rates can come down several more times this year in 2026,” Goolsbee said, and added, “I just don’t want to front load it too much before we actually have the evidence that the inflation is headed” back down to the Fed’s 2% goal,” Reuters reported.
Meanwhile, the New Zealand Dollar (NZD) trades broadly stable even as traders doubt that the Reserve Bank of New Zealand (RBNZ) will hike interest rates in the near term. Hawkish RBNZ prospects have diminished as Governor Anna Breman said in the monetary policy announcement last week that the economy could continue to grow without triggering inflationary pressures.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
AUD/JPY Price Forecast: Uptrend intact despite dip below 111.00
The rally on the AUD/JPY was halted on Thursday as the cross-pair retreated some 0.40% during the session on broad strength of the Japanese Yen. Hawkish comments by two officials of the Bank of Japan, weighed on the pair, which trades below the 111.00 mark at the time of writing.
AUD/JPY Price Forecast: Technical outlook
The uptrend remains intact on the AUD/JPY which despite testing daily lows of 110.26, its is poised to end Thursday’s session near the highs, opening the door for further upside.
The Relative Strength Index (RSI) showed that buyers are in charge, with the index above its neutral line, but slightly tilted to the downside, an indication that traders could push the AUD/JPY to challenge the 110.00 mark.
Nevertheless, price action remains constructive as the AUD/JPY registered successive series of higher highs and higher lows. Therefore, for a bullish continuation, the pair must clear 111.00, followed by the yearly high of 111.47. Once cleared the next stop would be 112.00.
On the other hand, on further weakness, the AUD/JPY first support would be the day’s low of 110.26, followed by 110.00. Should the pair clear the latter, a drop towards the 20-day Simple Moving Average (SMA) at 109.48 is on the cards.
AUD/JPY Price Chart – Daily
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.
AUD/USD declines on USD strength, hawkish RBA outlook sustains
AUD/USD trades with a negative bias on Thursday as broad-based US Dollar (USD) strength weighs on the Australian Dollar (AUD). At the time of writing, the pair is trading around 0.7078, down 0.60%.
The pair has now trimmed most of the previous day’s gains, driven by stronger-than-expected inflation data that boosted expectations the Reserve Bank of Australia (RBA) could maintain a tighter policy stance for longer.
The Trimmed Mean CPI rose 3.4% YoY in January, up from 3.3% in December. Meanwhile, the headline Consumer Price Index (CPI) held steady at 3.8% YoY, unchanged from the previous month and remaining above the RBA’s 2-3% target range.
RBA Governor Michele Bullock said earlier this week, “We’re in a situation where the labour market, we think, is a little bit tight, and inflation is a bit elevated. I don’t think it’s taking off again, but it’s a little bit elevated.”
She added that the economy is “close to balance — maybe a little bit tight,” noting that “this is where it’s difficult” and that policy judgments are becoming more challenging.
The RBA is widely expected to raise interest rates again, with futures pricing pointing to a potential move in May, while markets largely anticipate the Bank will hold rates steady at its March meeting.
Meanwhile, the US Dollar is drawing support from fading Federal Reserve (Fed) rate-cut expectations as disinflation progress shows signs of stalling and inflation remains above the Fed’s 2% target.
Data released last week showed the Core Personal Consumption Expenditures (PCE) Price Index — the Fed’s preferred inflation gauge — rose 0.4% MoM in December, accelerating from 0.2% in November. On an annual basis, Core PCE climbed to 3% YoY, up from 2.8% previously.
Markets now widely expect the Fed to keep interest rates unchanged at its March and April meetings, while scaling back expectations for a June rate cut, according to the CME FedWatch Tool.
Looking ahead, attention now turns to Friday’s US Producer Price Index (PPI) data for January. Analysts expect headline PPI to rise 0.3% MoM, easing from the previous 0.5% increase. On an annual basis, PPI is forecast to moderate to 2.6% from 3.0%.
UK: Spring Statement seen as quiet placeholder – Deutsche Bank
Deutsche Bank’s Sanjay Raja expects the UK Spring Statement on 3 March to be a low-key update, with few new policy measures after the Autumn Budget. The Office for Budget Responsibility will refresh forecasts, with borrowing projected to undershoot and fiscal headroom to rise.
Spring Statement seen largely non event
“On the 3rd of March, the Chancellor will present an official update on the economy and public finances. Big picture, we’re not expecting any fireworks. With the Autumn Budget taking place only three months ago, we see very little in any new information.”
“What will we get as part of the Spring Statement? As usual, the Office for Budget Responsibility (OBR) will present its Economic and Fiscal Outlook, complete with an economic update, details on expenditure and spending, and estimated of the various buffers against the fiscal rules.”
“Almost certainly, policy measures will be thin, with policy reversals/u-turns likely to be the main feature in the Spring Statement. While there remains some speculation that the Chancellor could surprise with a sweetener or two ahead of the local elections, we think any new spending measures will be marginal – if that.”
“From a borrowing perspective, the current fiscal year will include good news for the Treasury. Borrowing has, thus far, undershot the OBR’s projections. With the economy holding up well – in spite of labour market weakness – favourable market conditions, we think, will result in a modest improvement to the borrowing outlook.”
“There will be three key numbers to watch in the Spring Statement. First, the fiscal headroom. We see the Chancellor’s fiscal headroom in 2029/30 rising on both fiscal rules, with the primary stability rule showing a surplus of GBP 25.2bn, and the secondary investment rule showing a surplus of GBP 30.6bn.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
South Africa Producer Price Index (YoY) fell from previous 2.9% to 2.2% in January
EUR/USD stays defensive around 1.1800 in the European session on Thursday. The US Dollar stabilizes, following the recent decline led by tariff uncertainty, capping the pair’s upside. All eyes now remain on the US-Iran nuclear talks after ECB President Lagarde’s testimony fails to impress Euro bulls.
AUD/JPY Price Forecast: Softens to near 111.00 but holds bullish momentum above 100-day EMA
The AUD/JPY cross trades in negative territory around 111.15 during the early European session on Thursday. The Japanese Yen (JPY) edges higher against the Australian Dollar (AUD) following hawkish remarks from the Bank of Japan (BoJ) policymakers.
BoJ’s most hawkish board member, Hajime Takata, on Thursday renewed his call for raising the benchmark interest rate, describing the nation’s once-frozen inflation trend as heated to the core. Takata further stated that the central bank must conduct further rate hikes in a gradual manner.
“I believe the bank should make a further gear shift and engage in communication that assumes that the price stability target is almost achieved,” said Takata.
Japan’s Tokyo Consumer Price Index (CPI) will be in the spotlight later on Friday. However, if the report shows softer-than-expected outcomes, this could drag the JPY lower and create a tailwind for the cross in the near term.
Technical Analysis:
In the daily chart, AUD/JPY is bullish in the near-term as price extends well above the rising 100-day exponential moving average, confirming a mature uptrend rather than a short-covering spike. The latest candles hold near the upper Bollinger Band around 111.30 while the middle band climbs through the 109.30 area, indicating persistent upside pressure and expanding volatility. RSI at 65.92 remains in bullish territory without extreme overbought conditions, suggesting buyers still control momentum despite the recent acceleration.
Initial support emerges at the Bollinger middle band near 109.30, which aligns with recent consolidation and would be the first area to test trend strength on a pullback. A deeper correction would expose secondary support closer to 107.50, where the lower band region converges with prior breakout territory. On the topside, immediate resistance sits just above the market at 111.50, marking the latest swing high within the upper band region, followed by a psychological barrier at 112.50 if bulls extend the advance.
(The technical analysis of this story was written with the help of an AI tool.)
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.
Australia Private Capital Expenditure registered at 0.4% above expectations (0%) in 4Q
Gold attracts some buyers for the second straight day as trade jitters and geopolitical tensions ahead of the US-Iran nuclear talks underpin demand for safe-haven assets. Apart from this, a softer US Dollar further supports the bullion, though the underlying bullish sentiment could cap gains. Bulls might also opt to wait for acceptance above the $5,200 mark before positioning for any meaningful appreciating move.
USD/ZAR: Range floor at risk as ZAR richens – Societe Generale
Societe Generale analysts flag that USD/ZAR remains in a sideways consolidation but warn that failure to clear the 50‑day moving average could extend the decline toward lower projections. They add that South African fiscal consolidation supports SAGBs, yet stretched ZAR valuations, reduced SARB carry and a bearish 3‑month risk reversal point to mean‑reversion risks for the currency.
Sideways pattern with downside extension risk
“USD/ZAR has evolved within a sideways consolidation after carving out an interim trough near 15.63 last month. Signals of a large up move are yet to emerge. The 50-DMA near 16.25/16.40, which is also the upper limit of recent range, represents an important hurdle near term.”
“Failure to cross this resistance zone may lead to extension in the phase of decline. A break below the recent pivot low at 15.63 could deepen the down move toward the next projections at 15.45/15.30 and 15.00.”
“In South Africa, FinMin Godongwana is anticipated to reaffirm fiscal consolidation thanks to above forecast tax revenues and the improving growth backdrop. The deficit for this year is on track for 4.5% of GDP target. The political alignment lowers fiscal tail risks so a credible debt path should bode well for further gains in SAGBs.”
“For the ZAR, valuations could be a burden to further appreciation. The REER is approaching 113 compared to a 10-year average of 106. Monetary easing by the SARB is chipping away at carry.”
“In FX options the 3-month USD/ZAR risk reversal has widened to roughly 2.67, more bearish than during last year’s tariff-driven volatility. This signals positioning for mean reversion.”
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
United States EIA Crude Oil Stocks Change climbed from previous -9.014M to 15.989M in February 20
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