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Global markets entered Friday with monetary-policy divergence firmly in focus as traders prepared for Fed Chair Kevin Warsh’s Jackson Hole address. The Australian and New Zealand Dollars strengthened as expectations for additional RBA and RBNZ tightening increased, while hotter Tokyo inflation reinforced the possibility of a September Bank of Japan rate hike. Sterling remained relatively resilient despite expectations for the Bank of England’s next rate increase being pushed further out, while Gold slipped below $4,600 as persistent US inflation kept further Fed tightening on the table. With the US NFP annual revision and Jackson Hole remarks also due, interest-rate expectations remain the primary driver across FX and precious metals.
The New Zealand Dollar gained ground against the US Dollar, with NZD/USD trading around 0.5960 during Friday’s Asian session. The Kiwi is benefiting from increasingly hawkish expectations surrounding the Reserve Bank of New Zealand, with markets heavily pricing a 25-basis-point hike at the September meeting following stronger inflation data.
• RBNZ Expectations: Markets are strongly pricing a September rate increase, providing support for NZD.
• New Zealand Inflation: Hotter-than-expected Q2 inflation has strengthened the case for additional monetary tightening.
• Rate Outlook: Expectations that the RBNZ could continue tightening toward a higher terminal rate are supporting the Kiwi.
• Fed Policy: A hawkish message from Warsh could strengthen the US Dollar and limit NZD/USD gains.
• Market Positioning: Heavy speculative short positioning could amplify upside moves if traders unwind bearish NZD positions.
• Trend: Bullish
• Resistance: 0.5990
• Support: 0.5910
• Forecast: NZD/USD retains a positive bias while trading above its 100-day SMA. A sustained break above 0.5990 could open the door toward the psychological 0.6000 level and potentially extend the recovery. On the downside, a move below 0.5910 could expose 0.5845.
• Market Sentiment: Moderately bullish.
• Catalysts: RBNZ rate expectations, Warsh’s Jackson Hole speech, US Dollar direction and US rate expectations.
The Australian Dollar extended its winning streak for a fourth consecutive session, with AUD/USD trading around 0.7200 and approaching recent multi-month highs. Stronger-than-expected Australian inflation has sharply increased expectations for additional Reserve Bank of Australia tightening, providing the Aussie with significant support.
• RBA Expectations: Markets are now pricing roughly a 50% probability of a September rate increase, sharply higher than previously.
• Australian Inflation: Persistent price pressures have strengthened expectations that the RBA will need to tighten further.
• Bank Forecasts: Major Australian banks have brought forward expectations for additional policy tightening.
• Yield Advantage: A higher Australian rate outlook is increasing the currency’s relative appeal.
• Fed Policy: Warsh’s Jackson Hole remarks could determine whether USD strength interrupts AUD’s recent advance.
• Trend: Bullish
• Resistance: 0.7250
• Support: 0.7160
• Forecast: AUD/USD remains technically constructive above its short- and medium-term moving averages. However, an RSI above 70 suggests the pair is entering overbought territory. A sustained move beyond 0.7200 could extend the advance toward 0.7250, while profit-taking could initially bring 0.7160 back into focus.
• Market Sentiment: Bullish, although increasingly stretched.
• Catalysts: RBA rate expectations, Australian inflation outlook, Jackson Hole, US yields and broader risk sentiment.
Gold slipped below the psychological $4,600 level during Friday’s Asian session, trading around $4,580 after retreating from its recent three-month high. Persistent US inflation has increased expectations that the Federal Reserve could tighten policy further, raising the opportunity cost of holding the non-yielding precious metal.
• Fed Expectations: Markets have increased expectations for another US rate increase following the latest inflation figures.
• Jackson Hole: Warsh’s speech represents the most important immediate catalyst for Gold.
• US Inflation: Core PCE remained at 3.3% year-over-year, keeping inflation well above the Fed’s target.
• Treasury Yields: Higher yields would pressure Gold, while falling yields could encourage renewed buying.
• Geopolitical Risk: Uncertainty surrounding the Strait of Hormuz and Iran’s conditions for reopening it could preserve some safe-haven demand.
• Trend: Neutral to Bearish
• Resistance: $4,600 – $4,620
• Support: $4,550
• Forecast: Gold could remain under pressure while trading below $4,600, particularly if Warsh reinforces expectations for tighter Fed policy. A recovery above the $4,600-$4,620 area could restore bullish momentum, while a decisive break below $4,550 could expose the metal to a deeper correction.
• Market Sentiment: Cautious ahead of Jackson Hole.
• Catalysts: Warsh’s speech, Fed rate expectations, Treasury yields, US Dollar direction and geopolitical developments.
The British Pound remained relatively resilient around the 1.3600 region even as expectations for the Bank of England’s next rate increase shifted further into the future. Falling energy prices are helping ease UK inflation concerns, reducing the urgency for additional monetary tightening and leading markets to push some BoE hike expectations into 2027.
• BoE Expectations: Softer inflation pressures are allowing markets to delay expectations for further tightening.
• Energy Prices: Lower energy costs could reduce UK inflationary pressure and weaken the case for near-term rate hikes.
• Sterling Momentum: GBP has gained substantially since late July, although much of the move has reflected broader US Dollar weakness.
• Fed Outlook: Warsh’s policy message could have a greater immediate impact on GBP/USD than domestic UK developments.
• US Dollar: Renewed USD strength remains one of the primary risks to Sterling’s recent gains.
• Trend: Neutral to Bullish
• Resistance: 1.3700
• Support: 1.3500
• Forecast: GBP/USD could remain supported while holding above the 1.3500 area, but recent momentum indicators suggest the rally has become stretched. A break above 1.3700 would reinforce the bullish structure, while a hawkish Fed surprise could trigger a correction toward the mid-1.3500 region.
• Market Sentiment: Cautiously bullish.
• Catalysts: BoE expectations, UK inflation outlook, Jackson Hole, US NFP revision and US Dollar direction.
The Japanese Yen strengthened on Friday, pushing USD/JPY down toward 159.30 after Tokyo inflation data strengthened expectations for a Bank of Japan rate increase. Tokyo core CPI accelerated to 1.8% year-over-year in August, above the 1.7% market forecast, while inflation excluding food and energy climbed to 2.0%.
• Tokyo Inflation: Stronger underlying inflation is reinforcing expectations for further BoJ tightening.
• BoJ Expectations: Markets are considering the possibility of a rate increase at the September 17–18 meeting.
• Yield Differentials: Higher Japanese rate expectations could narrow the US-Japan yield gap and support the Yen.
• Fed Policy: A hawkish Warsh speech could strengthen US yields and partially offset JPY gains.
• Technical Positioning: USD/JPY remains capped beneath its 100-day moving average, limiting near-term upside momentum.
• Trend: Neutral to Bearish USD/JPY
• Resistance: 160.00 – 160.30
• Support: 158.85
• Forecast: USD/JPY could remain under pressure if markets continue increasing expectations for a September BoJ hike. A break below 158.85 could expose 157.45, while a recovery through the 160.00-160.30 resistance zone would be needed to restore stronger bullish momentum.
• Market Sentiment: Bullish for JPY.
• Catalysts: BoJ rate expectations, Japanese inflation, Jackson Hole, US Treasury yields and Fed policy expectations.
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