Forex Today: Risk aversion grips markets as tensions in Mideast escalate further
Here is what you need to know on Wednesday, September 2:
In the second half of midweek, markets displayed a cautious stance due to the escalating crisis in the Middle East. Investors kept a close watch on private sector employment data from the United States. The Bank of Canada announced its monetary policy decisions. The US Dollar emerged as the strongest currency against a list of major currencies throughout the week, with the strongest against the New Zealand Dollar.
Crude Oil prices spiked following US military strikes in Tehran, which claimed civilian casualties. US President Donald Trump vowed further, harsher attacks against Iran, should the Islamic Revolutionary Guard Corps retaliate. West Texas Intermediate (WTI) gained nearly 5% on Tuesday and reached a six-week high above $90 during Asian trading hours on Wednesday, before correcting lower. At the time of reporting, WTI was trading flat at around $89.50.
The USD Index climbed towards 100.00 on Tuesday, continuing its upward trajectory into Wednesday. The Reserve Bank of New Zealand (RBNZ) increased the policy rate by 25 basis points to 2.75%, as anticipated. RBNZ Governor Anna Breman stated that they would need to evaluate the policy stance and that a potential rate hike is uncertain.
New Zealand's Gross Domestic Product (GDP) expanded by 2.1% in the second quarter, better than the estimated 1.8%. The Australian Dollar remained unaffected by the GDP reading and was last seen trading flat near 0.7150. The US Dollar (USD) gained bullish momentum, trading above 1.3900 in the European session on Wednesday. The Bank of Canada (BoC) is expected to keep interest rates unchanged at 2.25%.
The Bank of Japan's board member Hajime Takata suggested a more flexible approach to rate hikes, considering various options beyond conventional 0.25% increases. Consecutive rate hikes could be a possibility. The USD/JPY pair declined by 0.35% on Wednesday due to broader USD strength. Euro (EUR)/US Dollar (USD) edged lower in the European morning and closed near 1.1550.
Gold (XAU/USD) plummeted more than 2.5% on Tuesday due to escalating geopolitical tensions, falling below $4,300/oz, marking its lowest level in two weeks. This decline was attributed to heightened oil prices from renewed US-Iran hostilities.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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