Forex Today: US Dollar extends rebound, Gold surpasses $4,000
Here is what you need to know on Wednesday, October 8:
The US Dollar (USD) continues to gather strength against its rivals midweek, with the USD Index climbing to its highest level since early August near 99.00. Investors will continue to pay close attention to comments from central bank officials in the absence of high-impact data releases. Later in the American session, the Federal Reserve (Fed) will publish the minutes of the September policy meeting.
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 strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.82% | 0.27% | 1.98% | -0.00% | 0.29% | 1.15% | 0.57% | |
| EUR | -0.82% | -0.65% | 1.08% | -0.85% | -0.57% | 0.30% | -0.27% | |
| GBP | -0.27% | 0.65% | 1.86% | -0.20% | 0.08% | 0.96% | 0.39% | |
| JPY | -1.98% | -1.08% | -1.86% | -1.92% | -1.72% | -0.89% | -1.42% | |
| CAD | 0.00% | 0.85% | 0.20% | 1.92% | 0.33% | 1.16% | 0.57% | |
| AUD | -0.29% | 0.57% | -0.08% | 1.72% | -0.33% | 0.87% | 0.30% | |
| NZD | -1.15% | -0.30% | -0.96% | 0.89% | -1.16% | -0.87% | -0.56% | |
| CHF | -0.57% | 0.27% | -0.39% | 1.42% | -0.57% | -0.30% | 0.56% |
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).
US lawmakers failed to resolve their disputes over the funding legislation on Tuesday, and the government shutdown passed the one-week mark. The Senate will vote again on Wednesday, and Senate Majority Leader John Thune said that the chamber will be voting on the same competing bills over and over. Meanwhile, the White House's Office of Management and Budget reportedly sent a memo, noting that the 750,000 furloughed workers are not guaranteed back pay. US stock index futures trade mixed in the European morning on Wednesday after Wall Street's main indexes closed in negative territory on Tuesday.
Gold's record-setting rally continues without losing any steam midweek. XAU/USD was last trading at a new all-time high above $4,030, gaining more than 1% on the day. Gold is already up nearly 5% since the beginning of October.
In the early hours of the Asian session, the Reserve Bank of New Zealand (RBNZ) announced that it cut the policy rate by 50 basis-points to 2.5% from 3%, against the market expectation for a 25 bps rate cut. In its policy statement, the RBNZ noted that the Committee remains open to further reductions in interest rates as required for inflation to settle sustainably near the 2% target mid-point in the medium term. NZD/USD stays under heavy bearish pressure and trades at its lowest level in six months near 0.5750, losing about 0.9% on a daily basis.
USD/JPY extends its weekly uptrend and trades at its highest level since February above 152.00. Japan’s ruling Liberal Democratic Party (LDP) decided to postpone the start of an extraordinary Diet session to October 20 or later after talks between new LDP leader Sanae Takaichi and Komeito chief Tetsuo Saito failed on maintaining their long-standing governing partnership.
Outgoing French Prime Minister Sébastien Lecornu said on Wednesday that they must get a budget approved by the end of the year and noted that talks so far show a willingness to do that. Lecornu will meet with President Emmanuel Macron later in the day. Nevertheless, EUR/USD struggles to hold its ground and declines toward 1.1600 in the European morning on Wednesday.
After losing about 0.5% on Tuesday, GBP/USD edges lower and trades near 1.3400 to start the European session.
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.
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