Forex Today: Cautious start to week as US President Trump rejects Iran proposal
Here is what you need to know on Monday, May 11:
Following the risk-positive action to end the previous week, financial markets turn cautious on Monday. In the absence of high-tier data releases, headlines coming out of the Middle East will be watched closely by investors. On Tuesday, the US Bureau of Labor Statistics will publish the Consumer Price Index (CPI) data for April.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.14% | 0.24% | 0.28% | -0.04% | 0.10% | 0.36% | 0.23% | |
| EUR | -0.14% | 0.11% | 0.11% | -0.20% | -0.03% | 0.23% | 0.09% | |
| GBP | -0.24% | -0.11% | 0.02% | -0.30% | -0.14% | 0.11% | -0.02% | |
| JPY | -0.28% | -0.11% | -0.02% | -0.32% | -0.14% | 0.09% | -0.05% | |
| CAD | 0.04% | 0.20% | 0.30% | 0.32% | 0.18% | 0.37% | 0.27% | |
| AUD | -0.10% | 0.03% | 0.14% | 0.14% | -0.18% | 0.24% | 0.09% | |
| NZD | -0.36% | -0.23% | -0.11% | -0.09% | -0.37% | -0.24% | -0.11% | |
| CHF | -0.23% | -0.09% | 0.02% | 0.05% | -0.27% | -0.09% | 0.11% |
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).
Over the weekend, Iran reportedly sent a proposal, via Pakistan, to the US, looking for an immediate end to the war and a halt to the US naval blockade, asking for guarantess of no further attacks on Iran and recognition of sovereignty over the Strait of Hormuz. US President Donald Trump called Iran's proposal "totally unacceptable." Additionally, Israeli Prime Minister Benjamin Netanyahu said the war on Iran is not over, noting that Tehran retains its capabilities it had at the beginning of the conflict.
After losing about 0.4% in the previous week, the US Dollar (USD) Index opened with a bullish gap before retreating to the 98.00 region and stabilizing there. Meanwhile, US stock index futures trade marginally lower on the day, reflecting the cautious market mood. On Friday, the data from the US showed that Nonfarm Payrolls rose by 115K in April. This print surpassed the market expectation for an increase of 62K by a wide margin but failed to help the USD gather strength.
Annual inflation in China, as measured by the change in the CPI, climbed to 1.2% in April from 1.0% in March, the National Bureau of Statistics of China reported early Monday. After posting its fixth consecutive weekly gain, AUD/USD corrects lower and trades slightly below 0.7250.
EUR/USD stays in a consolidation phase below 1.1800 in the European morning on Monday. Earlier in the day, European Central Bank (ECB) Governing Council member Martin Kocher said that there’s no need to delay the interest rate hikes if energy prices don’t improve swiftly.
USD/JPY gains traction on Monday and trades in positive territory, slighty above 157.00.
Gold (XAU/USD) rose more than 2% in the previous week and snapped a two-week losing streak. XAU/USD stays on the back foot in the European morning on Monday and trades near $4,670, losing about 1% on the day.
GBP/USD opened with a bearish gap and came within a touching distance of 1.3550 before staging a rebound. At the time of press, the pair was trading at around 1.3600, still down 0.25% on the day.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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