Forex Today: US Dollar stabilizes after long weekend
Here is what you need to know on Monday, July 6:
Markets start the week in a relatively calm manner as investors wait for trading conditions to normalize following a three-day weekend in the United States (US). In the second half of the day, the US economic calendar will feature the Institute for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) data for June and the Bank of Canada (BoC) will publish its Business Outlook Survey. Additionally, several officialls from major central banks will be delivering speeches.
The US Dollar (USD) Index clings to modest daily gains at around 101.00 in the European morning on Monday after losing about 0.5% in the previous week, pressured by the disappointing labor market data for June. Meanwhile, US stock index futures trade mixed, reflecting a cautious market stance.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.11% | 0.11% | 0.49% | 0.11% | 0.14% | 0.45% | 0.23% | |
| EUR | -0.11% | 0.00% | 0.37% | 0.00% | 0.04% | 0.35% | 0.12% | |
| GBP | -0.11% | -0.00% | 0.37% | -0.02% | -0.01% | 0.35% | 0.14% | |
| JPY | -0.49% | -0.37% | -0.37% | -0.38% | -0.34% | -0.05% | -0.19% | |
| CAD | -0.11% | -0.00% | 0.02% | 0.38% | 0.00% | 0.35% | 0.15% | |
| AUD | -0.14% | -0.04% | 0.01% | 0.34% | -0.01% | 0.34% | 0.13% | |
| NZD | -0.45% | -0.35% | -0.35% | 0.05% | -0.35% | -0.34% | -0.21% | |
| CHF | -0.23% | -0.12% | -0.14% | 0.19% | -0.15% | -0.13% | 0.21% |
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).
While speaking at the World Peace Forum over the weekend, Iran’s ambassador to China, Abdolreza Rahmani Fazli, said that Tehran is considering introducing new service fees for ships passing through the Strait of Hormuz, while promising “special" treatment for countries that supported Iran during the recent conflict. Crude Oil prices edge higher on Monday and the barrel of West Texast Intermediate (WTI) was last seen trading at around $69.
After snapping a two-week losing streak, EUR/USD edges lower early Monday but manages to hold above 1.1400. The European economic calendar will feature Producer Price Index (PPI) and Retail Sales data for May. Earlier in the day, the data from Germany showed that Factory Orders expanded by 1.9% on a monthly basis, surpassing the market expectation for an increase of 1.2%.
USD/JPY gathers bullish momentum on Monday and trades slightly above 162.00, rising about 0.5% on the day.
GBP/USD corrects lower and trades below 1.3350 after rising more than 1% in the previous week.
USD/CAD trades marginally higher on the day above 1.4200.
Gold (XAU/USD) rose more than 2% and registered its largest one-week gains sinc eearly May. XAU/USD struggles to build on its gains and edges lower on Monday, losing about 0.5% near $4,150.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact 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 when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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