Forex Today: US Dollar softens amid hopes Russia-Ukraine energy ceasefire
Here is what you need to know on Monday, October 12:
The US Dollar Index (DXY) declines to near 102.20 on Monday as renewed Middle East tensions leave sentiment fragile. Traders await the release of key US inflation data later this week, which could offer some hints about the US interest rate path. The US Consumer Price Index (CPI) report will be published on Wednesday, followed by the Producer Price Index (PPI) and Retail Sales data on Thursday.
Markets are now pricing in nearly a 17.7% chance that the US Federal Reserve (Fed) will raise the interest rate in its October policy meeting, but are pricing in an 84.1% probability of an increase in December, according to the CME FedWatch tool.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.07% | -0.16% | 0.03% | -0.10% | -0.00% | 0.02% | 0.02% | |
| EUR | 0.07% | -0.12% | 0.07% | -0.02% | 0.06% | 0.16% | 0.08% | |
| GBP | 0.16% | 0.12% | 0.19% | 0.05% | 0.15% | 0.24% | 0.18% | |
| JPY | -0.03% | -0.07% | -0.19% | -0.15% | -0.05% | 0.02% | -0.03% | |
| CAD | 0.10% | 0.02% | -0.05% | 0.15% | 0.10% | 0.13% | 0.11% | |
| AUD | 0.00% | -0.06% | -0.15% | 0.05% | -0.10% | 0.09% | 0.01% | |
| NZD | -0.02% | -0.16% | -0.24% | -0.02% | -0.13% | -0.09% | -0.06% | |
| CHF | -0.02% | -0.08% | -0.18% | 0.03% | -0.11% | -0.01% | 0.06% |
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).
Traders remain glued to developments in the Middle East. The Saudi-led coalition said on Sunday that an unidentified projectile hit a passenger terminal at King Khalid International Airport in Riyadh. The Houthis swiftly claimed the attacks, saying they were a response to “Saudi aggression.”
Elsewhere, US President Donald Trump on Sunday claimed Russia and Ukraine have agreed to an ”energy ceasefire”, but he offered no details on it, per the Guardian. Ukraine’s President Volodymyr Zelenskyy said that he was not aware of an “energy ceasefire” between Ukraine and Russia announced by Trump, but added that if Moscow agreed to such a ceasefire, Kyiv would accept it.
EUR/USD holds steady above 1.1200 in the European morning. Traders will closely watch Italy as the government is set to introduce a budget encompassing recently approved allocations to defense and energy.
GBP/USD gathers strength to near 1.3250 on Monday. Bank of England (BoE) policymakers Sarah Breeden and Catherine Mann are set to speak later in the day.
USD/JPY trades with mild gains below 158.50 in the European session on Monday. Trading activity expected to remain subdued due to a national holiday in Japan. Traders remain on high alert for currency intervention from Japanese authorities to prop up the Japanese Yen during the holiday.
Gold declines to around $4,185 on Monday. Yellow metal might receive some support from rising investment demand, with inflows into gold-backed exchange-traded funds reaching a four-year high, according to Bloomberg data.
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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