Forex Today: US Dollar remains weak pre-Fed, Gold hits new record-high
Here is what you need to know on Tuesday, September 16:
The US Dollar (USD) stays under modest bearish pressure early Tuesday as investors adjust their positions ahead of the Federal Reserve's critical two-day policy meeting. In the second half of the day, August Retail Sales, Import Price Index and Export Price Index data will be featured in the US economic calendar.
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 weakest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.54% | -0.59% | -0.53% | -0.51% | -0.35% | -0.38% | -0.56% | |
| EUR | 0.54% | -0.03% | -0.05% | 0.03% | 0.22% | 0.12% | -0.03% | |
| GBP | 0.59% | 0.03% | 0.04% | 0.05% | 0.25% | 0.14% | -0.12% | |
| JPY | 0.53% | 0.05% | -0.04% | 0.00% | 0.24% | 0.15% | -0.02% | |
| CAD | 0.51% | -0.03% | -0.05% | -0.00% | 0.27% | 0.09% | -0.17% | |
| AUD | 0.35% | -0.22% | -0.25% | -0.24% | -0.27% | -0.11% | -0.29% | |
| NZD | 0.38% | -0.12% | -0.14% | -0.15% | -0.09% | 0.11% | -0.26% | |
| CHF | 0.56% | 0.03% | 0.12% | 0.02% | 0.17% | 0.29% | 0.26% |
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).
The USD Index closed in negative territory on Monday, pressured by the improving risk mood in the American session. Wall Street's main indexes opened on a bullish noted and closed in positive territory. Early Tuesday, the USD Index continues to push lower and was last seen trading at its lowest level in over two months, slightly above 97.00. Meanwhile, US stock index futures trade mixed.
The UK's Office for National Statistics (ONS) reported in the European morning that the ILO Unemployment Rate remained unchanged at 4.7% in the three months to July, as anticipated. In this period, annual wage inflation, as measured by the change in the Average Earnings Excluding Bonus, edged lower to 4.8% from 5% to match the market expectation. GBP/USD builds on Monday's gains and was last seen trading above 1.3620. The ONS will publish August inflation data on Wednesday.
EUR/USD benefits from the broad-based USD weakness and rises toward 1.1800 in the European morning on Tuesday. Later in the session, ZEW Survey - Economic Sentiment data for Germany and the Eurozone, and July Industrial Production data for the Euro area will be watched closely by market participants.
After losing nearly 0.5% on Monday, USD/CAD edges lower and trades below 1.3800 in the European session on Tuesday. In the early American session, Statistics Canada will publish Consumer Price Index (CPI) data for August. On Wednesday, the Bank of Canada (BoC) will announce policy decisions.
USD/JPY turns south in the European morning and trades below 147.00. In the early Asian session, the Japanese economic calendar will feature Merchandise Trade Balance data for August.
Following a quiet start to the week, Gold gathered bullish momentum in the second half of the day on Monday and rose nearly 1%. XAU/USD continues to push higher and trades at a new record-high above $3,680 in the European session on Tuesday.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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