Forex Today: US Dollar struggles to find demand ahead of key data releases
Here is what you need to know on Wednesday, December 3:
The US Dollar (USD) stays on the back foot early Wednesday after closing in negative territory on Monday and Tuesday. In the second half of the day, the Automatic Data Processing's private sector employment data and the Institute for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) report for November will be featured in the US economic calendar.
Growing expectations for a dovish Federal Reserve (Fed) outlook after US President Donald Trump hinted that he wants to nominate his chief economic adviser Kevin Hassett to replace outgoing Fed Chairman Jerome Powell next year make it difficult for the USD to find demand. The USD Index edges lower toward 99.00 in the European morning on Wednesday. Meanwhile, the market mood remains relatively upbeat midweek, with US stock index futures rising between 0.2% and 0.3%.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.40% | 0.02% | -0.30% | -0.04% | -0.53% | -0.38% | -0.19% | |
| EUR | 0.40% | 0.42% | 0.11% | 0.35% | -0.13% | 0.00% | 0.21% | |
| GBP | -0.02% | -0.42% | -0.06% | -0.05% | -0.54% | -0.40% | -0.21% | |
| JPY | 0.30% | -0.11% | 0.06% | 0.26% | -0.24% | -0.09% | 0.10% | |
| CAD | 0.04% | -0.35% | 0.05% | -0.26% | -0.54% | -0.34% | -0.16% | |
| AUD | 0.53% | 0.13% | 0.54% | 0.24% | 0.54% | 0.15% | 0.33% | |
| NZD | 0.38% | -0.01% | 0.40% | 0.09% | 0.34% | -0.15% | 0.19% | |
| CHF | 0.19% | -0.21% | 0.21% | -0.10% | 0.16% | -0.33% | -0.19% |
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).
Regarding the peace negotiations between Russia and Ukraine, citing an adviser who was at the meeting, the BBC reported that talks between Russia's President Putin and US envoy Steve Witkoff were "constructive" but there is "more work to do." Additionally, Kremlin aide Yuri Ushakov said that "no compromise" was reached over territorial concessions by Ukraine.
The data from Australia showed earlier in the day that the Gross Domestic Product (GDP) expanded at an annual rate of 2.1% in the third quarter. This print followed the 1.8% growth recorded in the second quarter and came in slightly below the market expectation of 2.2%. AUD/USD preserves its bullish momentum early Wednesday and trades at its highest level since late October, above 0.6580.
EUR/USD builds on its weekly gains and climbed toward 1.1650 in the European morning. Later in the session, the Eurostat will release the Producer Price Index (PPI) figures for October. Additionally, European Central Bank President Christine Lagarde will speak at a hearing before the Committee on Economic and Monetary Affairs (ECON) of the European Parliament in Brussels, Belgium.
After touching its highest level in about six weeks above $4,260 on Monday, Gold corrected lower and closed in negative territory on Tuesday. XAU/USD stabilizes early Wednesday and fluctuates in a tight channel above $4,200.
GBP/USD struggled to capitalize on the broad-based USD weakness and registered small losses on Monday and Tuesday. The pair holds its ground in the European morning and recovers toward 1.3250.
Following Monday's decline, USD/JPY staged a rebound on Tuesday as the risk-positive market atmosphere weighed on the safe haven Japanese Yen (JPY). The pair moves sideways in a narrow channel above 155.70 in the European morning on Wednesday.
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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