Forex Today: Markets turn cautious after long weekend in US
Here is what you need to know on Tuesday, February 17:
Safe-haven flows dominate the action in financial markets early Tuesday as trading conditions normalize following the US holiday. The economic calendar will feature ZEW sentiment figures from Germany, the weekly ADP Employment Change 4-week Average data from the US and January inflation report from Canada.
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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.13% | 0.41% | -0.41% | 0.11% | 0.21% | 0.04% | -0.00% | |
| EUR | -0.13% | 0.28% | -0.54% | -0.01% | 0.09% | -0.09% | -0.12% | |
| GBP | -0.41% | -0.28% | -0.81% | -0.30% | -0.20% | -0.37% | -0.40% | |
| JPY | 0.41% | 0.54% | 0.81% | 0.53% | 0.64% | 0.45% | 0.43% | |
| CAD | -0.11% | 0.01% | 0.30% | -0.53% | 0.10% | -0.08% | -0.12% | |
| AUD | -0.21% | -0.09% | 0.20% | -0.64% | -0.10% | -0.17% | -0.21% | |
| NZD | -0.04% | 0.09% | 0.37% | -0.45% | 0.08% | 0.17% | -0.03% | |
| CHF | 0.00% | 0.12% | 0.40% | -0.43% | 0.12% | 0.21% | 0.03% |
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 UK's Office for National Statistics (ONS) announced early Tuesday that the ILO Unemployment Rate rose to 5.2% in the three months to December, while the Employment Change was up 52K. In this period, the annual wage inflation, as measured by the change in the Average Earnings Excluding Bonus, declined to 4.2% from 4.4%, as expected. GBP/USD stays under bearish pressure in the European morning and trades below 1.3600.
The US Dollar (USD) Index holds steady at around 97.00 after posting small gains on Monday. Following the long weekend, stock and bond markets return to action on Tuesday. At the time of press, US stock index futures were down between 0.3% and 0.7% on the day, while the benchmark 10-year US Treasury bond yield was trading at its lowest level since early December near 4.02%, losing more than 0.5% on a daily basis. The Federal Reserve Bank of New York will publish the Empire State Manufacturing Index for February later in the day and several Federal Reserve (Fed) policymakers will be delivering speeches.
USD/CAD closed marginally higher on Monday and was last seen trading at around 1.3650. The Consumer Price (CPI) Index in Canada is forecast to rise 2.4% on a yearly basis in January, matching December's increase.
Gold edged lower and closed in negative territory below $5,000 on Monday. XAU/USD remains under bearish pressure in the European morning on Tuesday and trades near $4,900, losing more than 1.5% on a daily basis.
NZD/USD stays quiet and moves sideways in a narrow channel above 0.6000 on Tuesday. In the Asian session on Wednesday, the Reserve Bank of New Zealand (RBNZ) will announce monetary policy decisions.
After rising about 0.5% on Monday, USD/JPY stays on the back foot early Tuesday and trades in the red below 153.00.
EUR/USD continues to stretch lower after posting losses on Monday and trades below 1.1850.
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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