Forex Today: US Dollar drops to six-week low, markets hope for a swift end to US-Iran war
Here is what you need to know on Tuesday, April 14:
Following the bullish action seen in the first half of the day on Monday, the US Dollar (USD) Index turned south and closed the day deep in negative territory. Early Tuesday, the USD Index struggles to stage a rebound and fluctuates at its lowest level since early March below 98.50. In the American session, the US Bureau of Labor Statistics will publish the Producer Price Index (PPI) data for March. Additionally, several policymakers from major central banks will be delivering speeches.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.89% | -0.97% | -0.24% | -0.64% | -1.42% | -1.42% | -1.04% | |
| EUR | 0.89% | -0.08% | 0.62% | 0.26% | -0.47% | -0.53% | -0.15% | |
| GBP | 0.97% | 0.08% | 0.62% | 0.35% | -0.39% | -0.47% | -0.07% | |
| JPY | 0.24% | -0.62% | -0.62% | -0.38% | -1.09% | -1.08% | -0.81% | |
| CAD | 0.64% | -0.26% | -0.35% | 0.38% | -0.63% | -0.70% | -0.41% | |
| AUD | 1.42% | 0.47% | 0.39% | 1.09% | 0.63% | -0.02% | 0.26% | |
| NZD | 1.42% | 0.53% | 0.47% | 1.08% | 0.70% | 0.02% | 0.38% | |
| CHF | 1.04% | 0.15% | 0.07% | 0.81% | 0.41% | -0.26% | -0.38% |
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).
US President Donald Trump said late Monday that they have been approached by the "right people on Iran" and that they want to have a deal. Trump also noted that the US blockade of the Strait of Hormuz had started. Meanwhile, US Vice President JD Vance told Fox News that meaningful progress had been made in talks even though they failed to deliver a breakthrough. Vance further noted that the framework for a comprehensive agreement is achievable if Iran is willing to take the next step. According to the New York Times, Iranian officials had proposed suspending nuclear activities for five years during the weekend negotiations, but the US insisted for a 20-year suspension.
Wall Street's main indexes closed mixed on Monday. The S&P 500 Index lost about 0.1%, while the Nasdaq Composite Index rose more than 1%. Early Tuesday, US stock index futures trade virtually unchanged on the day.
The data from Japan showed earlier in the day that Industrial Production contracted by 2% on a monthly basis in February. This print came in slightly better than the market expectation for a decrease of 2.1%. USD/JPY continues to edge lower after posting marginal losses on Monday and trades near 159.20 in the European morning on Tuesday.
EUR/USD holds its ground and continues to advance toward 1.1800 early Tuesday, trading at its highest level since March 2. European Central Bank (ECB) Chief Economist Philip Lane and ECB President Christine Lagarde will be speaking later in the American session.
GBP/USD gained more than 0.3% on Monday despite starting the week with a bearish gap. The pair stretches higher and trades above 1.3500 to start the European session on Tuesday. Bank of England (BoE) Governor Andrew Bailey will participate in a panel discussion at Columbia University later in the day.
Gold reversed its direction after falling below $4,650 and registered marginal gains on Monday. XAU/USD extends its recovery on Tuesday and closes in on $4,800.
Crude Oil prices stabilize early Tuesday, with the barrel of West Texas Intermediate trading in a narrow channel slightly below $93.00.
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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