Forex Today: US Dollar retreats as markets gear up for key events
Here is what you need to know on Wednesday, September 9:
The US Dollar (USD) struggles to stay resilient against its major rivals midweek, with the USD Index declining to its lowest level in over two weeks below 98.70. The US economic calendar will feature the weekly ADP Employment Change and the Energy Information Administration's (EIA) Crude Oil Stock Change data. More importantly, the European Central Bank (ECB) will announce monetary policy decision on Thursday and the US Bureau of Labor Statistics (BLS) will publish July Consumer Price Index figures on Friday.
The USD managed to hold its ground on Tuesday as markets turned risk-averse with the crisis in the Middle East deepening. Wall Street's main indexes closed in negative territory, while the barrel of West Texas Intermediate (WTI) climbed to its highest level since early June. In the European morning on Wednesday, US stock index futures trade mixed, while the WTI stays relatively quiet at around $92.00.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.25% | -0.33% | -1.81% | -0.44% | -0.52% | 0.31% | -0.10% | |
| EUR | 0.25% | -0.08% | -1.53% | -0.19% | -0.25% | 0.57% | 0.16% | |
| GBP | 0.33% | 0.08% | -1.56% | -0.11% | -0.17% | 0.67% | 0.23% | |
| JPY | 1.81% | 1.53% | 1.56% | 1.46% | 1.37% | 2.20% | 1.78% | |
| CAD | 0.44% | 0.19% | 0.11% | -1.46% | -0.03% | 0.76% | 0.35% | |
| AUD | 0.52% | 0.25% | 0.17% | -1.37% | 0.03% | 0.83% | 0.41% | |
| NZD | -0.31% | -0.57% | -0.67% | -2.20% | -0.76% | -0.83% | -0.42% | |
| CHF | 0.10% | -0.16% | -0.23% | -1.78% | -0.35% | -0.41% | 0.42% |
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 Dollar fails to capitalise on stronger US data as confidence erodes
Analysts at Rabobank note that the release of the "stronger than expected US Nonfarm Payrolls data last Friday had a material impact on market expectations regarding the risk of a Fed rate hike later this month." The "USD, however, has struggled to find traction on the news," with Rabobank arguing that the "Dollar debasement debate which was triggered by US Treasury Secretary Bessent’s bond intervention announcement on August 19 appears to have undermined confidence in the greenback" and curtailed its ability to benefit from the shift in rate expectations.
The data from China showed early in the day that the Consumer Price Index (CPI) rose by 0.4% on a monthly basis in August. This print followed the 0.1% decrease recorded in July and came in above the market expectation of 0.3%. After closing flat on Tuesday, AUD/USD edges higher on Wednesday and was last seen gaining about 0.3% on the day above 0.7230.
GBP/USD gains traction and trades above 1.3550 after failing to make a decisive move in either direction on Tuesday.
BoE Governor Bailey flags upside inflation risks as energy shock keeps Pound bid
FXS Speechtracker scored comments from Bank of England (BoE) Governor Andrew Bailey during his testimony before the Treasury Select Committee a 7.2, notably above his 6.0 historic average, signalling a more hawkish tone than usual. Emphasis on the US-Iran war, Ukrainian attacks on Russian refineries, and the warning that energy prices “could be higher still” underlined persistent cost‑push pressures that keep UK inflation risks skewed to the upside. Bailey’s remark that “risks to inflation are to upside” and that the market’s BoE rate curve reflects concern about further energy price rises reinforced a bias toward tighter policy, even as Bailey denies any “secret plan to raise rates, unconditionally.”
EUR/USD benefits from the renewed USD weakness and trades near 1.1650 in the European session on Wednesday.
Gold (XAU/USD) stages a rebound and gains more than 1% on the day above $4,400 after posting large losses on Tuesday.
The Japanese Yen continues to gather strength midweek, with USD/JPY falling toward 153.00 and losing about 0.5% so far on the day.
BoJ speculation builds as markets eye first 50 bps hike since 1989
Rabobank notes that “in markets, there is some speculation the Bank of Japan (BoJ) might even think about a 50bps hike,” stressing that, if delivered, “it would be the first such move since 1989, when it was still in a bubble.” The bank adds that, “appropriately, given the current geopolitical backdrop, it was also before the first Cold War had fully ended and was a time when the US used national security arguments vs. its allies to achieve the likes of the Plaza Accord,” drawing a parallel between today’s policy debates and an earlier era of US–Japan economic tension.
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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