Forex Today: Trump chaos triggers safe-haven demand
Here is what you need to know on Wednesday, January 21:
Safe-haven flows continue to dominate financial markets on Tuesday as geopolitical tensions between United States (US) President Donald Trump and Greenland/Europe remain high.
US President Donald Trump argued early Tuesday again that Denmark is unable to adequately protect Greenland and said they will discuss the issue in Davos. Trump also noted that he will impose a 200% tariff on French wines and champagnes if France declines to join the Gaza Board of Peace.
Financial markets in the US returned to action following a long weekend, but the US economic calendar did not feature any high-impact data releases. The country published the Automatic Data Processing (ADP) Employment Change 4-week Average data, showing that private employers added an average of 8K jobs per week in the 4-week period ending January 20, down from the 11K added in the previous week.
The US Dollar (USD) Index continues to edge lower in the American session and is now trading around the 98.50 price zone.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.71% | -0.12% | -0.06% | -0.26% | -0.30% | -0.69% | -1.04% | |
| EUR | 0.71% | 0.59% | 0.63% | 0.45% | 0.41% | 0.00% | -0.33% | |
| GBP | 0.12% | -0.59% | 0.06% | -0.14% | -0.18% | -0.57% | -0.92% | |
| JPY | 0.06% | -0.63% | -0.06% | -0.20% | -0.24% | -0.63% | -0.98% | |
| CAD | 0.26% | -0.45% | 0.14% | 0.20% | -0.04% | -0.44% | -0.77% | |
| AUD | 0.30% | -0.41% | 0.18% | 0.24% | 0.04% | -0.39% | -0.72% | |
| NZD | 0.69% | -0.01% | 0.57% | 0.63% | 0.44% | 0.39% | -0.35% | |
| CHF | 1.04% | 0.33% | 0.92% | 0.98% | 0.77% | 0.72% | 0.35% |
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).
GBP/USD is trading close to the 1.3460 price zone after the UK's Office for National Statistics reported on Tuesday that the ILO Unemployment Rate remained unchanged at 5.1% in the three months to November. In this period, the Employment Change was +82,000, compared to the 17,000 decrease recorded in the three months to October.
EUR/USD is trading near the 1.1730 price zone after Germany's ZEW sentiment data printed at 59.6, above the 50 expected. The EU Economic Sentiment was released at 40.8, well above the 35.2 expected by economists, helping push the Euro (EUR) higher amid an already weakened US Dollar (USD).
USD/CAD is trading near the 1.3830 level, slipping and losing almost half of last week’s gains.
USD/JPY is trading little changed and near the 157.90 price zone.
Gold is trading at a record high of $4.757 zone amid rising geopolitical tensions. Market focus is now on US President Trump's speech in Davos on Wednesday.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Coming up next:
The ONS will publish the UK December inflation data on Wednesday.
The US will release the PCE reports for October and November, and the Q3 GDP report, on Thursday.
The BoJ will release its monetary policy decision on Friday, while Governor Kazuo Ueda will then offer a press conference. Additionally, the Eurozone and German HCOB Composite, Manufacturing, and Services PMI will be released later in the European session. The US and UK S&P Global PMIs will also be released on Friday.
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