Forex Today: Geopolitical uncertainty keeps markets on edge
Here is what you need to know on Tuesday, September 22:
Financial markets adopt a cautious stance early Tuesday amid mounting geopolitical uncertainty. The European economic calendar will feature preliminary Consumer Confidence Index data for September. Meanwhile, investors will pay close attention to comments from central bankers.
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 strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.37% | 0.26% | 0.58% | 0.37% | 0.15% | -0.11% | -0.06% | |
| EUR | -0.37% | -0.09% | 0.22% | 0.00% | -0.22% | -0.47% | -0.42% | |
| GBP | -0.26% | 0.09% | 0.21% | 0.09% | -0.13% | -0.38% | -0.33% | |
| JPY | -0.58% | -0.22% | -0.21% | -0.19% | -0.44% | -0.68% | -0.64% | |
| CAD | -0.37% | -0.00% | -0.09% | 0.19% | -0.16% | -0.49% | -0.42% | |
| AUD | -0.15% | 0.22% | 0.13% | 0.44% | 0.16% | -0.25% | -0.28% | |
| NZD | 0.11% | 0.47% | 0.38% | 0.68% | 0.49% | 0.25% | 0.04% | |
| CHF | 0.06% | 0.42% | 0.33% | 0.64% | 0.42% | 0.28% | -0.04% |
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 US Dollar (USD) Index continues to edge higher and fluctuates above 100.50 in the European session after closing in positive territory on Monday. US Treasury Secretary Scott Bessent said that Iranian airlines could effectively be shut out of international travel from September 23, while Iran’s Islamic Revolutionary Guard Corps (IRGC) said the US and Israel must accept the region’s freedom from their "vile and criminal presence." After falling more than 3% on Monday, the barrel of West Texas Intermediate (WTI) is up about 1% early Tuesday. On a positive note, US envoy to the United Nations Mike Waltz said that US President Donald Trump keeps an open mind for Iran to return to the “negotiating table if they do so in good faith”.
Dollar index extends post-Fed gains toward key resistance
Analysts at MUFG/BTMU note that it has been “a quiet start to the week in the FX market,” with the Dollar continuing to trade on “a stronger footing after the Fed’s decision last week to begin tightening monetary policy.” They highlight that this firmer tone has “helped to lift the Dollar index back above the 100.00-level for the first time since the start of August,” adding that “the next important resistance level is provided by the year-date-high from 24th June at 101.80.”
Reserve Bank of Australia (RBA) Governor Michele Bullock said in a statement released during the Asian trading session on Tuesday that supply shocks are difficult for monetary policy to deal with. Bullock reiterated that the policy needs to deal with second-round effects on inflation. These comment failed to support the Australian Dollar (AUD) and AUD/USD was last seen trading near 0.7100, losing about 0.2% on the day.
EUR/USD stays under bearish pressure and trades at its lowest level since late July below 1.1450 in the European morning on Tuesday. European Central Bank (ECB) President Christine Lagarde will deliver a pre-recorded video at 10th Annual Research Conference "Central Banks' Response to Future Challenges: Resilience, Credibility, and Innovation," later in the session.
After closing marginally lower on Monday, GBP/USD continues to push lower and trades near 1.3350 in the European session, pressured by the broad-based USD strength.
Gold is already down about 1% on the day and tests $4,300 after losing 0.8% on Monday.
Gold softens as Fed hike and hawkish signals weigh on sentiment
Analysts at ING note that gold "edged lower at the start of the week as investors assessed the implications of the Federal Reserve's first rate hike since 2023 and the prospect of further policy tightening." They highlight that comments from Fed officials have "reinforced concerns that inflation remains elevated," in turn "supporting expectations that rates will stay higher for longer." ING cautions that "tighter monetary policy remains a headwind for bullion," but points out that "ETF holdings are sitting at a six-month high, and continued central bank buying should help limit downside."
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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