Forex Today: US Dollar rally pauses to start new week
Here is what you need to know on Monday, November 3:
The US Dollar (USD) starts the new week in a relatively calm manner after outperforming its major rivals in the previous week. In the second half of the day, the Institute for Supply Management (ISM) will publish the US Manufacturing Purchasing Managers' Index (PMI) data for October.
US Dollar Price Last 7 Days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.83% | 1.34% | 0.80% | 0.01% | -0.26% | 0.91% | 0.95% | |
| EUR | -0.83% | 0.52% | 0.07% | -0.81% | -1.01% | 0.07% | 0.12% | |
| GBP | -1.34% | -0.52% | -0.55% | -1.32% | -1.51% | -0.44% | -0.44% | |
| JPY | -0.80% | -0.07% | 0.55% | -0.88% | -1.15% | -0.03% | 0.03% | |
| CAD | -0.01% | 0.81% | 1.32% | 0.88% | -0.32% | 0.90% | 0.90% | |
| AUD | 0.26% | 1.01% | 1.51% | 1.15% | 0.32% | 1.08% | 1.09% | |
| NZD | -0.91% | -0.07% | 0.44% | 0.03% | -0.90% | -1.08% | 0.00% | |
| CHF | -0.95% | -0.12% | 0.44% | -0.03% | -0.90% | -1.09% | -0.00% |
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).
Following Federal Reserve (Fed) Chairman Jerome Powell's cautious comments on policy-easing earlier last week, several Fed policymakers echoed his tone by noting that it might not be easy to cut rates again in December. In turn, the USD Index preserved its bullish momentum and climbed to its highest level since early August above 99.80 on Friday. Early Monday, the index stays in a consolidation phase at around 99.70. Meanwhile, US stock index futures trade mixed in the European morning after Wall Street's main indexes registered small gains on Friday.
The data from China showed earlier in the day that the business activity in the manufacturing sector expanded at a modest pace in October, with the RatingDog Manufacturing PMI coming in at 50.6. This reading missed the market expectation of 50.9.
After closing in negative territory for three consecutive days, EUR/USD finds a foothold on Monday and fluctuates in a narrow band below 1.1550.
AUD/USD clings to small recovery gains near 0.6550 after ending the previous week virtually unchanged. In the Asian session on Tuesday, the Reserve Bank of Australia (RBA) will announce monetary policy decisions. Markets expect the RBA to keep its policy rate unchanged at 3.6%.
USD/JPY climbed to its highest level since February near 154.50 last week. With Japanese officials verbally intervening by noting that they continue to closely monitor in foreign exchange markets, the pair stabilized toward the end of the week. Early Monday, USD/JPY moves sideways, slightly above 154.00.
GBP/USD lost more than 1% last week and briefly dipped below 1.3100 on Friday. The pair struggles to gather recovery momentum on Monday and trades near 1.3150.
Gold remained relatively calm on Friday but ended up losing more than 2% on a weekly basis. XAU/USD holds steady above $4,000 to start the new week.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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