Forex Today: US Dollar retreats from two-month high as Middle East tensions ease
Here is what you need to know on Tuesday, June 9:
The US Dollar (USD) retreats from a two-month high to around 99.85 in early European trading on Tuesday as Middle East hostilities ebbed. Traders await the release of the US Consumer Price Index (CPI) inflation report on Wednesday and the Producer Price Index (PPI) data on Thursday for more clues on the Fed's interest rate path.
Traders are now pricing in a 43.2% chance of a 25 basis points (bps) rate hike in December, up from just about 14% a month ago, according to the CME FedWatch tool.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.09% | -0.18% | -0.03% | -0.12% | -0.19% | -0.47% | -0.13% | |
| EUR | 0.09% | -0.07% | 0.09% | -0.02% | -0.05% | -0.35% | -0.01% | |
| GBP | 0.18% | 0.07% | 0.15% | 0.08% | -0.02% | -0.27% | 0.06% | |
| JPY | 0.03% | -0.09% | -0.15% | -0.09% | -0.16% | -0.44% | -0.10% | |
| CAD | 0.12% | 0.02% | -0.08% | 0.09% | -0.07% | -0.33% | 0.00% | |
| AUD | 0.19% | 0.05% | 0.02% | 0.16% | 0.07% | -0.26% | 0.07% | |
| NZD | 0.47% | 0.35% | 0.27% | 0.44% | 0.33% | 0.26% | 0.33% | |
| CHF | 0.13% | 0.00% | -0.06% | 0.10% | 0.00% | -0.07% | -0.33% |
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 on Tuesday that he might have a proposal for the Iran agreement within days, per Reuters. Early Monday, Israeli Prime Minister Benjamin Netanyahu said that the war against Iran and its Lebanon-based proxy Hezbollah “has not yet ended,” though he insisted both are weaker than ever.
Meanwhile, Iran had announced an end to its military operations against Israel. However, its central military command warned that if Israel continued to attack, including in southern Lebanon, “much harsher and more crushing actions than before will be on the way."
Data released by the General Administration of Customs on Tuesday showed that China's Trade Surplus surged to $105.43 billion in May, widening from $84.82 billion recorded in April. Additionally, Exports rose by 19.4% YoY in May, compared to 14.1% in April, better than the 15.0% expected. Imports climbed 27.4% YoY in May, versus 25.3% prior, above the market consensus of 25.0%.
Germany’s Industrial Production grew for the first time since the war broke out in Iran, with the figure rising 0.4% MoM in April, Destatis reported on Tuesday. This reading followed a decline of 0.1% in March and was in line with the market expectations. Annually, German Industrial Production came in at -0.5% in the same period, compared to March’s revised 3.4% decrease.
EUR/USD gathers strength to near 1.1550 in the European morning. The European Central Bank (ECB) is set to raise its key interest rate for the first time in almost three years at the upcoming June policy meeting on Thursday.
GBP/USD gains momentum above 1.3350, rebounding from a three-week low.
USD/JPY holds steady around 160.15 in the European morning on Tuesday. Markets are on high alert for foreign exchange intervention from Japanese authorities. Japan’s Finance Minister Satsuki Katayama on Tuesday emphasized that the stance is unchanged and authorities are prepared for decisive measures.
Gold posts modest gains near $4,340 on Tuesday. However, the yellow metal remains near its lowest since March 24 amid uncertainty in the Middle East and rising bets of a US interest rate hike.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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