Forex Today: US Dollar stabilizes as markets turn cautious on Mideast uncertainty
Here is what you need to know on Thursday, August 6:
Following the risk-positive action seen earlier in the week, markets adopt a cautious stance on Thursday. The US economic calendar will feature Challenger Job Cuts for July, weekly Initial Jobless Claims and second-quarter Unit Labor Costs data ahead of Friday's critical official employment report, which will feature Nonfarm Payrolls (NFP) figures.
The US Dollar (USD) weakened slightly after weak data releases midweek but managed to find its footing as the optimism about the conflict in the Middle East Coming to an end faded. The ADP Employment Change declined to 44K in July from 98K in June and fell short of the market expectation of 70K. Additionallly, the Institue for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) came in at 54.1, below analysts' estimate of 54.5. Early Thursday, the USD Index clings to marginal daily gains but stays below 100.00.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.25% | 0.38% | 0.00% | -0.05% | 0.46% | 0.19% | |
| EUR | -0.03% | 0.23% | 0.36% | -0.02% | 0.03% | 0.44% | 0.17% | |
| GBP | -0.25% | -0.23% | -0.19% | -0.26% | -0.20% | 0.21% | -0.06% | |
| JPY | -0.38% | -0.36% | 0.19% | -0.31% | -0.29% | 0.19% | -0.09% | |
| CAD | -0.01% | 0.02% | 0.26% | 0.31% | 0.04% | 0.51% | 0.20% | |
| AUD | 0.05% | -0.03% | 0.20% | 0.29% | -0.04% | 0.40% | 0.14% | |
| NZD | -0.46% | -0.44% | -0.21% | -0.19% | -0.51% | -0.40% | -0.26% | |
| CHF | -0.19% | -0.17% | 0.06% | 0.09% | -0.20% | -0.14% | 0.26% |
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).
Kashkari tempers rate hike rhetoric, keeps Fed reaction function in focus
Minneapolis Federal Reserve (Fed) Bank President Neel Kashkari's speech received a score of 4.6/10 on the FXS Speechtracker on Thursday, notably softer relative to the historical average of 6.8/10, signaling a less forceful policy tone. By stressing that the goal is to bring down inflation without deliberately slowing the economy and highlighting recent price pressures as largely supply-driven, Kashkari leaned away from aggressive tightening while still acknowledging some demand-side contribution. The explicit remark about not calling for a dramatic increase in rates, coupled with emphasis on explaining the reaction function rather than changing it, pointed to a cautious, communication-focused stance that is modestly less hawkish than the established baseline.
Iran and Oman are reportedly close to finalizing a proposed framework for commercial shipping through the Strait of Hormuz. However, Iranian Deputy Foreign Minister Kazem Gharibabadi told Islamic Republic News Agency (IRNA) that the agreement would not automatically reopen the waterway. According to a senior Gulf official, there is a 50% chance that Iran and Oman will reach a deal by Friday.
Meanwhile, United States (US) Vice President JD Vance told Fox News that talks with Iran were "messy," calling Iranians "extraordinarily difficult people." Following the sharp decline seen earlier in the week, crude Oil prices were virtually unchanged on Wednesday. In the European morning on Thursday, the barrel of West Texas Intermediate trades marginally higher on the day at around $74.50.
Brent steadies as Hormuz corridor eases but does not erase risk premium
Analysts at Commerzbank note that Brent crude is showing signs of stabilization, with prices having "edged up 0.1% to USD79.45, consolidating after a steep three-session decline on the Hormuz deal optimism." They stress that the proposed arrangement in the Strait of Hormuz is not a comprehensive resolution but "would provide a temporary shipping corridor valid for two to four months." In their view, this "more measured tone" from officials indicates that "while the geopolitical risk premium has eased, a full restoration of normal shipping may take some time," leaving the broader oil backdrop still contingent on how the corridor is implemented and whether it is extended.
EUR/USD corrects lower and trades slightly below 1.1550 after posting gains for two consecutive days. Eurostat will publish Retail Sales data for June later in the session.
USD/JPY extends its sideways grind slightly below 158.00 after failing to make a decisive move in either direction on Wednesday.
Gold rose more than 4% on Wednesday and climbed above $4,300 for the first time since mid-June, registering its biggest one-day gain since February. XAU/USD remains in a consolidation phase at around $4,250 on Thursday.
Gold rallies as easing Middle East tensions and softer Fed expectations weigh on USD
Analysts at OCBC note that Gold “rose sharply overnight as easing Middle East tensions drove oil prices lower while US Treasury yields and USD eased,” with market expectations for the Fed to hike in September also softening. They highlight that “about 55% probability priced (vs. 66% a week ago),” and that the “sharp move in Gold accelerated after prices cleared recent resistance, triggering technical buying and short covering.”
OCBC adds that Gold’s strength “suggests investors are increasingly pricing a de-escalation of the US-Iran conflict, a normalisation of oil flows through the Strait of Hormuz, lower real interest rates and a softer USD,” reinforcing the view that geopolitical and rate dynamics are now tilting in favour of the metal.
GBP/USD retreats slightly following a two-day rally and trades near 1.3450 in the early European session on Thursday.
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
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