FX Today: US Dollar sleeps, Trump does not
Here is what you need to know on Tuesday, January 20:
Over the weekend, the United States (US) President Donald Trump announced 10% tariffs on all goods from eight European countries as part of his plan to take over Greenland. As a result, financial markets were dominated by risk aversion. Meanwhile, the US stock and bond markets remained closed on Monday in observance of Martin Luther King Jr. Day.
Trump will impose a 10% tariff on all goods from Denmark, Sweden, France, Germany, the Netherlands, Finland, Britain, and Norway on February 1st. The tariff rate is also set to increase to 25% on June 1st if the US fails to reach a deal to purchase Greenland by then. Citing EU diplomats, Reuters reported on Sunday that EU ambassadors reached a broad agreement to retaliate with a tariff package on 93 billion Euros of US imports, a measure suspended for six months back in August.
The US Dollar Index (DXY) is trading near 99.00, with little movement, as US markets are closed for Martin Luther King Jr. Day.
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 | -0.40% | -0.37% | -0.03% | -0.35% | -0.45% | -0.72% | -0.73% | |
| EUR | 0.40% | 0.03% | 0.37% | 0.05% | -0.05% | -0.32% | -0.33% | |
| GBP | 0.37% | -0.03% | 0.36% | 0.03% | -0.08% | -0.35% | -0.35% | |
| JPY | 0.03% | -0.37% | -0.36% | -0.33% | -0.44% | -0.69% | -0.71% | |
| CAD | 0.35% | -0.05% | -0.03% | 0.33% | -0.10% | -0.37% | -0.38% | |
| AUD | 0.45% | 0.05% | 0.08% | 0.44% | 0.10% | -0.28% | -0.27% | |
| NZD | 0.72% | 0.32% | 0.35% | 0.69% | 0.37% | 0.28% | -0.01% | |
| CHF | 0.73% | 0.33% | 0.35% | 0.71% | 0.38% | 0.27% | 0.01% |
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).
EUR/USD is trading close to the 1.1650 price region, as the Euro (EUR) gains the upperhand on a muted US Dollar (USD).
USD/CAD is trading near the 1.3870 price zone, losing ground, even though the Canadian Consumer Price Index (CPI) indicated that inflation rose to 2.4% yearly from the 2.2% expected, in the monthly report, the situation changed as the print showed a -0.2% reading, still not aligned with the expected -0,3% but lower than last month’s 0.1%.
GBP/USD is trading near the 1.3440 level, with the Great British Pound (GBP) gaining some ground on a dormant USD. In response to the 10% tariffs, the European Union (EU) and the UK appear set to retaliate against the US.
USD/JPY is trading close to the 158.00 price zone, still on the green side after trimming some of the Asian hours losses, following Japanese Prime Minister Sanae Takaichi's announcement of plans to dissolve parliament for a snap election set to take place on February 8. Takaichi aims to reaffirm her power with this snap election.
AUD/USD is trading near the 0.6720 price zone, trimming all of its Friday’s losses. Earlier in the day, markets learned that Australian inflation unexpectedly rose in December, according to the TD-MI inflation gauge released by the Melbourne Institute.
Gold hit a record high near $4,690 earlier in the day, now trading close-by at $4,674 per troy ounce. The high came as geopolitical tensions escalated between Trump and Europe.
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.
What’s next in the docket
UK Employment data is set to be released alongside the German ZEW survey on Economic Sentiment in the European session on Tuesday.
On Wednesday, the UK will publish the December CPI and the PPI, alongside a Trump speech at the Davos Economic Forum in Switzerland.
On Thursday, the US will release the November PCE report and the Q3 GDP report.
Friday comes packed with the BoJ's monetary policy decision, statement, and conference; additionally, the Eurozone and German HCOB Composite, Manufacturing, and Services PMI will be released later in the European session. US and UK S&P Global PMIs will release at the start of the American session.
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