United States Dollar Index wobbles around 99.40 in countdown to US NFP data
- The US Dollar Index consolidates around 99.40 as the US NFP data takes center stage.
- Latest remarks from Fed officials have indicated that they are more concerned about high inflation.
- Investors await comments from the US-Iran regarding progress towards a permanent peace deal.
The US Dollar (USD) struggles for a direction as investors await the United States (US) Nonfarm Payrolls (NFP) data for May, which will be published at 12:30 GMT.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades flat near 99.40.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.03% | -0.02% | -0.05% | -0.03% | 0.16% | 0.10% | -0.03% | |
| EUR | 0.03% | 0.00% | 0.00% | 0.00% | 0.19% | 0.11% | 0.01% | |
| GBP | 0.02% | -0.01% | -0.02% | -0.02% | 0.17% | 0.10% | -0.01% | |
| JPY | 0.05% | 0.00% | 0.02% | 0.02% | 0.20% | 0.14% | 0.01% | |
| CAD | 0.03% | -0.00% | 0.02% | -0.02% | 0.18% | 0.12% | 0.00% | |
| AUD | -0.16% | -0.19% | -0.17% | -0.20% | -0.18% | -0.06% | -0.18% | |
| NZD | -0.10% | -0.11% | -0.10% | -0.14% | -0.12% | 0.06% | -0.12% | |
| CHF | 0.03% | -0.01% | 0.00% | -0.01% | -0.00% | 0.18% | 0.12% |
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 Bureau of Labor Statistics (BLS) is expected to report that employers hired 85K fresh workers, lower than 115K in April. The Unemployment Rate is seen steady at 4.3%.
Year-on-Year (YoY) Average Hourly Earnings, a key measure of wage growth, is estimated to arrive lower at 3.4% from the previous reading of 3.6%. On a monthly basis, the wage growth measure is expected to have grown 0.3% faster than 0.2% in April.
Theoretically, the US official employment data influences market expectations for the Federal Reserve’s (Fed) monetary policy outlook significantly; however, the impact is expected to be limited this time, unless there is a dramatic change, as recent remarks from officials have indicated that they are more concerned about rising inflation than weak job market conditions.
Minneapolis Federal Reserve (Fed) Bank President Neel Kashkari said last week that the major concern for the central bank now is higher US inflation than deteriorating labor market conditions; however, the central bank needs to pay attention to both.
On Thursday, Kansas City Fed Bank President Jeffrey Schmid said that the “biggest risk facing the economy right now is inflation”, and the big question now is whether the Fed should “stay patient on rates or raise them to tamp this thing down and meet the inflation target”.
On the geopolitical front, investors seek fresh comments from both the US and Iran regarding progress in negotiations towards a permanent peace deal.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact 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 when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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