Forex Today: Oil plunges on Iran-Israel ceasefire, USD weakens ahead of Powell
Here is what you need to know on Tuesday, June 24:
Risk flows dominate the action in financial markets on Tuesday as investors cheer the announcement of a ceasefire between Iran and Israel. The European economic calendar will feature business sentiment data from Germany. In the second half of the day, Federal Reserve Chairman Jerome Powell will testify about the semiannual Monetary Policy Report before the US House Financial Services Committee.
After exchanging missile strikes for 12 days, Iran and Israel reached an agreement to end the conflict. Israel's Prime Minister Benjamin Netanyahu said on Tuesday that Israel achieved Iran war goals, adding that the country will respond forcefully to a breach of the truce. In response, crude oil prices declined sharply. After losing about 9% late Monday, the barrel of West Texas Intermediate continues to push lower and was last seen trading at around $65.50, down more than 2% on the day.
The US Dollar (USD) also stays under selling pressure as the market mood improves. The USD Index was last seen fluctuating at around 98.00, losing about 0.3%. Meanwhile, US stock index futures gain nearly 1% on the day after Wall Street's main indexes closed in positive territory on the back of a risk rally late Monday. During the American trading hours, several Fed policymakers are scheduled to deliver speeches.
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 | -0.18% | -0.41% | -0.77% | -0.10% | -0.72% | -0.80% | 0.04% | |
| EUR | 0.18% | -0.25% | -0.56% | 0.08% | -0.54% | -1.05% | 0.23% | |
| GBP | 0.41% | 0.25% | -0.32% | 0.35% | -0.27% | -0.78% | 0.35% | |
| JPY | 0.77% | 0.56% | 0.32% | 0.67% | -0.00% | -0.08% | 0.67% | |
| CAD | 0.10% | -0.08% | -0.35% | -0.67% | -0.63% | -1.13% | -0.00% | |
| AUD | 0.72% | 0.54% | 0.27% | 0.00% | 0.63% | -0.51% | 0.62% | |
| NZD | 0.80% | 1.05% | 0.78% | 0.08% | 1.13% | 0.51% | 1.14% | |
| CHF | -0.04% | -0.23% | -0.35% | -0.67% | 0.00% | -0.62% | -1.14% |
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).
USD/CAD trades marginally lower on the day at around 1.3700 after setting a multi-week high near 1.3800 on Monday. May Consumer Price Index (CPI) data from Canada will be watched closely by market participants later in the session.
GBP/USD gained more than 0.5% on Monday and extended its rebound early Tuesday. At the time of press, the pair was up nearly 0.5%, trading slightly below 1.3600. Bank of England (BoE) Governor Andrew Bailey will testify before the Lords Economic Affairs Committee at 14:00 GMT.
EUR/USD preserves its bullish momentum after posting strong gains on Monday and trades near 1.1600 in the European morning on Tuesday.
Gold stays on the back foot early Tuesday and trades at its lowest level in about two weeks near $3,320, pressured by the easing geopolitical tensions.
USD/JPY made a sharp U-turn after touching its highest level since mid-May above 148.00 late Monday and extended its slide early Tuesday. At the time of press, the pair was losing more than 0.7% on the day and testing 145.00.
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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