Forex Today: US Dollar rallies as war drums beat louder in the Middle East
The US Dollar (USD) remained bid on Tuesday amid an escalation of the conflict between Israel and Iran, which boosted the Greenback due to its haven appeal. Fears that the United States (US) could be involved in joining Israel's attack on Iran loom, pushing economic data and the Federal Reserve’s monetary policy decision to the backseat.
Here's what to watch on Wednesday, June 18:
Geopolitics is dominating the headlines. US President Donald Trump refrained from sending senior officials to meet with Iran to reach a deal, according to US officials who spoke with CNN. Meanwhile, Axios' revelation that Trump is considering attacking Iran could push the Greenback higher, alongside safe-haven currencies and Gold.
The US Dollar Index (DXY) rallied past 98.86, up 0.74% at four-day highs, despite US Treasury yields plunging. This move came despite the release of worse-than-expected US Retail Sales data in May and a softer reading on Industrial Production. On Wednesday, Initial Jobless Claims for the last week, Housing Starts, Building Permits and the Federal Open Market Committee (FOMC) policy decision will set the tone for the Greenback.
Consequently, most G8 forex currencies were laggards compared to the US Dollar. EUR/USD fell below 1.1500 even though German ZEW figures were positive, and ECB’s officials took a page of the Fed’s blueprint, adopting a wait-and-see mode, turning data dependent. Traders' focus will be on HICP figures for the Eurozone, the Eurozone Current Account and ECB officials, led by Panetta, Nagel, Lane, and Vice-President Luis De Guindos.
The GBP/USD pair was pressured by risk aversion, even though investors seemed convinced that the Bank of England (BoE) will keep interest rates unchanged at Thursday’s monetary policy meeting. Before the meeting, BoE officials will get an update on UK inflation figures on Wednesday.
USD/JPY climbed above 145.00 as the Bank of Japan (BoJ) kept rates unchanged at 0.50%, though it flagged that “downside risks are bigger for the economy and prices,” according to BoJ Governor Ueda. The docket will feature BoJ Ueda press conference, the Reuters Tankan Index, Machinery Orders and the Balance of Trade.
Antipodeans reversed their course on Tuesday, ahead of the FOMC’s meeting, as sentiment shifted sour. AUD/USD fell 0.75%, settling at 0.6470, while NZD/USD plummeted 0.77% to 0.6010. The docket in New Zealand will feature the Current Account, while Australia's schedule is absent.
In the commodities space, WTI rose over 4.82% after bouncing off daily lows of $69.56, reaching $73.33 per barrel, as the Middle East crisis deteriorates and the likelihood of the US entering the conflict increases.
Gold ended flat near $3,387 after traveling from a daily low of $3,366 to a peak of $3.403. Traders seem reluctant to drive Bullion higher, even though a poll made on central banks suggests that they would continue increasing their Gold reserves. This, along with the FOMC’s monetary policy decision, will be crucial in providing direction for the precious metal.
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 strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.54% | 1.05% | 0.49% | 0.76% | 0.17% | 0.11% | 0.63% | |
| EUR | -0.54% | 0.39% | -0.07% | 0.22% | -0.24% | -0.43% | 0.09% | |
| GBP | -1.05% | -0.39% | -0.43% | -0.17% | -0.62% | -0.81% | -0.30% | |
| JPY | -0.49% | 0.07% | 0.43% | 0.26% | -0.62% | -0.71% | -0.28% | |
| CAD | -0.76% | -0.22% | 0.17% | -0.26% | -0.50% | -0.64% | -0.13% | |
| AUD | -0.17% | 0.24% | 0.62% | 0.62% | 0.50% | -0.18% | 0.33% | |
| NZD | -0.11% | 0.43% | 0.81% | 0.71% | 0.64% | 0.18% | 0.52% | |
| CHF | -0.63% | -0.09% | 0.30% | 0.28% | 0.13% | -0.33% | -0.52% |
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).
Author
Christian Borjon Valencia
FXStreet
Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.
