|

Forex Today: Eyes on FOMC Minutes as holiday mood sets in

Here is what you need to know on Tuesday, December 30:

The action in financial markets turns subdued early Tuesday as trading conditions remain thin heading into the New Year holiday. In the second half of the day, the US economic calendar will feature housing data and the Federal Reserve will release the minutes of the December policy meeting.

US Dollar Price This Month

The table below shows the percentage change of US Dollar (USD) against listed major currencies this month. US Dollar was the weakest against the Australian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD-1.46%-1.96%-0.06%-2.08%-2.44%-1.41%-1.77%
EUR1.46%-0.51%1.41%-0.63%-0.99%0.05%-0.32%
GBP1.96%0.51%2.19%-0.12%-0.49%0.56%0.18%
JPY0.06%-1.41%-2.19%-2.05%-2.40%-1.36%-1.75%
CAD2.08%0.63%0.12%2.05%-0.41%0.69%0.29%
AUD2.44%0.99%0.49%2.40%0.41%1.06%0.67%
NZD1.41%-0.05%-0.56%1.36%-0.69%-1.06%-0.38%
CHF1.77%0.32%-0.18%1.75%-0.29%-0.67%0.38%

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 data from the US showed on Monday that Pending Home Sales increased by 3.3% in November. Additionally, the Federal Reserve Bank of Dallas reported that the Dallas Fed Manufacturing Index edged lower to -10.9 in December from -10.4 in November. These figures failed to trigger a noticeable market reaction and the US Dollar (USD) Index held steady at around 98.00. The USD Index stays quiet in the European morning on Tuesday and continues to move sideways.

Following the record-setting rally, Gold staged a sharp correction on Monday and lost more than 4% on a daily basis. XAU/USD recovers on Tuesday but remains below $4,400.

Similarly, Silver (XAG/USD) fell about 9% on Monday after touching a all-time-high of $84 at the beginning of the week. The pair gains traction on Tuesday and climbs toward $75, rising more than 3% on the day.

EUR/USD failed to make a decisive move in either direction on Monday and closed the day virtually unchanged. The pair extends its sideways grind above 1.1750 in the European morning on Tuesday.

GBP/USD registered marginal gains on Monday but struggled to gather momentum. The pair holds steady at around 1.3500 to start the European session.

USD/JPY lost more than 0.3% on Monday as the hawkish tone seen in the Bank of Japan's Summary of Opinions supported the Japanese Yen. The pair holds steady at around 156.00 early Tuesday.

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.

Author

Eren Sengezer

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

More from Eren Sengezer
Share:

Editor's Picks

GBP/USD loses momentum, flirts with 1.3200

GBP/USD is struggling to maintain its positive bias on Thursday, retreating toward the 1.3200 region in response to the pick in the buying interest around the Greenback. That said, Cable remains under scrutiny as cautious market sentiment keeps investors focused on the US-Iran conflict and political effervescence in the UK.

EUR/USD trims gains, challenges 1.1400

EUR/USD now gives away part of its earlier advance, receding toward the 1.1400 contention zone on Thursday. Meanwhile, the pair’s recovery comes amid extra losses in the US Dollar, at the time when while investors continue to monitor developments in the Middle East and sentiment surrounding global technology stocks.

Gold remains bid and close to $4,100

Gold accelerates its recovery and approaches the key $4,000 mark per troy ounce at the end of the week, adding to Thursday’s advance. However, expectations for a hawkish Fed remain steady and keep the yellow metal’s potential upside contained.

Crypto Today: Bitcoin at $60,000, Ethereum at $1,500, and XRP at $1 face a make-or-break test

Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) are trading in the red on Friday after three consecutive days of losses, testing their respective make-or-break support levels.

Week ahead – NFP report to challenge Dollar strength and the hawkish Fed

Dollar strength dominates markets, as the hawkish Fed overshadows geopolitics and lower oil prices. NFP week could drive September Fed hike expectations and boost market volatility. The euro lacks fresh bullish catalysts, all eyes on the preliminary inflation report and the ECB Forum.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.