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Forex Today: Financial markets stabilize after central bank bonanza

Here is what you need to know on Monday, December 18:

Following the previous week's highly volatile action amid major central banks' monetary policy announcements, markets seem to have stabilized to start the new week. The US Dollar (USD) Index stays near 102.50 after losing more than 1% last week and the benchmark 10-year US Treasury bond yield seems to have stabilized slightly below 4%. IFO sentiment data from Germany and Bundesbank's Monthly Report will be featured in the European economic docket. Market participants will also pay close attention to comments from central bank officials.

The risk rally that was triggered after the dovish Federal Reserve surprise late Wednesday lost its steam ahead of the weekend, with Wall Street's main indexes closing mixed on Friday. Early Monday, US stock index futures trade modestly higher on the day, pointing to a marginal improvement in risk mood. 

US Dollar price in the last 7 days

The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the weakest against the Australian Dollar.

 USDEURGBPCADAUDJPYNZDCHF
USD -1.45%-1.12%-1.57%-2.17%-1.93%-1.94%-1.23%
EUR1.43% 0.33%-0.12%-0.71%-0.47%-0.47%0.26%
GBP1.11%-0.33% -0.45%-1.05%-0.80%-0.81%-0.11%
CAD1.55%0.12%0.44% -0.59%-0.35%-0.36%0.35%
AUD2.12%0.71%1.02%0.58% 0.23%0.23%0.92%
JPY1.90%0.47%0.70%0.35%-0.24% -0.01%0.68%
NZD1.90%0.48%0.80%0.36%-0.23%0.00% 0.69%
CHF1.17%-0.26%0.06%-0.38%-0.97%-0.73%-0.74% 

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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

During the Asian trading hours, the data from New Zealand showed that the Westpac Consumer Confidence Index for the fourth quarter rose to 88.9 from 80.2. Other data revealed that the Business NZ PSI moved into expansion territory in November, increasing from 48.9 in October to 51.2. NZD/USD gained traction on upbeat data releases and was last seen rising more than 0.5% on the day at 0.6240.

Despite closing in negative territory on Friday, EUR/USD rose more than 1% in the previous week. The pair holds its ground in the European morning and trades in positive territory slightly above 1.0900.

Following the pullback seen ahead of the weekend, GBP/USD seems to have steadied at around 1.2700 early Monday.

USD/JPY declined below 141.00 for the first time since late July on Thursday and staged a modest rebound on Friday. The pair seems to have gone into a consolidation phase above 142.00 on Monday. The Bank of Japan will announce monetary policy decisions in the Asian session on Tuesday.

After coming within a touching distance of $2,050 in the second half of the previous week, XAU/USD lost its bullish momentum as the US Treasury bond yields stabilized following the sharp decline seen in the Fed aftermath. Gold stays relatively quiet to start the new week and fluctuates at around $2,020.

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.

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