Forex Today: Investors await comments from Fed officials
Here is what you need to know on Wednesday, August 6:
The trading action in financial markets remains subdued on Wednesday as investors' search for the next catalyst continues. Eurostat will release Retail Sales data for June in the European session. Later in the day, the US Treasury will hold a 10-year note auction. More importantly, several Federal Reserve (Fed) policymakers will be delivering speeches.
The US Dollar (USD) failed to gather recovery momentum on Tuesday and the USD Index closed the day virtually unchanged. The data published by the Institute for Supply Management (ISM) showed that the Services Purchasing Managers Index (PMI) declined to 50.1 in July from 50.8 in June. The Employment Index of the PMI survey dropped to 46.4 from 47.2 in the same period, while the Prices Paid Index, the inflation component, rose to 69.9 from 67.5. Early Wednesday, the USD Index extends its sideways grind below 99.00 and US stock index futures gain between 0.3% and 0.4%.
US Dollar PRICE Last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.22% | 0.43% | -0.46% | 0.02% | 0.36% | 0.62% | 0.28% | |
| EUR | 0.22% | 0.68% | -0.32% | 0.21% | 0.54% | 0.83% | 0.55% | |
| GBP | -0.43% | -0.68% | -0.98% | -0.41% | -0.11% | 0.19% | -0.10% | |
| JPY | 0.46% | 0.32% | 0.98% | 0.57% | 0.90% | 1.16% | 0.82% | |
| CAD | -0.02% | -0.21% | 0.41% | -0.57% | 0.34% | 0.59% | 0.31% | |
| AUD | -0.36% | -0.54% | 0.11% | -0.90% | -0.34% | 0.29% | 0.02% | |
| NZD | -0.62% | -0.83% | -0.19% | -1.16% | -0.59% | -0.29% | -0.28% | |
| CHF | -0.28% | -0.55% | 0.10% | -0.82% | -0.31% | -0.02% | 0.28% |
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).
In an interview with CBNC on Tuesday, US President Donald Trump said they were getting very close to making a deal with China. Trump also noted that US Treasury Secretary Scott Bessent will not be considered as Fed Chair Jerome Powell's replacement because he wants to remain in his current position.
The data from Germany showed on Wednesday that Factory Orders declined by 1% on a monthly basis in June. This reading followed the 1.4% contraction recorded in May and came in weaker than the market expectation for an increase of 1%. EUR/USD continues to move up and down in a very tight channel below 1.1600 after this data.
The Unemployment Rate in New Zealand edged higher to 5.2% in the second quarter from 5.1% in the first quarter, Statistics New Zealand reported. This print came in better than the market expectation of 5.3%. After closing marginally lower on Tuesday, NZD/USD holds its ground early Wednesday and trades in positive territory above 0.5900.
GBP/USD continues to tread water slightly below 1.3300 for the third consecutive day on Wednesday. The Bank of England (BoE) will announce monetary policy decisions on Thursday.
USD/JPY stays relatively quiet in the European session on Wednesday and fluctuates above 147.50 after posting small gains on Tuesday.
Gold struggles to preserve its bullish momentum and trades in the red below $3,370 midweek.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Author
Eren Sengezer
FXStreet
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.
