Here is what you need to know on Thursday, January 23:
Major currency pairs fluctuate in relatively tight ranges early Thursday as investors await the next fundamental catalyst. The US economic calendar will feature weekly Initial Jobless Claims data and the US Treasury will hold a 10-year Treasury Inflation-Protected Securities (TIPS) auction. Additionally, the European Commission will release the preliminary Consumer Confidence data for January.
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 weakest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.30% | -1.19% | 0.19% | -0.55% | -1.25% | -1.30% | -0.74% | |
| EUR | 1.30% | 0.05% | 1.40% | 0.65% | 0.12% | -0.11% | 0.44% | |
| GBP | 1.19% | -0.05% | 1.27% | 0.59% | 0.07% | -0.17% | 0.39% | |
| JPY | -0.19% | -1.40% | -1.27% | -0.73% | -1.37% | -1.57% | -1.09% | |
| CAD | 0.55% | -0.65% | -0.59% | 0.73% | -0.63% | -0.76% | -0.20% | |
| AUD | 1.25% | -0.12% | -0.07% | 1.37% | 0.63% | -0.32% | 0.24% | |
| NZD | 1.30% | 0.11% | 0.17% | 1.57% | 0.76% | 0.32% | 0.38% | |
| CHF | 0.74% | -0.44% | -0.39% | 1.09% | 0.20% | -0.24% | -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 US Dollar (USD) Index struggled to gain traction on Wednesday as the improving risk mood made it difficult for the USD to find demand. US stock index futures trades marginally lower early Thursday, pointing to a cautious market stance, while the USD Index holds steady above 108.00. US President Donald Trump said late Wednesday that he would impose high levels of sanctions on Russia and tariff imports if they fail to reach a settlement to end its war against Ukraine.
USD/CAD closed in positive territory and continued to stretch higher toward 1.4400 during the Asian trading hours on Thursday. Later in the day, Statistics Canada will publish Retail Sales figures for November.
The data from Japan showed on Thursday that Exports rose by 2.8% on a yearly basis in December, while Imports expanded by 1.8% in the same period. Early Friday, the Bank of Japan will announce monetary policy decisions and markets foresee a 25 basis points rate increase. Ahead of this key event, USD/JPY trades in a tight range at around 156.50.
EUR/USD continues to move up and down in a narrow channel slightly above 1.0400 after closing marginally lower on Wednesday.
GBP/USD corrected lower on Wednesday but managed to stabilize above 1.2300. The pair was last seen trading flat on the day at around 1.2315.
Gold closed in positive territory for the third consecutive day on Wednesday and touched its highest level since late October above $2,760. XAU/USD stays in a consolidation phase early Thursday and trades slightly above $2,750.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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