Forex Today: Markets assess UK data, await comments from Fed policymakers
Here is what you need to know on Thursday, November 13:
Pound Sterling stays under modest selling pressure in the European morning on Thursday as markets assess disappointing data releases from the UK. Investors will pay close attention to comments from central bank policymakers later in the day and will await updates on US data releases following the reopening of the government shutdown.
Pound Sterling Price This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.43% | 0.09% | 0.54% | -0.41% | -1.27% | -0.81% | -1.11% | |
| EUR | 0.43% | 0.50% | 1.02% | -0.01% | -0.87% | -0.41% | -0.71% | |
| GBP | -0.09% | -0.50% | 0.59% | -0.51% | -1.36% | -0.91% | -1.21% | |
| JPY | -0.54% | -1.02% | -0.59% | -1.01% | -1.84% | -1.38% | -1.73% | |
| CAD | 0.41% | 0.00% | 0.51% | 1.01% | -0.76% | -0.42% | -0.77% | |
| AUD | 1.27% | 0.87% | 1.36% | 1.84% | 0.76% | 0.45% | 0.15% | |
| NZD | 0.81% | 0.41% | 0.91% | 1.38% | 0.42% | -0.45% | -0.30% | |
| CHF | 1.11% | 0.71% | 1.21% | 1.73% | 0.77% | -0.15% | 0.30% |
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The UK's Office for National Statistics reported early Thursday that the Gross Domestic Product (GDP) contracted 0.1% on a monthly basis in September. In the third quarter, UK's GDP expanded at an annual rate of 1.3%, missing the market expectation of 1.4%. Other data from the UK showed that Industrial Production and Manufacturing Production declined by 2% and 1.7%, respectively, in September. GBP/USD came under bearish pressure with the immediate reaction and declined toward 1.3100 before staging a rebound. At the time of press, the pair was virtually unchanged on the day, at around 1.3130.
The House of Representatives approved the temporary funding package and brought an end to the longest government shutdown in US history on Wednesday. Shortly after, US President Donald Trump has signed the funding bill. During a briefing with reporters on Wednesday, White House press secretary Karoline Leavitt said that the Bureau of Labor Statistics might never release the employment and inflation data for October. The Nonfarm Payrolls (NFP) data for September is expected to be published next week but there is no official confirmation yet. After failing to make a decisive move in either direction on Wednesday, the US Dollar (USD) Index edges slightly lower and fluctuates below 99.50 early Thursday.
In the Asian session on Thursday, the data from Australia showed that the Employment Change in October was +42.2K, compared to the market expectation of 20K. In this period, the Unemployment Rate declined to 4.3% from 4.5%, while the Participation Rate held steady at 67%. Finally, Consumer Inflation Expectations in Australia dropped to 4.5% in November from 4.8%. AUD/USD benefits from the upbeat employment data and was last seen rising 0.5% on the day at 0.6575.
EUR/USD holds its ground after posting marginal gains on Wednesday and trades at a fresh two-week high above 1.1600 early Thursday.
Bank of Japan (BoJ) Governor Kazuo Ueda said on Thursday that the Japanese central bank will strive to create a strong economy so that tax revenues rise without tax hikes. After rising more than 0.4% on Wednesday, USD/JPY stays in a consolidation phase above 154.50 in the European morning on Thursday.
Following Tuesday's choppy action, Gold gathered bullish momentum on Wednesday and rose more than 1.5%. XAU/USD extends its weekly rally in the European morning on Thursday and trades above $4,200.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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.
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