|

Forex Today: Markets await comments from central bankers

Here is what you need to know on Friday, May 9:

The US Dollar (USD) Index stays in a consolidation phase slightly below 100.50 after reaching its highest level in nearly a month earlier in the day. In the absence of high-tier data releases, market participants will pay close attention to comments from central bankers on Friday. In the early American session, Statistics Canada will publish April employment data.

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 strongest against the Canadian Dollar.

USDEURGBPJPYCADAUDNZDCHF
USD0.71%-0.04%0.35%0.84%0.68%0.78%0.55%
EUR-0.71%-0.47%-0.10%0.39%0.24%0.34%0.10%
GBP0.04%0.47%0.15%0.86%0.71%0.81%0.58%
JPY-0.35%0.10%-0.15%0.49%0.34%0.51%0.31%
CAD-0.84%-0.39%-0.86%-0.49%-0.45%-0.05%-0.29%
AUD-0.68%-0.24%-0.71%-0.34%0.45%0.09%-0.14%
NZD-0.78%-0.34%-0.81%-0.51%0.05%-0.09%-0.24%
CHF-0.55%-0.10%-0.58%-0.31%0.29%0.14%0.24%

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 Federal Reserve's (Fed) hawkish tone and the announcement of the UK-US trade deal boosted the USD on Thursday. After rising nearly 0.8% on the day, the USD Index continued to stretch higher and touched its strongest level since April 11 near 100.90 during the Asian trading hours on Friday. Several Fed policymakers, including NY Fed President John Williams and Fed Governor Christopher Waller, will be delivering speeches in the second half of the day. Meanwhile, US stock index futures trade mixed in the European session on Friday after Wall Street's main indexes closed in positive territory on Thursday.

The data from China showed early Friday that the trade surplus shrank to $96.18 billion in April from $102.64 billion in March. On a yearly basis, Exports rose by 9.3%, while Imports contracted by 0.2%. AUD/USD trades marginallyl higher on the day above 0.6400 to begin the European session.

The Bank of England (BoE) announced on Thursday that it lowered the policy rate by 25 basis points (bps) to 4.25%, as widely anticipated. In the policy statement, the BoE reiterated that a gradual and careful approach to further withdrawal of monetary policy restraint remains appropriate. While speaking at the post-meeting press conference, BoE Governor Andrew Bailey noted that the overall impact of tariffs on inflation remains uncertain. GBP/USD lost more than 0.3% on Thursday and continued to edge lower early Friday. At the time of press, the pair was trading slightly above 1.3250.

USD/JPY preserved its bullish momentum and rose more than 1% on Thursday. The pair corrects lower early Friday but holds above 145.00.

EUR/USD dropped to its weakest level in nearly a month below 1.1200 in the Asian session on Friday after closing in negative territory for two consecutive days. The pair stages a rebound and trades near 1.1250 in the European morning.

Gold came under renewed bearish pressure on Thursday and dropped below $3,300. XAU/USD gains traction early Friday and trades near $3,330.

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.

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

AUD/USD remains depressed near 0.6950 after RBA minutes

AUD/USD attracts follow-through selling during Tuesday’s Asian session, looking to extend the overnight rejection slide from 0.7000, or a two-week top, following the release of RBA meeting Minutes. The US Dollar retains a bullish undertone near its highest level since April 2025 as energy-driven inflation risks keep December Fed rate hike bets firmly on the table. Adding to this, geopolitical risks further underpin the safe-haven USD.

USD/JPY extends retreat below 158.50 as intervention risks loom

USD/JPY is dropping below 158.50 in the Asian session on Tuesday, snapping a two-day winning streak and pulling back from an over two-week top touched the previous day, despite Japan's soft PPI inflation print. Bulls turn cautious amid speculation that authorities will step in to prop up the Japanese Yen, which, in turn, weighs on the pair.

Gold bulls seem hesitant below $4,200 as hawkish Fed offset USD weakness

Gold retains a mildly positive bias though it remains capped below the $4,200 mark and the top boundary of a two-week-old trading range. The US Dollar retreats from its highest level since April 2025 amid some profit-taking, offering support to the precious metal. However, the US Federal Reserve's hawkish stance and escalating Middle East conflicts could limit deeper losses for the safe-haven buck, keeping a lid on the commodity and warranting some caution for aggressive bulls.

Solana reclaims 50-day EMA amid tokenization expansion

Solana (SOL) trades above $107 on Tuesday, reclaiming the 50-day EMA after closing below it the previous day. Meanwhile, Solana’s tokenization expansion and the upcoming listing of Hong Kong’s second spot Solana Exchange Traded Fund highlight growing institutional interest.

Dollar corrects as markets watch bank earnings
The US Dollar remains broadly strong but is now correcting, with a possible retest of the breakout zone around 102 on the Dollar Index. Equity markets are showing a mixed picture: the S&P 500 and Nasdaq are weaker, while blue-chip indices such as the Dow Jones and DAX are moving higher.
Has Bitcoin really escaped the macro forces it was built to fight?
Over 17 years ago, Satoshi Nakamoto designed Bitcoin (BTC) on the back of a global financial crisis as an alternative to the global monetary system outside the control of central banks, governments and traditional intermediaries. This raises a key question: has Bitcoin really become independent of the macroeconomic forces it was built to challenge?