Forex Today: Markets quiet down ahead of this week's key events
Here is what you need to know on Monday, February 16:
Major currency pairs trade in familiar ranges to start the week as investors stay on the sidelines ahead of this week's key events and macroeconomic data releases. The European economic calendar will feature Industrial Production data for December on Monday. Stock and bond markets in the US will remain closed in observance of the Presidents Day holiday.
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 weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.43% | -0.39% | -2.70% | -0.44% | -1.12% | -0.43% | -1.12% | |
| EUR | 0.43% | 0.05% | -2.35% | -0.00% | -0.66% | 0.00% | -0.69% | |
| GBP | 0.39% | -0.05% | -2.09% | -0.06% | -0.74% | -0.01% | -0.74% | |
| JPY | 2.70% | 2.35% | 2.09% | 2.38% | 1.69% | 2.41% | 1.58% | |
| CAD | 0.44% | 0.00% | 0.06% | -2.38% | -0.57% | 0.03% | -0.67% | |
| AUD | 1.12% | 0.66% | 0.74% | -1.69% | 0.57% | 0.70% | 0.00% | |
| NZD | 0.43% | -0.00% | 0.01% | -2.41% | -0.03% | -0.70% | -0.69% | |
| CHF | 1.12% | 0.69% | 0.74% | -1.58% | 0.67% | -0.00% | 0.69% |
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 closed the previous week in negative territory as the softer-than-expected inflation data didn't allow the USD to gather strength heading into the weekend. The US Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 2.4% on a yearly basis in January, following the 2.7% increase recorded in December. This print came in below the market expectation of 2.5%. The USD Index moves sideways near 97.00 in the European morning on Monday.
Citing two sources familiar with the matter, CBS News reported early Monday that US President Donald Trump told Israeli Prime Minister Benjamin Netanyahu that he would support Israeli strikes on Iran ballistic missile program. This headline hasn't yet triggered a noticeable market reaction and the barrel of West Texas Intermediate was last seen trading virtually unchanged on the day at $62.80.
EUR/USD stays in a consolidation phase and fluctuates in a narrow range above 1.1850 after closing the previous week marginally higher. European Central Bank (ECB) policymaker Joachim Nagel is scheduled to deliver a speech later in the day.
The data from Japan showed earlier in the day that the Gross Domestic Product (GDP) expanded at an annual rate of 0.2% in the fourth quarter. This print followed the 2.6% contraction recorded in the previous quarter and came in weaker than the market expectation for an expansion of 1.6%. After losing nearly 3% last week, USD/JPY stages a rebound early Monday and trades near 153.30, rising 0.4% on the day.
AUD/USD moves sideways below 0.7100 in the European morning on Monday. The Reserve Bank of Australia (RBA) will publish the minutes of the February policy meeting early Tuesday, at which the bank decided to raise the policy rate by 25 basis points to 3.85%.
Gold rose sharply on Friday and managed to end the week in positive territory. XAU/USD, however, struggles to attract buyers and trades below $5,000 in the European morning on Monday.
The UK's Office for National Statistics (ONS) will publish employment data on Tuesday. GBP/USD stays quiet in the European session and trades slightly below 1.3650.
Statistics Canada will release Consumer Price Index (CPI) figures for January on Tuesday. USD/CAD holds steady at around 1.3600 in the European morning on Monday after ending the previous week modestly lower.
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.
