Forex Today: Markets remain cautious ahead of this week's key events
Here is what you need to know on Monday, December 9:
Financial markets stay relatively calm early Monday as investors refrain from taking large positions ahead of this week's key events and data releases. Sentix Investor Confidence for December will be featured in the European economic docket and later in the day the US Census Bureau will publish Wholesale Inventories data for October.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.13% | -0.03% | 0.18% | 0.06% | -0.29% | 0.28% | 0.09% | |
| EUR | -0.13% | -0.15% | 0.16% | 0.02% | -0.33% | 0.23% | 0.04% | |
| GBP | 0.03% | 0.15% | 0.13% | 0.17% | -0.18% | 0.38% | 0.19% | |
| JPY | -0.18% | -0.16% | -0.13% | -0.14% | -0.37% | -0.01% | -0.00% | |
| CAD | -0.06% | -0.02% | -0.17% | 0.14% | -0.31% | 0.22% | 0.03% | |
| AUD | 0.29% | 0.33% | 0.18% | 0.37% | 0.31% | 0.56% | 0.37% | |
| NZD | -0.28% | -0.23% | -0.38% | 0.01% | -0.22% | -0.56% | -0.20% | |
| CHF | -0.09% | -0.04% | -0.19% | 0.00% | -0.03% | -0.37% | 0.20% |
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).
After posting losses for three consecutive days, the US Dollar (USD) Index gained traction on Friday and closed the day in positive territory.
The US Bureau of Labor Statistics (BLS) reported that Nonfarm Payrolls (NFP) in the US rose by 227,000 in November. This reading followed the 36,000 increase reported in October (revised from 12,000) and came in above the market expectation of 200,000. Other details of the report showed that the Unemployment Rate ticked up to 4.2% in November from 4.1%, while the annual wage inflation, as measured by the change in the Average Hourly Earnings, held steady at 4%, coming in above the market forecast of 3.9%. Early Monday, the USD Index clings to small gains above 106.00 and the benchmark 10-year US Treasury bond yield stays slightly below 4.15%. On Wednesday, the BLS will publish Consumer Price Index (CPI) figures for November.
In the Asian session, the data from China showed that the Consumer Price Index (CPI) declined by 0.6% on a monthly basis in November, compared to the market forecast for a decrease of 0.4%. On Tuesday, Trade Balance data from China will be watched closely by market participants.
AUD/USD came under heavy bearish pressure on Friday and lost nearly 1% on the day. The pair struggles to stage a rebound and trades at its weakest level since early August below 0.6400. The Reserve Bank of Australia (RBA) will release monetary policy decisions early Tuesday.
Japan's Gross Domestic Product (GDP) expanded at an annual rate of 1.2% in the third quarter, Japan's Cabinet Office reported on Monday. This reading came in better than the market expectation for a growth of 0.9%. USD/JPY showed no reaction to this report and was last seen trading marginally higher on the day above 150.00.
After reaching its highest level in three weeks above 1.0600 on Friday, EUR/USD reversed its direction and closed the day in negative territory. The pair continues to edge lower to begin the new ween and trades at around 1.0550. Later in the week, the European Central Bank (ECB) will conduct its last policy meeting of the year.
GBP/USD snapped a three-day winning streak on Friday as the US Dollar benefited from the upbeat employment data. The pair holds its ground early Monday and fluctuates near 1.2750.
Gold failed to make a decisive move in either direction in the previous week. XAU/USD extends its sideways grind slightly below $2,650 in the European morning on Monday.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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.
