Forex Today: Markets remain cautious as Trump's deadline approaches
Here is what you need to know on Tuesday, April 7:
Markets cling to a cautious stance early Tuesday as United States (US) President Donald Trump's 20:00 EST deadline for Iran to reach an agreement to end the war nears. In the second half of the day, the US economic calendar will feature weekly ADP Employment Change 4-week Average data and the US Census Bureau will publish Durable Goods Orders for February.
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 strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.61% | -0.39% | 0.10% | -0.02% | -0.86% | 0.39% | 0.03% | |
| EUR | 0.61% | 0.30% | 0.72% | 0.66% | -0.20% | 1.00% | 0.70% | |
| GBP | 0.39% | -0.30% | 0.44% | 0.34% | -0.50% | 0.74% | 0.42% | |
| JPY | -0.10% | -0.72% | -0.44% | -0.13% | -1.10% | 0.27% | -0.02% | |
| CAD | 0.02% | -0.66% | -0.34% | 0.13% | -0.90% | 0.40% | 0.07% | |
| AUD | 0.86% | 0.20% | 0.50% | 1.10% | 0.90% | 1.28% | 0.92% | |
| NZD | -0.39% | -1.00% | -0.74% | -0.27% | -0.40% | -1.28% | -0.33% | |
| CHF | -0.03% | -0.70% | -0.42% | 0.02% | -0.07% | -0.92% | 0.33% |
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).
US President Trump told reporters late Monday that every bridge and every powerplant in Iran will be destroyed by midnight Tuesday if Iran doesn't agree to a deal that is acceptable to him, adding that opening the Strait of Hormuz fully must be part of it.
In response, Iran's top joint military command called Trump's threats 'delusional' and said that those threats won't make up for the US' 'humiliation and disgrace' in the Middle East. Additionally, an advisor to Iran's Parliament Speaker Mohammad Bagher Ghalibaf said on Tuesday that US President Donald Trump has about 20 hours to either surrender to Iran, or his allies will return to the Paleolithic Age.
After posting marginal losses on Monday, the US Dollar (USD) Index stabilizes near 100.00 in the European morning on Tuesday. US stock index futures lose between 0.3% and 0.5%, while crude Oil price edge higher, with the barrel of West Texas Intermediate (WTI) rising about 1% on the day near $105.00.
The data from the US showed on Monday that the business activity in the service sector expanded at a healthy pace in March, with the Institute for Supply Management's (ISM) Services Purchasing Managers' Index (PMI) coming in at 54. On a negative note, the Employment Index of the survey dropped to 45.2 from 51.8 in February, highlighting a decline in the service sector payrolls. Finally, the Prices Paid Index climbed to 70.7 from 63, reflecting stronger input inflation.
EUR/USD trades in a narrow channel at around 1.1550 after posting small gains on Monday.
GBP/USD gained 0.3% and snapped a two-day losing streak on Monday. The pair stays in a consolidation phase above 1.3200 in the European morning on Tuesday.
NZD/USD edges lower and trades near 0.5700 after closing in positive territory on Monday. In the early trading hours of the Asian session on Wednesday, the Reserve Bank of New Zealand (RBNZ) will announce monetary policy decisions.
USD/JPY failed to make a decisive move in either direction on Monday and ended the day virtually unchanged. The pair extends its sideways grind and trades below 160.00 early Tuesday.
Gold (XAU/USD) managed to erase a small portion of its losses after opening the week with a bearish gap but failed to gather momentum. XAU/USD stays quiet early Tuesday and holds above $4,600.
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.
(This story was corrected on April 7 at 09:39 GMT to note that the NZD/USD pair closed in positive territory on Monday.)
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.
