Forex Today: Markets stabilize ahead of key central bank meetings
Here is what you need to know on Tuesday, June 17:
The trading action in financial markets turns subdued on Tuesday as investors remain optimistic about a de-escalation of the Israel-Iran conflict. Economic sentiment data from the Eurozone and Germany will be featured in the European economic calendar. Later in the day, May Retail Sales and Industrial Production data from the US will be watched closely by market participants.
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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.03% | 0.08% | -0.16% | 0.00% | -0.22% | -0.23% | -0.16% | |
| EUR | -0.03% | 0.03% | -0.17% | -0.04% | -0.22% | -0.18% | -0.21% | |
| GBP | -0.08% | -0.03% | -0.25% | -0.07% | -0.27% | -0.27% | -0.23% | |
| JPY | 0.16% | 0.17% | 0.25% | 0.16% | -0.07% | -0.07% | -0.03% | |
| CAD | -0.00% | 0.04% | 0.07% | -0.16% | -0.29% | -0.16% | -0.16% | |
| AUD | 0.22% | 0.22% | 0.27% | 0.07% | 0.29% | 0.02% | 0.01% | |
| NZD | 0.23% | 0.18% | 0.27% | 0.07% | 0.16% | -0.02% | -0.01% | |
| CHF | 0.16% | 0.21% | 0.23% | 0.03% | 0.16% | -0.01% | 0.01% |
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 Wall Street Journal reported on Monday that Iran was looking to end hostilities with Israel and resume the talks over its nuclear program. Later in the day, G7 leaders attended a summit in Canada and issued a joint statement calling for a “de-escalation” on Iran on Monday. The G7 statement said that members have been consistently clear that Iran can never have a nuclear weapon. Meanwhile, US President Donald Trump left the summit early and travelled back to Washington. Although there was speculation that Trump was going back to work on a cease fire deal between Israel and Iran, he clarified that this was not the case. Early Tuesday, a senior Iranian army commander reportedly noted that the attacks against Israel will intensify later in the day.
The US Dollar (USD) Index stays quiet and holds slightly above 98.00 after ending the first day of the week virtually unchanged. In the meantime, US stock index futures trade modestly lower. The Federal Reserve will announce monetary policy decisions on Wednesday.
The Bank of Japan (BoJ) announced on Tuesday that it left the short-term interest rate target steady in the range of 0.4%- 0.5%, as widely anticipated. In the policy statement, the BoJ noted that the economic growth is likely to moderate as trade policies lead to a slowdown in overseas economy and a decline in corporate profits. BoJ Governor Kazuo Ueda repeated in the post-meeting press conference that they will keep raising interest rates if prices and the economy moves in line with their outlook. Meanwhile, Bloomberg reported that US President Donald Trump and Japanese Prime Minister Shigeru Ishiba failed to reach a trade agreement on the sidelines of the G7 summit. Despite these developments, USD/JPY fluctuates in a tight channel at around 144.50 early Tuesday.
Crude oil prices declined sharply and the barrel of West Texas Intermediate (WTI) lost about 4% on Monday. Early Tuesday, the WTI is up nearly 2% on the day, trading slightly above $71.
Gold lost more than 1% on Monday and snapped a three-day winning streak. In the European session, XAU/USD remains flat below $3,400.
GBP/USD extends its sideways grind above 1.3550 after closing little changed on Monday. The UK's Office for National Statistics (ONS) will release May inflation data on Wednesday. On Thursday, the Bank of England (BoE) will announce monetary policy decisions.
EUR/USD ended the first trading day of the week marginally higher. The pair stays in a consolidation phase early Tuesday and moves up and down in a narrow band above 1.1550.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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.
