Forex Today: Markets turn risk-averse as Trump renews tariff threats
Here is what you need to know on Tuesday, August 26:
The US Dollar (USD) stabilizes after fluctuating wildly in the late American session on Monday and early Tuesday. In the second half of the day, July Durable Goods Orders and the Conference Board's Consumer Confidence Index data for August will be featured in the US economic calendar.
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 | 0.32% | 0.40% | 0.00% | 0.38% | 0.30% | 1.35% | -0.19% | |
| EUR | -0.32% | 0.06% | -0.43% | 0.06% | -0.12% | 1.02% | -0.50% | |
| GBP | -0.40% | -0.06% | -0.62% | -0.00% | -0.14% | 0.96% | -0.57% | |
| JPY | 0.00% | 0.43% | 0.62% | 0.45% | 0.37% | 1.37% | -0.12% | |
| CAD | -0.38% | -0.06% | 0.00% | -0.45% | -0.09% | 0.95% | -0.57% | |
| AUD | -0.30% | 0.12% | 0.14% | -0.37% | 0.09% | 1.11% | -0.42% | |
| NZD | -1.35% | -1.02% | -0.96% | -1.37% | -0.95% | -1.11% | -1.51% | |
| CHF | 0.19% | 0.50% | 0.57% | 0.12% | 0.57% | 0.42% | 1.51% |
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 USD came under renewed bearish pressure after United States (US) President Donald Trump announced on Truth Social that he has fired Federal Reserve (Fed) Governor Lisa Cook by sharing a letter addressed to her. "I have determined that there is sufficient cause to remove you from your position," Trump told Cook.
In a statement shared by her attorneys, “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so,” Cook said and added that she will continue to carry out her duties as Fed Governor. The USD staged a rebound following this development. At the time of press, the USD Index was virtually unchanged on the day at 98.40.
In the meantime, Trump renewed tariff threats and caused markets to adopt a cautious stance. He said that countries that charge taxes to digital service providers from the US will face "subsequent additional tariffs." Moreover, Trump told reporters that China has to give the US magnets, or they will charge them "200% tariff or something." US stock index futures are down about 0.3% in the European morning.
EUR/USD lost more than 0.8% on Monday and erased the majority of the gains it recorded on Friday. The pair fluctuates in a tight channel above 1.1600 in the European morning on Tuesday.
GBP/USD turned south on Monday and fell about 0.5% on a daily basis. The pair stays in a consolidation phase at around 1.3450 to start the European session.
The Reserve Bank of Australia (RBA) published the Minutes of its August monetary policy meeting on Tuesday, which showed that board members agreed that some further reduction in the cash rate is likely to be needed in the coming year. AUD/USD struggles to gain traction on Tuesday and trades below 0.6500.
Following Friday's sharp decline, USD/JPY gathered bullish momentum and gained more than 0.5% on Monday. After spending the Asian session on the back foot, the pair reversed its direction and was last seen trading marginally higher on the day, slightly below 148.00. Japanese Finance Minister Katsunobu Kato said earlier in the day that he is “alarmed over FX moves, including those driven by speculators.”
After posting small losses on Monday, Gold benefited from risk-aversion and pushed higher early Tuesday. As of writing, XAU/USD was trading at a fresh two-week high near $3,380.
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.
