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Forex Today: Markets turn risk-averse to start week

Here is what you need to know on Monday, May 19:

Safe-haven flows dominate the action in financial markets at the beginning of the week. Eurostat will publish revisions to April inflation data later in the session. In the second half of the day, several Federal Reserve (Fed) policymakers will be delivering speeches.

US Dollar PRICE Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Euro.

USDEURGBPJPYCADAUDNZDCHF
USD-0.45%-0.27%-0.19%-0.07%-0.11%-0.21%-0.30%
EUR0.45%-0.08%0.08%0.21%0.23%0.07%-0.08%
GBP0.27%0.08%-0.14%0.28%0.30%0.14%-0.00%
JPY0.19%-0.08%0.14%0.12%0.24%0.18%-0.05%
CAD0.07%-0.21%-0.28%-0.12%-0.03%-0.14%-0.28%
AUD0.11%-0.23%-0.30%-0.24%0.03%-0.16%-0.29%
NZD0.21%-0.07%-0.14%-0.18%0.14%0.16%-0.14%
CHF0.30%0.08%0.00%0.05%0.28%0.29%0.14%

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).

Late Friday, Moody's announced that it downgraded the United States' credit rating to 'AA1' from 'AAA', citing concerns about the growing $36 trillion debt pile. "Successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs," Moody's said, per Reuters. US stock index futures stay under strong bearish pressure in the European morning and were last seen losing between 0.8% and 1.3% on the day. The US Dollar (USD) Index retreats toward 100.50 after posting gains for fourth consecutive weeks.

On a positive note, a key congressional committee, the House panel, approved US President Donald Trump’s tax cut bill early Monday, paving the way for possible passage in the House of Representatives later this week.

Meanwhile, US Treasury Secretary Scott Bessent told CNN News on Sunday that President Trump will bring tariffs up to the April 2 levels if partners don't negotiate in good faith. "There are incoming deals with 18 important trading partners," he added.

EUR/USD holds its ground and trades slightly above 1.1200 in the early European session on Monday.

After losing more than 3% in the previous week, Gold recovers modestly and stays comfortably above $3,200.

GBP/USD gains traction and trades above 1.3300 on Monday. The pair closed the previous week marginally higher after recovering from the multi-week low it touched at 1.3140.

AUD/USD stays relatively quiet and fluctuates in a narrow range slightly above 0.6400 in the European morning. The Reserve Bank of Australia (RBA) will announce monetary policy decisions in the Asian session on Tuesday. Markets expect the RBA to lower the policy rate to 3.85% from 4.1%.

USD/JPY remains under bearish pressure and trades at around 145.00 to begin the European session. Bank of Japan (BoJ) Deputy Governor Shinichi Uchida reiterated earlier in the day that the central bank will keep raising interest rates if the economy and prices improve in line with their forecasts.

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

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.

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