Forex Today: Mixed opening to week as markets assess US political developments
Here is what you need to know on Monday, July 22:
The US Dollar (USD) struggles to find demand at the beginning of the week, while US stock index futures trade in positive territory. Federal Reserve Bank of Chicago's National Activity Index for June will be the only data featured in the US economic calendar on Monday. Meanwhile, investors will keep a close eye on political developments in the US after President Joe Biden announced on Sunday that he is withdrawing from the 2024 Presidential election.
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 | 0.21% | 0.47% | -0.96% | 0.72% | 1.78% | 1.84% | -0.72% | |
| EUR | -0.21% | 0.29% | -0.95% | 0.71% | 1.60% | 1.82% | -0.74% | |
| GBP | -0.47% | -0.29% | -1.15% | 0.41% | 1.31% | 1.48% | -1.03% | |
| JPY | 0.96% | 0.95% | 1.15% | 1.69% | 2.54% | 2.78% | 0.04% | |
| CAD | -0.72% | -0.71% | -0.41% | -1.69% | 0.98% | 1.11% | -1.44% | |
| AUD | -1.78% | -1.60% | -1.31% | -2.54% | -0.98% | 0.22% | -2.31% | |
| NZD | -1.84% | -1.82% | -1.48% | -2.78% | -1.11% | -0.22% | -2.53% | |
| CHF | 0.72% | 0.74% | 1.03% | -0.04% | 1.44% | 2.31% | 2.53% |
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 recovery gains on Thursday and Friday, the USD Index stays on the back foot but manages to hold above 104.00 in the European morning on Monday. In the meantime, the benchmark 10-year US Treasury bond yield retreats toward 4.2%, losing over 0.5% on the day. Following his announcement of dropping out of the race, President Biden endorsed Vice President Kamala Harris in an X post that read: "I want to offer my full support and endorsement for Kamala to be the nominee of our party this year. Democrats — it’s time to come together and beat Trump. Let’s do this."
The People's Bank of China (PBoC) announced early Monday that it cut the one-year Loan Prime Rate (LPR) by 10 basis points (bps) from 3.45% to 3.35% and lowered the five-year LPR from 3.95% to 3.85%. Additionally, the PBoC cut its interest rate for the 7-day reverse report to 1.7% from 1.8%. After losing 1.5% and snapping a five-week winning streak last week, AUD/USD continues to push lower on Monday and was last seen losing 0.3% on the day at around 0.6660.
EUR/USD registered losses on Thursday and Friday, closing the previous week virtually unchanged after the bullish action seen in the first half. The pair holds steady and fluctuates in a narrow channel slightly below 1.0900 in the European morning on Monday.
Following a two-day decline, GBP/USD stages a modest recovery and trades above 1.2900 at the beginning of the week.
USD/JPY came under heavy bearish pressure in the late Asian session on Monday and dropped toward 156.00. Although the pair managed to erase a small portion of its losses, it was last seen losing still more than 0.5% on the day near 156.60.
After setting a new all-time high on Tuesday, Gold reversed its direction in the second half of the previous week and extended its decline on Friday, losing nearly 2% on the day. XAU/USD, however, ended the week slightly above the critical level of $2,400. Early Monday, the yellow metal moves up and down in a tight channel.
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.
