Forex Today: Mood sours as markets await mid-tier data releases
Here is what you need to know on Tuesday, October 8:
Markets hold a cautious tone early Tuesday as investors await the next batch of macroeconomic data releases. The US economic docket will feature NFIB Business Optimism Index for September and RealClearMarkets/TIPP Economic Optimism Index data for October. The US Bureau of Economic Analysis will also publish Goods Trade Balance figures for August. Later in the American session, several Federal Reserve (Fed) policymakers are scheduled to deliver speeches.
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 | 1.37% | 2.34% | 2.91% | 0.85% | 2.80% | 3.79% | 0.92% | |
| EUR | -1.37% | 0.95% | 1.49% | -0.51% | 1.41% | 2.37% | -0.46% | |
| GBP | -2.34% | -0.95% | 0.56% | -1.45% | 0.44% | 1.42% | -1.38% | |
| JPY | -2.91% | -1.49% | -0.56% | -1.97% | -0.08% | 0.88% | -1.90% | |
| CAD | -0.85% | 0.51% | 1.45% | 1.97% | 1.93% | 2.91% | 0.07% | |
| AUD | -2.80% | -1.41% | -0.44% | 0.08% | -1.93% | 0.96% | -1.84% | |
| NZD | -3.79% | -2.37% | -1.42% | -0.88% | -2.91% | -0.96% | -2.75% | |
| CHF | -0.92% | 0.46% | 1.38% | 1.90% | -0.07% | 1.84% | 2.75% |
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 National Development and Reform Commission (NDRC), China’s state planner, said on Tuesday that the downward pressure on China's economy is increasing. "China's economy is facing more complex internal, external environments," the NDRC noted. After Wall Street's main indexes closed the first day of the week deep in negative territory on Monday, US stock index futures trade marginally lower early Tuesday, reflecting the souring mood. Meanwhile, the US Dollar (USD) Index continues to move sideways near 102.50 after failing to make a directional move in either direction on Monday.
The data from Germany showed that Industrial Production increased by 2.9% on a monthly basis in August. This reading followed the 2.4% contraction recorded in July and came in better than the market expectation of 0.8%. EUR/USD struggles to benefit from the upbeat data and trades marginally higher on the day below 1.1000.
In the minutes of the September policy meeting, the Reserve Bank of Australia (RBA) said board members discussed options of lowering raising interest rates and added: "Scenarios for lowering, holding, and raising rates are all conceivable given the considerable uncertainty about the economic outlook." While speaking at the Walkley Foundation, RBA Deputy Governor Andrew Hauser noted that they will act on policy when inflation stops being high and sticky. After posting large losses on Monday, AUD/USD continued to push lower in the Asian session on Tuesday. At the time of press, the pair was trading at its lowest level since mid-September below 0.6730.
Japan economy minister Ryosei Akazawa said on Tuesday that a decline in real wages for the first time in three months is not good news. Akazawa further stated that the Japanese government will create an environment where real wages continue to rise. USD/JPY showed no reaction to these remarks and was last seen fluctuating in a narrow channel at around 148.00.
GBP/USD edged lower amid risk-aversion in the second half of the day on Monday and closed the day below 1.3100. The pair struggles to stage a rebound early Tuesday.
Gold registered modest losses for the fourth consecutive day on Monday. XAU/USD stays on the back foot and trades below $2,640 in the European morning on Tuesday.
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.
