Forex Today: US Dollar consolidates gains ahead of key data
Here is what you need to know on Wednesday, November 5:
The US Dollar (USD) stabilizes in the European morning on Wednesday after gathering strength against its major rivals for five consecutive trading days. In the second half of the day, the ADP Employment Change and the ISM Services PMI data for October will be watched closely by market participants.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.37% | 0.84% | -0.28% | 0.73% | 0.93% | 1.35% | 0.57% | |
| EUR | -0.37% | 0.47% | -0.58% | 0.36% | 0.54% | 0.98% | 0.19% | |
| GBP | -0.84% | -0.47% | -1.20% | -0.11% | 0.07% | 0.51% | -0.27% | |
| JPY | 0.28% | 0.58% | 1.20% | 0.98% | 1.18% | 1.61% | 0.97% | |
| CAD | -0.73% | -0.36% | 0.11% | -0.98% | 0.13% | 0.60% | -0.16% | |
| AUD | -0.93% | -0.54% | -0.07% | -1.18% | -0.13% | 0.43% | -0.34% | |
| NZD | -1.35% | -0.98% | -0.51% | -1.61% | -0.60% | -0.43% | -0.77% | |
| CHF | -0.57% | -0.19% | 0.27% | -0.97% | 0.16% | 0.34% | 0.77% |
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).
On Tuesday, the Senate, once again, failed to pass the temporary funding bill. In turn, the government shutdown entered its 36th day, becoming the longest in US history. Wall Street's main indexes suffered large losses and the USD Index climbed to its highest level since early August above 100.20. Early Wednesday, the USD Index fluctuates in a narrow channel slightly above 100, while US stock index futures trade mixed.
The Chinese Finance Ministry announced early Wednesday that they will lift some tariffs on US agricultural goods from November 10, and that they will suspend 24% tariffs on US imports for a year. In the meantime, US President Donald Trump noted that he met with Swiss officials to discuss trade and other issues and announced additional trade talks, signaling possible progress on the tariff dispute.
EUR/USD lost more than 0.3% on Tuesday and closed near 1.1480 on Tuesday. The pair struggles to gather recovery momentum early Wednesday and moves sideways below 1.1500.
The data from New Zealand showed that the Unemployment Rate edged higher to 5.3% in the third quarter from 5.2%, as anticipated. After losing more than 1% on Tuesday, NZD/USD holds steady at around 0.5650 in the European morning on Wednesday.
USD/JPY extended its slide after closing in negative territory on Tuesday and briefly dipped below 153.00 in the Asian session on Wednesday. The pair staged a rebound afterward and was last seen trading flat on the day at around 153.50.
GBP/USD came under heavy bearish pressure on Tuesday after finance minister Rachel Reeves hinted at higher taxes in her pre-budget speech. After losing nearly 1% and touching its weakest level since mid-April at 1.3010, the pair finds it difficult to gain traction early Wednesday and remains well below 1.3050.
Gold failed to stabilize above $4,000 and lost more than 1.5% on Tuesday. XAU/USD finds a foothold early Wednesday and clings to strong daily recovery gains at around $3,970.
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.
