Forex Today: US Dollar consolidates recovery gains, attention shifts to PMI data
Here is what you need to know on Wednesday, April 23:
The US Dollar (USD) recovered sharply on Tuesday, with the USD Index gaining more than 1% on the day. S&P Global will publish preliminary Manufacturing and Services Purchasing Managers Index (PMI) data for Germany, the Eurozone, the UK and the US on Wednesday. Markets will also pay close attention to comments from central bankers.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.09% | -0.18% | -0.26% | -0.23% | -0.55% | -1.05% | 0.63% | |
| EUR | -0.09% | -0.42% | -0.40% | -0.37% | -0.82% | -1.19% | 0.53% | |
| GBP | 0.18% | 0.42% | 0.21% | 0.06% | -0.41% | -0.76% | 0.95% | |
| JPY | 0.26% | 0.40% | -0.21% | 0.02% | -0.39% | -0.64% | 0.94% | |
| CAD | 0.23% | 0.37% | -0.06% | -0.02% | -0.43% | -0.81% | 0.89% | |
| AUD | 0.55% | 0.82% | 0.41% | 0.39% | 0.43% | -0.33% | 1.33% | |
| NZD | 1.05% | 1.19% | 0.76% | 0.64% | 0.81% | 0.33% | 1.75% | |
| CHF | -0.63% | -0.53% | -0.95% | -0.94% | -0.89% | -1.33% | -1.75% |
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).
Easing fears over the Federal Reserve (Fed) losing its independence allowed the market mood to improve in the American session on Tuesday.
US President Donald Trump said at a press conference that he had no intention of firing Fed Chair Jerome Powell, despite being frustrated with high interest rates. "The press runs away with things. No, I have no intention of firing him. I would like to see him be a little more active in terms of his idea to lower interest rates," Trump said. Regarding the trade negotiations with China, he noted that they were going well and added that he thinks they will reach a deal.
Reflecting the risk-positive market environment, Wall Street's main indexes gained more than 2.5% on Tuesday. Early Wednesday, US stock index futures rise between 1.3% and 2%, while the USD Index stays in negative territory above 99.00. Later in the day, the Fed will publish its Beige Book.
After touching a new record high of $3,500 on Tuesday, Gold reversed its direction and ended the day below $3,400. XAU/USD extends its correction in the European morning and was last seen losing more than 2% on the day near $3,300.
EUR/USD fell 0.8% on Tuesday and erased a large part of Monday's gains. After dropping toward 1.1300 in the Asian session on Wednesday, the pair regained its traction and recovered toward 1.1400 by the beginning of the European session.
GBP/USD fell below 1.3250 early Wednesday after closing in negative territory on Tuesday. The pair managed to stage a rebound and advanced beyond 1.3300 in the early European morning, erasing its daily losses in the process.
After slumping to its weakest level since September below 140.00 early Tuesday, USD/JPY reversed its direction and ended the day with a gain of about 0.5%. The pair holds steady above 141.50 in the European session.
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.
