Forex Today: US Dollar helped by caution ahead of major events

Valeria Bednarik FXStreet

Here is what you need to know on Thursday, December 18:

The US Dollar (USD) found some near-term demand on Wednesday, helped by the poor performance of Wall Street and hawkish comments from Federal Reserve (Fed) Governor Christopher Waller, who said o the Fed is not in a rush to cut interest rates, adding the job market is very soft,” and that current payrolls growth not good. Waller however, showed no concerns about inflation, as it remains “well anchored,” according to his words. The US Dollar Index (DXY) retreated from its weekly peak in the 98.60 area, trading mixed across the FX board, but overall weak.

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 weakest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.11%	-0.10%	-0.20%	0.12%	0.58%	0.37%	-0.19%
EUR	0.11%		0.02%	-0.09%	0.22%	0.71%	0.48%	-0.09%
GBP	0.10%	-0.02%		0.00%	0.21%	0.69%	0.46%	-0.10%
JPY	0.20%	0.09%	0.00%		0.31%	0.78%	0.55%	0.21%
CAD	-0.12%	-0.22%	-0.21%	-0.31%		0.47%	0.25%	-0.16%
AUD	-0.58%	-0.71%	-0.69%	-0.78%	-0.47%		-0.23%	-0.79%
NZD	-0.37%	-0.48%	-0.46%	-0.55%	-0.25%	0.23%		-0.56%
CHF	0.19%	0.09%	0.10%	-0.21%	0.16%	0.79%	0.56%

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 Sterling Pound fell against the Greenback, following the release of United Kingdom (UK) data. Headline Consumer Price Index (CPI) rose 3.2% over the year in November, down from 3.6% in October, but still well above the Bank of England (BoE) 2% target. GBP/USD trimmed most of its intraday losses ahead of the close, recovering from a fresh weekly low of 1.3311 and currently flirting with the 1.3400 mark. The BoE is scheduled to announce its monetary policy decision on Thursday, and market participants anticipate a 25 bps interest rate cut to 3.75%.

EUR/USD held above the 1.1700 mark and settled in its comfort zone around the 1.1750. The EU downwardly revised the November Harmonized Index of Consumer Prices (HICP) from a flash estimate of 2.2% to 2.1% YoY. The news came ahead of the European Central Bank (ECB) monetary policy announcement, scheduled also for Thursday. The ECB is widely expected to leave interest rates unchanged and to repeat its message of being in a “good place.” The focus will be on fresh economic projections, which include expectations for the next two years.

Adding to central banks’ announcements, the United States (US) will publish the November Consumer Price Index (CPI). The annualized index is foreseen at 3.1% higher than the previous 3%. Market players are quite sensitive to US data that can shape future Fed decisions.

Commodity-linked currencies were among the worst performers vs the USD, with the AUD and the CAD posting some intraday losses. The Japanese Yen (JPY) also weakened against the Greenback, while the Swiss Franc (CHF) managed to post some modest gains.

Gold retained its positive bias, but was unable to extend its weekly advance. XAU/USD is trading above the $4,330 mark at the end of the American session.

Economic Indicator

Consumer Price Index (YoY)

Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.

Why it matters to traders?

The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.