Forex Today: US Dollar on weak footing, markets focus on central bank speak
Here is what you need to know on Monday, September 30:
The US Dollar (USD) struggles to find demand to start the last trading day of the third quarter. In the first half of the day on Monday, investors will pay close attention to Consumer Price Index data from Germany. Later in the American session, several Federal Reserve policymakers, including Chairman Jerome Powell, will be delivering speeches.
The USD Index turned south on Friday and touched its weakest level in over a year at 100.15, before staging a technical correction toward the end of the week. The US Bureau of Economic Analysis reported that the core Personal Consumption Expenditures (PCE) Price Index rose 0.1% on a monthly basis in August, at a softer pace than the market expectation of 0.2%. Early Monday, the USD Index stays below 100.50. Powell will participate in a moderated discussion titled "A View from the Federal Reserve Board" at the National Association for Business Economics Annual Meeting, in Nashville, starting at 17:00 GMT. Fed Governor Michelle Bowman is also scheduled to speak in the early American session. Meanwhile, US stock index futures trade marginally lower on the day.
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 weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | -0.50% | -1.38% | -0.40% | -1.84% | -2.08% | -0.95% | |
| EUR | 0.01% | -0.55% | -1.33% | -0.37% | -1.88% | -2.05% | -0.95% | |
| GBP | 0.50% | 0.55% | -0.72% | 0.17% | -1.34% | -1.52% | -0.41% | |
| JPY | 1.38% | 1.33% | 0.72% | 1.00% | -0.55% | -0.69% | 0.32% | |
| CAD | 0.40% | 0.37% | -0.17% | -1.00% | -1.40% | -1.69% | -0.58% | |
| AUD | 1.84% | 1.88% | 1.34% | 0.55% | 1.40% | -0.16% | 0.95% | |
| NZD | 2.08% | 2.05% | 1.52% | 0.69% | 1.69% | 0.16% | 1.12% | |
| CHF | 0.95% | 0.95% | 0.41% | -0.32% | 0.58% | -0.95% | -1.12% |
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 data from China showed on Monday that the Caixin Manufacturing PMI declined to 49.3 in September from 50.4 in August, while the Caixin Services PMI edged lower to 50.3 from 51.6. Over the weekend, Bloomberg reported that the People's Bank of China (PBOC) is planning to tell banks to lower mortgage rates for existing home loans before October 31 in its latest attempt to shore up the troubled property sector as the economy slows. In the meantime, ANZ Business Confidence Index in Australia improved to 60.9 in September from 50.6 in August. AUD/USD edged higher to start the new week and the pair was last seen trading at its highest level since February 2023 above 0.6900.
The UK's Office for National Statistics announced early Monday that it revised the annualized Gross Domestic Product (GDP) growth for the second quarter lower to 0.7% from the 0.9% reported in the advanced estimate. GBP/USD clings to modest daily gains, slightly below 1.3400 after this data.
After declining sharply and losing more than 1.5% on a daily basis on Friday, USD/JPY continues to inch lower toward 142.00 early Monday. Following reports from various Japanese media outlets over the weekend, Japan’s incoming Prime Minister (PM) Shigeru Ishiba proposed October 27 for a snap election. If a snap election is confirmed by end-October, the parliament will likely be dissolved by October 9.
EUR/USD stays relatively quiet in the early European session and fluctuates in a narrow channel above 1.1150.
After setting a new all-time high above $2,680 on Thursday, Gold registered modest losses on Friday. XAU/USD holds steady and trades in a tight range above $2,650 early Monday.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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.
