Forex Today: US Dollar retreats as geopolitics remain under spotlight
Here is what you need to know on Friday, June 20:
The US Dollar (USD) struggles to find demand early Friday as market focus shifts back to geopolitics following this week's central bank meetings. In the second half of the day, May Retail Sales from Canada and preliminary June Consumer Confidence data from the Eurozone will be featured in the economic calendar.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.22% | 0.73% | 0.58% | 0.89% | 0.13% | 0.41% | 0.52% | |
| EUR | -0.22% | 0.39% | 0.35% | 0.68% | 0.03% | 0.20% | 0.31% | |
| GBP | -0.73% | -0.39% | -0.02% | 0.28% | -0.36% | -0.19% | -0.09% | |
| JPY | -0.58% | -0.35% | 0.02% | 0.31% | -0.74% | -0.52% | -0.46% | |
| CAD | -0.89% | -0.68% | -0.28% | -0.31% | -0.68% | -0.47% | -0.37% | |
| AUD | -0.13% | -0.03% | 0.36% | 0.74% | 0.68% | 0.17% | 0.27% | |
| NZD | -0.41% | -0.20% | 0.19% | 0.52% | 0.47% | -0.17% | 0.10% | |
| CHF | -0.52% | -0.31% | 0.09% | 0.46% | 0.37% | -0.27% | -0.10% |
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 Federal Reserve's (Fed) cautious stance on policy-easing and the risk-averse market atmosphere helped the USD outperform its rivals early Thursday. After reaching its highest level in a week above 99.00, however, the USD Index lost its traction and was last seen fluctuating at around 98.60.
Markets turned risk-averse on Thursday on reports hinting at a direct involvement of the United States (US) in the Iran-Israel conflict. Later in the day, US Senate Intelligence Committee Chair noted that US President Donald Trump said that he will give Iran the last chance to make a deal to end its nuclear program. Trump reportedly decided that he would delay his final decision on launching strikes for up to two weeks. Although Israel and Iran continue to exchange strikes, this development seems to be helping markets breathe a sigh of relief.
During the Asian trading hours, the People’s Bank of China (PBOC), China's central bank, announced that it left the one-year and five-year Loan Prime Rates (LPRs) unchanged at 3.00% and 3.50%, respectively.
The data from Japan showed early Friday that the National Consumer Price Index rose by 3.5% on a yearly basis in May, following the 3.6% increase recorded in April. Meanwhile, commenting on trade talks with the US, Japan's top trade negotiator Ryosei Akazawa said on Friday that Japan will not fixate on the looming date for so-called reciprocal tariffs to go back to higher levels. "We're looking for the possibility of a deal in ministerial-level negotiations but the outlook remains in a fog," Akazawa added. After closing in positive territory on Thursday, USD/JPY fluctuates in a tight channel slightly below 145.50 on Friday.
The UK's Office for National Statistics reported on Friday that Retail Sales declined by 2.7% on a monthly basis in May, compared to the market expectation of -0.5%. On Thursday, the Bank of England (BoE) announced that it left the policy rate unchanged at 4.25%, as expected. After posting small gains on Thursday, GBP/USD struggles to gather bullish momentum and trades below 1.3500 early Friday.
Following Thursday's indecisive action, Gold stays under bearish pressure in the European morning on Friday and trades at its lowest level in a week below $3,350.
EUR/USD holds steady above 1.1500 in the early European session on Friday after rebounding from the weekly low it set below 1.1450 on Thursday.
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.
