Forex Today: US Dollar retreats as markets gear up for presidential election
Here is what you need to know on Monday, November 4:
The US Dollar (USD) stays under heavy selling pressure to start the new week as investors gear up for the presidential election on Tuesday. Factory Orders for September will be the only data featured in the US economic docket on Monday. During the European trading hours, November Sentix Investors Confidence data from the Eurozone and revisions to October HCOB Manufacturing PMI for Germany and the Eurozone will be watched closely by market participants.
The USD Index ignored the disappointing labor market data on Friday and gained 0.4% on the day. The index, however, opened with a bearish gap and extended its slide to a fresh two-week low below 104.00. Meanwhile, US stock index futures trade marginally higher in the European morning on Monday.
Nonfarm Payrolls (NFP) in the US rose by 12,000 in October, the US Bureau of Labor Statistics (BLS) reported on Friday. This reading followed the 223,000 increase (revised from 254,000) recorded in September and missed the market expectation of 113,000 by a wide margin. "It is likely that payroll employment estimates in some industries were affected by the hurricanes; however, it is not possible to quantify the net effect on the over-the-month change in national employment, hours, or earnings estimates because the establishment survey is not designed to isolate effects from extreme weather events," the BLS explained in its press release.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.53% | -0.53% | 0.00% | -0.15% | -0.59% | -0.22% | -0.20% | |
| EUR | 0.53% | -0.03% | 0.12% | -0.01% | 0.25% | -0.07% | -0.06% | |
| GBP | 0.53% | 0.03% | -0.12% | 0.02% | 0.28% | -0.04% | -0.03% | |
| JPY | 0.00% | -0.12% | 0.12% | -0.14% | -0.05% | -0.00% | 0.10% | |
| CAD | 0.15% | 0.01% | -0.02% | 0.14% | -0.24% | -0.07% | -0.05% | |
| AUD | 0.59% | -0.25% | -0.28% | 0.05% | 0.24% | -0.31% | -0.31% | |
| NZD | 0.22% | 0.07% | 0.04% | 0.00% | 0.07% | 0.31% | 0.00% | |
| CHF | 0.20% | 0.06% | 0.03% | -0.10% | 0.05% | 0.31% | -0.00% |
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).
EUR/USD snapped a four-day winning streak on Friday but ended the week in positive territory. The pair benefits from the broad-based selling pressure surrounding the USD early Monday and rises toward 1.0900.
GBP/USD gathers bullish momentum to start the new week and rises toward 1.3000, where it met resistance in the previous week.
Following Thursday's sharp decline, USD/JPY reversed its direction on Friday and gained more than 0.6%. The pair stays on the back foot on Monday and fluctuates deep in the red at around 152.00.
Gold declined sharply after setting a new record-high and lost nearly 2% in the second half of the week. XAU/USD holds steady early Monday and trades near $2,740.
During the Asian trading hours, the data from Australia showed that the TD-MI Inflation Gauge, released by Melbourne Institute, rose to 3% on a yearly basis in October from 2.6% in September. The Reserve Bank of Australia (RBA) will announce monetary policy decisions early Tuesday and it's expected to leave the policy rate unchanged at 4.35%. AUD/USD keeps its footing following a bullish opening to the week and trades near 0.6600.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact 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 when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for 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.
