Forex Today: US Dollar shows resilience ahead of next batch of data
Here is what you need to know on Thursday, October 1:
Following the choppy action seen on the last day of the third quarter, the US Dollar (USD) holds its ground against its rivals in the European morning on Thursday. The US economic calendar will feature weekly Initial Jobless Claims data and the Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index report for September. Several policymkers from the European Cental Bank (ECB) and the Federal Reserve (Fed) will be delivering speeches throughout the day.
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 | 0.52% | -0.13% | 0.59% | 0.76% | 0.84% | 0.72% | 1.05% | |
| EUR | -0.52% | -0.70% | 0.11% | 0.21% | 0.32% | 0.19% | 0.52% | |
| GBP | 0.13% | 0.70% | 0.63% | 0.90% | 1.00% | 0.88% | 1.20% | |
| JPY | -0.59% | -0.11% | -0.63% | 0.06% | 0.19% | 0.06% | 0.36% | |
| CAD | -0.76% | -0.21% | -0.90% | -0.06% | 0.13% | -0.04% | 0.31% | |
| AUD | -0.84% | -0.32% | -1.00% | -0.19% | -0.13% | -0.13% | 0.19% | |
| NZD | -0.72% | -0.19% | -0.88% | -0.06% | 0.04% | 0.13% | 0.33% | |
| CHF | -1.05% | -0.52% | -1.20% | -0.36% | -0.31% | -0.19% | -0.33% |
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).
On Wednesday, the Automatic Data Processing (ADP) reported that employment in the private sector increased by 90K in September, surpassing the market expectation of 70K. In the meantime, the US Bureau of Economic Analysis revised the annualized Gross Domestic Product (GDP) growth for the second quarter to 2.2% from 1.5% in the previous estimate, and announced that the core Personal Consumption Expenditures (PCE) Price Index, the Fed's preferred gauge of inflation, rose 3% on a yearly basis in August. This print came in below the market expectation of 3.3%. The US Dollar (USD) Index retreated with the initial reaction to the mixed data releases but managed to regain its traction later in the American session to end the day marginally higher. Early Thursday, the USD Index holds above 101.50.
US inflation revisions temper relief as Fed keeps October options open
Economists at Societe Generale note that August inflation data offered only limited comfort to the Fed. They highlight that while "Core PCE undershot expectations," the underlying picture was "less reassuring," with "softer core goods inflation" merely masking "a reacceleration in core services and super-core inflation, pointing to still-firm underlying price pressures."
Turning to the policy outlook, Societe Generale judges that "inflation revisions were modestly favorable, but growth revisions were more important." In their view, "the economy entered 2H26 with stronger momentum than previously thought, while underlying inflation remains too elevated to provide the Fed with clear comfort." As a result, they argue that "a pause in October remains possible, but an October hike remains on the table pending September CPI and PPI data."
Fed's Kashkari questions policy tightness as resilient economy keeps hawkish bias alive
Meanwhile, Minneapolis Fed President Neel Kashkari delivered a notably hawkish-leaning message, with a FXS Speechtracker score of 7.1/10, and further supported the USD late Wednesday. Kashkari underscored his concern that inflation near 3% remains “too high” despite recent data. Emphasis on a resilient economy, strong consumer spending, and broad job availability, alongside doubts about how tight policy really is and suggestions that the neutral rate may be higher and “elevated at least for now,” reinforced the case for keeping rates restrictive. The explicit penciling in of one more hike this year and another in 2027, while hoping to tame inflation with only modest action, signalled a bias toward further tightening if the economy and inflation fail to cool meaningfully.
The Bank of Japan (BoJ) published the Summary of Opinions from the September monetary policy meeting earlier in the day. The document showed that some members noted that it would be appropriate to keep raising the interest rate in line with the economy and price developments, while reiterating that they must focus on anchoring the underlying inflation near 2%. After closing virtually unchanged on Wednesday, USD/JPY gathers bullish momentum and trades near 158.20 in the European morning on Thursday, rising more than 0.5% on the day.
EUR/USD remains under bearish pressure after closing in the red on Wednesday and declines toward 1.1300.
GBP/USD benefited from the upbeat UK macroeconomic data on Wednesday and managed to register daily gains despite the broad USD resilience. The pair, however, fails to preserve its bullish momentum and trades marginally lower on the day near 1.3250 in the early European session.
Gold recovers modestly toward $4,200 in the European morning after losing about 0.6% on Wednesday.
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.
