Forex Today: US Dollar shows resilience despite Trump-Fed drama
Here is what you need to know on Wednesday, August 27:
The action in financial markets remain relatively quiet early Wednesday as investors assess the latest headlines surrounding the escalating feud between United States (US) President Donald Trump and the Federal Reserve. The economic calendar will not offer any high-impact data releases. Later in the American session, the US Treasury will hold a 5-year note auction.
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 Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.96% | 0.46% | 0.65% | 0.16% | 0.18% | 0.54% | 0.50% | |
| EUR | -0.96% | -0.49% | -0.38% | -0.79% | -0.71% | -0.42% | -0.45% | |
| GBP | -0.46% | 0.49% | -0.04% | -0.30% | -0.28% | 0.08% | 0.04% | |
| JPY | -0.65% | 0.38% | 0.04% | -0.41% | -0.43% | -0.03% | -0.02% | |
| CAD | -0.16% | 0.79% | 0.30% | 0.41% | 0.03% | 0.41% | 0.34% | |
| AUD | -0.18% | 0.71% | 0.28% | 0.43% | -0.03% | 0.36% | 0.31% | |
| NZD | -0.54% | 0.42% | -0.08% | 0.03% | -0.41% | -0.36% | -0.04% | |
| CHF | -0.50% | 0.45% | -0.04% | 0.02% | -0.34% | -0.31% | 0.04% |
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).
Fed Governor Lisa Cook will reportedly file a lawsuit challenging her removal by US President Donald Trump. While speaking at a Cabinet meeting on Tuesday, Trump noted that he is prepared to abide by any court decision but indicated he was not concerned about Cook’s challenge. He further noted that he already has somebody in mind as Cook's replacement, adding there will soon be a majority of rate-cut voters within the Fed.
Meanwhile, the data from the US showed on Tuesday that the Conference Board's Consumer Confidence Index eased slightly to 97.4 in August from 98.7 in July. In this period, the Present Situation Index dropped by 1.6 points to 131.2, while the Expectations Index, which measures short-term expectations for income, economic activity, and employment, fell by 1.2 points to 74.8. After losing about 0.2% on Wednesday, the US Dollar (USD) Index stays in positive territory near 98.50 in the European morning on Wednesday.
Bank of Canada (BoC) Governor Tiff Macklem noted late Tuesday that the BoC will not be revisiting its 2% inflation target for the foreseeable future, citing uncertainty around trade and ever-changing tariff policies from the US. USD/CAD fluctuates in a very tight range below 1.3850 after posting marginal losses on Tuesday.
The data published by the Australian Bureau of Statistics (ABS) showed on Wednesday that Australia’s Consumer Price Index (CPI) jumped by 2.8% in the year to July, following a 1.9% increase reported in June. This reading surpassed the market expectation of 2.3%. After rising above 0.6500 during the Asian trading hours, AUD/USD lost its traction and was last seen trading in negative territory at around 0.6480.
GfK Consumer Confidence Index in Germany declined to -23.6 in September from -21.7 in August, missing analysts' estimate of -21.5. In the meantime, the political drama in France escalates after French Prime Minister François Bayrou announced that a no-confidence vote will be held on September 8th. Political parties in France failed to agree on the 2026 budget, which aims to cut government spending by 44 billion Euros to restore fiscal balance. EUR/USD stays on the back foot and declines toward 1.1600 in the European morning on Wednesday.
GBP/USD edges lower toward 1.3450 after posting small gains on Tuesday.
USD/JPY trades in a narrow band below 148.00 in the European session on Wednesday. In the Asian session, July Unemployment Rate and Tokyo CPI data will be featured in the Japanese economic docket.
Gold gathered bullish momentum in the American session on Tuesday and climbed to a two-week high above $3,390. XAU/USD corrects lower in the European morning and trades below $3,380.
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.
