Forex Today: US Dollar stretches higher ahead of Fedspeak, housing data


Here is what you need to know on Tuesday, April 16:

The US Dollar (USD) continues to gather strength early Tuesday after outperforming its major rivals on Monday. The US economic docket will feature Housing Starts and Building Permits data for March. The Federal Reserve (Fed) will release Industrial Production figures and several Fed policymakers, including Chairman Jerome Powell, will be delivering speeches later in the American session.

Although easing geopolitical tensions made it difficult for the USD to find demand in the first half of the day on Monday, the currency gathered bullish momentum after upbeat Retail Sales data. In turn, the USD Index closed in positive territory for the fourth consecutive day. Early Tuesday, the index continues to push higher toward 106.50 and trades at its strongest level since early November. Meanwhile, the benchmark 10-year US Treasury bond yield holds steady above 4.6% after rising nearly 2% on Monday. 

US Dollar price in the last 7 days

The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the Australian Dollar.

  USD EUR GBP CAD AUD JPY NZD CHF
USD   2.36% 1.91% 1.73% 2.88% 1.74% 2.47% 0.92%
EUR -2.41%   -0.46% -0.64% 0.56% -0.61% 0.13% -1.47%
GBP -1.94% 0.46%   -0.17% 1.00% -0.17% 0.60% -0.99%
CAD -1.76% 0.63% 0.18%   1.17% 0.01% 0.75% -0.84%
AUD -2.96% -0.54% -1.02% -1.19%   -1.17% -0.43% -1.99%
JPY -1.77% 0.63% 0.18% -0.02% 1.17%   0.74% -0.84%
NZD -2.54% -0.12% -0.57% -0.77% 0.41% -0.74%   -1.60%
CHF -0.95% 1.44% 1.02% 0.83% 1.96% 0.85% 1.60%  

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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

 

Iranian Foreign Minister Hossein Amir-Abdollahian reportedly told his Chinese counterpart in a phone conversation that Iran is willing to "exercise restraint and has no intention of further escalating the situation." Following the sharp decline seen in Wall Street's main indexes on Monday, US stock index futures trade marginally lower early Tuesday.

During the Asian trading hours, the data from China showed that the real Gross Domestic Product (GDP) expanded at an annual rate of 5.3% in the first quarter. This reading followed the 5.2% growth recorded in the fourth quarter of 2023 and came in better than the market expectation of 5%. On a negative note, Retail Sales in China grew 3.1% on a yearly basis in March, falling short of analysts' estimate for an increase of 4.5%.

AUD/USD came under bearish pressure following the mixed Chinese data and was last seen trading at its lowest level in five months, slightly above 0.6400.

Australian Dollar moves back and forth amid risk-off mood, stronger US Dollar.

Japan's Chief Cabinet Secretary Yoshimasa Hayashi said on Tuesday that it's important for currencies to move in a stable manner, reflecting fundamentals. Hayashi refrained from commenting on a possible intervention but reiterated that they are prepared to take all measures. USD/JPY gained 0.6% on Monday and reached its highest level in over 30 years before going into a consolidation phase below 154.50.

Japanese Yen bears turn cautious amid intervention fears and geopolitical tensions.

The UK's Office for National Statistic reported early Tuesday that the ILO Unemployment Rate climbed to 4.2% in the three months to February from 4%. Further details of the report showed that the wage inflation, as measured by the change in the Average Earnings Excluding Bonus, edged lower to 6% from 6.1% on a yearly basis. GBP/USD pushed lower toward 1.2400 after the data and touched its weakest level since mid-November.

Gold declined toward $2,320 in the early American session on Monday, pressured by rising US yields and the broad-based USD strength. The risk-averse market atmosphere, however, helped XAU/USD gather bullish momentum later in the day. After rising more than 1.5% on Monday, Gold seems to have stabilized at around $2,380 early Tuesday.

EUR/USD's recovery attempt remained short-lived on Monday and the pair closed the fifth consecutive day in the red. In the European morning on Tuesday, EUR/USD stays on the back foot and trades within a touching distance of 1.0600.

Later in the day, Statistics Canada will publish the Consumer Price Index data for March. USD/CAD stays in positive territory above 1.3800 in the European morning. 

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.

 

 

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