Forex Today: US Dollar struggles to extend rebound ahead of key US data
Here is what you need to know on Friday, August 15:
The US Dollar (USD) finds it difficult to hold its ground after posting gains against its major rivals on Thursday. The US economic calendar will feature Retail Sales and Industrial Production data for July. Later in the session, the University of Michigan will publish the preliminary Consumer Sentiment Survey for August, which will feature Consumer Confidence Index and 1-year Consumer Inflation Expectations figures.
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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.25% | -0.77% | -0.32% | 0.30% | 0.22% | 0.57% | -0.32% | |
| EUR | 0.25% | -0.52% | -0.05% | 0.56% | 0.48% | 0.79% | -0.05% | |
| GBP | 0.77% | 0.52% | 0.42% | 1.09% | 1.00% | 1.32% | 0.47% | |
| JPY | 0.32% | 0.05% | -0.42% | 0.67% | 0.59% | 0.98% | 0.16% | |
| CAD | -0.30% | -0.56% | -1.09% | -0.67% | -0.07% | 0.22% | -0.63% | |
| AUD | -0.22% | -0.48% | -1.00% | -0.59% | 0.07% | 0.31% | -0.52% | |
| NZD | -0.57% | -0.79% | -1.32% | -0.98% | -0.22% | -0.31% | -0.83% | |
| CHF | 0.32% | 0.05% | -0.47% | -0.16% | 0.63% | 0.52% | 0.83% |
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).
Ahead of the weekend, investors will also pay close attention to headlines coming out of the highly-anticipated meeting between US President Donald Trump and Russian President Vladimir Putin in Alaska.
The USD gathered strength on Thursday after the Bureau of Labor Statistics (BLS) reported that annual producer inflation, as measured by the change in the Producer Price Index (PPI), jumped to 3.3% in July from 2.4% in June. In this period, the core PPI rose by 3.7% on a yearly basis, up sharply from the 2.6% increase recorded in June.
In the Asian session on Friday, the data from China showed Retail Sales grew by 3.7% on a yearly basis in July. This reading fell short of the market expectation of 4.6%. Additionally, Industrial Production Expanded by 5.7%, following the 6.8% increase reported in the previous month. After losing nearly 0.8% on Thursday, AUD/USD stages a rebound early Friday and trades in positive territory, slightly above 0.6500.
USD/JPY stays under bearish pressure and trades near 147.00 after closing marginally higher on Thursday. Japan's Gross Domestic Product (GDP) expanded at an annual rate of 1% in the second quarter. This print followed the 0.6% expansion recorded in the previous quarter and came in better than the market expectation of 0.4%.
EUR/USD stays in positive territory above 1.1650 after closing in the red on Thursday. The European economic calendar will not offer any high-impact data releases on Friday.
Following the strong rally seen in the first half of the week, GBP/USD lost its traction and fell more than 0.3% on the day on Thursday. The pair shakes off the bearish pressure in the European session on Friday and trades slightly above 1.3550.
Gold turned south and lost more than 0.5% on Thursday as US Treasury bond yields pushed higher following the hot producer inflation data. XAU/USD holds steady in the European morning on Friday and trades below $3,350.
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.
