Forex Today: USD weakens, Gold slumps below $4,000 as risk flows dominate
Here is what you need to know on Tuesday, October 28:
The market mood remains upbeat early Tuesday and Gold extends its slide as investors cheer news of a trade agreement between the United States (US) and Japan, while remaining optimistic about a US-China deal. The US economic calendar will feature the Conference Board's Consumer Confidence data for October and Housing Price Index figures for August.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.17% | -0.15% | -0.50% | -0.05% | -0.16% | 0.19% | -0.24% | |
| EUR | 0.17% | 0.04% | -0.27% | 0.12% | 0.08% | 0.36% | -0.07% | |
| GBP | 0.15% | -0.04% | -0.41% | 0.09% | 0.06% | 0.32% | -0.14% | |
| JPY | 0.50% | 0.27% | 0.41% | 0.36% | 0.25% | 0.57% | 0.17% | |
| CAD | 0.05% | -0.12% | -0.09% | -0.36% | -0.17% | 0.24% | -0.22% | |
| AUD | 0.16% | -0.08% | -0.06% | -0.25% | 0.17% | 0.27% | -0.19% | |
| NZD | -0.19% | -0.36% | -0.32% | -0.57% | -0.24% | -0.27% | -0.46% | |
| CHF | 0.24% | 0.07% | 0.14% | -0.17% | 0.22% | 0.19% | 0.46% |
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).
US President Donald Trump met with Japan's new Prime Minister Sanae Takachi early Tuesday and signed a framework deal for securing the supply of critical minerals and rare earths. Trump also signed separate deals with Malaysia and Camdonia, in addition to frameworks for trade pacts with Thailand and Vietnam. Wall Street's main indexes registered strong gains on Monday, with the S&P 500, the Nasdaq Composite and the Dow Jones Industrial Average all closing at new record-highs. Early Tuesday, US stock index futures trade mixed. In the meantime, the US Dollar (USD) Index stays under modest bearish pressure below 99.00 after closing modestly lower on Monday.
Gold stays under heavy bearish pressure following the previous week's deep correction. After losing more than 3% on Monday, Gold was last seen losing about 1.2% on the day at $3,940.
EUR/USD holds its ground after posting small gains on Monday and trades at around 1.1650 in the European session on Tuesday. The data from Germany showed earlier in the day that the GfK Consumer Confidence Index declined to -24.1 for November from -22.5 in October.
GBP/USD clings to marginal gains near 1.3350 in the European morning after closing in positive territory and snapping a six-day losing streak on Monday.
AUD/USD gained more than 0.6% on Monday after opening with a bullish gap. The pair stays in a consolidation phase at around 0.6550 on Tuesday. In the early trading hours of the Asian session on Wednesday, investors will scrutinize third-quarter inflation data from Australia.
After rising above 153.00 on Monday, USD/JPY reversed its direction in the Asian session on Tuesday. At the time of press, the pair was trading slightly below 152.00, losing about 0.5% on the day. Japan's Economics Minister Minoru Kiuchi reiterated on Tuesday that it’s important for foreign exchange (FX) moves to reflect fundamentals and be stable.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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.
