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Forex Today: Market mood improves to start the new week
Here is what you need to know on Monday, April 22:
US stock index futures started the week on a bullish note, reflecting an improvement in risk mood. European Commission will release the preliminary Consumer Confidence data for April on Monday and European Central Bank (ECB) President will deliver a speech. The US economic docket will not feature any high-impact data releases.
Investors remain optimistic about an avoidance of a further deepening of the crisis in the Middle East following a relatively quiet weekend in terms of news regarding the Iran-Israel conflict. At the time of press, US stock index futures were up between 0.4% and 0.6%. The US Dollar (USD) Index holds steady near 106.00 and the benchmark 10-year US Treasury bond yield continues to fluctuate above 4.6%.
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 Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.15% | 0.66% | -0.25% | 0.72% | 0.90% | 0.62% | -0.29% | |
| EUR | 0.15% | 0.80% | -0.10% | 0.87% | 1.06% | 0.78% | -0.12% | |
| GBP | -0.67% | -0.81% | -0.91% | 0.06% | 0.24% | -0.04% | -0.97% | |
| CAD | 0.25% | 0.10% | 0.90% | 0.97% | 1.14% | 0.87% | -0.05% | |
| AUD | -0.73% | -0.88% | -0.07% | -0.98% | 0.18% | -0.10% | -1.02% | |
| JPY | -0.89% | -1.05% | -0.22% | -1.16% | -0.18% | -0.26% | -1.21% | |
| NZD | -0.63% | -0.77% | 0.02% | -0.88% | 0.10% | 0.27% | -0.93% | |
| CHF | 0.27% | 0.12% | 0.93% | 0.03% | 0.99% | 1.17% | 0.89% |
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).
During the Asian trading hours, the People's Bank of China (PBoC) reported that it left the one-year and five-year Loan Prime Rates unchanged at 3.45% and 3.95%, respectively. Meanwhile, China’s Commerce Ministry announced on Friday that they decided to impose a levy of 43.5% on imports of propionic acid from the United States. Propionic acid is commonly used in food, feed, pesticides and medical fields.
AUD/USD pair showed no reaction to China-related news and edged higher to the 0.6450 area at the weekly opening before retreating slightly. Judo Bank Manufacturing and Services PMI data for April will be released in the early trading hours of the Asian session on Tuesday.
Australian Dollar holds steady following gains amid the lackluster US Dollar.
The Swiss National Bank (SNB) announced early Monday that it raised the minimum reserve requirement for banks from 2.5% to 4%. USD/CHF largely ignored this headline and was last seen trading modestly higher on the day above 0.9100.
EUR/USD closed the previous week virtually unchanged. The pair holds steady above 1.0650 in the European morning on Monday.
GBP/USD came under bearish pressure in the American session on Friday and broke below 1.2400, ending the week in negative territory. The pair stays in a consolidation phase above 1.2350 in the early European session.
Gold registered small daily gains on Friday but closed the week below $2,400. XAU/USD stages a technical correction on Monday and was last seen losing over 1% on the day below $2,360.
Gold price extends its steady intraday descent to $2,360 area, bullish potential seems intact.
USD/JPY moves up and down in a very tight channel below 155.00 on Monday. On Friday, the Bank of Japan will announce monetary policy decisions.
Japanese Yen bears retain control near multi-decade low, 155.00 eyed ahead of BoJ on Friday.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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