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Forex Today: Major pairs hold steady as focus shifts to US Consumer Confidence data
Here is what you need to know on Tuesday, August 27:
Major currency pairs continue to trade in relatively tight ranges early Tuesday after closing the first day of the week little changed. The US economic calendar will feature Housing Price Index data for June, the Conference Board's Consumer Confidence Index and the Richmond Fed Manufacturing Index for August. Later in the American session, the US Treasury will hold a 2-year note auction.
US Dollar PRICE Last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 7 days. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.71% | -1.59% | -1.10% | -1.16% | -0.62% | -1.93% | -1.74% | |
| EUR | 0.71% | -0.88% | -0.39% | -0.44% | 0.11% | -0.92% | -1.04% | |
| GBP | 1.59% | 0.88% | 0.48% | 0.45% | 1.01% | -0.05% | -0.17% | |
| JPY | 1.10% | 0.39% | -0.48% | -0.05% | 0.49% | -0.55% | -0.67% | |
| CAD | 1.16% | 0.44% | -0.45% | 0.05% | 0.54% | -0.48% | -0.62% | |
| AUD | 0.62% | -0.11% | -1.01% | -0.49% | -0.54% | -1.02% | -1.18% | |
| NZD | 1.93% | 0.92% | 0.05% | 0.55% | 0.48% | 1.02% | -0.14% | |
| CHF | 1.74% | 1.04% | 0.17% | 0.67% | 0.62% | 1.18% | 0.14% |
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).
The upbeat Durable Goods Orders data for July and the mixed action seen in Wall Street's main indexes helped the US Dollar (USD) stay resilient against its rivals on Monday. Following the previous week's sharp decline, the USD Index closed in positive territory on Monday and was last seen moving sideways slightly below 101.00. Meanwhile, US stock index futures trade flat on the day in the European morning. Reuters reported earlier in the day that US Air Force General C.Q. Brown, chairman of the Joint Chiefs of Staff, said that fears of a near-term broader Middle East conflict have ebbed after Israel and Lebanon’s Hezbollah exchanged fire without further escalation.
The data from Germany showed that the GfK Consumer Confidence Index declined to -22 for September from -18.6. This reading came in worse than the market expectation of -17.5. In the meantime, Germany's Destatis confirmed that the Gross Domestic Product (GDP) contracted 0.1% on a quarterly basis in the second quarter. EUR/USD holds steady above 1.1150 after closing marginally lower on Monday.
GBP/USD edged lower on Monday but managed to stabilize at around 1.3200 early Tuesday.
Japan’s Finance Minister Shunichi Suzuki said on Tuesday that FX rates are determined by various factors, not just monetary policies and interest rate differentials but also by geopolitical risks, market sentiment and others. After closing marginally higher on Monday, USD/JPY trades in a narrow band near 145.00 in the early European session.
Gold failed to preserve its bullish momentum after rising toward $2,530 early Monday and closed the day with small gains. Gold stays on the back foot on Tuesday and retreats toward $2,500.
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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