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Forex Today: US Dollar selloff pauses ahead of data releases
Here is what you need to know on Tuesday, September 17:
The US Dollar (USD) continued to weaken against its major rivals at the beginning of the week, with the USD Index losing 0.4% on the day. As market attention turns to US data releases ahead of Wednesday's all-important Federal Reserve (Fed) monetary policy announcements, investors seem to be moving to the sidelines. In the European session, Germany's ZEW Institute will publish September Economic Sentiment data for Germany and the Eurozone. In the second half of the day, August Retail Sales and Industrial Production data will be featured in the US economic docket.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.84% | -1.04% | -1.83% | 0.21% | -1.41% | -0.76% | -0.62% | |
| EUR | 0.84% | -0.20% | -1.00% | 1.06% | -0.58% | 0.04% | 0.21% | |
| GBP | 1.04% | 0.20% | -0.80% | 1.22% | -0.37% | 0.25% | 0.44% | |
| JPY | 1.83% | 1.00% | 0.80% | 2.07% | 0.43% | 1.07% | 1.23% | |
| CAD | -0.21% | -1.06% | -1.22% | -2.07% | -1.62% | -0.97% | -0.82% | |
| AUD | 1.41% | 0.58% | 0.37% | -0.43% | 1.62% | 0.65% | 0.81% | |
| NZD | 0.76% | -0.04% | -0.25% | -1.07% | 0.97% | -0.65% | 0.16% | |
| CHF | 0.62% | -0.21% | -0.44% | -1.23% | 0.82% | -0.81% | -0.16% |
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).
Following Monday's slide, the USD Index holds steady below 101.00 in the European morning on Tuesday. In the meantime, the benchmark 10-year US Treasury bond yield clings to small daily gains above 3.6%, while US stock index futures trade flat.
EUR/USD gathered bullish momentum and Monday and climbed to a fresh 10-day high above 1.1100. Early Tuesday, the pair stays in a consolidation phase near Monday's closing level.
GBP/USD extended its rebound to begin the week and rose above 1.3200 for the first time in over a week. The pair fluctuates in a narrow channel at around 1.3210 in the European morning. Early Wednesday, the UK's Office for National Statistics will release the August inflation report.
Statistics Canada will publish Consumer Price Index (CPI) data for August later in the day. On a monthly basis, the CPI is forecast to rise 0.1% following the 0.4% increase recorded in July. After closing the first day of the week virtually unchanged, USD/CAD holds steady to start the European session and trades slightly below 1.3600.
AUD/USD started the week on a firm footing and gained 0.7% despite the latest batch of disappointing macroeconomic data releases from China. The pair stays relatively quiet on Tuesday and moves up and down in a narrow band at around 0.6750.
After touching its lowest level in over a year below 140.00 on Monday, USD/JPY staged a rebound and erased the majority of its daily losses. The pair stays calm near 140.50 in the European morning.
Gold set a new record-high near $2,590 on Monday but failed to preserve its bullish momentum. XAU/USD trades above $2,580 early Tuesday.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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