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Forex Today: US Dollar consolidates previous week's gains ahead of Fedspeak
Here is what you need to know on Monday, October 7:
The US Dollar (USD) Index rose more than 2% in the previous week and registered its largest one-week gain of 2024. The index stays in a consolidation phase at around 102.50 in the European morning on Monday. Later in the session, Eurostat will publish Retail Sales data for August. In the second half of the day, Consumer Credit Change for August will be the only data featured in the US economic docket. During the American trading hours, several Federal Reserve (Fed) policymakers, including Governor Michelle Bowman, will be delivering speeches.
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 strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.87% | 2.09% | 4.27% | 0.58% | 1.63% | 3.08% | 2.03% | |
| EUR | -1.87% | 0.23% | 2.36% | -1.24% | -0.18% | 1.20% | 0.27% | |
| GBP | -2.09% | -0.23% | 2.25% | -1.47% | -0.42% | 0.97% | 0.00% | |
| JPY | -4.27% | -2.36% | -2.25% | -3.49% | -2.60% | -1.13% | -2.10% | |
| CAD | -0.58% | 1.24% | 1.47% | 3.49% | 1.09% | 2.47% | 1.50% | |
| AUD | -1.63% | 0.18% | 0.42% | 2.60% | -1.09% | 1.39% | 0.42% | |
| NZD | -3.08% | -1.20% | -0.97% | 1.13% | -2.47% | -1.39% | -0.98% | |
| CHF | -2.03% | -0.27% | -0.01% | 2.10% | -1.50% | -0.42% | 0.98% |
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 USD benefited from the upbeat employment data for September on Friday and continued to outperform its major rivals heading into the weekend. The US Bureau of Labor Statistics reported that Nonfarm Payrolls (NFP) rose by 254,000 in September, surpassing the market expectation of 140,000 by a wide margin. Additionally, the Unemployment Rate edged lower to 4.1% from 4.2% in the same period.
EUR/USD extended its weekly downtrend on Friday and touched its lowest level since mid-August near 1.0950. The pair struggles to stage a rebound in the early European session on Monday and trades below 1.1000.
GBP/USD fell below 1.3100 with the immediate reaction to the US labor market data on Friday but managed to erase its losses to end the day flat. The pair holds steady and moves up and down in a narrow band slightly above 1.3100 in the European morning.
In its quarterly report published on Monday, the Bank of Japan (BoJ) raised the assessment for two of Japan's nine regions. "All regions in Japan saw economy recovering moderately, picking up or picking up moderately," the BoJ further noted. After rising more than 1% on Friday, USD/JPY edges lower early Monday and trades below 148.50.
Gold registered small losses in the previous week despite the broad USD strength as the precious metal capitalized on safe-haven demand. XAU/USD stays on the back foot to start the week and trades in negative territory below $2,650.
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.
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