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Forex Today: Quiet start to week as focus remains on geopolitics, central bank speak
Here is what you need to know on Monday, November 18:
Financial markets remain relatively quiet at the beginning of the new week. The economic calendar will not feature any high-impact macroeconomic data releases on Monday. Market participants will keep a close eye on headlines surrounding geopolitics and pay attention to comments from central bank officials.
Boosted by hawkish comments from Federal Reserve (Fed) officials, including Chairman Jerome Powell, the US Dollar (USD) Index gained more than 1.5% in the previous week. The index stays in a consolidation phase above 106.50 in the European morning on Monday. Later in the day, Chicago Fed President Austan Goolsbee will be delivering a speech. Meanwhile, US stock index futures trade in positive territory after Wall Street's main indexes closed in the red on Friday.
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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.65% | 2.22% | 1.14% | 1.33% | 1.83% | 1.77% | 1.26% | |
| EUR | -1.65% | 0.55% | -0.39% | -0.21% | 0.28% | 0.22% | -0.30% | |
| GBP | -2.22% | -0.55% | -1.02% | -0.74% | -0.26% | -0.32% | -0.83% | |
| JPY | -1.14% | 0.39% | 1.02% | 0.19% | 0.60% | 0.72% | 0.12% | |
| CAD | -1.33% | 0.21% | 0.74% | -0.19% | 0.55% | 0.42% | -0.09% | |
| AUD | -1.83% | -0.28% | 0.26% | -0.60% | -0.55% | -0.08% | -0.57% | |
| NZD | -1.77% | -0.22% | 0.32% | -0.72% | -0.42% | 0.08% | -0.51% | |
| CHF | -1.26% | 0.30% | 0.83% | -0.12% | 0.09% | 0.57% | 0.51% |
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).
Citing two US officials familiar with the decision, CNN News reported over the weekend that US President Joe Biden has authorized Ukraine to use powerful long-range American weapons to strike inside Russia. Reporting on the matter, “the change comes largely in response to Russia's deployment of North Korean ground troops to supplement its own forces, a development that has caused alarm in Washington and Kyiv,” Reuters said.
EUR/USD fell nearly 1.7% last week and registered its lowest weekly close since October 2023. The pair holds steady in the early European session and fluctuates at around 1.0550. During the American trading hours, European Central Bank (ECB) President Christine Lagarde will deliver a speech titled "The Economic and Human Issues of a Changing Era" at an event organized by The Collège des Bernardins in Paris, France.
GBP/USD declined over 2% last week and closed in negative territory for the seventh consecutive week. The pair trades in a narrow range slightly below 1.2650 early Monday. On Wednesday, the UK's Office for National Statistics will publish Consumer Price Index (CPI) data for October.
Bank of Japan (BoJ) Governor Kazuo Ueda said on Monday that the Japanese economy is recovering moderately despite weak signs. "We will scrutinize at each policy meeting how foreign exchange moves affect our economic, price forecasts and risks," Ueda reiterated. After falling more than 1% on Friday, USD/JPY moves up and down in a narrow band at around 154.50 on Monday.
Gold remained under bearish pressure last week and dropped to its lowest level in nearly two months below $2,540 on Thursday. Following a quiet Friday, XAU/USD gains traction to begin the new week and recovers toward $2,600.
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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