Here is what you need to know on Monday, November 25:
The US Dollar (USD) Index opened with a bearish gap after closing the previous week in positive territory. IFO business sentiment survey from Germany will be featured in the European economic docket. Later in the day, Chicago Fed National Activity Index and Dallas Fed Manufacturing Business Index from the US will be looked upon for fresh catalysts.
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Euro.
USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
---|---|---|---|---|---|---|---|---|
USD | -0.61% | -0.53% | 0.22% | -0.10% | -0.26% | -0.06% | -0.11% | |
EUR | 0.61% | -0.09% | 0.21% | -0.08% | 0.28% | -0.03% | -0.08% | |
GBP | 0.53% | 0.09% | 0.31% | 0.01% | 0.37% | 0.06% | 0.01% | |
JPY | -0.22% | -0.21% | -0.31% | -0.30% | -0.03% | -0.20% | -0.12% | |
CAD | 0.10% | 0.08% | -0.01% | 0.30% | -0.01% | 0.05% | -0.03% | |
AUD | 0.26% | -0.28% | -0.37% | 0.03% | 0.00% | -0.30% | -0.35% | |
NZD | 0.06% | 0.03% | -0.06% | 0.20% | -0.05% | 0.30% | -0.05% | |
CHF | 0.11% | 0.08% | -0.01% | 0.12% | 0.03% | 0.35% | 0.05% |
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).
News of Donald Trump selecting fund manager Scott Bessent as the US Treasury Secretary triggered a sharp decline in US Treasury bond yields as the weekly opening and caused the USD to come under pressure. At the time of press, the benchmark 10-year US Treasury bond yield was down more than 1.5% on the day below 4.35% and the USD Index was losing 0.55% at 106.90. Meanwhile, US stock index futures were last seen rising between 0.6% and 0.4%.
Reporting on this development, Reuters quoted Stephen Spratt, strategist at Societe Generale, saying "the market view (is) that Bessent is a 'safe hands' candidate."
"A relief as the risk of a more unorthodox pick was priced out of markets and as Bessent has mentioned restraining US borrowing," Reuters said.
After losing more than 1% for the third consecutive week, EUR/USD benefits from the broad-based USD weakness and trades decisively higher on the day at around 1.0500.
GBP/USD started the week decisively higher and was last seen trading at around 1.2600, where it was up more than 0.5% on a daily basis. Bank of England Deputy Governor Clare Lombardelli and Monetary Policy Committee external member Swati Dhingra will be delivering speeches later in the day.
Gold rose nearly 2% in the previous week but declined sharply early Monday, pressured by improving risk mood. XAU/USD was last seen trading below $2,670, losing 1.8% on the day.
Despite the selling pressure surrounding the USD, USD/JPY's losses remain limited early Monday as the Japanese Yen struggles to find demand as a safe-haven on Monday. At the time of press, the pair was down 0.3% on the day at around 154.30.
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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