Forex Today: US Dollar clings to recovery gains as focus remains on US data, Fedspeak
Here is what you need to know on Wednesday, October 2:
The US Dollar (USD) continued to gather strength against its rivals following Monday's bullish action, with the USD Index climbing to its highest level in nearly two weeks above 101.00 on Tuesday. The European Commission will release the Unemployment Rate data for August during the European trading hours. Later in the day, the ADP Employment Change data for September will be featured in the US economic docket. Investors will also scrutinize comments from Federal Reserve (Fed) officials, including Fed Governor Michelle Bowman and Richmond Fed President Thomas Barkin.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.87% | 0.66% | 1.20% | -0.20% | 0.14% | 0.71% | 0.54% | |
| EUR | -0.87% | -0.19% | 0.33% | -1.03% | -0.66% | -0.12% | -0.25% | |
| GBP | -0.66% | 0.19% | 0.65% | -0.84% | -0.49% | 0.07% | -0.06% | |
| JPY | -1.20% | -0.33% | -0.65% | -1.32% | -1.10% | -0.45% | -0.59% | |
| CAD | 0.20% | 1.03% | 0.84% | 1.32% | 0.39% | 0.91% | 0.79% | |
| AUD | -0.14% | 0.66% | 0.49% | 1.10% | -0.39% | 0.54% | 0.42% | |
| NZD | -0.71% | 0.12% | -0.07% | 0.45% | -0.91% | -0.54% | -0.14% | |
| CHF | -0.54% | 0.25% | 0.06% | 0.59% | -0.79% | -0.42% | 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 data published by the US Bureau of Labor Statistics showed on Tuesday that JOLTS Job Openings climbed to 8.04 million in August from 7.71 million in July. On a negative note, the ISM Manufacturing PMI held steady at 47.2 in September, missing the market expectation of 47.5 and pointing to an ongoing contraction in the manufacturing sector's business activity. Following these data releases, Wall Street's main indexes turned south and the risk-averse atmosphere helped the USD outperform its rivals.
Meanwhile, escalating geopolitical tensions seem to be causing investors to adopt a cautious stance midweek. Iran has reportedly fired about 200 ballistic missiles on Israel and Israel has vowed to retaliate against the attack. Israel's Prime Minister Benjamin Netanyahu said that Iran had made a “big mistake” and “will pay,” reviving fears over a deepening conflict in the Middle East. Reflecting the negative shift in market mood, US stock index futures were down between 0.3% and 0.4% at the time of press.
EUR/USD lost more than 0.5% on Tuesday and closed the third consecutive day in negative territory. At the time of press, the pair was trading in a tight range slightly above 1.1050.
GBP/USD declined sharply on Tuesday and touched its lowest level since September 19 below 1.3250. The pair holds steady in the European morning on Wednesday but trades below 1.3300. The Bank of England will release the minutes of the Financial Policy Committee (FPC) meeting and publish the FPC Statement later in the day.
After closing the day virtually unchanged on Tuesday, USD/JPY edges higher toward 144.00 in the European morning on Wednesday. The data from Japan showed earlier in the day that the Consumer Confidence Index improved slightly to 36.9 in September from 36.7 in August.
Gold benefited from escalating geopolitical tensions and gained more than 1% on Tuesday, despite the broad-based USD strength. XAU/USD struggles to build on Tuesday's gains and trades in negative territory near $2,650 on Wednesday.
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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