Forex Today: Choppy action continues as focus shifts to BoE hearings, mid-tier data releases
Here is what you need to know on Tuesday, November 19:
In the absence of high-tier data releases, the US Dollar (USD) corrected lower to start the week. The action in financial markets remain choppy early Tuesday as investors await Bank of England's (BoE) Monetary Policy Hearings. Later in the day, Consumer Price Index (CPI) data from Canada will be watched closely by market participants. The US economic docket will feature Building Permits and Housing Starts figures for October.
Following the impressive rally seen in the previous week, the USD Index turned south on Monday and closed the day in negative territory. In the European morning on Tuesday, the index fluctuates in a tight range above 106.00. Meanwhile, US stock index futures trade marginally higher after Wall Street's main indexes closed the first day of the week mixed.
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 weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.45% | -0.42% | 0.20% | -0.50% | -0.79% | -0.48% | -0.48% | |
| EUR | 0.45% | 0.20% | 0.79% | 0.07% | -0.19% | 0.09% | 0.08% | |
| GBP | 0.42% | -0.20% | 0.59% | -0.13% | -0.40% | -0.11% | -0.13% | |
| JPY | -0.20% | -0.79% | -0.59% | -0.73% | -0.95% | -0.64% | -0.64% | |
| CAD | 0.50% | -0.07% | 0.13% | 0.73% | -0.27% | 0.02% | 0.01% | |
| AUD | 0.79% | 0.19% | 0.40% | 0.95% | 0.27% | 0.28% | 0.27% | |
| NZD | 0.48% | -0.09% | 0.11% | 0.64% | -0.02% | -0.28% | -0.01% | |
| CHF | 0.48% | -0.08% | 0.13% | 0.64% | -0.01% | -0.27% | 0.00% |
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 Reserve Bank of Australia (RBA) published the Minutes of its November monetary policy meeting in the Asian session on Tuesday. "It is not possible to rule anything in or out regarding future changes in the cash rate," the RBA reiterated in its publication and said that the board would need more than one good quarterly inflation report to justify a rate cut. After gaining 0.7% on Monday, AUD/USD continues to edge higher and was last seen trading in positive territory above 0.6500.
The broad-based USD weakness and rising crude oil prices weighed heavily on USD/CAD on Monday and the pair lost over 0.5%. In the European morning, the pair moves sideways slightly above 1.4000. Annual inflation in Canada, as measured by the change in the CPI, is forecast to rise to 1.9% in October from 1.6% in September.
Japan’s Finance Minister Katsunobu Kato repeated on Tuesday that they are “closely watching FX moves with the utmost sense of urgency,” adding that they will continue to take appropriate action against excessive moves. USD/JPY closed marginally higher on Monday before retreating to the 154.50 area early Tuesday.
BoE Governor Bailey and other members of the Monetary Policy Committee will respond to questions before the Treasury Committee starting at 10:15 GMT. GBP/USD snapped a six-day losing streak on Monday but lost its bullish momentum before reaching 1.2700.
EUR/USD gained more than 0.5% on Monday before going into a consolidation phase at around 1.0600 early Tuesday. Eurostat will release revisions to October Harmonized Index of Consumer Prices readings in the European session.
Gold gathered bullish momentum and rose nearly 2% on Monday. XAU/USD continues to stretch higher in the European morning and was last seen trading above $2,620.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
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