Forex Today: US Dollar stabilizes as focus shifts to Fed Chairman Powell’s testimony

July 9, 2024 9:23 am

Here is what you need to know on Tuesday, July 9:

The US Dollar stays resilient against its major rivals early Tuesday, with the US Dollar Index moving sideways near 105.00 after posting small gains on Monday. The US economic calendar will feature NFIB Business Optimism Index for June and RealClearMarkets/TIPP Economic Optimism for July. More importantly, Federal Reserve Chairman Jerome Powell will present the Semi-Anual Monetary Policy Report and testify before the Senate Banking Committee.

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 weakest against the Australian Dollar.

  USD EUR GBP JPY CAD AUD NZD CHF
USD   -0.73% -1.18% -0.37% -0.71% -1.25% -0.75% -0.46%
EUR 0.73%   -0.45% 0.40% 0.02% -0.51% -0.04% 0.26%
GBP 1.18% 0.45%   0.87% 0.49% -0.08% 0.43% 0.70%
JPY 0.37% -0.40% -0.87%   -0.36% -0.88% -0.43% -0.14%
CAD 0.71% -0.02% -0.49% 0.36%   -0.54% -0.04% 0.23%
AUD 1.25% 0.51% 0.08% 0.88% 0.54%   0.49% 0.76%
NZD 0.75% 0.04% -0.43% 0.43% 0.04% -0.49%   0.27%
CHF 0.46% -0.26% -0.70% 0.14% -0.23% -0.76% -0.27%  

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).

After opening the week with a bearish gap, EUR/USD staged a rebound and closed marginally higher on Monday. The pair stays relatively quiet in the European morning on Tuesday and fluctuates in a tight range above 1.0800.

GBP/USD touched its highest level since June 12 at 1.2860 on Monday but lost its bullish momentum to end the day virtually unchanged. Early Tuesday, the pair holds steady at around 1.2800. 

Following the previous week’s rally, NZD/USD lost its traction and registered modest losses on Monday. The Reserve Bank of New Zealand (RBNZ) will announce monetary policy decisions in the Asian session on Wednesday. Markets widely expect the RBNZ to leave the policy rate unchanged at 5.5%. Ahead of this key event, NZD/USD stays in a consolidation phase above 0.6100.

Gold came under heavy bearish pressure and lost over 1% on Monday, erasing all of Friday’s gains in the process. Reports of China’s central bank pausing Gold purchases for the second straight month in June and growing optimism about a ceasefire-hostage deal between Israel and Hamas caused XAU/USD to stretch lower. Early Tuesday, the pair consolidates its losses near $2,360.

USD/JPY continues to move up and down in a narrow channel at around 161.00 after ending the first trading day of the week virtually unchanged. Following the conclusion of the first day of meeting with market participants, the Bank of Japan (BoJ) said that it “received various views from participants in the survey including idea to reduce monthly buying to around ¥2-3 trillion, or to keep buying around V4 trillion.”

Fed FAQs

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.

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