US dollar on weak base, markets focus on central bank

VaselineSeptember 30, 2024

0 4 minutes read

US dollar on weak base, markets focus on central bank

Here’s what you need to know on Monday, September 30:

The US dollar (USD) struggling to find demand to begin the final trading day of the third quarter. In the first half of Monday, investors will pay close attention to German consumer price index data. Later in the US session, several Federal Reserve policymakers, including Chairman Jerome Powell, will give speeches.

The USD index turned south on Friday and hit its weakest level in over a year at 100.15 before making a technical correction towards the end of the week. The U.S. Bureau of Economic Analysis reported that the core price index for personal consumption expenditures (PCE) rose 0.1% month-on-month in August, slower than market expectations of 0.2%. Early Monday, the USD index remains below 100.50. Powell will participate in a moderated discussion titled “A View from the Federal Reserve Board” at the annual meeting of the National Business Economics Association in Nashville beginning at 5:00 PM GMT. Fed Governor Michelle Bowman is also scheduled to speak in the first US session. Meanwhile, US stock index futures are trading marginally lower on the day.

US Dollar PRICE Last 7 days

The table below shows the percentage change of the US dollar (USD) against the main listed currencies over the last 7 days. The US dollar was weakest against the New Zealand dollar.

	USD	EURO	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.01%	-0.50%	-1.38%	-0.40%	-1.84%	-2.08%	-0.95%
EURO	0.01%		-0.55%	-1.33%	-0.37%	-1.88%	-2.05%	-0.95%
GBP	0.50%	0.55%		-0.72%	0.17%	-1.34%	-1.52%	-0.41%
JPY	1.38%	1.33%	0.72%		1.00%	-0.55%	-0.69%	0.32%
CAD	0.40%	0.37%	-0.17%	-1.00%		-1.40%	-1.69%	-0.58%
AUD	1.84%	1.88%	1.34%	0.55%	1.40%		-0.16%	0.95%
NZD	2.08%	2.05%	1.52%	0.69%	1.69%	0.16%		1.12%
CHF	0.95%	0.95%	0.41%	-0.32%	0.58%	-0.95%	-1.12%

The heatmap shows the percentage changes of major currencies against each other. The base currency is chosen from the left column, while the quoted currency is chosen from the top row. For example, if you choose the US dollar in the left column and move along the horizontal line to the Japanese yen, the percentage change shown in the box will be USD (base)/JPY (quote).

Data from China showed on Monday that the Caixin Manufacturing PMI fell to 49.3 in September from 50.4 in August, while the Caixin Services PMI fell to 50.3 from 51.6. Over the weekend, Bloomberg reported that the People’s Bank of China (PBOC) plans to tell banks to lower mortgage rates on existing home loans before October 31, in the latest attempt to prop up the troubled housing sector as the economy slows. Meanwhile, Australia’s ANZ business confidence index improved to 60.9 in September from 50.6 in August. AUD/USD rose to start the new week and the pair was last seen trading at its highest level since February 2023 above 0.6900.

The United Kingdom’s Office for National Statistics announced on Monday morning that it had revised annualized growth in Gross Domestic Product (GDP) for the second quarter to 0.7 percent, from the 0.9 percent reported in the forward estimate. GBP/USD it is clinging to modest daily gains, slightly below 1.3400 after these dates.

After falling sharply and losing more than 1.5% daily on Friday, USD/JPY continues to drop inches towards 142.00 early monday. Following reports from various Japanese media outlets over the weekend, Japan’s incoming Prime Minister (Prime Minister) Shigeru Ishiba proposed October 27 for an early election. If early elections are confirmed by the end of October, parliament is likely to be dissolved by October 9.

EUR/USD it remains relatively quiet at the start of the European session and fluctuates in a narrow channel above 1.1150.

After setting a new all-time high above $2,680 on Thursday, Gold posted modest losses on Friday. XAU/USD is holding steady and trading in a tight range above $2,650 on Monday morning.

Fed FAQ

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to ensure price stability and to promote full employment. Its main tool for achieving these objectives is the adjustment of interest rates. When prices rise too quickly and inflation is above the Fed’s 2 percent target, it raises interest rates, raising 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 can lower interest rates to encourage lending, which hurts 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. Twelve Fed officials attend the FOMC—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 rotating one-year terms. .

In extreme situations, the Federal Reserve can resort to a policy called 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 of 2008. It involves the Fed printing more dollars and using them to buy higher quality 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 of bonds it holds at maturity to buy new bonds. It is usually positive for the value of the US dollar.

VaselineSeptember 30, 2024

0 4 minutes read

US Dollar PRICE Last 7 days

Fed FAQ

Vaseline

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