The US dollar recovery continues ahead of the next batch of US data

VaselineOctober 3, 2024

0 4 minutes read

The US dollar recovery continues ahead of the next batch of US data

Here’s what you need to know on Thursday, October 3:

The US dollar (USD) continues to gather strength against its rivals for a fourth straight day on Thursday as market focus shifts to the next set of US macroeconomic data releases. The US Labor Department will release weekly data on initial jobless claims in the first US session. Later in the day, August factory orders and September ISM services PMI data will also be released in the US economic file. In addition, Federal Reserve Bank of Minneapolis President Neel Kashkari and Federal Reserve Bank of Atlanta President Raphael Bostic will deliver speeches.

PRICE USD this week

The table below shows the percentage change in the US dollar (USD) against the major listed currencies this week. The US dollar was the strongest against the Japanese yen.

	USD	EURO	GBP	JPY	CAD	AUD	NZD	CHF
USD		1.21%	1.69%	2.90%	0.09%	0.59%	1.64%	1.30%
EURO	-1.21%		0.48%	1.68%	-1.08%	-0.56%	0.46%	0.15%
GBP	-1.69%	-0.48%		1.31%	-1.55%	-1.03%	-0.02%	-0.33%
JPY	-2.90%	-1.68%	-1.31%		-2.67%	-2.28%	-1.18%	-1.51%
CAD	-0.09%	1.08%	1.55%	2.67%		0.55%	1.55%	1.24%
AUD	-0.59%	0.56%	1.03%	2.28%	-0.55%		1.02%	0.71%
NZD	-1.64%	-0.46%	0.02%	1.18%	-1.55%	-1.02%		-0.33%
CHF	-1.30%	-0.15%	0.33%	1.51%	-1.24%	-0.71%	0.33%

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).

After closing the first two days of the week in positive territory, the USD index rallied and gained nearly 0.4% on Wednesday. Early on Thursday, the index continued to rise and was last seen trading at a one-month high around 101.80. Meanwhile, U.S. stock index futures remain in negative territory Thursday morning, reflecting a cautious market mood.

EUR/USD extended its weekly downtrend and closed below 1.1050 on Wednesday. The pair remains on the back foot early Thursday and is trading near 1.1030. Eurostat will release producer price index data for August later in the session.

GBP/USD remains under heavy bear pressure after posting losses on Wednesday and is trading at its lowest level in over two weeks near 1.3150 in European morning, losing more than 0.8% on the day. In an interview with The Guardian newspaper, Bank of England Governor Andrew Bailey said they may become “a bit more active on rate cuts if there is still good news on inflation,” triggering a selloff in the pound.

USD/JPY rose higher and gained more than 2% on Wednesday. After hitting its strongest level since late August at 147.24 during Asian trading hours on Thursday, the pair lost ground and was last seen trading flat on the day , slightly below 146.50.

Data from Australia showed earlier in the day that both exports and imports fell by 0.2% month-on-month in August. AUD/USD ignored this data and was last seen trading in the red at around 0.6860.

Despite the persistent strength of the USD, Gold managed to hold on and posted marginal losses on Wednesday, supported by rising geopolitical tensions. XAU/USD is struggling to gain traction on Thursday and is trading below $2,650.

Frequently asked questions about US dollars

The US dollar (USD) is the official currency of the United States of America and the “de facto” currency of a significant number of other countries where it is found in circulation alongside local banknotes. It is the world’s most heavily traded currency, accounting for more than 88% of total global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, as of 2022. After World War II world, the USD has taken over from the British pound as the world’s reserve currency. For most of its history, the US dollar was backed by gold, until the Bretton Woods Agreement in 1971, when the gold standard disappeared.

The most important factor influencing the value of the US dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to ensure price stability (inflation control) and to promote full employment. Its main tool for achieving these two objectives is the adjustment of interest rates. When prices rise too fast and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the value of the USD. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which affects interest rates.

In extreme situations, the Federal Reserve can also print more dollars and engage in 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 when credit has dried up because banks will not lend to each other (for fear of default). It is a last resort when simply lowering interest rates is unlikely to achieve the desired result. It was the Fed’s preferred weapon to combat the credit crunch that occurred during the Great Financial Crisis of 2008. This involves the Fed printing more dollars and using them to buy US government bonds, mainly from financial institutions . QE usually leads to a weaker US dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal of maturing bonds it holds in new purchases. It is usually positive for the US dollar.

VaselineOctober 3, 2024

0 4 minutes read

PRICE USD this week

Frequently asked questions about US dollars

Vaseline

Related Articles

Shipping stocks fall after US port strike ends By Reuters

SPY Triggers Our Sell Signal, Price Seeks A Bottom (Technical Analysis)

Verint Systems CFO sells over $87,000 worth of stock via Investing.com

Politics and Markets 10/10/24