US dollar clings to recovery gains as focus remains on US data, Fedspeak

VaselineOctober 2, 2024

0 4 minutes read

US dollar clings to recovery gains as focus remains on US data, Fedspeak

Here’s what you need to know on Wednesday, October 2:

The US dollar (USD) continued to rally against its rivals following Monday’s bullish action, with the USD index climbing to a near two-week high above 101.00 on Tuesday. The European Commission will release unemployment rate data for August during European trading hours. Later in the day, ADP Employment Change data for September will be presented in the US economic register. Investors will also look to comments from Federal Reserve (Fed) officials, including Fed Governor Michelle Bowman and Richmond Fed President Thomas Barkin.

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		0.87%	0.66%	1.20%	-0.20%	0.14%	0.71%	0.54%
EURO	-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 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 released by the U.S. Bureau of Labor Statistics showed on Tuesday that JOLTS job openings rose to 8.04 million in August from 7.71 million in July. On a negative note, the ISM Manufacturing PMI was steady at 47.2 in September, missing market expectations of 47.5 and indicating a continued contraction in manufacturing business activity. Following the data, Wall Street’s main indexes turned south, and the risk-averse mood helped the USD outperform its rivals.

Meanwhile, escalating geopolitical tensions appear to have investors taking a cautious stance midweek. Iran reportedly fired about 200 ballistic missiles at Israel, and Israel vowed to retaliate against the attack. Israeli Prime Minister Benjamin Netanyahu said Iran had made a “big mistake” and “will pay”, reigniting fears of deepening conflict in the Middle East. Reflecting the negative shift in market sentiment, U.S. stock index futures were down between 0.3% and 0.4% at press time.

EUR/USD it lost more than 0.5% on Tuesday and closed its third straight day in negative territory. At press time, the pair was trading in a tight range just above 1.1050.

GBP/USD it fell sharply on Tuesday and hit its lowest level since September 19 below 1.3250. The pair is holding steady in the European morning on Wednesday, but is trading below 1.3300. The Bank of England will publish the minutes of the Financial Policy Committee (FPC) meeting and publish the FPC Statement later in the day.

After closing the day essentially unchanged on Tuesday, USD/JPY edges higher towards 144.00 on Wednesday European morning. 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 broad-based USD strength. XAU/USD is struggling to build on Tuesday’s gains and traded in negative territory near $2,650 on Wednesday.

Frequently asked questions about sense of risk

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 bear during the reference period. In a “risky” market, investors are optimistic about the future and more willing to buy risky assets. In a “de-risking” market, investors begin to “play it safe” because they are worried about the future and therefore buy less risky assets that are more certain to yield a return, even if it is relatively modest .

Typically during “risk on” periods, stock markets will rise, most commodities – except gold – will also gain in value as they benefit from a positive growth outlook. Currencies of nations that are large commodity exporters are strengthening due to increased demand and Cryptocurrencies are rising. In a “risk-off” market, Bonds rise – 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), Canadian dollar (CAD), New Zealand dollar (NZD) and minor currencies such as the ruble (RUB) and South African rand (ZAR) all tend to rise in markets that are “risk-on” .This is because the economies of these currencies depend heavily on commodity exports for growth, and commodities tend to rise in price during risky periods.This is because investors anticipate higher demand for commodities in the future the cause of intensified economic activity.

The main currencies that tend to rise during “risk-off” periods 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 world’s largest economy is unlikely to default. The yen, because of increased demand for Japanese government bonds, because a large proportion are held by domestic investors, who are unlikely to withdraw them – even in a crisis. Swiss franc, as strict Swiss banking laws provide investors with increased capital protection.

VaselineOctober 2, 2024

0 4 minutes read

PRICE USD this week

Frequently asked questions about sense of risk

Vaseline

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