News & Analyses

Markets start the new week in a calm manner

Here is what you need to know on Monday, May 6:

The action in financial markets remains subdued at the start of the week. The US Dollar (USD) holds steady and US stock index futures trade little changed. HCOB will release revisions to April PMI data for Germany and the Eurozone on Monday and Eurostat will publish Producer Price Index figures for March. The US economic docket will not offer any high-tier data releases but investors will pay close attention to comments from Federal Reserve (Fed) policymakers.

US Dollar price in the last 7 days

The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the weakest against the Japanese Yen.

USD   -0.51% -0.28% 0.21% -1.08% -2.80% -0.92% -0.86%
EUR 0.51%   0.23% 0.72% -0.57% -2.25% -0.40% -0.33%
GBP 0.29% -0.24%   0.49% -0.81% -2.51% -0.63% -0.56%
CAD -0.21% -0.75% -0.49%   -1.30% -3.01% -1.13% -1.07%
AUD 1.07% 0.57% 0.80% 1.29%   -1.68% 0.17% 0.23%
JPY 2.71% 2.22% 2.44% 2.90% 1.62%   1.80% 1.88%
NZD 0.91% 0.40% 0.62% 1.11% -0.17% -1.86%   0.07%
CHF 0.85% 0.34% 0.56% 1.05% -0.23% -1.92% -0.07%  

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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).


The USD Index (DXY) came under heavy selling pressure in the American session on Friday following the disappointing labor market data. Although the DXY managed to stage a late rebound, it lost nearly 1% for the week. Early Monday, the index moves sideways slightly above 105.00 and the benchmark 10-year US Treasury bond yield stays deep in negative territory near 4.5%.

AUD/USD gathered bullish momentum and reached its highest level since mid-March at 0.6650 on Friday. The pair retreated slightly at the beginning of the week but managed to stabilize above 0.6600. In the Asian trading hours on Tuesday, the Reserve Bank of Australia (RBA) will announce monetary policy decisions. The RBA is widely forecast to hold the policy rate unchanged at 4.35%.

Australian Dollar remains firmer due to improved risk appetite.

EUR/USD advanced to a fresh multi-week high above 1.0800 on Friday but erased a portion of its daily gains heading into the weekend. Nevertheless, the pair rose over 0.5% for the week. Early Monday, EUR/USD fluctuates in a tight channel above 1.0750.

After spiking above 1.2630 in the early American session on Friday, GBP/USD reversed its direction and closed the day at around 1.2550. The pair holds steady near its weekly closing level in the European morning.

USD/JPY lost more than 3% in the previous week and registered its largest one-week loss since late 2022, pressured by suspected fx interventions. The pair stages a rebound early Monday and was last seen rising more than 0.6% near 154.00.

Gold closed in negative territory for the second consecutive week but managed to hold above $2,300. XAU/USD edged higher in the European morning and was last seen trading above $2,310.


The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “ contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.

While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.

Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.

Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.

Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.


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