News & Analyses

US Dollar struggles to recover, more Fedspeak on the agenda

Here is what you need to know on Thursday, April 4:

The US Dollar (USD) came under renewed selling pressure on Wednesday and the USD Index closed the second consecutive day in negative territory. S&P Global will release revisions to Services PMI data for Germany, the Eurozone and the UK on Thursday. Later in the day, the US economic docket will feature weekly Initial Jobless Claims and Goods Trade Balance data for February. Several Federal Reserve (Fed) policymakers will be delivering speeches during the American trading hours.

ISM Services PMI in the US declined to 51.4 in March from 52.6 in February. This reading came in below the market expectation of 52.7 and weighed on the USD on Tuesday. Additionally, the Prices Paid Index of the survey, the inflation component, declined to 53.4 from 58.6. Later in the American session, Federal Reserve Chairman Jerome Powell reiterated that they were in no rush to reduce rates. “The Fed has time to let incoming data guide its policy decisions; the central bank is making decisions meeting by meeting,” Powell added. These comments failed to support the USD and the USD Index fell 0.5% on Wednesday.

Wall Street’s main indexes closed mixed on Wednesday and the benchmark 10-year US Treasury bond yield retreated toward 4.35% after reaching its highest level since November above 4.4%. Early Thursday, US stock index futures trade in positive territory.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Australian Dollar.

USD   -0.45% -0.13% -0.07% -0.83% 0.19% -0.83% 0.51%
EUR 0.45%   0.32% 0.38% -0.38% 0.65% -0.38% 1.00%
GBP 0.12% -0.33%   0.06% -0.70% 0.32% -0.70% 0.65%
CAD 0.06% -0.39% -0.08%   -0.77% 0.24% -0.78% 0.57%
AUD 0.82% 0.38% 0.70% 0.75%   1.01% -0.01% 1.33%
JPY -0.20% -0.64% -0.33% -0.24% -0.99%   -1.04% 0.34%
NZD 0.82% 0.37% 0.69% 0.76% 0.00% 1.00%   1.33%
CHF -0.54% -0.98% -0.65% -0.60% -1.37% -0.34% -1.36%  

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).


Earlier in the day, the data from Australia showed that Building Permits declined by 1.9% on a monthly basis in February, following the 2.5% contraction recorded in January. AUD/USD ignored the weak data and extended its recovery toward 0.6600 in the Asian session after rising more than 0.7% on Wednesday.

Australian Dollar holds position after gains amid firmer US Dollar, Initial Jobless Claims eyed.

EUR/USD preserves its bullish momentum early Thursday and trades in positive territory above 1.0800 after rising over 0.8% in the previous two days. 

GBP/USD advanced beyond 1.2600 and gained 0.6% on Wednesday. The pair clings to small daily gains above 1.2650 in the early European session.

Gold extended its rally and reached a new all-time high above $2,300 in the Asian session on Thursday. XAU/USD stages a technical correction and retreats toward $2,290 in the European trading hours.

Gold price remains on the defensive below $2,300 as traders look to US NFP on Friday.

USD/JPY ignores the selling pressure surrounding the USD and continues to move up and down in a narrow range above 151.50.

Japanese Yen struggles to attract buyers, hangs near multi-decade low against USD.


US Dollar FAQs

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 notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took 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 went away.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

In extreme situations, the Federal Reserve can also print more Dollars and enact 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 (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly 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 from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.


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