Market Update – September 12th
Here’s what you should keep an eye on today:
US Dollar (USD)
The US dollar is expected to stabilize after a decline seen on Thursday. The focus is now turning towards the preliminary consumer index data for September. Traders are also monitoring comments from officials at the European Central Bank (ECB) since their quiet period following the policy announcement has come to an end.
This Week’s US Dollar Price
The changes in the US dollar against various currencies this week indicate that it was particularly weak against the Australian dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.25% | -0.39% | -0.56% | 0.03% | -1.60% | -1.21% | -0.31% | |
| EUR | 0.25% | -0.15% | -0.28% | 0.27% | -1.33% | -0.93% | -0.06% | |
| GBP | 0.39% | 0.15% | -0.20% | 0.42% | -1.19% | -0.77% | 0.09% | |
| JPY | 0.56% | 0.28% | 0.20% | 0.55% | -1.05% | -0.79% | 0.29% | |
| CAD | -0.03% | -0.27% | -0.42% | -0.55% | -1.53% | -1.19% | -0.34% | |
| AUD | 1.60% | 1.33% | 1.19% | 1.05% | 1.53% | 0.42% | 1.30% | |
| NZD | 1.21% | 0.93% | 0.77% | 0.79% | 1.19% | -0.42% | 0.87% | |
| CHF | 0.31% | 0.06% | -0.09% | -0.29% | 0.34% | -1.30% | -0.87% |
The changes in the table represent how the US dollar is moving against each listed currency. For instance, if you’re looking at USD to JPY, the box shows how that rate has changed.
The ECB held its key rates steady, which was not surprising after their September meeting. In a press conference, ECB president Christine Lagarde avoided providing new insights on rate projections, emphasizing that they were not following a specific path. Following a dip to 1.1660, the EUR/USD bounced back to close above 1.1700. On Friday, the pair seems to be consolidating below 1.1750.
The U.S. Bureau of Labor Statistics shared on Thursday that annual inflation in the U.S., as per the Consumer Price Index, increased to 2.9% from 2.7% in July. The core CPI, which discounts volatile items like food and energy, rose by 0.3% month-over-month. These figures align with analyst expectations. However, concerns arose when the Labor Department reported a rise in first-time unemployment claims to 263,000 for the week ending September 6, exceeding last week’s forecast of 236,000. As a result, after these numbers were released, the USD index dropped approximately 0.3%, currently holding just above 97.50, while U.S. stock futures fell about 0.1%.
In the UK, the National Statistics Office revealed early Friday that GDP remained unchanged in July. In contrast, industrial and manufacturing production fell, with declines of 0.9% and 1.3% respectively. At this point, GBP/USD is trading slightly above 1.3550.
The USD/JPY pair saw a minor loss on Thursday after struggling to stay above 148.00. For Friday’s European session, it’s expected to hover around 147.50. The Japan External Trade Ministry announced it would be introducing further export restrictions on some foreign firms as part of ongoing sanctions against Russia’s actions in Ukraine.
Gold, on the other hand, failed to gain upward momentum and decreased modestly on Thursday. Currently, XAU/USD is trading at about $3,650.
ECB FAQ
The European Central Bank, located in Frankfurt, Germany, serves as the eurozone’s reserve bank. Its main responsibilities include setting interest rates and managing the region’s monetary policy, aiming to keep inflation around 2%. Typically, the ECB raises or lowers interest rates to achieve this goal. Higher interest rates usually lead to a stronger euro, while lower rates tend to weaken it. Key monetary policy decisions are made at eight scheduled meetings each year, involving six permanent council members along with the head of the national bank and ECB president Christine Lagarde.
In exceptional situations, the ECB can deploy a tool known as quantitative easing (QE). This process involves the bank printing euros and buying assets—typically government or corporate bonds—from financial institutions. QE is intended to provide liquidity and usually has a weakening effect on the euro, employed as a last resort when lowering interest rates doesn’t suffice. It was notably used during the financial crisis from 2009-2011 and during the COVID-19 pandemic.
Quantitative tightening (QT) serves as the counterbalance to QE, often implemented once economic recovery is in progress and inflation begins to rise. During QT, the ECB stops purchasing bonds and refrains from reinvesting the principal of existing ones, which is generally a positive sign for the euro.
