Here’s what you should know on Thursday, February 19th.
The momentum for the United States dollar (USD) gained traction late Wednesday, largely due to the hawkish tone found in the minutes from the Federal Reserve’s January policy meeting. The US economic calendar also features data on December’s goods trade balance and the weekly new unemployment insurance claims. Investors, however, will be keeping a close eye on geopolitical developments.
USD price this week
Below is a table showing the percentage change of the US dollar (USD) versus major currencies for this week. Notably, the USD has been the strongest against the Japanese yen.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.62% | 1.04% | 1.57% | 0.53% | -0.01% | 0.77% | 0.52% | |
| EUR | -0.62% | 0.42% | 0.95% | -0.09% | -0.64% | 0.15% | -0.10% | |
| GBP | -1.04% | -0.42% | 0.27% | -0.50% | -1.05% | -0.27% | -0.52% | |
| JPY | -1.57% | -0.95% | -0.27% | -1.03% | -1.54% | -0.79% | -1.00% | |
| CAD | -0.53% | 0.09% | 0.50% | 1.03% | -0.58% | 0.25% | -0.02% | |
| australian dollar | 0.00% | 0.64% | 1.05% | 1.54% | 0.58% | 0.80% | 0.54% | |
| new zealand dollar | -0.77% | -0.15% | 0.27% | 0.79% | -0.25% | -0.80% | -0.25% | |
| swiss franc | -0.52% | 0.10% | 0.52% | 1.00% | 0.02% | -0.54% | 0.25% |
This heat map indicates the percentage changes across major currencies. The left column shows the base currency while the top row indicates the quote currency. For example, selecting USD from the left column and moving across to JPY shows the percentage change for USD (base)/JPY (quote).
The Fed’s recent publications clarified that the committee doesn’t have a strictly one-sided approach. Some policymakers indicated a willingness to adopt a more balanced view on future decisions, suggesting a rate increase might be warranted if inflation remains stubbornly high. Lloyd Chan, a senior currency analyst at MUFG, analyzed the FOMC minutes, stating, “Although there are divergent views, the hawkish signal from the Fed minutes still supports near-term sentiment for the USD.” The US dollar index rose over 0.5% on Wednesday, reaching a one-week peak around 97.80 early Thursday in Asia. By the time of the report, the index was trading flat at approximately 97.70, showing little change for the day.
In related news, CBS reported early Thursday that the U.S. military is gearing up for a potential strike against Iran as early as Saturday. Sources mention that the USS Abraham Lincoln carrier group is already in the area, while another carrier group, the USS Gerald Ford, is heading toward the Middle East. As a result, gold prices have risen amidst these rising geopolitical tensions, trading positively above $5,000.
Australian data released early Thursday revealed that the unemployment rate held steady at 4.1% in January, surpassing market expectations of 4.2%. The employment change for the month stood at +17,800, which was slightly lower than the anticipated +20,000. The Australian dollar/US dollar experienced positive movement, trading above 0.7050 on Thursday.
New Zealand’s new Reserve Bank Governor Anna Breman mentioned on Thursday that the committee is prepared to adjust its policy stance if the inflation outlook changes to ensure it meets target levels. After a decline of over 1% on Wednesday, the New Zealand dollar/US dollar rebounded by more than 0.3% to trade around 0.5980 on the day.
Under pressure from the stronger US dollar, the euro/usd shares fell in U.S. markets on Wednesday, down about 0.6% for the day. However, the pair saw a corrective rise early Thursday, trading around 1.1800.
GBP/USD declined more than 0.5% on Wednesday, closing in the negative for the third consecutive day. After dropping to a four-week low of 1.3480 during Asian trading, it managed a recovery to approximately 1.3500 by Thursday morning in Europe.
USD/JPY continued its upward trend after a nearly 1% gain on Wednesday, now trading around 155.00.
US Dollar Frequently Asked Questions
The United States Dollar (USD) serves as the official currency of the United States and is widely used in several other nations alongside local currencies. It stands as the most traded currency globally, handling over 88% of foreign currency transactions, with an average daily trading volume of $6.6 trillion as of 2022. Following World War II, the USD took over from the British pound as the world’s reserve currency, having historically been backed by gold until the abolition of the gold standard in 1971.
The primary factor affecting the value of the US dollar is the monetary policy set by the Federal Reserve System (Fed). The Fed has two main objectives: achieving price stability (controlling inflation) and promoting full employment. To meet these goals, it adjusts interest rates. Should inflation rise too quickly above the Fed’s 2% target, interest rates will be increased to bolster the USD’s value. Conversely, if inflation drops below 2% or if unemployment remains high, interest rates may be reduced, impacting the dollar negatively.
In extreme scenarios, the Federal Reserve can opt to print more dollars and implement quantitative easing (QE). This is a strategy used to enhance credit flow in a struggling financial system, deployed when credit resources are exhausted. It’s a last resort after interest rate cuts fail to yield results. This method was notably utilized during the Great Financial Crisis of 2008, where the Fed increased the money supply to purchase U.S. Treasuries primarily from financial institutions. QE tends to weaken the US dollar.
On the flip side, quantitative tightening (QT) involves the Fed halting bond purchases from financial institutions and refraining from reinvesting in new purchases. This process is usually favorable for the US dollar.
