Key Updates for Tuesday, September 16th
US Dollar (USD) is expected to experience some downward pressure early Tuesday as traders adjust their positions for the Federal Reserve’s important two-day policy meeting. On the first, various data will be released, including August’s retail sales figures and import/export price indexes.
This Week’s US Dollar Performance
The following table outlines the shifts in the US dollar (USD) against other major currencies this week. Notably, the dollar has struggled against the British pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.54% | -0.59% | -0.53% | -0.51% | -0.35% | -0.38% | -0.56% | |
| EUR | 0.54% | -0.03% | -0.05% | 0.03% | 0.22% | 0.12% | -0.03% | |
| GBP | 0.59% | 0.03% | 0.04% | 0.05% | 0.25% | 0.14% | -0.12% | |
| JPY | 0.53% | 0.05% | -0.04% | 0.00% | 0.24% | 0.15% | -0.02% | |
| CAD | 0.51% | -0.03% | -0.05% | -0.00% | 0.27% | 0.09% | -0.17% | |
| AUD | 0.35% | -0.22% | -0.25% | -0.24% | -0.27% | -0.11% | -0.29% | |
| NZD | 0.38% | -0.12% | -0.14% | -0.15% | -0.09% | 0.11% | -0.26% | |
| CHF | 0.56% | 0.03% | 0.12% | 0.02% | 0.17% | 0.29% | 0.26% |
The table provides an overview of each currency’s change. Selections can be made from the left column and across the top. For instance, choosing USD from the left and JPY from the top will show the relevant rate of change.
On Monday, the USD Index finished in negative territory, which impacted market sentiment during the US session. Wall Street started strong but ended positively. As of early Tuesday, the USD index continued to fall, hitting its lowest point in over two months at just above 97.00. US stock index futures are showing mixed signals.
The UK’s National Statistics Office (ONS) reported that the ILO unemployment rate remained steady at 4.7% for the three months ending in July. During this time, annual wage inflation, excluding bonuses, dipped from 5% to 4.8%, aligning with market forecasts. GBP/USD has built on Monday’s gains, trading above 1.3620. ONS is set to publish August inflation data on Wednesday.
EUR/USD is poised to benefit from the USD’s weakening, moving toward 1.1800 on Tuesday morning in Europe. Later in the session, the ZEW Survey – Economic Sentiment data for Germany and the Eurozone, along with July’s industrial production data for the Eurozone, will be monitored closely by traders.
Following a nearly 0.5% loss on Monday, USD/CAD is expected to remain subdued in Tuesday’s European session, trading below 1.3800. Early in the US session, Canada will release August’s Consumer Price Index (CPI) data, with the Bank of Canada (BOC) announcing its policy decision on Wednesday.
USD/JPY is trending downward below 147.00 during the European morning, and the Japanese Economic Calendar will include commodity trade balance data for August in early Asian hours.
After a slow start to the week, XAU/USD gained bullish momentum on Monday, rising almost 1%. On Tuesday morning in Europe, it will likely continue to rise, trading near the new record high of $3,680.
Frequently Asked Questions about the Fed
What drives US monetary policy?
The Federal Reserve sets US monetary policy, focusing on price stability and full employment. Interest rates are the main tool for achieving these objectives. When inflation is high, rates go up, making the dollar more appealing. Conversely, if inflation is low or unemployment is high, rates may be cut to stimulate borrowing.
How often does the Fed meet for policy decisions?
The Federal Reserve meets eight times a year during which the Federal Open Market Committee (FOMC) reviews the economic landscape and decides on policies. The FOMC consists of 12 federal officials, including seven from the Governor’s Committee and four from the Regional Reserve Bank presidents, serving on a rotating basis.
What is Quantitative Easing (QE)?
In extraordinary situations, the Federal Reserve can implement Quantitative Easing (QE), which significantly increases credit flow in the economy. This non-standard measure is typically used during crises or when inflation is very low. For example, during the 2008 financial crisis, the Fed resorted to QE by purchasing high-quality bonds, which usually leads to a depreciation of the dollar.
What is Quantitative Tightening (QT)?
Quantitative Tightening (QT) is the opposite of QE, involving the Fed stopping bond purchases and not reinvesting maturing bonds. This generally has a positive effect on the dollar’s value.
