- USD/CAD drops sharply to nearly 1.4200 as the US dollar is below its major peers' performance.
- Our initial unemployed claims have been slightly higher.
- Fed officials are worried about the increased risk of inflation being the other way around.
The USD/CAD pair approaches a key level of 1.4200 North American trading hours on Thursday. The Rooney Pair is weakened as the US Dollar (USD) performs its main peer, with the US Dollar Index (DXY) dropping to nearly 106.70.
Today's US Dollar Price
The table below shows the rate of change in the US dollar (USD) against today's listed currencies. The US dollar was the strongest against the Canadian dollar.
| USD | EUR | GBP | JPY | CAD | aud | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.32% | -0.25% | -1.00% | -0.24% | -0.62% | -0.76% | -0.28% | |
| EUR | 0.32% | 0.06% | -0.69% | 0.08% | -0.31% | -0.44% | 0.02% | |
| GBP | 0.25% | -0.06% | -0.74% | 0.02% | -0.37% | -0.51% | -0.01% | |
| JPY | 1.00% | 0.69% | 0.74% | 0.77% | 0.38% | 0.20% | 0.72% | |
| CAD | 0.24% | -0.08% | -0.02% | -0.77% | -0.38% | -0.52% | -0.03% | |
| aud | 0.62% | 0.31% | 0.37% | -0.38% | 0.38% | -0.14% | 0.37% | |
| NZD | 0.76% | 0.44% | 0.51% | -0.20% | 0.52% | 0.14% | 0.50% | |
| CHF | 0.28% | -0.02% | 0.01% | -0.72% | 0.03% | -0.37% | -0.50% |
The heatmap shows the rate of change of each other's major currencies. The base currency is selected from the left column, and the estimated currency is selected from the top row. For example, if you select US dollars from the left column and move along the horizon to Japanese Yen, the rate of change shown in the box represents USD (base)/JPY (QUOTE).
Greenback will face sales pressure after the release of US (US) initial unemployment claims data, slightly exceeding expectations for the week ending February 14th. Estimated to 215k.
The US dollar has already performed poorly despite US President Donald Trump's announcement Wednesday that tariffs on cars, semiconductors and drugs could be imposed within next month. Market participants expect Trump's tariff agenda could lead to a global trade war. Such a scenario would result in a global slowdown.
Meanwhile, the Hawkish Federal Open Market Committee (FOMC) meeting at its January meeting also failed to support the US dollar. FOMC minutes on Wednesday showed officials were more concerned about deepening the risk of rising inflation due to Trump's policy than risks to the labor market.
At the policy meeting, the Fed has stabilized interest rates in the range of 4.25% to 4.50%, leading to a cautious attitude towards interest rate reductions.
In neighboring countries, investors are awaiting December's retail sales data to be released on Friday. Monthly retail sales, an important measure of consumer spending, is estimated to have grown by 1.6% after maintaining the flat in December.
US Dollar FAQ
The US dollar (USD) is the official currency of the United States and is “effectively” currency in a considerable number of other countries in circulation along with local notes. According to data from 2022, it is the most frequently traded currency in the world, accounting for more than 88% of global forex sales, or an average of $6.6 trillion per day. After World War II, the US dollar took over from the British pound as the world's reserve currency. For much of its history, the US dollar was supported by gold, but in 1971 there was the Bretton Woods Agreement, which lost its gold standard.
The most important single factor affecting the value of the US dollar is monetary policy shaped by the Federal Reserve. The Fed has two tasks: achieving price stability (control inflation) and promoting full employment. The main tool to achieve these two goals is adjusting interest rates. When prices rise rapidly and inflation exceeds the Fed's 2% target, the Fed will raise interest rates and help the USD value. If inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which is heavier on the greenback.
In extreme circumstances, the Federal Reserve could also print more dollars and enact quantitative easing (QE). QE is a process that dramatically increases the credit flow in the financial system where the Fed has been stuck. This is a non-standard policy measure used when credits run out (due to the fear of counterparty defaults) as banks are not lending to each other. If you're not likely to achieve the desired outcome simply by lowering your interest rates, this is a last resort. Fed combating the credit crunch that occurred during the 2008 financial crisis was a weapon of choice for the Fed. It involves printing Fed prints in more dollars and using them to buy US government bonds primarily from financial institutions. QE usually weakens the US dollar.
Quantitative tightening (QT) is the reverse process in which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest principal from mature bonds with new purchases. Usually, it's positive for US dollars.
