Forex Today: US Dollar recovery continues ahead of next batch of US data
by Eren Sengezer · FXStreetHere is what you need to know on Thursday, October 3:
The US Dollar (USD) continues to gather strength against its rivals for the fourth consecutive day on Thursday as market focus shifts to the next set of macroeconomic data releases from the US. The US Department of Labor will publish the weekly Initial Jobless Claims data in the early American session. Later in the day, August Factory Orders and September ISM Services PMI data will also be featured in the US economic docket. Additionally, Federal Reserve Bank of Minneapolis President Neel Kashkari and Federal Reserve Bank of Atlanta Raphael Bostic will be delivering speeches.
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 strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.21% | 1.69% | 2.90% | 0.09% | 0.59% | 1.64% | 1.30% | |
| EUR | -1.21% | 0.48% | 1.68% | -1.08% | -0.56% | 0.46% | 0.15% | |
| GBP | -1.69% | -0.48% | 1.31% | -1.55% | -1.03% | -0.02% | -0.33% | |
| JPY | -2.90% | -1.68% | -1.31% | -2.67% | -2.28% | -1.18% | -1.51% | |
| CAD | -0.09% | 1.08% | 1.55% | 2.67% | 0.55% | 1.55% | 1.24% | |
| AUD | -0.59% | 0.56% | 1.03% | 2.28% | -0.55% | 1.02% | 0.71% | |
| NZD | -1.64% | -0.46% | 0.02% | 1.18% | -1.55% | -1.02% | -0.33% | |
| CHF | -1.30% | -0.15% | 0.33% | 1.51% | -1.24% | -0.71% | 0.33% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
After closing the first two days of the week in positive territory, the USD Index pushed higher and gained nearly 0.4% on Wednesday. Early Thursday, the index continues to stretch higher and was last seen trading at its highest level in a month at around 101.80. In the meantime, US stock index futures stay in negative territory early Thursday, reflecting a cautious market mood.
EUR/USD extended its weekly downtrend and closed below 1.1050 on Wednesday. The pair stays on the back foot early Thursday and trades near 1.1030. Eurostat will publish Producer Price Index data for August later in the session.
GBP/USD remains under heavy bearish pressure after posting losses on Wednesday and trades at its lowest level in over two weeks near 1.3150 in the European morning, losing over 0.8% on a daily basis. In an interview with the Guardian newspaper, Bank of England Governor Andrew Bailey said that they could become "a bit more activist on rate cuts if there’s further good news on inflation," triggering a Pound Sterling selloff.
USD/JPY surged higher and gained over 2% on Wednesday. After touching its strongest level since late August at 147.24 during the Asian trading hours on Thursday, the pair lost its traction and was last seen trading flat on the day slightly below 146.50.
The data from Australia showed earlier in the day that Exports and Imports both declined by 0.2% on a monthly basis in August. AUD/USD ignored these data and was last seen trading in the red at around 0.6860.
Despite the persistent USD strength, Gold managed to hold its ground and registered marginal losses on Wednesday, supported by the escalating geopolitical tensions. XAU/USD struggles to gain traction on Thursday and trades below $2,650.
US Dollar FAQs
What is the US Dollar?
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.
How do the decisions of the Federal Reserve impact the US Dollar?
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.
What is Quantitative Easing and how does it influence the US Dollar?
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.
What is Quantitative Tightening and how does it influence the 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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