The United States Federal Reserve (Fed) had a busy week. The Fed on Monday asked local banks in New York about their USD/JPY positions, fueling speculation that the United States may be preparing to cooperate with Japan on weakness in the Japanese yen (JPY). The news sparked a edged sell-off in the US dollar (USD) earlier this week.
The Fed met in mid-week. The central bank, as expected, left its target range for the federal funds rate unchanged at 3.50%-3.75%. Chairman Jerome Powell’s press conference focused on politics, Powell’s future and the subpoena, topics he was reluctant to discuss. On a positive note, Powell highlighted the marked improvement in economic growth and reduced risks associated with both inflation and employment.
The US Dollar Index (DXY) is trading near the 96.90 price area, recovering almost all of its weekly losses after US President Donald Trump finally named former Fed Governor Kevin Warsh as the next Fed chairman on Friday. The U.S. Senate must now confirm the nomination. On the other hand, next week the US will release the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) for January, MBA mortgage applications, January Challenger job layoffs and unemployment claims.
Today’s US dollar price
The table below shows the current percentage change of the United States Dollar (USD) against the major listed currencies. The US dollar was strongest against the Australian dollar.
| USD | EUR | GBP | JPY | BOOR | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.82% | 0.79% | 0.96% | 0.77% | 1.08% | 0.76% | 0.86% | |
| EUR | -0.82% | -0.03% | 0.11% | -0.05% | 0.26% | -0.10% | 0.04% | |
| GBP | -0.79% | 0.03% | 0.15% | -0.02% | 0.29% | -0.04% | 0.07% | |
| JPY | -0.96% | -0.11% | -0.15% | -0.19% | 0.11% | -0.22% | -0.11% | |
| BOOR | -0.77% | 0.05% | 0.02% | 0.19% | 0.30% | -0.01% | 0.09% | |
| AUD | -1.08% | -0.26% | -0.29% | -0.11% | -0.30% | -0.32% | -0.22% | |
| NZD | -0.76% | 0.10% | 0.04% | 0.22% | 0.00% | 0.32% | 0.10% | |
| CHF | -0.86% | -0.04% | -0.07% | 0.11% | -0.09% | 0.22% | -0.10% |
The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column and the quote currency from the top row. For example, if you select 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).
EUR/USD is trading near the 1.1880 price zone after the USD rebounded and made up almost all of the decline lost this week. Next week, Hamburg Commercial Bank (HCOB) will publish the manufacturing, services and composites PMIs for Germany and the euro zone. The euro area will publish the ECB bank lending survey and the December producer price index (PPI) for the euro area. Germany reports December data on factory orders and industrial production.
GBP/USD quotes are hovering near the level of 1.3600 due to the expectation that the Bank of England (BoE) will announce its decision on monetary policy on Thursday. This will be followed by a press conference from BoE Governor Andrew Bailey, during which he will provide recent insights into the central bank’s future interest rate path. The UK calendar includes the final January S&P Global PMIs and the Halifax House Price Report.
USD/JPY is trading near the 154.50 price zone, rebounding almost even after Tokyo CPI data showed inflation cooling in January. Headline inflation rose 1.5% y/y after 2% in December, while core inflation rates fell to 2%, below forecasts. This moderation in price pressures reduces the urgency for the Bank of Japan (BoJ) to raise interest rates.
USD/CAD is trading near the 1.3580 price zone and the Canadian dollar (CAD) is above the USD even after Canadian data showed the economy stalled in November, with GDP flat on the month after falling 0.3% earlier and missing expectations for a 0.1% gain.
The Canadian calendar will feature the S&P Global PMI and Ivey PMI indices in January.
Gold is trading near the $4,880 price zone, shedding all of its weekly gains after hitting a record high of $5,598 as some investors took profits and the US dollar (USD) surged.
Anticipating the economic outlook: voices on the horizon
Monday, February 2:
- Breeden from the BoE.
- Bostic Fed.
Tuesday, February 3:
Wednesday, February 4:
Thursday, February 5:
- BoE Governor Bailey.
- Bostic Fed.
- Bank of Canada (BoC) Governor Macklem.
Friday, February 6:
- Cipollone of the European Central Bank (ECB).
- Kocher from the ECB.
- BoE pill.
- Jefferson of the Fed.
Central bank meetings and upcoming data releases to shape monetary policy
Monday, February 2:
- Retail sales in December in Germany.
- American ISM manufacturing PMI index
Tuesday, February 3:
- Reserve Bank of Australia (RBA) decision on monetary policy.
- December in the US shakes up job offers.
Wednesday, February 4:
- Euro area – January Harmonized Index of Consumer Prices (HICP).
- January ADP employment change in the USA.
Thursday, February 5:
- Australia’s December trade balance.
- Retail sales in December in the euro zone.
- Decision of the Bank of England (BoE) on monetary policy.
- Decision of the European Central Bank (ECB) regarding monetary policy.
Friday, February 6 : :
- Canada January Net change in employment.
- Data on non-farm payrolls in the US in January.
- Michigan Consumer Sentiment Index for February in the US.
Gold FAQs
Gold has played a key role in human history as it has been widely used as a store of value and a medium of exchange. Nowadays, beyond its luster and employ in jewelry, the precious metal is widely viewed as a safe-haven asset, meaning it is considered a good investment in turbulent times. Gold is also widely seen as a hedge against inflation and currency depreciation because it is not tied to any particular issuer or government.
Central banks are the largest holders of gold. To support their currencies in turbulent times, central banks typically diversify their reserves and purchase gold to improve the perceived strength of the economy and currency. High gold reserves may provide a source of confidence in the country’s solvency. According to data from the World Gold Council, central banks added 1,136 tons of gold to their reserves in 2022, worth about $70 billion. This is the highest annual purchase since registration began. Central banks in emerging economies such as China, India and Turkey are rapidly increasing their gold reserves.
Gold has an inverse correlation with the US dollar and US treasury bonds, which are both major reserve assets and sheltered haven assets. When the dollar depreciates, gold tends to rise, allowing investors and central banks to diversify their holdings in turbulent times. Gold is also inversely correlated with risky assets. A rally in the stock market tends to weaken the price of gold, while sell-offs in riskier markets favor the precious metal.
The price may change due to many factors. Geopolitical instability or fear of a deep recession can quickly cause gold prices to rise due to its safe-haven status. Gold, as a non-yielding asset, tends to rise at lower interest rates, while the higher cost of money tends to weigh on the yellow metal. Still, most of the movements depend on the behavior of the US dollar (USD) when the asset is priced in dollars (XAU/USD). A forceful dollar tends to keep the gold price in check, while a weaker dollar will likely cause gold prices to rise.
