Here’s what you need to know on Wednesday, February 4:
The Reserve Bank of Australia (RBA) raised its interest rate by 25 basis points to 3.85%, in line with market expectations. The RBA’s hawkish tone indicates that inflationary pressures are likely to persist, suggesting further policy tightening may be on the horizon. The market is currently pricing in another interest rate raise by the end of the year
Iranian President Masoud Pezeshkian said Tehran would resume nuclear negotiations with the US, a move that could facilitate ease regional tensions and support the US dollar (USD).
On the other side of the pond, the Bureau of Labor Statistics (BLS) announced Monday that the United States (US) January employment report, scheduled for release on Friday, will be delayed due to the ongoing partial government shutdown. As a result, investors will have to rely on private sector indicators such as the ADP employment changes report, which is scheduled for release on Wednesday.
The U.S. Dollar Index (DXY) is trading near the 97.40 level, with little movement as the ongoing partial U.S. government shutdown keeps the U.S. dollar steady.
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 Japanese yen.
| USD | EUR | GBP | JPY | BOOR | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.14% | -0.08% | 0.08% | -0.11% | -0.65% | -0.54% | -0.50% | |
| EUR | 0.14% | 0.06% | 0.20% | 0.03% | -0.51% | -0.40% | -0.36% | |
| GBP | 0.08% | -0.06% | 0.17% | -0.03% | -0.57% | -0.46% | -0.42% | |
| JPY | -0.08% | -0.20% | -0.17% | -0.17% | -0.71% | -0.57% | -0.56% | |
| BOOR | 0.11% | -0.03% | 0.03% | 0.17% | -0.54% | -0.42% | -0.39% | |
| AUD | 0.65% | 0.51% | 0.57% | 0.71% | 0.54% | 0.11% | 0.16% | |
| NZD | 0.54% | 0.40% | 0.46% | 0.57% | 0.42% | -0.11% | 0.04% | |
| CHF | 0.50% | 0.36% | 0.42% | 0.56% | 0.39% | -0.16% | -0.04% |
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 1.1820 price zone ahead of Thursday’s monetary policy decision by the European Central Bank (ECB).
GBP/USD is hovering around 1.3690 and is slowly rising as the depreciating USD gives the advantage to the British Pound (GBP).
USD/CAD is trading near the 1.3650 level, having lost almost all of its intraday gains. Last week, the Bank of Canada (BoC) left the overnight rate unchanged at 2.25% at its January meeting.
AUD/USD is trading in the 0.7000 price zone following the RBA interest rate hike.
USD/JPY is trading near a weekly high near the 155.80 price area.
Gold is trading near the $4,910 price zone, recovering almost all of Monday’s losses.
What’s next on the docket:
Wednesday, February 4:
- Euro area – January Harmonized Index of Consumer Prices (HICP).
- January ADP employment change in the US.
- January U.S. ISM Purchasing Managers’ Index (PMI).
- Australia’s December trade balance.
Thursday, February 5:
- 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.
- 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 utilize 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.
