Forex Today: Choppy action continues as investors await next catalyst
|Here is what you need to know on Wednesday, June 26:
Major currency pairs continue to fluctuate in familiar ranges as market participants refrain from taking large positions in the absence of fundamental drivers. The US economic calendar will feature New Home Sales data for May on Wednesday. Later in the American session, the US Treasury will hold a 5-year note auction.
The US Dollar (USD) Index, which gauges the USD's valuation against a basket of six major currencies, registered small gains on Tuesday as the mixed action in Wall Street continued. The Dow Jones Industrial Average lost 0.76% on the day, while the Nasdaq Composite gained more than 1%. Early Wednesday, the USD Index clings to modest gains above 105.50 and US stock index futures trade marginally higher.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | -0.19% | 0.08% | -0.19% | -0.51% | 0.14% | 0.28% | |
| EUR | -0.04% | -0.22% | 0.09% | -0.19% | -0.53% | 0.14% | 0.31% | |
| GBP | 0.19% | 0.22% | 0.24% | 0.03% | -0.32% | 0.33% | 0.53% | |
| JPY | -0.08% | -0.09% | -0.24% | -0.27% | -0.56% | 0.14% | 0.20% | |
| CAD | 0.19% | 0.19% | -0.03% | 0.27% | -0.31% | 0.32% | 0.51% | |
| AUD | 0.51% | 0.53% | 0.32% | 0.56% | 0.31% | 0.67% | 0.85% | |
| NZD | -0.14% | -0.14% | -0.33% | -0.14% | -0.32% | -0.67% | 0.17% | |
| CHF | -0.28% | -0.31% | -0.53% | -0.20% | -0.51% | -0.85% | -0.17% |
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).
The data from Australia showed earlier in the day that the Consumer Price Index (CPI) rose 4% on a yearly basis in May. This reading followed the 3.6% increase recorded in April and came in above the market expectation of 3.8%. AUD/USD gathered bullish momentum after this data and climbed to its highest level in two weeks near 0.6700.
Statistics Canada reported on Wednesday that the annual CPI rose 2.9% in May, surpassing analysts' estimate for an increase of 2.6%. After falling toward 1.3600 with the immediate reaction to the hot inflation data, USD/CAD staged a rebound and was last seen moving up and down in a tight channel slightly above 1.3650.
GfK Consumer Confidence edged lower to -21.8 in Germany in July from -21.0. EUR/USD stays under modest pressure and trades below 1.0700 in the European morning on Wednesday.
Following Monday's rebound, GBP/USD struggled to preserve its bullish momentum and closed flat on Tuesday. The pair stays on the back foot and trades below 1.2700 early Wednesday.
After ending the day virtually unchanged on Tuesday, USD/JPY advances toward 160.00 in the early European session on Wednesday. In the early trading hours of the Asian session on Thursday, May Retail Trade data from Japan will be looked upon for fresh impetus.
Gold turned south and closed near $2,320 on Tuesday, erasing all of Monday's gains in the process. XAU/USD struggles to gain traction early Wednesday and fluctuates at around $2,315.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
(This story was corrected on June 26 at 07:39 GMT to say that Retail Trade data from Japan will be released on Thursday instead of Tuesday.)
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