Forex Today: US Dollar consolidates gains at multi-month highs as focus remains on geopolitics
|Here is what you need to know on Monday, April 15:
Growing expectations for a delay in the Federal Reserve's (Fed) policy pivot and escalating geopolitical tensions fuelled an impressive US Dollar (USD) rally last week. After rising over 1.5% in the previous week and touching its highest level since early November, the USD Index stays in a consolidation phase at around 106.00 early Monday. NY Empire State Manufacturing Index and Retail Sales data will be featured in the US economic docket.
Over the weekend, Iran launched an assault with dozens of drones in retaliation to the suspected Israeli attack on Iran’s consulate in Damascus on 1 April. "Iran, if necessary, will not hesitate to take further defensive measures to safeguard its legitimate interests against any military aggressions and unlawful use of force," the Iranian Foreign Ministry said in a statement. Meanwhile, UN Secretary-General Antonio Guterres condemned Iran’s drone attacks targeting Israel as a “serious escalation” and called on all sides to show restraint to avoid a devastating regional conflagration.
Following Friday's sharp decline seen in Wall Street, US stock index futures trade modestly higher to start the new week.
US Dollar price in the last 7 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies in the last 7 days. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.65% | 1.27% | 1.12% | 1.37% | 1.45% | 1.11% | 1.08% | |
| EUR | -1.68% | -0.38% | -0.54% | -0.28% | -0.20% | -0.54% | -0.59% | |
| GBP | -1.28% | 0.39% | -0.15% | 0.11% | 0.18% | -0.16% | -0.20% | |
| CAD | -1.13% | 0.54% | 0.16% | 0.25% | 0.34% | 0.00% | -0.04% | |
| AUD | -1.39% | 0.28% | -0.10% | -0.26% | 0.08% | -0.26% | -0.31% | |
| JPY | -1.45% | 0.22% | -0.15% | -0.31% | -0.06% | -0.30% | -0.35% | |
| NZD | -1.13% | 0.53% | 0.15% | 0.00% | 0.27% | 0.33% | -0.05% | |
| CHF | -1.08% | 0.58% | 0.20% | 0.05% | 0.30% | 0.38% | 0.04% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Middle East tensions escalate over the weekend after Iran attacks Israel.
Gold opened higher and advanced above $2,370 in the early Asian session before retreating below $2,360 by the European morning.
EUR/USD suffered heavy losses on Friday and broke below 1.0700. The pair seems to have stabilized at around 1.0650 in the early European session. Eurostat will release Industrial Production data for February later in the day.
GBP/USD lost 1.5% last week and registered its largest one-week decline since July. The pair stays relatively quiet below 1.2500 on Monday.
Japanese Finance Minister Shunichi Suzuki repeated on Monday that he is “watching FX moves closely," adding that he wants to be fully-prepared when asked about the broad Yen weakness. USD/JPY closed the previous week decisively higher and continued to push higher early Monday. At the time of press, the pair was trading at its highest level in over three decades near 154.00.
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.
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