Forex Today: Markets quiet down on Christmas Eve
Here is what you need to know on Wednesday, December 24:
The action in financial markets turns subdued on Wednesday as participants get ready for the Christmas holiday. Stock and bond markets in the US will open at the usual time but will close early on Christmas Eve, and the economic calendar will not feature any high-tier data releases until next week.
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 weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.70% | -1.01% | -1.26% | -0.85% | -1.57% | -1.77% | -0.98% | |
| EUR | 0.70% | -0.30% | -0.59% | -0.15% | -0.87% | -1.07% | -0.28% | |
| GBP | 1.01% | 0.30% | -0.19% | 0.15% | -0.58% | -0.77% | 0.02% | |
| JPY | 1.26% | 0.59% | 0.19% | 0.43% | -0.26% | -0.45% | 0.20% | |
| CAD | 0.85% | 0.15% | -0.15% | -0.43% | -0.65% | -0.92% | -0.13% | |
| AUD | 1.57% | 0.87% | 0.58% | 0.26% | 0.65% | 0.10% | 0.60% | |
| NZD | 1.77% | 1.07% | 0.77% | 0.45% | 0.92% | -0.10% | 0.80% | |
| CHF | 0.98% | 0.28% | -0.02% | -0.20% | 0.13% | -0.60% | -0.80% |
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 US Bureau of Economic Analysis (BEA) reported on Tuesday that the US' Gross Domestic Product (GDP) expanded at an annual rate of 4.3% in the third quarter. This print followed the 3.8% expansion recorded in the second quarter and came in much better than the market expectation of 3.3%. Other data from the US showed that Durable Goods Orders contracted by 2.2% on a monthly basis in October, while Industrial Production expanded by 0.2% in November. Although the US Dollar (USD) Index recovered from daily lows with the immediate reaction to the upbeat GDP data, it failed to extend its rebound later in the American session. The USD Index is down about 1% since the beginning of the week and stays quiet below 98.00 in the European morning.
Meanwhile, US President Donald Trump said in a social media post on Tuesday that anybody who disagrees with him will never be the chairman for the Federal Reserve, adding that he wants the new chairman to lower interest rates if the market is doing well. US stock index futures trade marginally lower early Wednesday after Wall Street's main indexes registered small gains on Tuesday.
Gold extended its weekly rally during the Asian trading hours and hit a new record-high above $4,520 before retreating below $4,500 by the European morning. Gold is up 3.5% this week and remains on track to end the fifth consecutive month in positive territory.
EUR/USD stays in a consolidation phase in the early European session after climbing above 1.1800 and setting a three-month-high.
GBP/USD is up 1% this week after posting strong gains on Monday and Tuesday. The pair holds steady above 1.3500 to start the European session.
USD/JPY remains under bearish pressure for the third consecutive day on Wednesday and declines toward 155.50.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.