The US dollar is trying to find support after last week’s sell-off
Here’s what you need to know on Monday, August 26:
The US dollar (USD) remains stable against its major rivals early on Monday after suffering heavy losses in the previous week. IFO sentiment data from Germany will be on the European agenda. Later in the day, durable goods orders data for July and Dallas Fed Manufacturing Business Index data for August from the US will be closely watched by market participants.
US Dollar PRICE Last 7 days
The following table shows the percentage change of the US dollar (USD) against major listed currencies over the last 7 days. The US dollar was the weakest against the Japanese yen.
| USD | EUR | GBP | EUR | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.37% | -1.89% | -2.67% | -1.25% | -1.53% | -2.61% | -2.14% | |
| EUR | 1.37% | -0.60% | -1.29% | 0.12% | -0.24% | -1.42% | -0.81% | |
| GBP | 1.89% | 0.60% | -0.85% | 0.70% | 0.35% | -0.76% | -0.21% | |
| EUR | 2.67% | 1.29% | 0.85% | 1.38% | 1.14% | 0.18% | 0.40% | |
| CAD | 1.25% | -0.12% | -0.70% | -1.38% | -0.31% | -1.30% | -0.94% | |
| AUD | 1.53% | 0.24% | -0.35% | -1.14% | 0.31% | -1.03% | -0.57% | |
| NZD | 2.61% | 1.42% | 0.76% | -0.18% | 1.30% | 1.03% | 0.49% | |
| CHF | 2.14% | 0.81% | 0.21% | -0.40% | 0.94% | 0.57% | -0.49% |
The heatmap shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column, while the quote currency is selected 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 shown in the box corresponds to USD (base)/JPY (quote).
The USD came under heavy selling pressure on Friday after U.S. Federal Reserve (Fed) Chairman Jerome Powell delivered a dovish speech. In his opening remarks at the annual Jackson Hole Economic Symposium, Powell said the time has come for monetary policy adjustment. “We will do everything we can to support a strong labor market while we continue to make progress toward price stability,” he added. The USD index fell 0.8% on Friday, losing 1.7% for the week, while the 10-year U.S. Treasury yield fell nearly 1.5% following Powell’s speech. Early Monday, the 10-year yield remained in negative territory below 3.8% and the USD index is fluctuating in a tight channel around 100.70.
Reuters reported over the weekend that Hezbollah fired hundreds of rockets and drones at Israel early Sunday. The Israeli military said it had carried out a wave of preemptive strikes in southern Lebanon to repel a large-scale Hezbollah rocket and drone attack. US stock index futures were marginally lower in Europe on Monday morning.
EUR/USD gained bullish momentum ahead of the weekend, hitting its highest level in over a year at 1.1200. The pair is in a consolidation phase early Monday and was last seen trading around 1.1180.
GBP/USD continued its weekly rally on Friday, rising above 1.3200 for the first time since March 2022. The pair is slightly lower in the European morning and is trading a few pips below 1.3200.
USD/JPY remains under downward pressure at the start of the week after losing over 1% on Friday, trading deep in the red below 144.00. Earlier in the day, data from Japan showed that the benchmark index rose to 109.0 in June from 108.6 in May.
Gold rose sharply on Friday to close the week above $2,500. XAU/USD continues its uptrend in the European morning and approaches the $2,520 mark.
Frequently Asked Questions about the Fed
Monetary policy in the U.S. is determined by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and to promote full employment. Its main tool for achieving these goals is adjusting interest rates. When prices rise too quickly and inflation is above the Fed’s 2% target, it raises interest rates, which increases the cost of borrowing across the economy. This leads to a stronger U.S. dollar (USD) because it makes the U.S. 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 can cut interest rates to encourage borrowing, which weighs on the greenback.
The Federal Reserve (Fed) holds eight meetings a year at which the Federal Open Market Committee (FOMC) assesses the economic situation and makes monetary policy decisions. The FOMC is attended by twelve Fed representatives – the seven members of the Board of Governors, the President of the Federal Reserve Bank of New York, and four of the remaining eleven presidents of the regional reserve banks, who serve a rotating one-year term.
In extreme situations, the Federal Reserve may resort to a policy called quantitative easing (QE). QE is the process by which the Fed significantly 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-quality bonds from financial institutions. QE usually weakens the U.S. 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 capital from the maturing bonds to buy new bonds. This usually has a positive effect on the value of the U.S. dollar.
