Forex News
- US Dollar Index declines as traders adopt caution after federal prosecutors open a criminal investigation into Fed Chair Powell.
- Traders reassess Fed rate-cut prospects after weaker-than-expected December job growth.
- The US Dollar may strengthen amid rising geopolitical tensions after President Trump warned Tehran against using force on protesters.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is halting its four-day winning streak and trading around 99.00 during the Asian hours on Monday.
Market caution has grown around the Federal Reserve after federal prosecutors opened a criminal investigation into Fed Chair Jerome Powell over the central bank’s Washington headquarters renovation and whether he misled Congress about the project’s scope, the New York Times reported Sunday.
The Greenback faces challenges as traders assess the likelihood of further US Federal Rate cuts after the recent jobs report showed job growth fell short of expectations in December. US Nonfarm Payrolls (NFP) rose by 50,000 in December, falling short of November's 56,000 (revised from 64,000) and came in weaker than the market expectation of 60,000. However, the Unemployment Rate ticked lower to 4.4% in December from 4.6% in November.
Richmond Fed President Tom Barkin said the decline in the unemployment rate was welcome and described job growth as modest but stable. Barkin added that it is difficult to find firms outside healthcare or AI that are hiring and said it remains unclear whether the labor market will tilt toward more hiring or more firing.
Traders continue to price in two Fed rate cuts this year, though the central bank is widely expected to keep policy unchanged later this month. According to the CME Group's FedWatch tool, Fed funds futures continue to price in about a 95% probability that the US central bank will keep rates unchanged at its January 27–28 meeting.
However, the US Dollar may further gain ground amid increased geopolitical tensions. US President Donald Trump warned Tehran against using force on demonstrators and signaled possible action if the crackdown intensifies, while Iranian officials cautioned against any US or Israeli intervention. Meanwhile, European countries led by the UK and Germany are considering increasing their military presence in Greenland to bolster Arctic security.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact 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 when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- Silver price hit a 10-day high of $84.02 on Monday.
- Precious metals gain as safe-haven demand rises amid escalating geopolitical tensions.
- Traders turn cautious as federal prosecutors open a criminal investigation into Fed Chair Jerome Powell.
Silver price (XAG/USD) extends its gains for the second successive day, trading around $83.10 per troy ounce during the Asian hours on Monday. Precious metals, including Silver, attract buyers as safe-haven demand rises amid escalating geopolitical tensions.
Investors closely watched nationwide protests in Iran, now in their third week and reportedly claiming hundreds of lives. US President Donald Trump warned Tehran against using force on demonstrators and signaled possible action if the crackdown intensifies, while Iranian officials cautioned against any US or Israeli intervention.
Bloomberg reported that European countries led by the UK and Germany are considering increasing their military presence in Greenland to bolster Arctic security. Germany may propose a joint NATO mission, while UK Prime Minister Keir Starmer has urged allies to strengthen efforts in the High North, following renewed remarks by US President Donald Trump calling for US ownership of Greenland.
Safe-haven demand for Silver also rises as traders turn cautious amid concerns surrounding the Federal Reserve. Federal prosecutors have opened a criminal investigation into Fed Chair Jerome Powell regarding the central bank's renovation of its Washington headquarters and whether Powell lied to Congress about the project's scope, the New York Times reported on Sunday.
Markets also assessed the likelihood of further Fed rate cuts after Friday’s jobs report showed job growth fell short of expectations. US Nonfarm Payrolls (NFP) rose by 50,000 in December, falling short of November's 56,000 (revised from 64,000) and came in weaker than the market expectation of 60,000.
Traders continue to price in two Fed rate cuts this year, though the central bank is widely expected to keep policy unchanged later this month. According to the CME Group's FedWatch tool, Fed funds futures continue to price in about a 95% probability that the US central bank will keep rates unchanged at its January 27–28 meeting.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- NZD/USD gathers strength to near 0.5745 in Monday’s early Asian session.
- Fed’s Powell said that the US Justice Department has threatened criminal charges against him in connection with his Senate testimony last June.
- RBNZ’s Breman said that the policy rate is likely to remain at its current level for an extended period if economic conditions unfold as expected.
The NZD/USD pair attracts some buyers to near 0.5745, snapping the four-day losing streak during the Asian session on Monday. The renewed concerns over the US Federal Reserve (Fed) independence exert some selling pressure on the US Dollar (USD) against the Kiwi.
The New York Times reported on Sunday that federal prosecutors opened a criminal investigation into Fed Chair Jerome Powell over the central bank's renovation of its Washington headquarters and whether Powell lied to Congress about the scope of the project.
Powell stated that the threat is not about his testimony or the renovation project but a pretext, adding that threat of criminal charges is a consequence of Fed setting interest rates based on its assessment of the public interest rather than the president's preferences. Powell described the move as unprecedented and a direct challenge to the Fed’s independence.
The Reserve Bank of New Zealand's (RBNZ) hawkish outlook on the future policy path could lift the NZD. RBNZ Governor Ann Breman said that the policy rate is likely to remain at its current level for an extended period if economic conditions unfold as expected. Economists anticipate the Official Cash Rate (OCR) to remain at 2.25% for a period, potentially until mid-2027, before gradually increasing.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
Federal Reserve (Fed) Chair Jerome Powell said in a statement that the US Justice Department has threatened criminal charges against him in connection with his Senate testimony last June, during which he discussed the estimated $2.5 billion renovation. Powell described the move as unprecedented and a direct challenge to the Fed’s independence.
Key quotes
Grand jury subpoenas were served on Friday.
New threat is not about his testimony or the renovation project but a pretext.
Testimony concerned multiyear renovation of historic buildings.
Justice Department on Friday threatened criminal indictment related to his Senate testimony last June.
I have carried out my duties without political fear or favor and will continue to do so.
Threat of criminal charges is a consequence of Fed setting interest rates based on its assessment of the public interest rather than the president's preferences.
Broader issue is whether the Federal Reserve will continue setting interest rates based on evidence and economics or be directed by political pressure and intimidation.
Market reaction
At the time of writing, the US Dollar Index (DXY) is trading around 98.95, down 0.18% on the day.
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.
- USD/CAD kicks off the new week on a weaker note amid a broad-based USD weakness.
- Concerns about the Fed’s independence weigh on the USD despite reduced rate cut bets.
- Retreating Oil prices and diminishing odds for a tighter BoC policy might cap the Loonie.
The USD/CAD pair attracts some selling at the start of a new week, snapping a nine-day winning streak to its highest level since December 5, around the 1.3920 region, touched on Friday. The intraday slide is sponsored by a broad-based US Dollar (USD) weakness and drags spot prices back below the 200-day Simple Moving Average (SMA) in the last hour.
Federal Reserve (Fed) Chair Jerome Powell said that the threat of criminal charges is a consequence of the central bank setting interest rates based on the best assessment of what will serve the public, rather than following the preference of the President. This adds to concerns about the Fed's independence and its ability to operate free from political interference, which drags the USD away from its highest level since December 5, touched on Friday, and exerts downward pressure on the USD/CAD pair.
Meanwhile, US President Donald Trump said on Sunday that he was considering a range of responses to the unrest sweeping Iran, including potential military action. This comes on top of the protracted Russia-Ukraine war and keeps geopolitical risks in play. This, along with reduced bets for more aggressive policy easing by the Fed, could act as a tailwind for the USD. Apart from this, an intraday pullback in Crude Oil prices could undermine the commodity-linked Loonie and support the USD/CAD pair.
The Canadian Dollar (CAD) is further pressured by signs of weakening domestic labour market conditions, which temper bets for a tighter Bank of Canada (BoC) policy. In contrast, the closely-watched US Nonfarm Payrolls (NFP) report showed on Friday that the Unemployment Rate slipped to 4.4% in December and eased concerns about the labor market report, building the case for the Fed to keep rates higher for longer. This could help limit deeper USD losses and warrants caution for the USD/CAD bears.
Traders might also opt to move to the sidelines ahead of the latest US inflation figures – the Consumer Price Index (CPI) and the Producer Price Index (PPI) on Tuesday and Wednesday, respectively. This, in turn, makes it prudent to wait for strong follow-through selling before confirming that the USD/CAD pair has topped out in the near-term and positioning for any meaningful corrective decline.
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.
- WTI price rises to near $59.20 in Monday’s early Asian session.
- Oil prices extended the rally on growing concerns that intensifying protests in Iran could disrupt supply from the OPEC producer.
- The US planned to take millions of barrels of Venezuela’s oil to the global market.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $59.20 during the early Asian trading hours on Monday. The WTI price jumps as tensions in Iran are fueling concerns in the oil market. Traders brace for the release of the American Petroleum Institute (API) crude oil stockpiles report on Tuesday.
US President Donald Trump is weighing a series of potential military options in Iran following deadly protests in the country, CNN reported on Sunday. Trump threatened repercussions if Iranian authorities target civilians, while Tehran warned the US and Israel against any intervention. The situation in Iran puts almost 2 million barrels per day of oil exports at risk of disruption, which could boost the WTI price in the near term.
“Markets seem more focused on the intensifying unrest in Iran amid heated rhetoric and resilient fundamentals,” said Amarpreet Singh, Barclays’ analyst.
Nonetheless, a US push to draw oil companies back into Venezuela might cap the upside for the black gold. Trump said last week that Venezuela’s interim government agreed to give as many as 50 million barrels of “high-quality, sanctioned oil” to the US. Trump added that the US wants full access to Venezuela’s oil following the arrest of former President Nicolas Maduro by US forces over the weekend.
The API crude oil stockpiles report will be published on Tuesday. A larger-than-expected crude oil inventory draw indicates stronger demand and could boost the WTI price, while a bigger build than estimated signals weaker demand or excess supply, which might drag the WTI price lower.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
On Monday, the People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead at 7.0108 compared to Friday's fix of 7.0128 and 6.9849 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
- GBP/USD regains positive traction at the start of a new week amid broad-based USD selling bias.
- Concerns about the Fed’s independence drag the USD away from a one-month top set on Friday.
- Rising geopolitical tensions fail to benefit the safe-haven buck or hinder the pair’s move up.
The GBP/USD pair attracts some buyers near a technically significant 200-day Simple Moving Average (SMA) and recovers slightly from a nearly three-week low, touched during the Asian session on Monday. Spot prices, for now, seem to have snapped a four-day losing streak and currently trade around the 1.3435 region, up 0.20% for the day.
Despite the global flight to safety and reduced bets for more aggressive policy easing by the US Federal Reserve (Fed), renewed concerns about the US central bank's independence weigh on the US Dollar (USD) and benefit the GBP/USD pair. In fact, Fed Chair Jerome Powell said in a statement that the Department of Justice is threatening a criminal indictment against him. Powell added that the threat of criminal charges is a consequence of the Fed on our best assessment of what will serve the public, rather than following the preference of the President.
The USD Index (DXY), which tracks the Greenback against a basket of currencies, is seen extending Friday's retracement slide from its highest level since December 9, touched ahead of the crucial US Nonfarm Payrolls (NFP) report. The headline US NFP showed that the economy added 50K new jobs in December, undershooting market expectations and offsetting a decline in the Unemployment Rate to 4.4%. Nevertheless, the data backs the case for potentially stagnant monetary policy in the first quarter, though it does little to impress the USD bulls.
However, rising bets for two more interest rate cuts by the Bank of England (BoE) in 2026 might hold back traders from placing aggressive bullish bets around the British Pound (GBP) and cap the GBP/USD pair. Traders might also opt to wait for this week's release of the latest US inflation figures – the Consumer Price Index (CPI) and the Producer Price Index (PPI) on Tuesday and Wednesday, respectively. Moreover, the monthly UK GDP report on Thursday would provide some meaningful impetus to the GBP/USD pair during the latter part of the week.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.24% | -0.20% | -0.16% | -0.16% | -0.19% | -0.20% | -0.36% | |
| EUR | 0.24% | 0.04% | 0.06% | 0.08% | 0.05% | 0.01% | -0.13% | |
| GBP | 0.20% | -0.04% | 0.02% | 0.04% | 0.00% | -0.03% | -0.17% | |
| JPY | 0.16% | -0.06% | -0.02% | 0.02% | -0.02% | -0.05% | -0.19% | |
| CAD | 0.16% | -0.08% | -0.04% | -0.02% | -0.03% | -0.06% | -0.21% | |
| AUD | 0.19% | -0.05% | -0.01% | 0.02% | 0.03% | -0.04% | -0.18% | |
| NZD | 0.20% | -0.01% | 0.03% | 0.05% | 0.06% | 0.04% | -0.14% | |
| CHF | 0.36% | 0.13% | 0.17% | 0.19% | 0.21% | 0.18% | 0.14% |
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).
Federal prosecutors have opened a criminal investigation into Federal Reserve (Fed) Chair Jerome Powell regarding the central bank's renovation of its Washington headquarters and whether Powell lied to Congress about the project's scope, the New York Times reported on Sunday.
The investigation is being overseen by the US Attorney’s Office for the District of Columbia. The office is led by US Attorney Jeanine Pirro, a former New York state prosecutor and Fox News host, who was appointed to that job by US President Donald Trump.
Market reaction
At the time of writing, the US Dollar Index (DXY) is trading around 98.90, down 0.23% on the day.
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.
- EUR/USD rises as the US Dollar weakens on dovish Federal Reserve expectations.
- US Nonfarm Payrolls rose 50,000 in December, below November’s revised 56,000 and the 60,000 forecast.
- UK- and Germany-led European nations are discussing boosting military presence in Greenland to strengthen Arctic security.
EUR/USD edges higher after registering gains in the previous six successive sessions, trading around 1.1650 during the Asian hours on Monday. The pair appreciates as the US Dollar (USD) struggles amid dovish Federal Reserve (Fed) expectations. Friday’s slower-than-expected US jobs growth suggests the US central bank could hold interest rates steady later this month.
US Nonfarm Payrolls (NFP) rose by 50,000 in December, falling short of November's 56,000 (revised from 64,000) and came in weaker than the market expectation of 60,000. However, the Unemployment Rate ticked lower to 4.4% in December from 4.6% in November, while the Average Hourly Earnings climbed to 3.8% YoY in December from 3.6% in the previous reading.
Richmond Fed President Tom Barkin said the decline in the unemployment rate was welcome and described job growth as modest but stable. Barkin added that it is difficult to find firms outside healthcare or AI that are hiring and said it remains unclear whether the labor market will tilt toward more hiring or more firing.
The Euro (EUR) could face additional downside as easing inflation in the Euro area dampens expectations for further policy tightening by the European Central Bank (ECB). Headline inflation slowed to 2.0% in December, a four-month low and in line with the ECB’s target, while core inflation eased to 2.3%, coming in slightly below forecasts.
Bloomberg reported that European nations led by the United Kingdom (UK) and Germany are discussing boosting their military presence in Greenland to reinforce Arctic security. Germany may propose a joint NATO mission, while UK Prime Minister Keir Starmer has urged allies to step up efforts in the High North, amid renewed comments by US President Donald Trump advocating US ownership of Greenland.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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