Here’s what you need to know on Wednesday, December 4:
Action in currency markets remains volatile early Wednesday as investors refrain from taking large positions ahead of key events. Bank of England (BoE) Governor Andrew Bailey, European Central Bank (ECB) President Christine Lagarde and Federal Reserve (Fed) Chair Jerome Powell will deliver speeches later in the day. The US economic calendar will include ADP employment change data and ISM services PMI for November.
After Monday’s rebound, the US Dollar Index (USD) lost its momentum and posted small losses on Tuesday. The index fluctuates in a tight range below 106.50 early Wednesday, while US stock index futures are trading in positive territory. Powell will participate in a moderated discussion at the New York Times DealBook Summit, beginning at 18:45 GMT.
US Dollar PRICE This Week
The table below shows the percentage change of the US Dollar (USD) against major currencies this week. US dollar was the weakest currency against the Japanese yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.59% | 0.38% | 0.32% | 0.54% | 1.10% | 1.12% | 0.65% | |
| EUR | -0.59% | -0.25% | -0.24% | -0.05% | 0.60% | 0.53% | 0.07% | |
| GBP | -0.38% | 0.25% | -0.02% | 0.21% | 0.86% | 0.79% | 0.30% | |
| JPY | -0.32% | 0.24% | 0.02% | 0.20% | 0.81% | 0.82% | 0.26% | |
| CAD | -0.54% | 0.05% | -0.21% | -0.20% | 0.72% | 0.58% | 0.09% | |
| AUD | -1.10% | -0.60% | -0.86% | -0.81% | -0.72% | -0.07% | -0.55% | |
| NZD | -1.12% | -0.53% | -0.79% | -0.82% | -0.58% | 0.07% | -0.46% | |
| CHF | -0.65% | -0.07% | -0.30% | -0.26% | -0.09% | 0.55% | 0.46% |
The heat map shows percentage changes for major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the box will represent USD (base)/JPY (quote).
Following the news that South Korean President Yoon Suk Yeo declared martial law, the USD/KRW it soared to its highest level in two years above 1,440 during US trading hours on Tuesday. In the Asian session on Wednesday, the Bank of Korea said it will deploy several measures to stabilize the Korean Won exchange rate. Additionally, South Korea’s Parliament intervened hours after President Yoon Suk Yeol’s announcement to flatly reject the call for martial law, and opposition parties introduced an impeachment bill against the president. Following these developments, USD/KRW underwent a deep correction and was last seen losing 0.6% on the day around 1,409.
EUR/USD struggled to gather bullish momentum and posted small gains on Tuesday. The pair remains firm in the European morning on Wednesday and is trading above 1.0500. ECB President Lagarde will testify before the European Parliament’s Economic and Monetary Affairs Committee in Brussels, Belgium, starting at 13:30 GMT.
GBP/USD closed with small gains on Tuesday and continued to advance towards 1.2700 early on Wednesday. BoE Governor Bailey’s pre-recorded keynote interview on the Financial Times Live Global Boardroom will be published at 09:00 GMT.
Data from Australia on Wednesday showed that gross domestic product (GDP) grew at an annual rate of 0.8% in the third quarter. This reading followed the 1% growth recorded in the second quarter and missed the market expectation of 1.1%. He AUD/USD turned lower following the disappointing data and fell to its weakest level since early August near 0.6400. The pair undergoes a correction in the European morning and is trading near 0.6450.
After closing the second consecutive day virtually unchanged on Tuesday, the USD/JPY gains traction and trades in positive territory above 150.00 early Wednesday.
The Gold failed to make a decisive move in either direction and closed virtually unchanged on Tuesday. XAU/USD extends its sideways move below $2,650 on Wednesday European morning.
Central banks FAQs
Central banks have a key mandate to ensure price stability in a country or region. Economies constantly face inflation or deflation when the prices of certain goods and services fluctuate. A constant rise in the prices of the same goods means inflation, a constant fall in the prices of the same goods means deflation. It is the central bank’s job to keep demand in line by adjusting its interest rate. For the largest central banks, such as the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has an important tool to raise or lower inflation: modify its reference interest rate. At pre-communicated times, the central bank will issue a statement with its reference interest rate and give additional reasons why it maintains or modifies it (cuts or raises it). Local banks will adjust their savings and loan rates accordingly, which in turn will make it harder or easier for citizens to make a profit on their savings or for companies to borrow and invest in their businesses. When the central bank substantially raises interest rates, we speak of monetary tightening. When you reduce your reference rate, it is called monetary easing.
A central bank is usually politically independent. Members of the central bank’s policy council go through a series of panels and hearings before being appointed to a position on the policy council. Each member of that council usually has a certain conviction about how the central bank should control inflation and the subsequent monetary policy. Members who want a very loose monetary policy, with low rates and cheap loans, to substantially boost the economy, while settling for inflation slightly above 2%, are called “doves.” Members who prefer higher rates to reward savings and want to control inflation at all times are called “hawks” and will not rest until inflation is at 2% or just below.
Typically, there is a chair who leads each meeting, has to create a consensus among the hawks or doves, and has the final say when votes need to be divided to avoid a 50-50 tie on whether to adjust current policy. The president will give speeches, which can often be followed live, communicating the current monetary stance and outlook. A central bank will try to push its monetary policy forward without causing wild swings in rates, stocks, or its currency. All central bank members will channel their stance toward markets ahead of a monetary policy meeting. A few days before a monetary policy meeting is held and until the new policy has been communicated, members are prohibited from speaking publicly. This is what is called the silent period.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
