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Forex Today: Dollar steadies as focus shifts to Fed Chair Powell’s testimony

Here’s what you need to know on Tuesday, July 9:

The US Dollar is holding firm against its major rivals early on Tuesday, with the Dollar Index moving sideways near 105.00 after posting small gains on Monday. The US economic calendar will include the NFIB Business Optimism Index for June and the RealClearMarkets/TIPP Economic Optimism for July. More importantly, Federal Reserve Chairman Jerome Powell will present the Semiannual Monetary Policy Report and testify before the Senate Banking Committee.

US Dollar PRICE Last 7 days

The table below shows the percentage change of the US Dollar (USD) against major currencies over the past 7 days. The US Dollar was the weakest currency against the Australian Dollar.

USD -0.73% -1.18% -0.37% -0.71% -1.25% -0.75% -0.46%
EUR 0.73% -0.45% 0.40% 0.02% -0.51% -0.04% 0.26%
GBP 1.18% 0.45% 0.87% 0.49% -0.08% 0.43% 0.70%
JPY 0.37% -0.40% -0.87% -0.36% -0.88% -0.43% -0.14%
CAD 0.71% -0.02% -0.49% 0.36% -0.54% -0.04% 0.23%
AUD 1.25% 0.51% 0.08% 0.88% 0.54% 0.49% 0.76%
NZD 0.75% 0.04% -0.43% 0.43% 0.04% -0.49% 0.27%
CHF 0.46% -0.26% -0.70% 0.14% -0.23% -0.76% -0.27%

The heatmap shows percentage changes of 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 chart will represent the USD (base)/JPY (quote).

After opening the week with a bearish gap, EUR/USD staged a rebound and closed marginally higher on Monday. The pair remains relatively quiet on Tuesday morning in Europe and fluctuates in a narrow range above 1.0800.

GBP/USD It touched its highest level since June 12 at 1.2860 on Monday, but lost its bullish momentum to end the day virtually unchanged. As of early Tuesday, the pair is holding steady around 1.2800.

Following the rebound of the previous week, NZD/USD The pair lost traction and posted modest losses on Monday. The Reserve Bank of New Zealand (RBNZ) will announce monetary policy decisions in the Asian session on Wednesday. Markets are widely anticipating that the RBNZ will keep the policy rate unchanged at 5.5%. Ahead of this key event, the NZD/USD remains in a consolidation phase above 0.6100.

Gold The XAU/USD pair came under heavy bearish pressure and lost over 1% on Monday, erasing all of Friday’s gains in the process. Reports that China’s central bank paused gold purchases for the second consecutive month in June and growing optimism over a ceasefire and hostage deal between Israel and Hamas sent the XAU/USD stretched lower. By early Tuesday, the pair is consolidating its losses near $2,360.

USD/JPY The dollar continues to move up and down in a narrow channel around 161.00 after ending the first trading day of the week virtually unchanged. Following the conclusion of the first day of meeting with market participants, the Bank of Japan (BoJ) said it “received various opinions from survey participants, including the idea of ​​reducing monthly purchases to around ¥2-3 trillion, or maintaining purchases around ¥4 trillion.”

The Fed FAQs

Monetary policy in the United States is directed 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 to adjust interest rates. When prices rise too quickly and inflation exceeds the Fed’s 2% target, the Fed raises interest rates, increasing borrowing costs throughout the economy. This translates into a strengthening of the 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 can lower 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 economic conditions and makes monetary policy decisions. The FOMC consists of twelve Federal Reserve officials: the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the 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 called Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a jammed 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 of 2008. It involves the Fed printing more dollars and using them to buy high-quality bonds from financial institutions. QE typically 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 capital of maturing bonds in its portfolio to buy new bonds. It is usually positive for the value of the US dollar.

Source: Fx Street

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