This is what you need to know to operate today Tuesday, May 20:
The Bank of the Australian Reserve (RBA) and the Popular Bank of China (PBOC) announced rates cuts early on Tuesday, as anticipated. Meanwhile, the US Dollar (USD) Fight to stand firm in front of their rivals while the markets maintain their risk aversion. The Canada Statistics Office will publish the data of the April Consumer Price Index (CPI) later in the day. In addition, investors will continue to analyze the comments of the Central Bank officials.
US dollar price this week
The lower table shows the percentage of the US dollar change (USD) compared to the main currencies this week. American dollar was the weakest currency against the euro.
| USD | EUR | GBP | JPY | CAD | Aud | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.85% | -0.64% | -0.56% | -0.18% | -0.21% | -0.63% | -0.40% | |
| EUR | 0.85% | -0.04% | 0.11% | 0.51% | 0.54% | 0.05% | 0.23% | |
| GBP | 0.64% | 0.04% | -0.15% | 0.55% | 0.58% | 0.09% | 0.27% | |
| JPY | 0.56% | -0.11% | 0.15% | 0.40% | 0.54% | 0.15% | 0.23% | |
| CAD | 0.18% | -0.51% | -0.55% | -0.40% | -0.01% | -0.45% | -0.28% | |
| Aud | 0.21% | -0.54% | -0.58% | -0.54% | 0.01% | -0.48% | -0.30% | |
| NZD | 0.63% | -0.05% | -0.09% | -0.15% | 0.45% | 0.48% | 0.17% | |
| CHF | 0.40% | -0.23% | -0.27% | -0.23% | 0.28% | 0.30% | -0.17% |
The heat map shows the percentage changes of the main currencies. The base currency is selected from the left column, while the contribution currency is selected in the upper row. For example, if you choose the US dollar of the left column and move along the horizontal line to the Japanese yen, the percentage change shown in the box will represent the USD (base)/JPY (quotation).
The PBOC cut its preferential loan rates (LPR) on Tuesday. The LPR at one year was reduced from 3.1% to 3.00%, while the five -year LPR was cut from 3.60% to 3.50%. Meanwhile, China accused the United States (USA) of undermining the preliminary trade agreement between the two countries late Monday, after the US issued a warning to the industry against the use of Chinese chips that indicated Huawei. Futures of the US stock indexes were losing between 0.3% and 0.5%, while the USD index fell 0.15% around 100.20.
The RBA reduced the official cash (OCR) rate at 25 basic points (PBS) to 3.85% from 4.1% after the conclusion of its May monetary policy meeting. In the policy statement, the RBA said that the climb of global commercial conflict was a key risk of the economy. When commenting on the policy perspectives, the Governor of the RBA, Michele Bullock, said they were possible more adjustments to politics and added that they have discussed whether to opt for a 25 or 50 PBs cut. After rising more than 0.8% on Monday, AUD/USD It remains defensive early on Tuesday and was losing 0.5% in the day around 0.6420.
USD/CAD It quotes on a narrow channel about 1,3950 in the European morning on Tuesday. Annual inflation in Canada is expected to be measured by the change in the CPI, decrease to 1.6% in April from 2.3% in March.
EUR/USD It remains in a consolidation phase about 1,1250 after rising around 0.7% on Monday. The European Commission will publish preliminary data from the consumer confidence index for May later in the day.
USD/JPY He registered losses for the fifth day of consecutive negotiation on Monday. The pair continues to yield and quote slightly below 144.50. Japan’s Minister of Finance, Shunichi Kato, said Tuesday that he expects any conversation with the US Treasury Secretary, Scott Besent, this week based on the change of foreign exchange.
Gold The highest higher day ended on Monday. The Xau/USD struggles to preserve its bullish impulse and goes back to the $ 3,200 early on Tuesday.
GBP/USD It remains firm and listed above 1,3350 after rising 0.6% on Monday. The United Kingdom National Statistics Office will publish April IPC data early on Wednesday.
FAQS Central Banks
Central banks have a key mandate that consists in guaranteeing the stability of prices 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 decrease in the prices of the same goods means deflation. It is the Central Bank’s task to keep the demand online by adjusting its interest rate. For larger central banks, such as the US Federal Reserve (FED), the European Central Bank (ECB) or the Bank of England (BOE), the mandate is to maintain inflation about 2%.
A central bank has an important tool to raise or lower inflation: modify its reference interest rate. In precommunicated moments, the Central Bank will issue a statement with its reference interest rate and give additional reasons of why it maintains or modifies it (cut it or the SUBE). Local banks will adjust their savings and loan rates accordingly, which in turn will make it difficult or facilitate that citizens obtain profits from their savings or that companies ask for loans and invest in their businesses. When the Central Bank substantially rises interest rates, there is talk of monetary hardening. When it reduces its reference rate, it is called monetary relaxation.
A central bank is usually politically independent. The members of the Central Bank Policy Council go through a series of panels and hearings before being appointed for a position in the Policy Council. Each member of that council usually has a certain conviction on how the Central Bank should control inflation and the consequent monetary policy. Members who want a very flexible monetary policy, with low types and cheap loans, to substantially boost the economy, while comprising with inflation slightly greater than 2%, are called “pigeons.” Members who prefer higher types to reward savings and want to control inflation at all times are called “hawks” and will not rest until inflation is located at 2% or just below.
Normally, there is a president who directs each meeting, has to create a consensus between the hawks or the pigeons and has the last word when the votes must be divided to avoid a draw to 50 on whether the current policy must be adjusted. The president will pronounce speeches, which can often be followed live, in which he will communicate the current monetary position and perspectives. A central bank will try to boost its monetary policy without causing violent oscillations of the fees, the actions or their currency. All members of the Central Bank will channel their position towards the markets before a monetary policy meeting. A few days before a monetary policy meeting is held and until the new policy has been communicated, the members are prohibited from speaking publicly. It is what is called a period of silence.
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.
