Forex Today: Eyes on US-Iran talks, mid-tier US data

US Dollar Price This week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.13%	-0.44%	0.75%	-0.03%	-0.53%	-0.24%	-0.32%
EUR	0.13%		-0.29%	0.89%	0.11%	-0.41%	-0.11%	-0.17%
GBP	0.44%	0.29%		1.35%	0.40%	-0.15%	0.19%	0.14%
JPY	-0.75%	-0.89%	-1.35%		-0.78%	-1.27%	-0.94%	-1.06%
CAD	0.03%	-0.11%	-0.40%	0.78%		-0.50%	-0.16%	-0.27%
AUD	0.53%	0.41%	0.15%	1.27%	0.50%		0.31%	0.25%
NZD	0.24%	0.11%	-0.19%	0.94%	0.16%	-0.31%		-0.06%
CHF	0.32%	0.17%	-0.14%	1.06%	0.27%	-0.25%	0.06%

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).

Wall Street's main indexes extended the weekly rally on Wednesday, led by the tech-heavy Nasdaq Composite. In turn, the US Dollar (USD) struggled to stay resilient against its rivals, with the USD Index closing the day in negative territory. In the European morning on Thursday, the USD holds steady above 97.50 and US stock index futures lose about 0.2%.

US Secretary of State Marco Rubio said earlier in the day that they will focus on the nuclear programme during the talks. "Iranian insistence on not discussing ballistic missiles is a very big problem," he added. After posting small losses for two consecutive days, the barrel of West Texas Intermediate (WTI) fluctuates in a tight range at around $65.50 on Thursday.

Bank of Japan (BoJ) Governor Kazuo Ueda said on Thursday that the the basic stance is to continue raising interest rates if the likelihood of their economic, price forecasts materialising heightens. Meanwhile, BoJ Board Member Hajime Takata noted that it's difficult to determine the desirable pace of rate hikes and the terminal rate. Following a two-day rally, USD/JPY edges lower in the European morning but manages to hold slightly above 156.00.

EUR/USD stays in a consolidation phase above 1.1800 in the early European session after rising about 0.3% on Wednesday.

GBP/USD gained 0.5% on Wednesday and continued to edge higher during the Asian session on Thursday. After touching a fresh weekly high above 1.3570, the pair lost its traction and was last seen trading virtually unchanged on the day near 1.3550.

Following Tuesday's sharp decline, Gold registered marginal gains on Wednesday. XAU/USD holds its ground in the European morning and rises toward $5,200.

AUD/USD stabilizes above 0.7100 after rising nearly 1% on Wednesday. Reserve Bank of Australia (RBA) Governor Michele Bullock said on Wednesday that the economy is in a good position and added that they have to be patient on judging the policy.

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

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