AUD/USD jumps to near 0.6700 as US-EU disputes keep Greenback under pressure
The AUD/USD pair trades 0.25% higher to near 0.6700 during the European trading session on Monday.
  • AUD/USD rises to near 0.6700 amid a weakened US Dollar due to US-EU disputes.
  • The EU opposes Washington’s desire to control Greenland.
  • Germany calls the US tariff threats as “unacceptable”, and warns of countermeasures.

The AUD/USD pair trades 0.25% higher to near 0.6700 during the European trading session on Monday. The Aussie pair demonstrates strength as the US Dollar (USD) underperforms in an extended weekend in the United States (US) due to escalating disputes between the United States (US) and the European Union (EU).

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is down 0.2% to near 99.20.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.

USD EUR GBP JPY CAD AUD NZD CHF
USD -0.23% -0.19% -0.02% -0.18% -0.26% -0.50% -0.54%
EUR 0.23% 0.04% 0.24% 0.05% -0.03% -0.28% -0.30%
GBP 0.19% -0.04% 0.19% 0.00% -0.08% -0.32% -0.35%
JPY 0.02% -0.24% -0.19% -0.18% -0.26% -0.50% -0.54%
CAD 0.18% -0.05% -0.01% 0.18% -0.07% -0.32% -0.36%
AUD 0.26% 0.03% 0.08% 0.26% 0.07% -0.25% -0.28%
NZD 0.50% 0.28% 0.32% 0.50% 0.32% 0.25% -0.04%
CHF 0.54% 0.30% 0.35% 0.54% 0.36% 0.28% 0.04%

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).

US-EU relations face turbulency as President Donald Trump announced 10% tariffs on several EU members and the United Kingdom (UK) on Saturday, and warned that they could be raised to 25% if the old continent doesn’t agree to Washington purchase Greenland. The US has shown a desire to acquire Greenland, citing risks to national security and world peace.

In response, Greenland Prime Minister (PM) Jens-Frederik Nielsen stated during Monday’s European session that the latest statements from the US, including threats of tariffs, do not change the fact that we will not let ourselves be pressured, Reuters reported.

The German ministry has also stated that tariff threats are “unacceptable”, and we are determined to respond to new tariffs with countertariffs.

Meanwhile, the Australian Dollar (AUD) trades broadly stable while investors await the Aussie employment data for December, which will be released on Thursday. The data is expected to show that the economy added 30K fresh workers after firing of 21.3K employees in November. Meanwhile, the Unemployment Rate is seen rising to 4.4% from 4.3% in November.

 

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.


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