Forex Today: US Dollar gains as Fed rate holding bets grow

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The US Dollar Index (DXY) is trading near the 99.35 price region, trimming half of its gains late in the American session on Thursday, supported by encouraging United States (US) data.

The US Dollar Index (DXY) is trading near the 99.35 price region, trimming half of its gains late in the American session on Thursday, supported by encouraging United States (US) data. Initial Jobless Claims for the week ending January 10 came in at 198K, below the 215K expected by economists and better than the 207K from the previous week.

Here is what you need to know on Friday, January 16:

Meanwhile, trading across the FX board remains choppy amid high levels of uncertainty.

Earlier this week, Federal Reserve (Fed) Chair Jerome Powell spoke out against the US President Donald Trump administration's decision to subpoena him, saying it amounted to an attempt to intimidate the US central bank into delivering lower interest rates. Trump stated on Wednesday that he has no plans to fire Powell despite the Justice Department's criminal investigation into the Fed Chair.

Also, Trump said on Thursday that Iran has “no plan for executions,” amid fears for the fate of detained anti-government protesters. Nonetheless, the US President declined to rule out military action, saying his administration will wait and see.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the British Pound.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.25%	0.31%	-0.06%	0.05%	-0.32%	0.04%	0.31%
EUR	-0.25%		0.07%	-0.31%	-0.20%	-0.56%	-0.21%	0.07%
GBP	-0.31%	-0.07%		-0.38%	-0.26%	-0.63%	-0.28%	-0.00%
JPY	0.06%	0.31%	0.38%		0.10%	-0.26%	0.07%	0.37%
CAD	-0.05%	0.20%	0.26%	-0.10%		-0.36%	-0.01%	0.27%
AUD	0.32%	0.56%	0.63%	0.26%	0.36%		0.37%	0.63%
NZD	-0.04%	0.21%	0.28%	-0.07%	0.01%	-0.37%		0.27%
CHF	-0.31%	-0.07%	0.00%	-0.37%	-0.27%	-0.63%	-0.27%

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).

EUR/USD slipped below the 1.1600 level as strong US data boosted the Fed's hold outlook. Traders now await the Harmonized Index of Consumer Prices (HICP) data from Germany, which is due on Friday.

GBP/USD slipped below the 1.3400 price zone, even though the United Kingdom (UK) Gross Domestic Product (GDP) for November printed higher than the 0.1% forecasted at 0.3%.

USD/JPY is muted near 158.50, and traders remain wary of intervention following strong warnings ahead of Japan's election.

AUD/USD rockets upwards as the Australian Consumer Inflation Expectations figure eased to 4.6% in January from 4.7% in the previous month. The better tone of equities also underpinned the Aussie.

Gold retreats to near $4,600 as expectations for a Fed rate pause grow.

Gold FAQs

Why do people invest in Gold?

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Who buys the most Gold?

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

How is Gold correlated with other assets?

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

What does the price of Gold depend on?

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.