Forex Today: Markets await Fed commentary, US House vote on funding bill

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		-0.23%	0.02%	0.40%	-0.35%	-0.74%	-0.63%	-0.71%
EUR	0.23%		0.26%	0.70%	-0.15%	-0.54%	-0.42%	-0.51%
GBP	-0.02%	-0.26%		0.51%	-0.38%	-0.77%	-0.65%	-0.74%
JPY	-0.40%	-0.70%	-0.51%		-0.81%	-1.20%	-1.08%	-1.21%
CAD	0.35%	0.15%	0.38%	0.81%		-0.31%	-0.29%	-0.43%
AUD	0.74%	0.54%	0.77%	1.20%	0.31%		0.11%	0.03%
NZD	0.63%	0.42%	0.65%	1.08%	0.29%	-0.11%		-0.09%
CHF	0.71%	0.51%	0.74%	1.21%	0.43%	-0.03%	0.09%

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).

On Tuesday, the weekly data published by the Automatic Data Processing (ADP) showed private employers shed an average of 11,250 jobs a week, for the four weeks ending October 25. This disappointing data weighed on the USD during the American trading hours, and the USD Index closed the day in negative territory. In the European morning on Wednesday, the USD Index holds steady at around 99.50. Meanwhile, US stock index futures were last seen gaining between 0.2% and 0.5%, reflecting a relatively upbeat market mood.

EUR/USD benefited from the broad USD weakness on Tuesday and briefly climbed above 1.1600. The pair stays in a consolidation phase early Wednesday and fluctuates in a narrow channel slightly below this level.

After falling toward 1.3100 on disappointing labor market data in the European session on Tuesday, GBP/USD staged a rebound and erased a portion of its daily losses. The pair struggles to gain traction on Wednesday and trades near 1.3150.

Following Monday's rally, Gold turned quiet on Tuesday and ended the day marginally higher. XAU/USD extends its sideways grind to begin the European session on Wednesday and holds comfortably above $4,100.

Japanese Prime Minister Sanae Takaichi said on Wednesday that they cannot say that Japan has emerged from deflation, and added that she hopes for the Bank of Japan (BoJ) to conduct policy so that Japan sees sustainable achievement of price target. USD/JPY continues to push higher and trades at its strongest level since February above 154.50 after posting small gains on Monday and Tuesday.

Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser said on Wednesday that their guess is that the monetary policy is still restrictive. "If it turns out we are no longer mildly restrictive, that has important implications for future policy," Hauser added. AUD/USD holds its ground on Wednesday and edges higher toward 0.6550. In the Asian session on Thursday, the Australian Bureau of Statistics will publish the labor market data for October.

Fed FAQs

What does the Federal Reserve do, how does it impact the US Dollar?

Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger 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 may lower interest rates to encourage borrowing, which weighs on the Greenback.

How often does the Fed hold monetary policy meetings?

The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.

What is Quantitative Easing (QE) and how does it impact USD?

In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.

What is Quantitative Tightening (QT) and how does it impact 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 principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.