- AUD/USD jumps to near 0.6560 as Fed dovish expectations have weighed on the US Dollar.
- Fed officials have started arguing in favor of monetary policy expansion amid growing labor market concerns.
- Australia’s Caixin Manufacturing PMI data came in higher at 50.5.
The AUD/USD pair gains sharply to near 0.6560 during the European trading session Monday. The Aussie pair advances as the US Dollar (USD) underperforms its peers on expectations that the Federal Reserve (Fed) will cut interest rates in the monetary policy meeting this month.
During the press time, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slides to near 97.55, the lowest level seen in a month.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.24% | -0.26% | 0.06% | 0.00% | -0.16% | -0.33% | -0.04% | |
| EUR | 0.24% | -0.03% | 0.21% | 0.24% | 0.08% | -0.09% | 0.20% | |
| GBP | 0.26% | 0.03% | 0.14% | 0.27% | 0.10% | -0.06% | 0.27% | |
| JPY | -0.06% | -0.21% | -0.14% | 0.01% | -0.21% | -0.35% | -0.06% | |
| CAD | -0.01% | -0.24% | -0.27% | -0.01% | -0.16% | -0.33% | 0.00% | |
| AUD | 0.16% | -0.08% | -0.10% | 0.21% | 0.16% | -0.17% | 0.17% | |
| NZD | 0.33% | 0.09% | 0.06% | 0.35% | 0.33% | 0.17% | 0.34% | |
| CHF | 0.04% | -0.20% | -0.27% | 0.06% | -0.00% | -0.17% | -0.34% |
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).
Growing United States (US) labor market concerns in the wake of tariffs imposed by President Donald Trump has increased traders’ confidence that the Fed will cut borrowing rates this month.
Also, a slew of Federal Open Market Committee (FOMC) members, including Jerome Powell, has also turned dovish in the monetary policy outlook, citing concerns over job demand.
For fresh cues on the current status of the US labor market, investors will focus on a number of employment-related data this week, such as JOLTS Job Openings for July, and ADP Employment Change and Nonfarm Payrolls (NFP) data for August.
Meanwhile, the Australian Dollar (AUD) trades higher as Caixin Manufacturing Purchasing Managers’ Index (PMI) has returned to expansion in August, released earlier in the data. The PMI data came in at 50.5, higher than expectations and the prior reading of 49.5. A figure below the 50.0 threshold is considered as contraction in the business activity.
Fed FAQs
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.
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.
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.
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.
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