Forex Today: US Dollar pulls back after NFP-fuelled gains

9 November, Monday: Key market developments to watch

November Sentix Investors Confidence data are due in Europe. Early on Monday, the US Dollar (USD) is retreating after its strong finish to the previous week. Several Federal Reserve (Fed) policymakers are due to speak later in the day. Tuesday's US Consumer Price Index release for October could intensify market volatility.

US Dollar: Today's Currency Moves

Today's percentage moves in the US Dollar (USD) against the major currencies listed appear in the table below. The New Zealand Dollar was the currency against which the US Dollar performed worst.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.21%	-0.27%	-0.19%	-0.16%	-0.40%	-0.95%	-0.13%
EUR	0.21%		-0.05%	0.04%	0.04%	-0.20%	-0.75%	0.07%
GBP	0.27%	0.05%		0.11%	0.09%	-0.15%	-0.69%	0.13%
JPY	0.19%	-0.04%	-0.11%		0.01%	-0.22%	-0.77%	0.05%
CAD	0.16%	-0.04%	-0.09%	-0.01%		-0.23%	-0.78%	0.04%
AUD	0.40%	0.20%	0.15%	0.22%	0.23%		-0.55%	0.27%
NZD	0.95%	0.75%	0.69%	0.77%	0.78%	0.55%		0.83%
CHF	0.13%	-0.07%	-0.13%	-0.05%	-0.04%	-0.27%	-0.83%

Percentage movements between the major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. Selecting the US Dollar on the left and following its row across to the Japanese Yen, for instance, gives the percentage change for USD (base)/JPY (quote) in the corresponding cell.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

165K jobs were added to US Nonfarm Payrolls (NFP) in October, the US Bureau of Labor Statistics reported on Friday. The figure comfortably exceeded the market forecast of 65K and followed September's 60K increase, revised up from 29K. The Unemployment Rate also fell from 4.2% to 4.1%, while the Labor Force Participation Rate edged up from 61.8% to 61.9%. The robust labour market figures immediately lifted the USD Index, which advanced about 0.7% on the day. During Monday's European morning, the USD Index is pulling back, although it remains just above 102.00.

A brighter risk backdrop at the start of the week appears to be limiting the USD's ability to extend its outperformance against other currencies. According to CNN, US President Donald Trump described fresh attacks on Iran as “highly unlikely” provided negotiations to end the conflict continued to advance. A meeting between Trump and Qatar's Prime Minister is expected later in the day, with a new ceasefire and the resumption of nuclear talks on the agenda. Separately, Saudi Arabia reported that debris falling after an attempted attack had damaged a Saudi Aramco administrative building in Riyadh. The Saudi-led coalition said it had intercepted two ballistic missiles and two cruise missiles aimed at the kingdom. Early Monday, oil prices are easing, with West Texas Intermediate down about 1% per barrel on the day.

US stock index futures are higher as market sentiment improves. At the time of publication, Dow Futures lead the advance with a 0.7% rise on the day.

EUR/USD is holding on to a modest recovery above 1.1150 early Monday. This follows Friday's decline of nearly 0.7%, which wiped out the pair's gains for the week.

Gold starts the week on a firmer footing, trading above $4,100 with a daily gain of about 1%. Although the precious metal fell on Friday, it ended the week nearly 5% higher.

Gold's resilience signals a possible safe-haven revival

Recent Gold trading has caught the attention of OCBC analysts, who describe “Gold’s relative resilience despite the sharp equity selloff” as “encouraging.” Following the latest correction and the scaling back of speculative positions, they believe “Gold may be gradually regaining some of its safe-haven appeal, potentially providing shelter amid turbulence elsewhere in financial markets.” OCBC nevertheless warns that “the extent to which Gold can hold up if equity weakness persists will be an important test,” indicating that the staying power of renewed safe-haven demand will depend on risk-asset performance over the coming days.

GBP/USD is approaching 1.3400 early Monday as its recovery strengthens following two consecutive daily declines. Bank of England Governor Andrew Bailey is scheduled to speak later in the day in Switzerland, at the Swiss Institute of International Studies Lecture Series and Dinner at the University of Zurich.

USD/JPY is losing ground towards 158.00 during the European morning. The pair had finished the previous week higher after advancing about 0.5% on Friday.

US Dollar: Key Questions Answered

US Dollar: Currency Role and Global Reach

Officially the currency of the United States of America, the US Dollar (USD) also serves as the ‘de facto’ currency in a substantial number of other countries, circulating alongside their domestic banknotes. No currency is traded more widely. According to 2022 data, it accounts for over 88% of worldwide foreign exchange turnover, equivalent to average daily transactions of $6.6 trillion. After the Second World War, the USD replaced the British Pound as the world's reserve currency. Gold backed the US Dollar for much of its history, until the Bretton Woods Agreement in 1971 brought the Gold Standard to an end.

Federal Reserve Decisions and Their Effect on the US Dollar

Monetary policy set by the Federal Reserve (Fed) is the single biggest influence on the US Dollar's value. The Fed's dual mandate covers price stability, meaning control of inflation, and the promotion of full employment. Interest-rate adjustments are its main means of meeting those goals. If prices climb too rapidly and inflation exceeds the Fed's 2% target, the central bank raises rates, supporting the USD. Conversely, inflation below 2% or an excessively high Unemployment Rate may prompt rate cuts, putting pressure on the Greenback.

Quantitative Easing: The Mechanism and US Dollar Impact

In exceptional circumstances, the Federal Reserve can create additional Dollars and introduce quantitative easing (QE). Through QE, the Fed sharply expands the supply of credit in a stalled financial system. This unconventional policy addresses situations in which credit has dried up because banks, fearing counterparty defaults, refuse to lend to one another. It is a last resort when interest-rate cuts alone are unlikely to deliver the required outcome. The Fed used it as its preferred response to the credit crunch during the Great Financial Crisis in 2008. Under QE, newly printed Dollars finance purchases of US government bonds, mainly from financial institutions. The US Dollar typically weakens as a result.

Quantitative Tightening: The Mechanism and US Dollar Impact

Usually supportive of the US Dollar, quantitative tightening (QT) reverses quantitative easing. The Federal Reserve halts bond purchases from financial institutions and refrains from reinvesting the principal repaid on its maturing bond holdings in further purchases.