Daily Currency Update

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The Greenback increases versus the Yen and Euro, but falls against commodity currencies following an emergency move by the Fed not seen since the 2008 crisis.

USD - United States Dollar

This morning, the Greenback is trading mixed versus the G10 currencies and the Japanese Yen declined as the mood in the markets improved due to the Fed slashing 50 basis points in its overnight rate (from 1.5 to 1 percent). The Fed has not made such an emergency move since the 2008 financial crisis. Still, given that the FX market has recently been driven by fear and mounting concerns that the coronavirus outbreak will slow record U.S. economic expansion, this seems like the right move. Right after his press conference convened, Chairman Jerome Powell said, “My colleagues and I took this action to help the U.S. economy keep strong in the face of new risks to the economic outlook... the spread of the coronavirus has brought new challenges and risks.” The question is if Jay Powell finally succumbed to presidential pressure or if the Fed (along with other G7 central banks) know something else regarding the coronavirus or another issue impacting the global economy. We don't see central banks shooting their bazookas very often.

The ADP non-farm employment change came in at 183k versus the expected 170k, which is helping the U.S. dollar to increase 0.39 and 0.40 percent versus the Japanese Yen and Euro, respectively. However, the January ADP number was revised by -82k to 209k from 291k, as reported last month.

Key Movers

Riskier currencies such as the Australian and New Zealand dollar outperformed the U.S. dollar by 0.5 and 0.22 percent, respectively. The Aussie dollar was a top performer after better than expected 4Q GDP numbers.

According to Bloomberg, the Fed’s emergency rate cut took some of the sting out of the inflation wave sweeping eastern Europe, helping them to beat peers. For instance, the Polish Zloty and the Czech Koruna were the best performers against the Euro and U.S. dollar. The Chinese Yuan rose the most since December and added fuel to a rebound in emerging-market currencies.

Expected Ranges

USD/CAD: 1.3303 - 1.3364 ▼

EUR/USD: 1.1050 - 1.1150 ▼

GBP/USD: 1.2726 - 1.2838 ▼

AUD/USD: 0.6592 - 0.6675 ▲

NZD/USD: 0.6248 - 0.6324 ▲