Forex Today: US Dollar extends correction as US-Iran conflict remains under spotlight
Here is what you need to know on Friday, July 10:
The action in financial markets remain choppy heading into the weekend as participants refrain from committing to large positions due to the uncertainty surrounding the conflict between Iran and the United States (US). In the second half of the day, June labor market report from Canada will be the only data release that could trigger a market reaction.
The US Dollar (USD) Index registered marginal losses on Thursday. In the absence of high-impact data releases, the risk-positive market atmosphere, as reflected by the bullish action seen in Wall Street's main indexes, made it difficult for the USD to stay resilient against its peers. Early Friday, US stock index futures trade mixed, while the USD Index stays in the red at around 100.75.
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 New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | -0.57% | 0.18% | -0.25% | -0.18% | -1.06% | 0.26% | |
| EUR | 0.01% | -0.58% | 0.17% | -0.27% | -0.14% | -1.08% | 0.22% | |
| GBP | 0.57% | 0.58% | 0.65% | 0.33% | 0.44% | -0.50% | 0.81% | |
| JPY | -0.18% | -0.17% | -0.65% | -0.46% | -0.24% | -1.22% | 0.05% | |
| CAD | 0.25% | 0.27% | -0.33% | 0.46% | 0.19% | -0.77% | 0.48% | |
| AUD | 0.18% | 0.14% | -0.44% | 0.24% | -0.19% | -0.94% | 0.36% | |
| NZD | 1.06% | 1.08% | 0.50% | 1.22% | 0.77% | 0.94% | 1.31% | |
| CHF | -0.26% | -0.22% | -0.81% | -0.05% | -0.48% | -0.36% | -1.31% |
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).
Following two nights of strike exchanges, the US and Iran seem to have taken a step back in the conflict. Citing a US official familiar with the matter, Al Jazeera reported that Washington remains committed to negotiations and diplomacy to find a resolution, adding that technical talks continue.
Williams flags inflation as ‘far too high’ as AI and energy keep Fed on hawkish footing
Meanwhile, New York Federal Reserve (Fed) president John Williams delivered a relatively hawkish speech on Thursday, with a 7/10 FXS Speechtracker score versus a 5.8/10 historical average, underscoring that inflation remains “far too high” and that monetary policy is closely watching energy-price pass-through. The acknowledgment that AI investment is currently a driver of inflation, even as it is framed as a future positive supply shock, signals a Fed that is wary of near-term price pressures while still buying into a longer-run productivity story. Overall, the emphasis on active debate around inflation scenarios and a “collective reaction function” points to a Committee that is not yet ready to relax its guard, a stance typically supportive of the Dollar and yields.
The FXS Fed Sentiment Index rose by 0.54 points to 125.92, reinforcing that the policy tone remains firmly in hawkish territory, well above the neutral 100 line. This incremental uptick, aligned with the stronger-than-usual FXS Speechtracker score, suggests markets should continue to price a Fed that is more inclined to lean against upside inflation risks than to pivot quickly toward easing.
EUR/USD holds its ground early Friday and edges higher toward 1.1450. The data from Germany confirmed that the annual Consumer Price Index (CPI) rose 2.3% on a yearly basis in June, matching the advanced estimate.
GBP/USD extends its weekly advance and trades at its highest level since mid-June above 1.3400.
USD/CAD stays on the back foot in the European morning on Friday and declines toward 1.4150. The Unemployment Rate in Canada is forecast to remain unchanged at 6.6% in June.
The data from Japan showed earlier in the day that the Producer Price Index rose 7.1% on a yearly basis in June. This print followed the 6.6% increase recorded in May and came in above the market expectation of 6.8%. Japan’s Finance Minister Satsuki Katayama said on Friday that the government will closely tracking economic indicator and market conditions. "Gradual interest rate rises are expected as government pursues active fiscal policy," Katayama added. USD/JPY remains under bearish pressure and loses about 0.5% on the day near 161.60.
Gold (XAU/USD) rose more than 1% on Thursday and snapped a three-day losing streak. XAU/USD struggles to preserve its recovery momentum early Friday and trades modestly lower on the day, slightly above $4,100.
Employment FAQs
How do employment levels affect currencies?
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
Why is wage growth important?
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
How much do central banks care about employment?
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.