Forex Today: Mood sours as Middle East tensions come back under spotlight
Here is what you need to know on Tuesday, August 18:
Financial markets cling to a cautious stance early Tuesday as tensions in the Middle East re-escalate. In the second half of the day, the US economic calendar will feature housing data, alongside Import Price Index, Export Price Index and Industrial Production figures for July.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.10% | 0.14% | 0.19% | -0.01% | 0.10% | 0.43% | 0.10% | |
| EUR | -0.10% | 0.04% | 0.11% | -0.11% | 0.00% | 0.33% | 0.01% | |
| GBP | -0.14% | -0.04% | 0.04% | -0.14% | -0.04% | 0.31% | -0.03% | |
| JPY | -0.19% | -0.11% | -0.04% | -0.19% | -0.09% | 0.25% | -0.08% | |
| CAD | 0.01% | 0.11% | 0.14% | 0.19% | 0.10% | 0.45% | 0.11% | |
| AUD | -0.10% | -0.00% | 0.04% | 0.09% | -0.10% | 0.34% | 0.00% | |
| NZD | -0.43% | -0.33% | -0.31% | -0.25% | -0.45% | -0.34% | -0.32% | |
| CHF | -0.10% | -0.01% | 0.03% | 0.08% | -0.11% | -0.01% | 0.32% |
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).
The US Dollar (USD) started the week on a bearish note as investors continued to scale back bets for a Federal Reserve (Fed) policy tightening in September following the previous week's disappointing data releases. In turn, the USD Index dropped to its weakest level since early June below 99.50 before staging a rebound in the late American session. In the European morning on Tuesday, the USD Index stays in positive territory at around 99.70.
US President Donald Trump said on Monday they are not seeking an extension of the Memorandum of Understanding, which expired on Monday. Additionally, in an interview with Fox News, Trump reportedly threatened to bomb Oman if it gets in the way of his administration's negotiations with Iran. In the meantime, the UK Maritime Trade Operations (UKMTO) reported early Tuesday that a vessel was struck by an "unknown projectile" wile passing through the Strait of Hormuz. After rising more than 3% on Monday, the barrel of West Texas Intermediate (WTI) continues to push higher and was last seen trading near $84.70, rising 0.7% on the day. Moreover, the benchmark 10-year US Treasury bond yield advance to its highest level since January 2025 near 4.75% on heightened Middle East risks, further supporting the USD.
Dollar carry and steady yields seen keeping risk appetite supported
Analysts at OCBC argue that the "combination of still-attractive USD carry and a pause in the USD's bullish momentum, following softer US economic data that has reduced the likelihood of a September Fed hike, should keep the greenback rangebound in the near term." They add that, "provided long-end US yields do not rise significantly further, the broader risk backdrop should remain supportive of carry trades," reinforcing the view that current market conditions continue to favour yield-seeking strategies.
After climbing to a fresh two-month high above 1.1600, EUR/USD corrects lower on Tuesday and was last seen trading at around 1.1570.
The UK's Office for National Statistics (ONS) reported earlier in the day that the ILO Unemployment Rate held steady at 4.9% in the three months to June. In this period, Employment Change increased by 83K, while annualized wage inflation, as measured by the change in the Average Earnings Excluding Bonus, edged higher to 3.5%. GBP/USD stays under modest bearish pressure and edges lower toward 1.3500 after closing flat on Monday. On Wednesday, the ONS will publish July inflation data.
USD/JPY trades modestly higher on the day at around 159.80 to start the European session on Tuesday.
Gold loses its traction after rising nearly 1% on Monday and trades slightly below $4,400.
The data from Canada showed on Tuesday that the Consumer Price Index (CPI) rose by 3% on a yearly basis in July. This print followed the 2.8% increase recorded in June and came in above the market expectation of 2.9%. USD/CAD stays in a consolidation phase below 1.3900 after ending the day virtually unchanged on Monday.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.