Today's forex: Market follows producer inflation data

Wednesday, September 10, 2025, here is the important information you need to know:

US Dollar (USD) largely ignored the significant downward revision of employment data on Tuesday, performing better than other major currencies. In the early trading session on Wednesday, the dollar is in a consolidation phase, with market focus shifting to the producer inflation report for August. Later in the US session, the Treasury will hold a 10-year Treasury auction.

Currency Performance This Week

The table below shows the percentage change of the US dollar (USD) against major currencies this week. The US dollar performed the strongest against the Canadian dollar.

| Currency Pair | USD | EUR | JPY | CAD | AUD | NZD | CHF | |--------|-----|-----|-----|-----|-----|-----|-----| | USD | - | -0.02% | -0.57% | 0.08% | -0.85% | -0.90% | -0.22% | | EUR | 0.02% | - | -0.47% | 0.09% | -0.82% | -0.84% | -0.20% | | GBP | 0.24% | 0.23% | -0.34% | 0.32% | -0.60% | -0.61% | 0.03% |

The heatmap shows the percentage change of major currencies relative to other currencies. The base currency is selected from the left column, and the quote currency is selected from the top row. For example, selecting the US Dollar from the left column and moving horizontally to the Japanese Yen, the percentage change displayed in the box represents USD (base) / JPY (quote).

The preliminary benchmark revision of employment data by the Labor Statistics Bureau indicates that as of March 2025, the number of new jobs is 911,000 less than initially reported. Although this data initially put pressure on the dollar, the dollar index subsequently reversed its trend, possibly supported by the "buy the rumor, sell the fact" market behavior. In early European trading on Wednesday, the dollar index firmly held above 97.50, while U.S. stock futures exhibited mixed trends. In the later trading session, the producer price index for August is expected to rise by 3.3% year-on-year, unchanged from the increase in July.

The tense situation in the Middle East has driven gold to strengthen, breaking through $3670 to reach a new high on Tuesday. After a pullback, gold prices slightly declined on the same day. In early trading on Wednesday, gold stabilized around $3650. Israel has targeted senior Hamas leaders in Qatar's capital, Doha, claiming to act against those "directly responsible for the October 7 massacre." Qatar issued an official response, stating that the action "blatantly violates international law" and condemned Israel's "cowardly" attacks.

On Wednesday during the Asian session, Chinese data showed that the Consumer Price Index (CPI) in August decreased by 0.4% year-on-year, while it remained unchanged in July. AUD/USD strengthened mid-week, trading in an active range above 0.6600.

EUR/USD fell over 0.4% on Tuesday, erasing most of Monday's gains. After breaking below 1.1700, the currency pair found support and ultimately edged slightly higher, closing above 1.1710.

GBP/USD rose to 1.3600 on Tuesday, then reversed and closed in negative territory. The early session on Wednesday was relatively calm, with trading slightly below 1.3550.

The USD/JPY saw slight fluctuations during the European session on Wednesday, trading below 147.50, with almost no change on Tuesday.

Frequently Asked Questions about US Dollar

Definition and Status of the Dollar

The US dollar (USD) is the legal tender of the United States and is also the "de facto" currency of many countries, circulating alongside local currencies. Data from 2022 shows that the dollar is the most traded currency in the world, accounting for over 88% of global foreign exchange trading volume, with an average daily trading volume of 6.6 trillion dollars. After World War II, the dollar replaced the British pound as the world's reserve currency. For most of history, the dollar was backed by gold until the end of the Bretton Woods system in 1971, which ended the gold standard.

The impact of Federal Reserve decisions on the US dollar

The key factor influencing the value of the US dollar is the monetary policy set by the Federal Reserve (Fed). The Fed has a dual mandate: to maintain price stability (control inflation) and to promote maximum employment. Its main tool is adjusting interest rates. When prices rise too quickly and the inflation rate exceeds the Fed's 2% target, raising interest rates helps the dollar appreciate. When the inflation rate is below 2% or the unemployment rate is too high, lowering interest rates may put pressure on the dollar.

Quantitative Easing and Its Impact on the US Dollar

In extreme circumstances, the Federal Reserve may issue more dollars and implement quantitative easing policies. This is an unconventional measure to inject credit significantly into a distressed financial system, used to address credit exhaustion when banks are unwilling to lend due to mutual distrust. When simply lowering interest rates has limited effects, this is a last resort. During the 2008 financial crisis, the Federal Reserve employed this strategy to combat credit tightening. The issuance of more dollars by the Federal Reserve is primarily used to purchase U.S. government bonds from financial institutions. Quantitative easing typically leads to a weakening of the dollar.

The impact of quantitative tightening on the US dollar

Quantitative Tightening (QT) is the opposite process, where the Federal Reserve stops purchasing bonds from financial institutions and no longer reinvests the principal of maturing bonds into new purchases. This typically benefits the appreciation of the dollar.

Disclaimer: This article is for reference only. Past performance does not guarantee future results.