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11 Sep 2024
Forex Today: Market attention shifts to August inflation data from US
Here is what you need to know on Wednesday, September 11:
The US Dollar (USD) stays under selling pressure early Wednesday as markets gear up for key inflation data. The US Bureau of Labor Statistics will release Consumer Price Index (CPI) data for August. Later in the day, the US Treasury will hold a 10-year note auction.
Following a bullish start to the week, the USD Index stays on the back foot in the European morning and was last seen losing nearly 0.3% on the day. Falling US Treasury bond yields and the sharp decline seen in the USD/JPY pair seems to be making it difficult for USD to hold its ground. At the time of press, the benchmark 10-year US Treasury bond yield was at its lowest level since June 2023 near 3.6%. On a yearly basis, the CPI is forecast to rise 2.6%, at a softer pace than the 2.9% increase recorded in 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 weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.25% | -0.09% | -0.78% | -0.15% | -0.19% | -0.07% | -0.26% | |
| EUR | 0.25% | 0.16% | -0.52% | 0.12% | 0.10% | 0.19% | -0.01% | |
| GBP | 0.09% | -0.16% | -0.70% | -0.05% | -0.11% | 0.02% | -0.16% | |
| JPY | 0.78% | 0.52% | 0.70% | 0.66% | 0.58% | 0.69% | 0.52% | |
| CAD | 0.15% | -0.12% | 0.05% | -0.66% | -0.06% | 0.08% | -0.13% | |
| AUD | 0.19% | -0.10% | 0.11% | -0.58% | 0.06% | 0.08% | -0.05% | |
| NZD | 0.07% | -0.19% | -0.02% | -0.69% | -0.08% | -0.08% | -0.19% | |
| CHF | 0.26% | 0.00% | 0.16% | -0.52% | 0.13% | 0.05% | 0.19% |
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).
Bank of Japan (BoJ) board member Junko Nagakawa said on Wednesday that the BoJ is likely to adjust the degree of monetary easing if the economy and prices move in line with their projections. "Even after the July rate hike, real interest rates remain deeply negative, and accommodative monetary conditions are maintained," Nagakawa added. Following these remarks, USD/JPY is trading at its weakest level since January below 141.50, losing more than 0.7% on the day.
Gold benefits from falling US Treasury bond yields on Wednesday and rises toward $2,530. XAU/USD set an all-time-high at $2,531 on August 20.
After closing in negative territory for three consecutive trading days, EUR/USD stages a rebound in the early European session and was last seen trading near 1.1050.
The UK's Office for National Statistics reported earlier in the day that Industrial Production and Manufacturing Production contracted by 0.8% and 1%, respectively, on a monthly basis in July. Other data from the UK showed that the monthly Gross Domestic Product (GDP) was unchanged in July. GBP/USD struggles to gather recovery momentum after these data releases and trades slightly below 1.3100.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.