US dollar consolidates weekly gains ahead of producer inflation data

VaselineOctober 11, 2024

0 4 minutes read

US dollar consolidates weekly gains ahead of producer inflation data

Here’s what you need to know on Friday, October 11:

Following Thursday’s volatile action, markets appear to have stabilized to begin the final trading day of the week. The US economic calendar will include producer price index (PPI) data for September and the University of Michigan consumer sentiment survey for October. In the first American session, Statistics Canada will release labor market data for September.

PRICE USD this week

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

	USD	EURO	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.25%	0.33%	0.04%	1.35%	0.74%	0.98%	-0.21%
EURO	-0.25%		0.14%	-0.16%	1.12%	0.46%	0.71%	-0.51%
GBP	-0.33%	-0.14%		-0.35%	0.99%	0.32%	0.60%	-0.54%
JPY	-0.04%	0.16%	0.35%		1.32%	0.70%	0.90%	-0.23%
CAD	-1.35%	-1.12%	-0.99%	-1.32%		-0.57%	-0.38%	-1.56%
AUD	-0.74%	-0.46%	-0.32%	-0.70%	0.57%		0.29%	-0.91%
NZD	-0.98%	-0.71%	-0.60%	-0.90%	0.38%	-0.29%		-1.17%
CHF	0.21%	0.51%	0.54%	0.23%	1.56%	0.91%	1.17%

The heatmap shows the percentage changes of major currencies against each other. The base currency is chosen from the left column, while the quoted currency is chosen from the top row. For example, if you choose the US dollar in the left column and move along the horizontal line to the Japanese yen, the percentage change shown in the box will be USD (base)/JPY (quote).

US inflation, as measured by the change in the consumer price index (CPI), fell to 2.4% on an annual basis in September from 2.5% in August, the Bureau of Labor Statistics (BLS) reported on Thursday US. Other details of the report showed that the core CPI, which excludes volatile food and energy prices, rose 3.3 percent on an annual basis, beating the August reading and the market forecast of 3.2 percent. Core monthly CPI rose 0.3% in September. The US dollar (USD) failed to benefit from those readings as weekly initial jobless claims came in at 258,000 in the week ended Oct. 5, up sharply from 225,000 the previous week. After hitting a near-month high around 103.20 on Thursday, the USD index ended the day flat and entered a consolidation phase below 103.00 on Friday morning.

Data released by Britain’s Office for National Statistics showed on Friday that Gross Domestic Product rose 0.2% month-on-month in August, matching the market estimate. During the same period, industrial production and manufacturing output rose by 0.5% and 1.1%, respectively. Although GBP/USD slightly higher on bullish data, remains well below 1.3100 in the European session.

EUR/USD closed flat on Thursday as the USD lost strength in the second half of the day. The pair is struggling to muster recovery momentum and is trading in a narrow channel slightly below 1.0950 in the European morning. Germany’s Destatis reiterated on Friday that the annual CPI rose 1.6% year-on-year in September, equal to the initial estimate.

USD/CAD extended its uptrend on Thursday and closed its seventh consecutive day in positive territory. Ahead of the Canadian jobs data, the pair is trading marginally higher on the day near 1.3750.

USD/JPY closed in the red on Thursday after reversing from a multi-month high set above 149.60. The pair remains relatively quiet and moves up and down in a tight band below 149.00.

Gold rallied momentum and snapped a six-day losing streak on Thursday. XAU/USD continues to rise, towards $2,650 on Friday.

Frequently asked questions about inflation

Inflation measures the increase in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change month-on-month (month-on-month) and year-on-year (YoY). Core inflation excludes more volatile items such as food and fuel, which can fluctuate due to geopolitical and seasonal factors. Core inflation is the figure that 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 the prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change from month to month (month-to-month) and year-to-year (year-to-year). Core CPI is the figure targeted by central banks because it excludes volatile food and fuel inputs. When core CPI rises above 2%, higher interest rates usually result, and vice versa when it falls below 2%. Because 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 increases the value of its currency, and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat higher inflation, which attracts more global capital inflows from investors looking for a profitable place to park their money.

Previously, gold was the asset investors turned to during periods of high inflation because it held its value, and while investors will often buy gold for its safe haven properties during periods of extreme market turbulence, this is not the case with most of the time. . This is because when inflation is high, central banks will raise interest rates to combat it. Higher interest rates are negative for gold because they increase the opportunity cost of holding gold versus an interest-bearing asset or putting money in a cash deposit account. On the other hand, lower inflation tends to be positive for gold as it lowers interest rates, making the shiny metal a more viable investment alternative.

VaselineOctober 11, 2024

0 4 minutes read

PRICE USD this week

Frequently asked questions about inflation

Vaseline

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