Markets fell to start the week, long weekend in the US and Canada

VaselineSeptember 2, 2024

0 4 minutes read

Markets fell to start the week, long weekend in the US and Canada

Here’s what you need to know on Monday, September 2:

Major currency pairs fluctuate in narrow channels at the beginning of the week. The European economic file will include revisions to August HCOB manufacturing PMI data for the euro area and Germany, alongside S&P Global/CIPS manufacturing PMI for the United Kingdom. Financial markets in the US and Canada will remain closed for the Labor Day holiday.

US Dollar PRICE Last 7 days

The table below shows the percentage change of the US dollar (USD) against the main listed currencies over the last 7 days. The US dollar was the strongest against the Japanese yen.

	USD	EURO	GBP	JPY	CAD	AUD	NZD	CHF
USD		1.18%	0.62%	1.46%	-0.10%	0.29%	-0.05%	0.09%
EURO	-1.18%		-0.61%	0.28%	-1.25%	-0.97%	-1.18%	-1.05%
GBP	-0.62%	0.61%		0.79%	-0.71%	-0.36%	-0.64%	-0.51%
JPY	-1.46%	-0.28%	-0.79%		-1.52%	-1.07%	-1.25%	-1.26%
CAD	0.10%	1.25%	0.71%	1.52%		0.38%	0.11%	0.20%
AUD	-0.29%	0.97%	0.36%	1.07%	-0.38%		-0.23%	-0.09%
NZD	0.05%	1.18%	0.64%	1.25%	-0.11%	0.23%		0.12%
CHF	-0.09%	1.05%	0.51%	1.26%	-0.20%	0.09%	-0.12%

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 price index for personal consumption expenditures (PCE), held steady at 2.5% on an annual basis in July, the US Bureau of Economic Analysis reported before the weekend. The core PCE price index, which excludes volatile food and energy prices, rose 0.2% on a monthly basis, as expected. The US dollar (USD) index extended its rally on Friday and gained about 1% for the week, closing in positive territory for the first time since mid-July.

EUR/USD lost 1.3% in the previous week, pressured by the general strength of the USD. The pair is struggling to recover early on Monday and was last seen trading around 1.1050.

GBP/USD it continued to decline on Friday and closed its third straight day in negative territory. The pair appears to have entered a consolidation phase below 1.3150 on Monday’s European morning.

Data from China showed earlier in the day that the Caixin Manufacturing PMI rose to 50.4 in August from 49.8 in July. That reading came in slightly better than market expectations of 50. Meanwhile, the Australian Bureau of Statistics reported that building permits rose 10.4% month-on-month in July, following a 6.4% decline in June. AUD/USD it showed no reaction to these numbers and was last seen trading marginally higher on the day near 0.6770.

After rising more than 1% in the previous week, USD/JPY it remains relatively quiet early Monday and fluctuates in a narrow band slightly below 146.50.

Gold it failed to make a decisive move in either direction and closed essentially unchanged last week. XAU/USD remains under modest bearish pressure to start the week and is trading below $2,500.

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.

(This story was corrected on September 2 at 07:53 GMT to say in the first paragraph that the European economic file will include revisions only to the August PMI data, not the manufacturing and services PMI data.)

VaselineSeptember 2, 2024

0 4 minutes read

US Dollar PRICE Last 7 days

Frequently asked questions about inflation

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