Here’s what you need to know on Thursday, July 11:
Action in the foreign exchange markets remains subdued in the second half of the week following Federal Reserve Chairman Jerome Powell’s two-day testimony before Congress. Thursday’s economic calendar will include the US Consumer Price Index (CPI) data for June, which has the potential to increase volatility. The US weekly initial jobless claims will also be closely watched by participants.
US Dollar PRICE This week
The table below shows the US Dollar (USD) exchange rate against major currencies this week. The US Dollar was the weakest currency against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.00% | -0.40% | 0.57% | -0.10% | -0.10% | 0.74% | 0.33% | |
| EUR | -0.00% | -0.20% | 0.91% | 0.22% | 0.07% | 1.08% | 0.66% | |
| GBP | 0.40% | 0.20% | 1.06% | 0.44% | 0.27% | 1.29% | 0.86% | |
| JPY | -0.57% | -0.91% | -1.06% | -0.65% | -0.63% | 0.34% | -0.19% | |
| CAD | 0.10% | -0.22% | -0.44% | 0.65% | -0.03% | 0.84% | 0.44% | |
| AUD | 0.10% | -0.07% | -0.27% | 0.63% | 0.03% | 1.01% | 0.60% | |
| NZD | -0.74% | -1.08% | -1.29% | -0.34% | -0.84% | -1.01% | -0.41% | |
| CHF | -0.33% | -0.66% | -0.86% | 0.19% | -0.44% | -0.60% | 0.41% |
The heatmap shows percentage changes of major currencies. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you choose the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change shown in the chart will represent the USD (base)/JPY (quote).
Fed Chair Powell repeated his prepared statement before the U.S. House Financial Services Committee on Wednesday and refrained from offering any new clues on the timing of interest rate cuts. Nevertheless, Wall Street’s major indexes posted strong midweek gains and made it difficult for the Fed to predict a rate cut. American dollar (USD) is expected to gain strength against its major rivals. After posting small losses on Wednesday, the USD Index is holding steady around 105.00 early Thursday. On an annualized basis, the CPI is forecast to rise by 3.1%, while the core CPI is expected to rise by 3.4%.
Economic indicator
CPI ex food and energy (YoY)
The CPI is published on US Labor Department and measures price movements by comparing retail prices of a representative basket of goods and services. The purchasing power of the dollar is diminished by inflation. The CPI is a key indicator for measuring inflation and purchasing trends. Products with high price volatility, such as energy and food, are excluded to capture a more accurate estimate of inflation. A reading above expectations is bullish for the dollar, while a reading below expectations is bearish.
Next post:
Thu Jul 11, 2024 12:30 PM
Frequency:
Monthly
Dear:
3.4%
Previous:
3.4%
Fountain:
US Bureau of Labor Statistics
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to this mandate, inflation should be around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures continue to rise amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
Data released by the UK Office for National Statistics showed in the European morning that Gross Domestic Product expanded by 0.4% on a monthly basis in May. This reading exceeded the market expectation of an expansion of 0.2%. After closing in positive territory on Wednesday, the GBP/USD continues to rise and was last seen trading at its highest level since early March above 1.2850.
EUR/USD The pair benefited from modest selling pressure surrounding the USD late on Wednesday and closed the day in positive territory. The pair remains firm on Thursday and advances towards 1.0850.
The Melbourne Institute reported in the Asian session that the Consumer Inflation Expectation fell to 4.3% in July from 4.4%. AUD/USD largely ignored this data and the pair was last seen trading marginally higher on the day, slightly above 0.6750.
USD/JPY remains in a consolidation phase above 161.50 after closing the first three days of the week in positive territory. Data from Japan showed that Machinery Orders declined 3.2% on a monthly basis in May.
Gold The pair rose towards $2,390 on Wednesday but erased a large part of its daily gains during US trading hours. XAU/USD struggles to muster bullish momentum but holds on to modest daily gains near $2,380 in the early European session.
Inflation FAQs
Inflation measures the rise in prices of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change month-on-month and year-on-year. 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 target level for 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 month-on-month and year-on-year. The core CPI is the target for central banks as it excludes the volatility of food and fuel. When the core CPI exceeds 2%, interest rates typically rise, and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually translates into a stronger currency. The opposite is true when inflation falls.
Although it may seem counterintuitive, high inflation in a country drives up the value of its currency and vice versa in the case of lower inflation. This is because the central bank will typically raise interest rates to combat higher inflation, which attracts more global capital inflows from investors looking for a lucrative place to park their money.
Gold was once the go-to asset for investors during times of high inflation because it preserved its value, and while investors often still buy Gold for its safe haven properties during times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks 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 the money in a cash deposit account. Conversely, lower inflation tends to be positive for Gold as it lowers interest rates, making the shiny metal a more viable investment alternative.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
