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Forex Today: Market focus shifts to US mid-level data and Canadian inflation numbers

This is what you need to know to trade today Tuesday June 25:

After a bearish start to the week, the US dollar (USD) remains firm in the early part of Tuesday as investors await US housing and consumer confidence data. At the start of the American session, Canada’s May Consumer Price Index (CPI) data will also be closely watched by market participants.

The positive shift in risk sentiment made it difficult for the USD to find demand in the first half on Monday. However, mixed action on Wall Street helped the coin limit its losses later in the day. However, the USD Index lost more than 0.3% on a daily basis, while the Dow Jones Industrial Average gained 0.67% and the Nasdaq Composite fell 1.3%. Today, Tuesday, the USD Index remains in a consolidation phase slightly below 105.50 and US stock index futures trade marginally higher on the day.

US Dollar PRICE This Week

The table below shows the percentage change of the US Dollar (USD) against major currencies this week. The US Dollar was the weakest currency against the Australian Dollar.

USD -0.37% -0.35% -0.18% -0.29% -0.45% -0.17% -0.15%
EUR 0.37% 0.03% 0.24% 0.12% -0.05% 0.24% 0.31%
GBP 0.35% -0.03% 0.14% 0.08% -0.09% 0.21% 0.27%
JPY 0.18% -0.24% -0.14% -0.10% -0.22% 0.06% 0.06%
CAD 0.29% -0.12% -0.08% 0.10% -0.14% 0.12% 0.19%
AUD 0.45% 0.05% 0.09% 0.22% 0.14% 0.30% 0.36%
NZD 0.17% -0.24% -0.21% -0.06% -0.12% -0.30% 0.06%
CHF 0.15% -0.31% -0.27% -0.06% -0.19% -0.36% -0.06%

The heat map shows percentage changes for 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 box will represent USD (base)/JPY (quote).

Data from Australia showed at the start of the Asian session that Westpac Consumer Confidence improved to 1.7% in June from -0.3% in May. Meanwhile, Chinese Premier Li Qiang noted that they are confident and capable of achieving the annual growth target of around 5% this year. After closing in positive territory on Monday, the AUD/USD continues to rise and trades around 0.6670.

Annual inflation in Canada, as measured by the change in the CPI, is expected to decline to 2.6% in May from 2.7% in April. He USD/CAD It closed in the red on Monday and continued lower early on Tuesday. The pair is now trading at its weakest level in three weeks near 1.3650.

He USD/JPY corrected lower after approaching 160.00 on Monday, as investors refrained from betting on further weakness in the Japanese Yen amid growing speculation over intervention. Japan’s Chief Cabinet Secretary Yoshimasa Hayashi reiterated that excessive foreign exchange (FX) volatility is undesirable, adding that they will closely monitor FX movements and take necessary action if necessary. Today, Tuesday, the USD/JPY trades in the red below 159.50.

He EUR/USD took advantage of the USD weakness on Monday and recovered towards 1.0750. The pair remains relatively calm and fluctuates in a narrow channel below this level in the European morning on Tuesday.

He GBP/USD gained traction and advanced to 1.2700 on Monday. This Tuesday, the pair remains in a consolidation phase near 1.2690.

He Gold posted small gains on Monday as the 10-year US Treasury yield fell below 4.25%. XAU/USD struggles to build on the recent recovery and trades in a narrow band below $2,330 entering the European session on Tuesday.

Inflation FAQs

Inflation measures the rise in prices of a representative basket of goods and services. General inflation is usually expressed as a month-on-month and year-on-year percentage change. 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 economists focus on and is the target level of central banks, which are mandated to keep inflation at a manageable level, typically around 2%.

The Consumer Price Index (CPI) measures the variation in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage of inter-monthly and inter-annual variation. Core CPI is the target of central banks as it excludes food and fuel volatility. When the underlying CPI exceeds 2%, interest rates usually 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 occurs 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, attracting 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 continue to purchase 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 placing money in a cash deposit account. On the contrary, lower inflation tends to be positive for Gold, as it reduces interest rates, making the shiny metal a more viable investment alternative.

Source: Fx Street

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