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Forex Today: Australian Dollar surges to two-week highs after strong CPI data

Here is what you need to know on Thursday, February 26:

The Australian Dollar (AUD) skyrocketed to near a two-week high after a hotter-than-expected January inflation report, fueling speculation of additional rate hikes by the Reserve Bank of Australia (RBA).

The US Dollar Index (DXY) fell near the 97.70 price region in the American session amid uncertainty over the United States (US) trade policies.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.

USDEURGBPJPYCADAUDNZDCHF
USD-0.27%-0.40%0.34%-0.18%-0.88%-0.52%-0.13%
EUR0.27%-0.13%0.59%0.09%-0.62%-0.25%0.14%
GBP0.40%0.13%0.74%0.21%-0.49%-0.13%0.26%
JPY-0.34%-0.59%-0.74%-0.51%-1.21%-0.83%-0.46%
CAD0.18%-0.09%-0.21%0.51%-0.70%-0.33%0.05%
AUD0.88%0.62%0.49%1.21%0.70%0.36%0.76%
NZD0.52%0.25%0.13%0.83%0.33%-0.36%0.39%
CHF0.13%-0.14%-0.26%0.46%-0.05%-0.76%-0.39%

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).

EUR/USD is trading near the 1.1800 price zone, up by over 20%, as softer inflation data released earlier in the day in the Eurozone pushed the Euro (EUR). The data reinforced expectations that the European Central Bank (ECB) will maintain a steady policy stance.

GBP/USD is trading near the 1.3550 level, recovering from its consolidation phase and climbing to a one-week high. Bank of England’s (BoE) Governor Andrew Bailey said a rate cut in March is possible but acknowledged that inflation services remain high.

AUD/USD rises by over 0.85% and trades near the 0.7120 price zone after the Australian January Consumer Price Index (CPI) rose 3.8% YoY, above expectations, while the trimmed mean measure jumped from 3.3% to 3.4% YoY. RBA Governor Michelle Bullock commented that the economy is in quite a good position.

USD/JPY is trading near 156.40, nearing an almost three-week high amid growing uncertainty over the Bank of Japan (BoJ) interest rate outlook. Japanese Prime Minister Sanae Takaichi expressed reservations about further rate hikes during her meeting last week with BoJ Governor Kazuo Ueda.

Gold is trading at $5,205, up by 0.75% through the day and recovering some of Tuesday’s losses and trying to regain its footing amid geopolitical uncertainty.

What’s next in the docket:

Thursday, February 26:

  • Tokyo February CPI.
  • US Initial Jobless Claims

Friday, February 27:

  • Swiss Q4 GDP.
  • Germany’s February flash CPI.
  • Germany’s February flash HICP.
  • Canadian Q4 GDP.
  • US Producer Price Index (PPI).

Gold FAQs

Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.

Author

Agustin Wazne

Agustin Wazne joined FXStreet as a Junior News Editor, focusing on Commodities and covering Majors.

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