Forex Today: German inflation data and US GDP revision to garner attention
Here is what you need to know on Thursday, August 29:
Major currency pairs turn quiet early Thursday as investors move to the sidelines ahead of key macroeconomic data releases. Later in the European session, Germany's Destatis will publish preliminary Consumer Price Index (CPI) data for August and the US Bureau of Economic Analysis will release the second estimate of the annualized Gross Domestic Product (GDP) growth for the second quarter. The US economic docket will also feature weekly Initial Jobless Claims figures and Pending Home Sales data for July.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.55% | -0.02% | 0.25% | -0.37% | -0.14% | -0.94% | -0.84% | |
| EUR | -0.55% | -0.62% | -0.29% | -0.91% | -0.78% | -1.46% | -1.36% | |
| GBP | 0.02% | 0.62% | 0.23% | -0.36% | -0.16% | -0.91% | -0.81% | |
| JPY | -0.25% | 0.29% | -0.23% | -0.61% | -0.29% | -0.94% | -0.98% | |
| CAD | 0.37% | 0.91% | 0.36% | 0.61% | 0.24% | -0.51% | -0.47% | |
| AUD | 0.14% | 0.78% | 0.16% | 0.29% | -0.24% | -0.69% | -0.57% | |
| NZD | 0.94% | 1.46% | 0.91% | 0.94% | 0.51% | 0.69% | 0.09% | |
| CHF | 0.84% | 1.36% | 0.81% | 0.98% | 0.47% | 0.57% | -0.09% |
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).
The US Dollar (USD) benefited from the cautious market stance on Wednesday and gathered strength against its major rivals. After touching its lowest level in over a year near 100.50 on Tuesday, the US Dollar Index gained nearly 0.5% on Wednesday before going into a consolidation phase at around 101.00. Meanwhile, US stock index futures trade mixed as investors assess chip-giant Nvidia's quarterly earnings report, which showed that the company's revenue hit a record of $30 billion for the three months to July, more than doubling from a year ago.
EUR/USD turned south and came within a few pips of 1.1100 on Wednesday. The pair holds its ground early Thursday but struggles to gather recovery momentum. At the time of press, EUR/USD was trading marginally higher on the day at around 1.1130.
GBP/USD lost its bullish momentum on Wednesday and fell more than 0.5%. The pair stages a rebound in the European morning and trades above 1.3200.
USD/JPY registered small gains on Wednesday but remained within its weekly range. The pair fluctuates in a narrow channel above 144.50 in the early European session. The data from Japan showed earlier in the day that the Consumer Confidence Index held steady at 36.7 in August.
Gold slumped below $2,500 during the American trading hours on Wednesday but managed to close the day above this key level. XAU/USD edges higher toward $2,520 on Thursday.
ANZ Business Confidence Index in New Zealand improved sharply to 50.6 in August from 27.1 in July. Following Wednesday's slight pullback, NZD/USD gathered bullish momentum and was last seen trading at its highest level since early January near 0.6300.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
