Forex Today: Markets remain cautious ahead of US PCE inflation data
Here is what you need to know on Friday, July 26:
Following the mixed action seen in financial markets on Thursday, investors cling to a cautious stance on Friday. The US economic docket will feature Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve's preferred gauge of inflation, for June later in the day, alongside Personal Income and Personal Spending figures. Finally, the University of Michigan will release revisions to July Consumer Sentiment Index data.
According to the US Bureau of Economic Analysis' first estimate, the United States' Gross Domestic Product (GDP) expanded at an annual rate of 2.8% in the second quarter. This reading followed the 1.4% growth recorded in the first quarter and came in above the market expectation of 2%. Other details of the GDP report showed that the Gross Domestic Product Price Index rose 2.3% in the second quarter, coming in below the market expectation of 2.6%, while the core Personal Consumption Expenditures Price Index rose 2.9% on a quarterly basis, below the 3.7% increase registered in the first quarter but above analysts' estimate of 2.7%.
After edging lower during the European trading hours, the US Dollar (USD) Index gained traction and erased its losses to close the day flat on upbeat GDP data on Thursday. Early Friday, the USD Index stays in a consolidation phase below 104.50, US stock index futures trade marginally higher and the 10-year US Treasury bond yield extends its sideways grind above 4.2%.
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 weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.32% | 0.40% | -2.20% | 0.73% | 2.01% | 2.08% | -0.59% | |
| EUR | -0.32% | 0.07% | -2.54% | 0.39% | 1.73% | 1.70% | -0.97% | |
| GBP | -0.40% | -0.07% | -2.71% | 0.28% | 1.66% | 1.61% | -1.06% | |
| JPY | 2.20% | 2.54% | 2.71% | 3.03% | 4.39% | 4.34% | 1.59% | |
| CAD | -0.73% | -0.39% | -0.28% | -3.03% | 1.37% | 1.34% | -1.32% | |
| AUD | -2.01% | -1.73% | -1.66% | -4.39% | -1.37% | -0.04% | -2.67% | |
| NZD | -2.08% | -1.70% | -1.61% | -4.34% | -1.34% | 0.04% | -2.59% | |
| CHF | 0.59% | 0.97% | 1.06% | -1.59% | 1.32% | 2.67% | 2.59% |
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).
During the Asian trading hours, the data from Japan showed that the Tokyo Consumer Price Index rose 2.2% on a yearly basis in July, down slightly from the 2.3% increase recorded in June. Tokyo CPI ex Food, Energy rose 1.5% in the same period. After touching its weakest level since early May below 152.00, USD/JPY staged a rebound in the American session on Thursday. Early Friday, the pair stays in a consolidation phase, slightly below 154.00.
Following a two-day decline, EUR/USD found a foothold and closed the day virtually unchanged on Thursday. The pair stays relatively quiet and moves up and down in a tight channel at around 1.0850 in the European morning.
GBP/USD failed to shake off the bearish pressure on Thursday and slumped to its lowest level in two weeks at 1.2850. The pair holds above this level early Friday but struggles to gather recovery momentum.
Gold lost more than 1% on Thursday on growing concerns over a worsening Chinese economic outlook. XAU/USD stages a technical correction in the European morning on Friday and trades modestly higher on the day at around $2,370.
Economic Indicator
Core Personal Consumption Expenditures - Price Index (YoY)
The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve’s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures." Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.
Read more.Next release: Fri Jul 26, 2024 12:30
Frequency: Monthly
Consensus: 2.5%
Previous: 2.6%
Source: US Bureau of Economic Analysis
After publishing the GDP report, the US Bureau of Economic Analysis releases the Personal Consumption Expenditures (PCE) Price Index data alongside the monthly changes in Personal Spending and Personal Income. FOMC policymakers use the annual Core PCE Price Index, which excludes volatile food and energy prices, as their primary gauge of inflation. A stronger-than-expected reading could help the USD outperform its rivals as it would hint at a possible hawkish shift in the Fed’s forward guidance and vice versa.
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.
