Forex Today: US Dollar consolidates weekly gains ahead of PCE inflation data

Eren Sengezer FXStreet

Here is what you need to know on Friday, October 27:

Financial markets stay relatively quiet early Friday as investors assess the latest macroeconomic events, while keeping an eye on developments surrounding the Israel-Hamas conflict. In the second half of the day, the US Bureau of Economic Analysis (BEA) will release the Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve's preferred gauge of inflation. The US economic docket will also feature the final reading of the University of Michigan's Consumer Confidence Index for October.

The US economy expanded at an annual rate of 4.9% in the third quarter, the BEA reported on Thursday. This reading surpassed the market expectation for a growth of 4.2% and helped the US Dollar (USD) stay resilient against its rivals. In the meantime, the benchmark 10-year US Treasury bond yield fell more than 2% on the day and limited the currency's gains. Early Friday, the USD Index consolidates its weekly gains above 106.50 and the 10-year yield fluctuates below 4.9%. Meanwhile, US stock index futures gain between 0.3% and 0.9% in the early European session, pointing to an improving risk mood on the last trading day of the week.

According to the latest reports, Israeli ground forces have carried out a large operation on Thursday, targeting Hamas positions in Gaza. In the meantime, the international community is urging Israel to have a temporary ceasefire to allow humanitarian aid to reach the region.

The European Central Bank (ECB) left key interest rates unchanged following the October policy meeting, as expected. During the press conference, President Christine Lagarde noted that it was premature to start talking about rate cuts and said that the decision to hold the policy steady did not necessarily mean that they will not hike again in the future. EUR/USD declined toward 1.0500 with the immediate reaction but managed to retrace its decline. Early Friday, the pair holds steady slightly above 1.0550.

GBP/USD failed to make a decisive move in either direction and ended the day virtually unchanged on Thursday. In the European morning, the pair moves up and down in a narrow band above 1.2100.

Following Thursday's volatile action, USD/JPY stabilized above 150.00 on Friday. Japanese Finance Minister Shunichi Suzuki declined to say whether the Bank of Japan intervened in the currency market and repeated that the excessive FX volatility is undesirable and policymakers will take thorough steps on FX with a strong sense of urgency.

Gold continued to edge higher as US Treasury bond yields turned south on Thursday. Early Friday, XAU/USD trades modestly higher on the day at around $1,990.

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.

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold holds above $4,000/three-month low as Fed hike bets and firm USD cap upside

Gold struggles to capitalize on its modest recovery from levels below the $4,000 psychological mark, or a three-month low set earlier this Friday, and retains a bearish tone through the first half of the European session. Federal Reserve officials recently signaled there is no urgency to raise interest rates. Traders, however, are still pricing in around an 80% chance that the US central bank will raise borrowing costs again at its December policy meeting.

Bitcoin, Ethereum, and Ripple rebound as major support levels cap recent sell-off

Bitcoin, Ethereum and Ripple rebound modestly on Friday after correcting and testing their key support zone the previous day. BTC holds the 50-day EMA, ETH finds support around the 100-day EMA, while XRP holds the horizontal floor near $1.300. The price action of these top three cryptocurrencies suggests a recovery if this critical support zone holds; a decisive close below these levels suggests a deeper correction.

US S&P Global PMI expected to show moderating business activity in October

The United States S&P Global preliminary Purchasing Managers Indices for October will be released on Friday, providing fresh insights into the health of the world's largest economy ahead of next week's Federal Reserve monetary policy meeting. The report includes the Manufacturing PMI, Services PMI and Composite PMI, which measure business activity across the private sector.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.