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


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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.

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