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Forex Today: US Dollar finds a foothold ahead of PCE inflation data

Here is what you need to know on Friday, December 22:

The US Dollar (USD) continued to weaken against its rivals on Thursday, with the USD Index touching its lowest level since early August below 102.00 in the American session. Early Friday, the USD holds its ground as investors move to the sidelines while waiting for the Personal Consumption Expenditures (PCE) Price Index data, the Federal Reserve's (Fed) preferred gauge of inflation, for November. 

US Core PCE Inflation Preview: Federal Reserve preferred price gauge looks set for another decline in November.

The downward revision to the third-quarter Gross Domestic Product (GDP) growth announced on Thursday caused the USD to come under renewed selling pressure. Meanwhile, Wall Street's main indexes gathered bullish momentum following Wednesday's choppy action, putting additional weight on the USD's shoulders. In the European morning on Friday, US stock index futures trade in negative territory and the USD Index consolidates its weekly losses slightly below 102.00. In addition to PCE inflation figures, the US economic docket will feature New Home Sales for November and the University of Michigan's Consumer Confidence Index for December (final).

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 Swiss Franc.

 USDEURGBPCADAUDJPYNZDCHF
USD -0.95%-0.16%-0.71%-1.19%0.04%-1.13%-1.60%
EUR0.94% 0.79%0.25%-0.23%0.98%-0.18%-0.65%
GBP0.19%-0.76% -0.52%-1.02%0.23%-0.94%-1.41%
CAD0.70%-0.25%0.54% -0.48%0.74%-0.43%-0.90%
AUD1.17%0.24%1.00%0.48% 1.21%0.05%-0.40%
JPY-0.04%-1.01%-0.20%-0.73%-1.22% -1.17%-1.65%
NZD1.12%0.18%0.93%0.43%-0.05%1.16% -0.46%
CHF1.58%0.65%1.43%0.89%0.42%1.61%0.45% 

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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Retail Sales in the UK increased by 1.3% on a monthly basis in November, the UK's Office for National Statistics (ONS) reported on Friday. This reading followed the no-change (revised from -0.3%) recorded in October and came in better than the market expectation for an increase of 0.4%. Other data from the UK revealed that the annualized Gross Domestic Product (GDP) growth for the third quarter got revised lower to 0.3% from 0.6% in the first estimate. GBP/USD edged slightly higher with the immediate reaction to the mixed data and was last seen trading marginally higher on the day at around 1.2700.

EUR/USD gained traction in the second half of the day on Thursday and closed in positive territory before stabilizing near 1.1000 early Friday.  

USD/JPY turned south on renewed USD weakness on Thursday and lost more than 100 pips. In the European morning on Friday, the pair seems to have gone into a consolidation phase below 142.50. The data from Japan showed that the National Consumer Price Index (CPI) rose 2.8% on a yearly basis in November, down from 3.3% increase recorded in October. In the meantime, the minutes of the Bank of Japan's monetary policy meeting showed that members agreed that they need to patiently maintain the current easy policy.

Gold benefited from retreating US Treasury bond yields and the selling pressure surrounding the USD to register modest gains on Thursday. XAU/USD stays relatively at around $2,050 early Friday.

Author

Eren Sengezer

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.

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