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Forex Today: US Dollar holds ground ahead of key US data

Here is what you need to know on Wednesday, March 26:

The US Dollar (USD) stays resilient against its major rivals early Wednesday, with the USD Index holding steady above 104.00 after snapping a four-day winning streak on Tuesday. The US economic calendar will feature Durable Goods Orders data for February. Additionally, several Federal Reserve (Fed) policymakers will be delivering speeches in the second half of the day.

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 Japanese Yen.

 USDEURGBPJPYCADAUDNZDCHF
USD 0.30%0.03%0.77%-0.72%-0.74%-0.34%0.09%
EUR-0.30% -0.39%-0.03%-0.98%-1.06%-0.59%-0.18%
GBP-0.03%0.39% 0.76%-1.22%-0.70%-0.20%0.10%
JPY-0.77%0.03%-0.76% -1.48%-1.53%-1.09%-0.70%
CAD0.72%0.98%1.22%1.48% 0.03%0.38%0.81%
AUD0.74%1.06%0.70%1.53%-0.03% 0.48%0.89%
NZD0.34%0.59%0.20%1.09%-0.38%-0.48% 0.49%
CHF-0.09%0.18%-0.10%0.70%-0.81%-0.89%-0.49% 

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 UK's Office for National Statistics (ONS) reported early Wednesday that annual inflation, as measured by the change in the Consumer Price Index (CPI), softened to 2.8% in February from 3% in January, coming in below the market expectation of 2.9%. The core CPI, which excludes volatile food and energy prices, rose 3.5% in this period, compared to the 3.7% increase recorded in January. On a monthly basis, the CPI rose 0.4% after falling 0.1% previously. GBP/USD struggles to gain traction following these data and trades in negative territory below 1.2950. Later in the day, the Chancellor of the Exchequer will deliver the UK 2025 Spring Statement in the House of Commons.

The disappointing Consumer Confidence data from the US made it difficult for the USD to outperform its rivals on Tuesday. In the meantime, Wall Street's main indexes registered small gains on the day. Early Wednesday, US stock index futures trade marginally lower on the day, reflecting a cautious market mood. 

EUR/USD closed the fifth consecutive trading day in negative territory on Tuesday. The pair manages to limit its losses but stays below 1.0800 in the European morning on Wednesday.

US President Donald Trump said in a Newsmax interview on Wednesday that he plans to implement copper import tariffs within weeks. Copper prices shot up to a new all-time-high after this development. In turn, AUD/USD gains traction and trades above 0.6300 in the European morning.

USD/JPY reversed its direction after a three-day climb and lost 0.5% on Tuesday. The pair stages a rebound and trades near 150.50 in the early European session.

After stabilizing above $3,000 on Tuesday, Gold registered small daily gains. XAU/USD struggles to gather bullish momentum but holds comfortably above $3,020 on Wednesday.

Inflation FAQs

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.

(This story was corrected on March 26 at 08:41 GMT to note that Durable Goods Orders data from the US is for February, not December.)

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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