Forex Today: Will Markets Remain Cautious Ahead of US Producer Inflation Data?

What should markets watch on Friday, 13 November?

Consolidation above 103.00 continues for the US Dollar (USD) Index after a three-day advance took it to its highest point since April 2025. The index measures the greenback against a basket of six major currencies. On Friday, Europe's economic calendar brings September Trade Balance figures alongside a revision to third-quarter Gross Domestic Product (GDP) growth. October Producer Price Index (PPI) figures follow later in the day from the US Bureau of Labor Statistics (BLS).

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How Has the US Dollar Performed This week?

The US Dollar (USD) recorded its strongest performance against the Swiss Franc this week. Its percentage moves against the major currencies listed are set out in the table below.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.66%	0.84%	0.91%	0.96%	1.00%	0.34%	1.94%
EUR	-0.66%		0.19%	0.28%	0.32%	0.45%	-0.30%	1.29%
GBP	-0.84%	-0.19%		0.08%	0.11%	0.26%	-0.50%	1.09%
JPY	-0.91%	-0.28%	-0.08%		0.03%	0.02%	-0.56%	0.96%
CAD	-0.96%	-0.32%	-0.11%	-0.03%		0.02%	-0.64%	1.01%
AUD	-1.00%	-0.45%	-0.26%	-0.02%	-0.02%		-0.75%	0.75%
NZD	-0.34%	0.30%	0.50%	0.56%	0.64%	0.75%		1.61%
CHF	-1.94%	-1.29%	-1.09%	-0.96%	-1.01%	-0.75%	-1.61%

To read the heat map of percentage moves between major currencies, select the base currency in the left-hand column and the quote currency in the top row. Selecting the US Dollar on the left and moving horizontally to the Japanese Yen, for instance, gives the percentage change for USD (base)/JPY (quote) in the corresponding cell.

Risk aversion helped the USD extend gains against its peers on Thursday, when no high-impact economic releases were scheduled. Hawkish remarks from Federal Reserve (Fed) officials also drove the benchmark 10-year US Treasury bond yield above 5%, lending the currency additional support.

Oil prices moved higher after US President Donald Trump said in a Thursday Truth Social post that they don't "need a deal with Iran." West Texas Intermediate (WTI) rose more than 2% per barrel over the day. Meanwhile, modest selling pressure persisted in Wall Street's main indices after trading opened. This followed news that Nvidia's (NVDA) long-serving CEO and co-founder Jensen Huang was resigning as CEO amid board scrutiny over several affairs. US stock index futures are slightly lower in early Friday trading.

What do Fed's Williams remarks reveal about US resilience and persistent inflation risks?

A strengthening US economy that remains resilient and robust, without overheating, was central to New York Fed President John Williams' speech. Its FXS Speechtracker score of 7/10, against a 6.1/10 baseline, indicated a modestly more hawkish tone than the historical average. His description of inflation as “stubbornly persistent and elevated”, alongside the observation that the central bank “still has work to do” to achieve the appropriate monetary policy stance, conveyed continued dependence on data but a clear bias towards tightening.

Upside risks to inflation were also highlighted by San Francisco Fed President Mary Daly, who pointed to technology-led momentum and persistent services prices, even though AI is currently contributing only modestly to inflation. Her emphasis on a “bias” towards additional tightening, her comfort with a September rate increase and her assessment that inflation pressures are “up, not down” signalled a Fed that puts bringing inflation down first. At the same time, possible future productivity improvements from AI were recognised as a potential disinflationary influence.

According to strategists at National Bank of Canada, the Dollar “remains supported by persistent inflation and the prospect of further Fed tightening.” In their assessment, “following October’s pause, another firm CPI report reinforces our expectation for tighter policy before year-end,” while a “deterioration in global risk appetite could provide further support through safe-haven demand.”

Gold is recovering on Friday but continues to trade below $4,000. The rebound follows Thursday's decline of more than 2.5%, which took the precious metal close to $3,850, its lowest point since October 2025.

EUR/USD is trading above 1.1050 as it recovers during the European session, although a weekly decline remains on the cards.

GBP/USD is confined to a narrow range below 1.3250 on Friday, following three straight days of declines. The pair has shed more than 0.8% over the week.

USD/JPY was almost flat on the day at 159.80 at the time of writing, after a sharp pullback ahead of European trading. Earlier in the Asian session, it had climbed above 160.00 to its highest point since early September. On Friday, Japanese Prime Minister Sanae Takaichi said the government remains in close touch with US financial authorities regarding the currency market. She also reaffirmed that officials would work to maintain orderly conditions in the foreign exchange market.

Inflation: Key Questions Answered

How is inflation measured?

A rise in the cost of a representative basket of goods and services is measured as inflation. The headline rate is generally reported as a percentage change month-on-month (MoM) and year-on-year (YoY). By leaving out volatile components such as food and fuel, whose prices can move with geopolitical developments and seasonal influences, core inflation provides the measure economists concentrate on. It is also the rate targeted by central banks, whose mandate is to keep inflation manageable, typically at around 2%.

What does the Consumer Price Index (CPI) measure?

Price movements in a basket of goods and services over time are tracked by the Consumer Price Index (CPI). Its changes are generally reported in percentage terms, both month-on-month (MoM) and year-on-year (YoY). Central banks target Core CPI because volatile food and fuel components are excluded from it. A Core CPI reading above 2% generally leads to higher interest rates, while a reading below 2% tends to have the reverse effect. As higher rates support a currency, rising inflation usually strengthens it; falling inflation generally produces the opposite outcome.

How does inflation affect exchange rates?

A country's currency tends to appreciate when inflation is high and depreciate when inflation is low, a relationship that may appear counter-intuitive. The explanation lies in the central bank's usual response: raising interest rates to contain higher inflation. Those higher rates draw additional international capital from investors seeking attractive returns on their money.

Why do changes in inflation affect Gold prices?

Historically, investors sought Gold during periods of high inflation because it retained its value. They still often purchase it as a safe haven when markets face extreme turmoil, but this relationship does not hold most of the time. High inflation generally prompts central banks to raise interest rates in response. For Gold, higher rates are a negative: they raise the opportunity cost of owning the metal rather than an interest-bearing asset or holding money in a cash deposit account. Conversely, lower inflation tends to favour Gold by bringing interest rates down, making the precious metal a more attractive investment alternative.