Forex Today: PMI reports from major economies and US CPI data to lift volatility

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.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.49%	0.77%	1.62%	-0.03%	-0.24%	-0.31%	0.49%
EUR	-0.49%		0.28%	1.21%	-0.51%	-0.63%	-0.86%	0.01%
GBP	-0.77%	-0.28%		0.69%	-0.80%	-0.91%	-1.14%	-0.28%
JPY	-1.62%	-1.21%	-0.69%		-1.68%	-1.87%	-1.98%	-1.22%
CAD	0.03%	0.51%	0.80%	1.68%		-0.17%	-0.35%	0.51%
AUD	0.24%	0.63%	0.91%	1.87%	0.17%		-0.23%	0.63%
NZD	0.31%	0.86%	1.14%	1.98%	0.35%	0.23%		0.86%
CHF	-0.49%	-0.01%	0.28%	1.22%	-0.51%	-0.63%	-0.86%

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).

Top economic officials from China and the US will meet in Malaysia on Friday to discuss trade-related issues ahead of next week's high-level meeting with US President Donald Trump and Chinese President Xi Jinping. The sides will reportedly focus on China's rare earth export controls. After closing virtually unchanged on Thursday, the US Dollar (USD) Index holds steady at around 99.00 in the early European session. Meanwhile, US stock index futures rise between 0.2% and 0.5% after Wall Street's main indexes registered gains on Thursday.

Crude oil prices stabilize following a two-day rally that was fuelled by the US' decision to sanction Russia's two largest oil companies. After rising more than 7% in a two-day span, the barrel of West Texas Intermediate (WTI) trades at around $61.50 on Friday.

The Financial Times reported early Friday that US President Trump has ended trade talks with Canada. In a post on Truth Social, Trump explained that he terminated trade negotiations with Canada "based on their egregious behavior." USD/CAD clings to marginal gains above 1.4000 in the European morning.

In the Asian session, the data from Australia showed that the economic activity in the private sector expanded at a healthy pace in October, with the S&P Global Composite PMI arriving at 52.6. AUD/USD showed no reaction to the PMI data and was last seen trading marginally lower on the day near 0.6500.

The UK's Office for National Statistics (ONS) announced early Friday that Retail Sales rose by 0.5% on a monthly basis in September. This reading came in much better than the market expectation for a decrease of 0.2%. After closing the fifth consecutive day in negative territory on Thursday, GBP/USD holds comfortably above 1.3300 but struggles to gather recovery momentum.

EUR/USD extends its sideways grind near 1.1600 in the European session on Friday.

Following the sharp correction seen early in the week, Gold stabilized above $4,000 and closed the previous two days virtually unchanged. XAU/USD edges lower early Friday and trades slightly below $4,100.

USD/JPY builds on its weekly gains and trades near 153.00 early Friday, rising more than 0.2% on a daily basis. The data from Japan showed that the National Consumer Price Index rose to 2.9% on a yearly basis in September from 2.7% in August.

Inflation FAQs

What is inflation?

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%.

What is the Consumer Price Index (CPI)?

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.

What is the impact of inflation on foreign exchange?

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.

How does inflation influence the price of Gold?

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.

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