Forex Today: Majors stabilize as USD selloff loses steam

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 New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.58%	-1.13%	0.21%	-0.81%	-0.76%	-1.63%	-0.24%
EUR	0.58%		-0.57%	0.80%	-0.25%	-0.22%	-1.07%	0.35%
GBP	1.13%	0.57%		1.32%	0.32%	0.33%	-0.51%	0.95%
JPY	-0.21%	-0.80%	-1.32%		-1.11%	-0.97%	-1.88%	-0.50%
CAD	0.81%	0.25%	-0.32%	1.11%		0.14%	-0.78%	0.63%
AUD	0.76%	0.22%	-0.33%	0.97%	-0.14%		-0.83%	0.48%
NZD	1.63%	1.07%	0.51%	1.88%	0.78%	0.83%		1.47%
CHF	0.24%	-0.35%	-0.95%	0.50%	-0.63%	-0.48%	-1.47%

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).

After the US Bureau of Labor Statistics (BLS) reported on Tuesday that consumer inflation rose at a much softer pace than expected in June, Wednesday's data showed that producer inflation also retreated sharply in this period. The Producer Price Index (PPI) declined by 0.3% on a monthly basis and it was up 5.5% on a yearly basis, well below the market forecast of 6.2%. The USD remained under bearish pressure midweek, with the USD Index losing about 0.5% on Wednesday. Early Thursday, the USD Index holds steady at around 100.50, while US stock index futures trade virtually unchanged on the day.

Warsh downplays inflation gauges, highlights AI disruption but keeps Fed tone steady

Comments from Fed Chair Kevin Warsh on the second day of his congressional testimony received a 5.4/10 on the FXS Speechtracker, notably softer relative to the historical average of 7/10, signaling a more cautious and nuanced tone. By calling recent inflation data an “imperfect gauge” of underlying inflation and framing AI as a source of both disruption and long-term job and wage gains, the remarks lean toward an emphasis on structural change rather than imminent policy tightening. The comment that whether AI is inflationary “is up to the Fed” underscores confidence in policy control but stops short of adding fresh hawkish impetus for the USD.

In the meantime, the US and Iran exchaged strikes for a fifth consecutive day. The US military announced in the early trading hours of the Asian session that they launched another wave of strikes on Iran, with Iranian media reporting explosions on Qeshm Island, Bandar Abbas and Chabahar. In responsse, Iran said that it targeted US assets in Kuwait, Bahrain and Jordan.

With tensions in the Middle East remaining high, Gold (XAU/USD) struggled to benefit from the broad USD weakness and registered marginal gains on Wednesday. In the European morning on Thursday, XAU/USD edges lower toward $4,000.

EUR/USD extended its rebound and touched its highest level in about a month above 1.1480 on Wednesday. The pair stays in a consolidation phase at around 1.1460 early Thursday.

GBP/USD gathered bullish momentum on Wednesday and rose more than 1% to reach its highest level in two months above 1.3550. The pair corrects lower and trades near 1.3530 in the European session on Thursday. The data published by the UK's Office for National Statistics (ONS) showed that the Gross Domestic Product (GDP) expanded by 0.1% on a monthly basis in May, as expected.

The Bank of Canada (BoC) announced on Wednesday that it left the policy rate unchanged at 2.25%, as anticipated. During the press conference, BoC Governor Tiff Macklem noted that longer-term inflation expectations remain well-anchored but acknowledged that biggest risks were conflicts with the Middle East and the trade relationship with the US. Following Tuesday's sharp decline, USD/CAD closed marginally lower on Wednesday and it was last seen fluctuating in a tight channel at around 1.4050.

USD/JPY moves sideways at around 162.00 after closing virtually unchanged on Wednesday. Japan’s Finance Minister Satsuki Katayama repeated on Thursday that the authorities are ready to take appropriate action on currency anytime as needed. In the meantime, The Bank of Japan's (BoJ) quarterly survey showed that 90.4% of Japanese households expect prices to rise a year from now, compared with 83.7% in the previous survey.

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.