Forex Today: PMI reports from major economies, US GDP 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		0.98%	1.41%	1.68%	0.56%	0.33%	1.27%	0.95%
EUR	-0.98%		0.43%	0.66%	-0.42%	-0.65%	0.29%	-0.02%
GBP	-1.41%	-0.43%		-0.02%	-0.85%	-1.08%	-0.15%	-0.45%
JPY	-1.68%	-0.66%	0.02%		-1.07%	-1.28%	-0.37%	-0.64%
CAD	-0.56%	0.42%	0.85%	1.07%		-0.27%	0.71%	0.40%
AUD	-0.33%	0.65%	1.08%	1.28%	0.27%		0.95%	0.63%
NZD	-1.27%	-0.29%	0.15%	0.37%	-0.71%	-0.95%		-0.31%
CHF	-0.95%	0.02%	0.45%	0.64%	-0.40%	-0.63%	0.31%

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 risk-averse market atmosphere helped the USD outperform its rivals on Thursday as markets adopted a cautious stance on growing concerns over a military conflict between the US and Iran. BBC reported late Thursday that US President Donald Trump said that Iran must make a deal, or “bad things will happen." Iran told UN Secretary-General Antonio Guterres that it does not seek war but said that they will not tolerate military aggression. Moreover, Iranian officials reportedly also warned of a decisive response if the US takes military action over the nuclear dispute. Early Friday, US stock index futures trade marginally higher on the day.

The US economy is projected to grow at an annual rate of 3% in the fourth quarter following the 4.4% growth recorded in the previous quarter. The core PCE Price Index, the Federal Reserve's preferred gauge of inflation, is expected to rise 2.9% on a yearly basis in December, up from 2.8% in November.

After closing in the red on Thursday, EUR/USD stays on the back foot early Friday and trades at around 1.1750. PMI data from Germany and the Eurozone are both forecast to point to an ongoing expansion in the private sector's business activity in February.

GBP/USD registered losses for the fourth consecutive on Thursday. The pair continues to push lower and trades at its weakest level since late January below 1.3450. The UK's Office for National Statistics reported on Friday that Retail Sales increased by 1.8% on a monthly basis in January, surpassing the market expectation of 0.2% by a wide margin.

USD/JPY extends its weekly rally and trades comfortably above 155.00 early Friday. Japan's Prime Minister Sanae Takaichi said earlier in the day that necessary spending will be funded as much as possible through the initial budget. She further stated that she will steadily lower the debt-to-GDP ratio and restore fiscal sustainability. National Consumer Price Index (CPI) rose 1.5% in January after rising 2.1% in December.

Gold held its ground as it managed to attract demand as a safe-haven on Thursday but struggled to gain traction because of the broad-based USD strength. XAU/USD edges higher in the European morning on Friday and trades above $5,000.

The data from Australia showed that the S&P Global Composite PMI declined to 52 in February's flash reading from 55.7 in January. AUD/USD largely ignored this report and was last seen trading marginally lower on the day near 0.7050.

GDP FAQs

What is GDP and how is it recorded?

A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.

How does GDP influence currencies?

A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.

How does higher GDP impact the price of Gold?

When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.