Forex Today: US Dollar retreats as risk mood improves

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 Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.11%	-0.66%	-0.33%	0.09%	-0.84%	-0.77%	-0.15%
EUR	0.11%		-0.56%	-0.15%	0.20%	-0.73%	-0.67%	-0.04%
GBP	0.66%	0.56%		0.32%	0.77%	-0.18%	-0.11%	0.52%
JPY	0.33%	0.15%	-0.32%		0.42%	-0.53%	-0.46%	0.22%
CAD	-0.09%	-0.20%	-0.77%	-0.42%		-0.79%	-0.87%	-0.24%
AUD	0.84%	0.73%	0.18%	0.53%	0.79%		0.07%	0.70%
NZD	0.77%	0.67%	0.11%	0.46%	0.87%	-0.07%		0.63%
CHF	0.15%	0.04%	-0.52%	-0.22%	0.24%	-0.70%	-0.63%

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).

Although the US military action against Venezuela caused markets to adopt a cautious stance at the beginning of the week, the bullish opening in Wall Street attracted risk flows. The Dow Jones Industrial Average rose more than 1% on the day, while the Nasdaq Composite gained about 0.8%. Meanwhile, the disappointing data from the US put additional weight on the USD's shoulders. The Institute for Supply Management (ISM) Manufacturing Purchasing Managers' Index (PMI) declined to 47.9 in December from 48.2 in November, showing that the contraction in the manufacturing sector's business activity continued at an accelerating pace. In the European morning on Tuesday, the USD Index declines toward 98.00 and loses about 0.2% on the day, while US stock index futures gain between 0.1% and 0.4%.

Gold ignored the upbeat market mood and capitalized on the renewed USD weakness on Monday to rise 2.7% on a daily basis. XAU/USD continues to stretch higher and trades near $4,470 on Tuesday.

Following the downward correction in the last week of 2025, Silver gathered bullish momentum and gained more than 5% on Monday. XAG/USD extends its rally early Tuesday and trades near $78.90, rising about 3% on the day.

After falling toward 1.1650, EUR/USD reversed its direction in the American session on Monday and ended the day virtually unchanged. The pair preserves its recovery momentum and trades in positive territory near 1.1750 in the European session on Tuesday.

GBP/USD made a sharp U-turn after falling toward 1.3400 on Monday and rose about 0.6% on the day. The pair continues to push higher and trades at its strongest level since mid-September above 1.3560 in the European morning.

AUD/USD gains traction on Tuesday and trades at its highest level since October 2024 above 0.6730. In the early trading hours of the Asian session on Wednesday, the Australian Bureau of Statistics will publish the Consumer Price Index (CPI) data for November.

USD/JPY trades in a tight channel below 156.50 after posting marginal losses on Monday.

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.