Forex Today: Eyes on Eurozone inflation and GDP data ahead of this week's key events
Here is what you need to know on Tuesday, April 30:
Following a volatile opening to the week, financial markets remain relatively quiet early Tuesday. Gross Domestic Product (GDP) data for the first quarter from the Euro area and Germany will be watched closely. Eurostat will also release the preliminary Harmonized Index of Consumer Prices (HICP) for April. The US economic docket will feature housing data and the Federal Reserve's (Fed) two-day meeting will get underway.
The US Dollar (USD) weakened against its major rivals on Monday and the USD Index closed the day in negative territory. In the European morning, the index recovers toward 106.00. In the meantime, the benchmark 10-year US Treasury bond yield holds above 4.6% and US stock index futures trade marginally lower.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.09% | 0.21% | 0.19% | 0.61% | 0.34% | 0.55% | 0.18% | |
| EUR | -0.09% | 0.13% | 0.09% | 0.54% | 0.31% | 0.46% | 0.09% | |
| GBP | -0.20% | -0.11% | -0.02% | 0.40% | 0.14% | 0.34% | -0.02% | |
| CAD | -0.18% | -0.09% | 0.02% | 0.41% | 0.14% | 0.36% | -0.01% | |
| AUD | -0.61% | -0.51% | -0.39% | -0.41% | -0.27% | -0.06% | -0.42% | |
| JPY | -0.33% | -0.23% | -0.12% | -0.14% | 0.28% | 0.21% | -0.17% | |
| NZD | -0.53% | -0.46% | -0.34% | -0.36% | 0.06% | -0.20% | -0.32% | |
| CHF | -0.16% | -0.09% | 0.02% | 0.01% | 0.43% | 0.19% | 0.37% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Following Japan's suspected intervention in foreign exchange markets, USD/JPY fell to 154.50 in the Asian trading hours on Monday. The pair erased a portion of its daily losses later in the day and continued to recover toward 157.00 early Tuesday. Japan's top currency diplomat, Masato Kanda, said that he has no comment on foreign exchange intervention for now when was asked by media if authorities had stepped into markets to support the Yen. Kanda added that the Ministry of Finance will release figures on currency intervention at the end of May.
Japanese Yen holds above 157.00 against USD, looks to US macro data for fresh impetus.
EUR/USD registered small gains on Monday but lost its traction on Tuesday. The pair was last seen trading at around 1.0700. The data from Germany showed earlier in the day that Retail Sales rose 1.8% on a monthly basis in March following the 1.9% contraction recorded in February.
Australian Bureau of Statistics reported on Tuesday that Private Sector Credit grew 5.1% on a yearly basis in March, while Retail Sales declined by 0.4% (MoM). Meanwhile, Caixin Manufacturing PMI in China edged higher to 51.4 in April from 51.1 in March and NBS Non-Manufacturing PMI declined to 51.2 from 53. AUD/USD came under heavy bearish pressure following mixed data releases and declined toward 0.6500 during the Asian trading hours.
Australian Dollar drops toward a psychological level after weaker Retail Sales.
GBP/USD rose more than 0.5% on Monday but reversed its direction early Tuesday. As of writing, the pair was down 0.25% on the day near 1.2530.
Gold struggled to find direction on the first trading day of the week and closed virtually unchanged. XAU/USD stays on the back foot in the European session and trades below $2,330.
Inflation FAQs
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%.
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.
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.
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.