Key Updates for Wednesday, July 16th
Pound Sterling and US Dollar (USD) are making headlines today. The USD index is likely to pull back from the recent multi-week high it reached on Tuesday. Expect producer inflation data for June and industrial production figures to be released later, alongside speeches from various Federal Reserve officials. Additionally, the Fed is set to distribute its beige book today.
This Week’s US Dollar Price
The table below outlines this week’s shifts in the US dollar (USD) against other major currencies. The USD has shown strength particularly against the Japanese yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.37% | 0.62% | 0.97% | 0.06% | 0.57% | 0.84% | 0.37% | |
| EUR | -0.37% | 0.23% | 0.59% | -0.32% | 0.19% | 0.46% | -0.01% | |
| GBP | -0.62% | -0.23% | 0.30% | -0.55% | -0.04% | 0.23% | -0.10% | |
| JPY | -0.97% | -0.59% | -0.30% | -0.77% | -0.39% | -0.06% | -0.53% | |
| CAD | -0.06% | 0.32% | 0.55% | 0.77% | 0.50% | 0.78% | 0.31% | |
| AUD | -0.57% | -0.19% | 0.04% | 0.39% | -0.50% | 0.25% | -0.19% | |
| NZD | -0.84% | -0.46% | -0.23% | 0.06% | -0.78% | -0.25% | -0.48% | |
| CHF | -0.37% | 0.00% | 0.10% | 0.53% | -0.31% | 0.19% | 0.48% |
The heatmap illustrates changes in major currencies. The base currency is on the left, and the corresponding currency is on the top. So, for instance, selecting US dollars from the left and looking across to Japanese Yen will show the rate of change.
In other news, the UK’s National Bureau of Statistics reported that annual inflation, indicated by changes in the Consumer Price Index (CPI), climbed from 3.4% in May to 3.6% in June, surpassing market expectations. The core CPI also rose to 3.7%, exceeding analysts’ predictions. After some initial declines, GBP/USD is now making a slight recovery and trading just above the 1.3400 mark.
On the other side of the Atlantic, recent US data indicated that annual CPI inflation increased from 2.4% in May to 2.7% in June. Meanwhile, core CPI saw a rise from 2.8% to 2.9%. The USD index had surged, reaching approximately 98.70 before being revised lower to around 98.50. President Trump mentioned that notifications regarding tariffs for smaller countries would be sent out soon, likely setting them at “a little over 10%.” Following some mixed signals from Wall Street, US stock index futures dipped about 0.3% early Wednesday.
After a quiet beginning on Monday, EUR/USD is now trending downwards, dropping below 1.1600 for the first time since late June. As of today, it hovers near 1.1620, with Eurostat set to release May’s trade balance data later.
Meanwhile, AUD/USD is steady after losing around 0.5% on Tuesday, comfortably holding above 0.6500. Market watchers are keenly awaiting Australian labor market data for June, expected tomorrow.
On Tuesday, USD/JPY climbed to its highest point since early April, going over 149.00, but has since eased to just above 148.50 this morning.
As for gold, it closed down for the second straight day on Tuesday. However, it may be recovering slightly this morning, trading around $3,340.
Inflation FAQ
Inflation reflects the increase in prices for a typical assortment of goods and services. Headline inflation is commonly presented as both monthly and yearly percentage changes, while core inflation excludes more fluctuating items like food and fuel. Central banks focus on core inflation to maintain manageable inflation levels, usually around 2%.
The Consumer Price Index (CPI) tracks price changes in goods and services over time, often shown as monthly and yearly percentage shifts. Core CPI, targeted by central banks, disregards volatile items, and when it exceeds 2%, interest rates may rise, which typically strengthens currency value.
This might seem odd, but high inflation can actually enhance a currency’s strength. This occurs because central banks often increase interest rates to combat inflation, attracting global investors looking for profitable opportunities.
Historically, gold is seen as a refuge for investors, particularly during inflationary periods, although that’s not always the case. Rising inflation usually prompts central banks to increase interest rates, which can negatively affect gold prices. Conversely, lower inflation tends to support gold’s attractiveness as interest rates drop.
