Key Updates for Thursday, June 25th
The U.S. dollar (USD) index experienced a brief correction after touching a 13-month high of 101.80 on Wednesday, settling around 101.50 early Thursday. Today, the U.S. Bureau of Economic Analysis (BEA) is expected to release the Personal Consumption Expenditures (PCE) price index along with the final revised figures for May’s personal spending and income, in addition to first-quarter gross domestic product (GDP) growth. Other important updates on the economic calendar include durable goods orders for May and weekly new jobless claims.
USD Performance this Week
The USD has shown strong performance this week, especially against the New Zealand dollar.
| USD | EUR | GBP | JPY | CAD | Australian Dollar | New Zealand Dollar | Swiss Franc | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.00% | 0.13% | 0.32% | 0.52% | 1.70% | 1.73% | 0.61% | |
| EUR | -1.00% | -0.87% | -0.59% | -0.43% | 0.75% | 0.68% | -0.38% | |
| GBP | -0.13% | 0.87% | 0.00% | 0.39% | 1.56% | 1.56% | 0.46% | |
| JPY | -0.32% | 0.59% | 0.00% | 0.15% | 1.36% | 1.38% | 0.23% | |
| CAD | -0.52% | 0.43% | -0.39% | -0.15% | 1.20% | 1.24% | 0.06% | |
| Australian Dollar | -1.70% | -0.75% | -1.56% | -1.36% | -1.20% | -0.00% | -1.08% | |
| New Zealand Dollar | -1.73% | -0.68% | -1.56% | -1.38% | -1.24% | 0.00% | -1.08% | |
| Swiss Franc | -0.61% | 0.38% | -0.46% | -0.23% | -0.06% | 1.08% | 1.08% |
The table indicates how the USD has performed against major currencies this week, with a notable strength against the NZD.
Investor sentiment leaned towards the USD midweek, as many moved away from risk-sensitive assets. In Thursday’s European trading, U.S. stock index futures were positive, with Nasdaq futures leading the charge with gains over 2%.
On a different note, Iran’s Revolutionary Guards have dismissed the proposed route through the Strait of Hormuz, cautioning that vessels in the area could face risks. Concurrently, Israeli Defense Minister Israel Katz stated that Israeli forces would not retreat from southern Lebanon, despite U.S. pressures, citing ongoing conflicts in Lebanon as a significant barrier to achieving lasting peace.
In the EUR/USD pair, trading hovered around 1.1350 after a 0.2% dip on Wednesday. The European Central Bank plans to release an economic report later today.
GBP/USD remained steady above 1.3150 in the morning hours following a decline the previous day.
USD/JPY edged up further after a modest uptick on Wednesday, pushing toward 162.00, raising potential intervention concerns. A bank board member pointed out that Japan has already achieved its 2% inflation target, suggesting a need for rate increases to maintain balance.
Gold (XAU/USD) faced ongoing selling pressure, trading below $4,000 in Europe this morning, marking a drop over 4% for the week.
Earlier, Australian statistics showed a slight decline in the unemployment rate for May, dropping to 4.4% from 4.5%. This was coupled with a 5.2 thousand increase in full-time employment, recovering from a loss in April. The AUD/USD pair struggled to regain momentum, stabilizing around 0.6900 in the European morning.
Frequently Asked Questions about Inflation
Inflation indicates how prices for a basket of goods and services increase over time. It’s typically presented as a percentage change month-over-month (MoM) and year-over-year (YoY), while core inflation excludes more volatile items such as food and fuel. Central banks aim for core inflation near 2% to keep it manageable.
The Consumer Price Index (CPI) measures price changes in a basket of goods and services, expressed as a percentage on a MoM and YoY basis. If core CPI exceeds 2%, it often leads to interest rate hikes. Conversely, when it drops below 2%, rates usually decrease, influencing currency values accordingly.
This dynamic suggests a correlation: high inflation often prompts central banks to increase interest rates, attracting investments due to favorable returns. Interestingly, while gold was traditionally seen as a safe haven during inflationary periods, rising interest rates often negatively affect its appeal, as they increase the opportunity cost of holding non-yielding assets like gold.
