Gold reached a new all-time high of $2,500 on Wednesday, while major currency pairs traded narrowly. Eurostat is set to release revised inflation data for June, and the US economic calendar will feature important data such as Housing Starts, Building Permits, and Industrial Production for June. Market participants are closely monitoring central bank officials’ comments.
In the UK, annual inflation remained steady at 2% in June, with core CPI rising by 3.5% and the Retail Price Index increasing by 2.9%. These figures were in line with analysts’ expectations. GBP/USD saw a slight increase but remained below 1.3000 following the release of the data. Meanwhile, the US Dollar Index closed flat on Tuesday after encountering resistance near 104.50 and edged lower to stay above 104.00 on Wednesday. The benchmark 10-year US Treasury bond yield remained below 4.2% after a sharp decline, and US stock index futures traded in negative territory.
The US Dollar was the weakest against the Japanese Yen this week, according to percentage change data. Gold continued to benefit from falling US Treasury bond yields, reaching a high above $2,480 before retreating slightly. USD/CAD reached a two-week high above 1.3700 on Tuesday but failed to maintain bullish momentum, trading around 1.3680 on Wednesday. In New Zealand, CPI rose by 3.3% annually in the second quarter, below market expectations of 3.5%. Despite this, NZD/USD traded positively above 0.6050.
EUR/USD traded within a narrow range on Tuesday and closed little changed, hovering around 1.0900 on Wednesday. Inflation measures the rise in the price of goods and services over time, with core inflation excluding volatile elements like food and fuel. Central banks target core inflation around 2% and adjust interest rates accordingly. Higher inflation typically results in a stronger currency, as central banks raise interest rates to combat it, attracting more capital inflows. Gold historically served as a hedge against high inflation, but higher interest rates can be negative for the metal, while lower inflation can be positive.
