On Friday, August 30, the US Dollar Index remained below 101.50 after two days of gains. In the European session, Eurostat will release the Harmonized Index of Consumer Prices for August, while investors will also be watching the July Personal Consumption Expenditures Price Index data, which is the Federal Reserve’s preferred measure of inflation.
The US Dollar was the strongest against the Euro this week, with the USD gaining against other major currencies as well. The macroeconomic data releases on Thursday were positive for the USD, with the Gross Domestic Product growth for the second quarter revised higher to 3% and the weekly Initial Jobless Claims lower at 231,000. US stock index futures traded higher on Friday, along with the benchmark 10-year US Treasury bond yield.
In Asia, Australia’s Retail Sales remained unchanged in July, which was below analysts’ estimates. The AUD/USD pair showed no significant reaction to this data and remained near 0.6800. EUR/USD closed lower, GBP/USD dropped to a weekly low below 1.3150, and USD/JPY traded lower despite positive data from Japan, where the Consumer Price Index rose and Unemployment Rate increased. Gold rebounded on Thursday following a sharp decline on Wednesday, trading around $2,520 on Friday.
Inflation measures the rise in the price of a representative basket of goods and services, expressed as a percentage change on a month-on-month and year-on-year basis. Core inflation excludes volatile elements such as food and fuel, with central banks targeting this figure and aiming to keep inflation around 2%. Higher inflation usually results in a stronger currency, as it may lead to higher interest rates, attracting more global capital inflows. Gold was traditionally viewed as a hedge against inflation, but high inflation can actually be negative for Gold as central banks may raise interest rates in response. Lower inflation tends to be positive for Gold, as it brings interest rates down, making Gold a more appealing investment alternative.
