Forex Today: US Dollar stabilizes ahead of key PCE inflation data

Here is what you need to know on Friday, August 29:

The US Dollar (USD) finds a foothold early Friday after posting losses for three consecutive days. In the second half of the day, Consumer Price Index (CPI) data from Germany and the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's (Fed) preferred gauge of inflation, from the US will be watched closely by market participants.

The USD Index continued to edge lower on Thursday as markets remained risk-positive. Upbeat macroeconomic data releases from the US, however, helped the USD limit its losses. The US Bureau of Economic Analysis (BEA) revised the annualized Gross Domestic Product (GDP) growth for the second quarter to 3.3% from 3.1% in its initial estimate. Additionally, weekly Initial Jobless Claims declined to 229,000 from 234,000 in the previous week. Early Friday, the USD Index clings to small daily gains near 98.00 and US stock index futures lose between 0.1% and 0.2%. On a yearly basis, the core PCE inflation is forecast to edge higher to 2.9% in July from 2.8% in June.

The data from Germany showed earlier in the day that Retail Sales declined by 1.5% on a monthly basis in July. This reading followed the 1% increase recorded in June and came in worse than the market expectation for a decrease of 0.4%. The annual CPI inflation in Germany is seen ticking up to 2.1% in July. After rising about 0.4% on Thursday, EUR/USD trades in a tight channel slightly above 1.1650 in the European morning.

USD/CAD dropped to its lowest level in three weeks near 1.3740 on Thursday. The pair struggles to gather recovery momentum early Friday and fluctuates a tad above 1.3750. Statistics Canada will publish second-quarter GDP data later in the day.

Japanese Finance Minister Katsunobu Kato said on Friday that he is aware of rising interest rates, adding that he will continue to engage with bond market participants and manage debt policies appropriately. Meanwhile, the data from Japan showed that the Tokyo CPI rose by 2.6% on a yearly basis in August after increasing by 2.9% in July. After losing 0.3% on Thursday, USD/JPY finds support and trades slightly above 147.00 in the European session.

GBP/USD posted marginal gains for the third consecutive day on Thursday but lost its traction early Friday. At the time of press, the pair was trading in the red below 1.3500.

Gold extended its uptrend on Thursday and touched its highest level since late July above $3,420. XAU/USD corrects lower in the European morning but manages to hold above $3,400.