Forex Today: US Dollar selloff loses steam ahead of critical inflation data
Here is what you need to know on Tuesday, November 10:
The US Dollar (USD) started the week under bearish pressure, with the USD Index losing more than 0.5% on Monday. Early Tuesday, the USD Index stays in a consolidation phase below 102.00 as investors refrain from taking large positions ahead of the critical October inflation data. Throughout the day, policymakers from the Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of England (BoE) will be delivering speeches as well.
US Dollar Price This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.80% | -0.76% | -0.27% | -0.06% | -0.78% | -1.30% | -0.14% | |
| EUR | 0.80% | 0.05% | 0.53% | 0.76% | 0.12% | -0.51% | 0.67% | |
| GBP | 0.76% | -0.05% | 0.49% | 0.70% | 0.07% | -0.56% | 0.62% | |
| JPY | 0.27% | -0.53% | -0.49% | 0.22% | -0.56% | -1.02% | 0.09% | |
| CAD | 0.06% | -0.76% | -0.70% | -0.22% | -0.74% | -1.28% | -0.05% | |
| AUD | 0.78% | -0.12% | -0.07% | 0.56% | 0.74% | -0.63% | 0.45% | |
| NZD | 1.30% | 0.51% | 0.56% | 1.02% | 1.28% | 0.63% | 1.20% | |
| CHF | 0.14% | -0.67% | -0.62% | -0.09% | 0.05% | -0.45% | -1.20% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Improving risk mood made it difficult for the USD to stay resilient against its rivals on Monday. Following the previous week's intense bearish action, Wall Street's main indexes started the week on a firm footing and the Nasdaq Composite gained more than 3% on Monday. The upbeat market mood carried over to the Asian session on Tuesday, with Korea's KOSPI Index rising more than 4% and Japan's Nikkei gaining nearly 3% on the day. Meanwhile, US stock index futures trade little changed in the European session, pointing to a loss of momentum in the risk rally.
Markets expect the Consumer Price Index (CPI) to rise by 0.3% on a monthly basis in October, following the 0.6% increase recorded in September. In this period, the core CPI, which excludes volatile food and energy prices, is seen increasing 0.2%. This time around, the report will not include annual figures due to the data gap of October 2025, which was caused by the government shutdown.
US Dollar momentum seen vulnerable if US inflation undershoots
Analysts at MUFG/BTMU highlight that both market participants and the Fed will be the US inflation release “for evidence of spillover effects from higher energy prices.” They note that “recent core CPI readings have surprised to the upside over the last couple of months putting pressure on the Fed to tighten policy,” even as “consensus expectations are looking for a softer core CPI print of 0.2% M/M in October.” MUFG/BTMU argue that such an outcome “would help put a dampener on the US Dollar’s upward momentum in the near-term,” with the bank observing that “the US Dollar appears to be running ahead of short-term yield spreads,” implying that “a hawkish surprise maybe required to maintain US Dollar strength.”
EUR/USD moves sideways in a tight range above 1.1200 after rising more than 0.7% on Monday.
GBP/USD gains 0.7% on Monday and retraced previous Friday's sharp decline. The pair holds steady at around 1.3450 in the early European session on Tuesday.
Gold extended its bullish action after posting strong gains in the previous week and rose nearly 1.75% to close at $4,140 on Monday. The precious metal corrects lower early Tuesday but manages to hold above $4,100.
USD/JPY lost about 0.3% on Monday before stabilizing at around 158.00 early Tuesday. The Bank of Japan's (BoJ) Summary of Opinions from the October monetary policy meeting showed that some members advocated for additional rate hikes in the near term, while other saw it appropriate to maintain current policy settings to assess risks around the economy and prices for some time.
During the Asian trading hours, the data from China showed that Exports and Imports expanded by 35.2% and 41.6%, respectively, on a yearly basis in October, causing the trade surplus to shrink to $105.28 billion from $133.53 billion. These figures failed to have a noticeable impact on AUD/USD, which was last seen trading virtually unchanged on the day at 0.6920.
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
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