Forex Today: UK inflation data arrive mixed, focus shifts to FOMC Minutes
Here is what you need to know on Wednesday, August 19:
Major currency pairs struggle to make directional moves midweek as investors await the next catalyst. Eurostat will publish revisions to July inflation data in the European session and the Federal Reserve (Fed) will release the minutes of the July policy meeting later in the day.
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 Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.25% | -0.19% | -0.08% | 0.00% | 0.26% | 0.34% | -0.19% | |
| EUR | 0.25% | 0.20% | 0.17% | 0.26% | 0.46% | 0.59% | 0.07% | |
| GBP | 0.19% | -0.20% | 0.04% | 0.05% | 0.25% | 0.39% | -0.19% | |
| JPY | 0.08% | -0.17% | -0.04% | 0.09% | 0.27% | 0.41% | -0.14% | |
| CAD | -0.01% | -0.26% | -0.05% | -0.09% | 0.20% | 0.32% | -0.23% | |
| AUD | -0.26% | -0.46% | -0.25% | -0.27% | -0.20% | 0.13% | -0.44% | |
| NZD | -0.34% | -0.59% | -0.39% | -0.41% | -0.32% | -0.13% | -0.58% | |
| CHF | 0.19% | -0.07% | 0.19% | 0.14% | 0.23% | 0.44% | 0.58% |
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).
The UK's Office for National Statistics (ONS) reported on Wednesday that annual inflation, as measured by the change in the Consumer Price Index (CPI), climbed to 2.9% in July from 2.6% in June, coming in line with analysts' expectations. In this period, the core CPI rose by 2.6%, matching June's print. Meanwhile, the Producer Price Index - Input declined by 1.7% on a monthly basis, compared to the market forecast for a no change. After closing marginally lower on Tuesday, GBP/USD edges higher in the European morning and trades at around 1.3550.
The US Dollar (USD) benefited from the risk-averse market atmosphere on Tuesday, with the USD Index ending the day with small gains. Early Wednesday, the USD Index struggles to hold its ground and stays in the red near 99.50, while US stock index futures remain flat.
Dollar support persists as FOMC minutes eyed and DXY stays rangebound
Analysts at ING highlight that the “unresolved conflict in the Middle East is keeping energy prices bid and partially contributing to the rise in long-end yields.” They note that longer-dated US Treasuries “actually found a little demand on yields above 5.30% yesterday, but risks still look skewed to the upside here,” underscoring lingering upward pressure at the back end of the US curve.
For today, ING says the market’s attention will centre on “tonight's release of the FOMC minutes for the July meeting.” They remind clients that “the vote was 9-3 for unchanged rates and the event proved a dovish one for the short end of the US curve and the Dollar, while the long end sold off,” a pattern that could shape expectations for the Fed’s next steps.
US President Donald Trump said late Tuesday that no talks were underway or scheduled with Iran. Meanwhile, Iran's foreign ministry spokesperson Esmaeil Baghaei rejected the UAE's claim that Iran was behind missiles launched against the Gulf country a day earlier. Oil prices stay relatively calm early Wednesday, with the barrel of West Texas Intermediate (WTI) trading little changed on the day, at around $84.50.
USD/CAD edges lower and trades below 1.3900 after posting moderate gains on Tuesday. US President Trump announced early Wednesday that they have paused 50% tariffs against Canada for a three-day period following overnight negotiations with Canadian Prime Minister Mark Carney.
EUR/USD gains traction in the European morning on Wednesday and trades near 1.1600.
European Central Bank (ECB) policymaker said on Wednesday that it is essential to keep inflation expectations anchored but added that he sees no clear sinds of second-round effects.
After posting minimal gains for two consecutive days, USD/JPY turns south on Wednesday and declines toward 159.00.
Yen outlook hinges on BoJ path as markets ramp up September hike bets
Strategists at OCBC note that markets are now "increasingly pricing in a September BoJ rate hike, with implied odds rising to around 80% from 50% at the start of August." They argue that if the BoJ "accelerates policy normalisation and the JPY sheds its status as a low-yielding funding currency, the currency should strengthen over time." For now, OCBC says, "we maintain our end-2026 USDJPY target of 163" but the team adds that they "could become more constructive on the JPY if the BoJ signals a more aggressive rate hiking path or if Japan actively encourages capital repatriation, including through institutions such as the GPIF."
Gold lost nearly 2% on Tuesday and erased the previous week's gains. The precious metal stages a rebound in the European morning on Wednesday and trades above $4,350.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
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