Here’s what you need to know on Friday, December 5:
After maintaining his steadfastness against his competitors on Thursday, US Dollar (USD) Struggling to attract buyers early Friday. In the second half of the day, the US Bureau of Economic Analysis (BEA) will publish September personal consumption expenditures (PCE) price index data, the Federal Reserve’s (Fed) preferred measure of inflation. Later in the US session, investors will pay close attention to the University of Michigan (UoM) Consumer Confidence Index report for December.
US dollar price this week
The table below shows the percentage change in the US Dollar (USD) against the major currencies listed this week. The US dollar was weakest against the Australian dollar.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | -0.51% | -0.80% | -0.97% | -0.20% | -1.15% | -0.66% | -0.06% | |
| euro | 0.51% | -0.28% | -0.45% | 0.32% | -0.64% | -0.14% | 0.46% | |
| GBP | 0.80% | 0.28% | 0.08% | 0.60% | -0.36% | 0.14% | 0.74% | |
| JPY | 0.97% | 0.45% | -0.08% | 0.77% | -0.21% | 0.30% | 0.90% | |
| Canadian | 0.20% | -0.32% | -0.60% | -0.77% | -1.01% | -0.46% | 0.14% | |
| Australian dollar | 1.15% | 0.64% | 0.36% | 0.21% | 1.01% | 0.50% | 1.10% | |
| New Zealand dollar | 0.66% | 0.14% | -0.14% | -0.30% | 0.46% | -0.50% | 0.60% | |
| Swiss franc | 0.06% | -0.46% | -0.74% | -0.90% | -0.14% | -1.10% | -0.60% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select USD 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).
Upbeat data from the US helped the dollar maintain its position on Thursday. Challenger, Gray & Christmas reported that planned job cuts fell 53% from October to 71,321 in November. In addition, the US Department of Labor’s weekly bulletin showed that initial unemployment claims fell to 191,000 from 218,000 the previous week. This reading was better than market expectations of 220,000. However, the probability of the Fed cutting interest rates by 25 basis points in December remained steady at around 90% even after these numbers, causing the US dollar’s recovery to remain shallow. The US Dollar Index remains weak and fluctuates in negative territory below 99.00 in European morning on Friday.
US Dollar/Canadian Dollar The index closed marginally higher on Thursday but retreated to the 1.3950 area early Friday. Later in the session, Statistics Canada will release employment data for November. Investors expect the unemployment rate to rise to 7% from 6.9% in October.
Japanese Finance Minister Satsuki Katayama said on Friday that interest rates are shaped by “various factors,” and reiterated that the government will closely monitor market developments, pursue appropriate debt management policies, and formulate budgets with fiscal sustainability in mind. After closing slightly lower on Thursday. USD/JPY The pair continues its decline on Friday and was last seen down 0.3% on the day at 154.65.
EUR/USD The stock lost about 0.25% on Thursday, snapping an eight-day winning streak. The pair is regaining its momentum in the European morning and is trading above the 1.1650 level. Eurostat will publish revisions to third-quarter employment and GDP change data later in the session.
After the sharp rise witnessed on Wednesday. GBP/USD It corrected lower on Thursday and ended the day with small losses. The pair settled at the 1.3350 level at the beginning of the European session on Friday.
gold He struggled to make a decisive move in either direction on Thursday and finished the second straight day virtually unchanged. The XAU/USD pair rose slightly early Friday and is trading above $4,200.
Frequently asked questions about inflation
Inflation measures the rise in the prices of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a monthly (MoM) and yearly (YoY) basis. Core inflation excludes more volatile items such as food and fuel, which can fluctuate due to geopolitical and seasonal factors. Core inflation is the number that economists focus on and is the level targeted by central banks, which are tasked with keeping 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 monthly (MoM) and yearly (YoY) basis. The core CPI is the number targeted by central banks because it excludes volatile food and fuel inputs. When the core CPI rises above 2%, it typically causes interest rates to rise and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually leads to a stronger currency. The opposite is true when inflation falls.
Although it may seem counterintuitive, high inflation in a country causes the value of its currency to rise and vice versa for lower inflation. This is because the central bank will typically raise interest rates to combat rising inflation, which attracts more global capital flows from investors looking for a profitable place to park their money.
Previously, gold was the asset investors turned to during times of high inflation because it maintained its value, and while investors will often continue to buy gold for its safe holdings 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 raise interest rates to combat it. High interest rates are negative for gold because they increase the opportunity cost of holding gold versus interest-bearing assets or putting money in a cash deposit account. On the flip side, lower inflation tends to be positive for gold because it lowers interest rates, making the shiny metal a more viable investment alternative.
