Forex Today: Dollar Weakens, Euro and Pound Rise, Gold Tests $3645

The forex instrument is testing the 1.1698 mark to the upside as market participants await fresh drivers. In particular, at 14:30 (GMT+2) today, the U.S. will publish August Producer Price Index (PPI) data, followed tomorrow by the Consumer Price Index (CPI). Forecasts suggest the PPI will rise another 3.3% year-over-year, while monthly growth will slow from 0.9% to 0.3%. The core measure, excluding food and energy, is expected to ease from 3.7% to 3.5% y/y and from 0.9% to 0.3% m/m. A sharp rise in prices would put pressure on the Federal Reserve’s future rate decisions, but for September, consensus is strong: according to the CME FedWatch Tool, the regulator is over 90% likely to cut rates by 25 basis points, while only about 8% expect a larger 50-point move. Meanwhile, at 14:15 (GMT+2) tomorrow, the European Central Bank will announce its policy decision. Officials are expected to keep the main refinancing rate at 2.15% and the deposit rate at 2.00%, consistent with President Christine Lagarde’s recent comments on economic activity. The ECB is essentially at the end of its easing cycle, unlike the Fed, and traders expect at most one more adjustment this year, possibly if political instability in France weighs on equities. Over the weekend, French PM François Bayrou resigned after a no-confidence vote (364 vs 194). Bayrou had sought to cut the budget deficit from 5.8% to 4.6%, amid debt rising to €3.3 trillion in June (114% of GDP). If unaddressed, debt service could exceed €100 billion by 2029. President Emmanuel Macron may nominate Defense Minister Sébastien Lecornu as his successor.  

GBP/USD

The pound is trading flat in GBP/USD, holding near 1.3536 in Asia, as some investors take profit ahead of U.S. data: August PPI due Wednesday at 14:30 (GMT+2) and CPI on Thursday. Forecasts suggest headline inflation will accelerate from 2.7% to 2.9% y/y, potentially softening expectations of aggressive Fed easing. Core CPI is expected to hold steady at 3.1%. Also on Thursday, weekly jobless claims are due at 14:30 (GMT+2): initial claims are projected to rise from 237K to 240K, while continuing claims may fall from 1.94M. The U.S. dollar remains pressured after last week’s weak labor report reignited calls for rate cuts, fueling criticism of Fed Chair Jerome Powell by President Trump’s administration. In August, nonfarm payrolls added just 22K jobs versus 79K in July (revised from 73K) and forecasts of 70K. Labor force participation ticked up from 62.2% to 62.3%, unemployment rose from 4.2% to 4.3%, while average hourly earnings slowed from 3.9% to 3.7% y/y but rose 0.3% m/m. Revised data also showed the economy created 911K fewer jobs in the 12 months through March than initially reported. In the UK, Friday at 08:00 (GMT+2), July GDP and industrial output data will be released. Analysts expect GDP growth to slow from 0.4% to 0.1% m/m, while industrial output may rise from 0.2% to 1.1%.

NZD/USD

The New Zealand dollar is advancing in NZD/USD during the Asian session, rebounding after Tuesday’s corrective pullback, which left the pair in the red. Yesterday, quotes set new highs since August 14, and are now testing 0.5950 to the upside as investors digest local and Chinese data. In July, NZ tourist arrivals rose 6.6% after 0.8% in June. Chinese CPI slowed to –0.4% y/y in August from flat in July (forecast –0.2%) and fell to 0.0% m/m from 0.4%. At 14:30 (GMT+2), U.S. PPI data will be released: the core is expected to decline from 3.7% to 3.5%. Thursday’s CPI report is forecast to show headline inflation accelerating from 2.7% to 2.9% y/y and from 0.2% to 0.3% m/m, with the core steady at 3.1% y/y and 0.3% m/m. Friday brings New Zealand data: at 00:30 (GMT+2), Business NZ Manufacturing PMI (last 52.8 vs 49.2 prior), followed at 00:45 by electronic card retail sales.

USD/JPY

The dollar is losing ground in USD/JPY during Asian trade, again testing 147.30 to the downside as investors await U.S. data. At 14:30 (GMT+2) today, PPI is due, followed tomorrow by CPI. Forecasts suggest only marginal changes, unlikely to sway the Fed’s September 17 decision: headline CPI is seen rising from 2.7% to 2.9% y/y, while the core may ease from 3.7% to 3.5%. Also, revised U.S. labor data released yesterday showed job growth for the 12 months through March was 911K lower than initially estimated, with 880K fewer in the private sector and 31K fewer in the public sector. This may influence Chair Powell’s rhetoric. Japan’s August PPI is due Thursday at 01:50 (GMT+2): analysts expect a slight acceleration to 2.7% y/y, but a –0.1% monthly print after +0.2% in July. Meanwhile, political turmoil remains in focus after PM Shigeru Ishiba resigned, less than a year after taking office, following his party’s July election defeat.

XAU/USD

Gold is gaining in XAU/USD, rebounding from yesterday’s correction. The pair is testing 3645.00 to the upside ahead of U.S. data. Today’s 14:30 (GMT+2) PPI release is followed Thursday by CPI. Forecasts call for PPI up 3.3% y/y but slowing to 0.3% m/m from 0.9%. Core PPI is expected to ease from 3.7% to 3.5% y/y and from 0.9% to 0.3% m/m. Also Thursday at 20:00 (GMT+2), the U.S. Treasury budget report is due, with the deficit seen narrowing slightly from –$291B to –$281B in August. On Friday at 16:00 (GMT+2), investors await updated September inflation expectations from the University of Michigan, along with consumer sentiment. Previous estimates saw 1-year inflation at 4.8% and 5-year at 3.5%.