Forex News
- The Euro recovers against the US Dollar following a brief decline after the US CPI release.
- Headline inflation meets expectations, but the monthly core reading comes in hotter than forecast.
- Gasoline prices account for more than one-third of the monthly increase in headline CPI.
EUR/USD reverses earlier losses on Friday after the latest United States (US) Consumer Price Index (CPI) report came broadly in line with expectations and failed to trigger a strong market reaction. Still, the data showed that inflation remains sticky, reinforcing expectations that the Federal Reserve (Fed) could raise interest rates next week. At the time of writing, EUR/USD trades around 1.1600 after touching an intraday low of 1.1569.
The headline CPI rose 0.4% MoM in August, matching market expectations but accelerating from the 0.1% increase recorded in July. Annual inflation held steady at 3.4%, also in line with forecasts.
Core CPI, which excludes volatile food and energy prices, increased 0.3% MoM, above the 0.2% forecast and the previous reading of 0.2%. Annual core inflation eased to 2.4% from 2.5%, matching market expectations. The report also showed that gasoline prices rose 3.9% in August and accounted for more than one-third of the monthly increase in headline inflation.
The US Dollar attracts limited buying interest following the release. The US Dollar Index (DXY), which tracks the Greenback limited buying interest following the release. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 99 after briefly climbing to 99.36 in the immediate reaction to the data. A pullback in US Treasury yields from multi-year highs also limits the Greenback’s advance.
The CPI figures follow Thursday’s Producer Price Index (PPI) report, which showed that annual producer inflation accelerated to 5.4% in August from 4.8% in July. The latest data strengthened expectations of a rate hike at the Fed’s September 15-16 meeting. According to the CME FedWatch Tool, markets now price in an 88% probability of a 25-basis-point increase, up from 67% earlier in the day.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.08% | -0.10% | -0.67% | 0.23% | -0.38% | -0.48% | 0.17% | |
| EUR | -0.08% | -0.17% | -0.73% | 0.16% | -0.45% | -0.62% | 0.09% | |
| GBP | 0.10% | 0.17% | -0.56% | 0.34% | -0.28% | -0.41% | 0.27% | |
| JPY | 0.67% | 0.73% | 0.56% | 0.92% | 0.31% | 0.16% | 0.86% | |
| CAD | -0.23% | -0.16% | -0.34% | -0.92% | -0.61% | -0.76% | -0.06% | |
| AUD | 0.38% | 0.45% | 0.28% | -0.31% | 0.61% | -0.14% | 0.54% | |
| NZD | 0.48% | 0.62% | 0.41% | -0.16% | 0.76% | 0.14% | 0.70% | |
| CHF | -0.17% | -0.09% | -0.27% | -0.86% | 0.06% | -0.54% | -0.70% |
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).
Commerzbank strategists argue that Brent crude should gradually retreat toward pre-war levels as covert tanker “dark transits” and diversions restore Gulf supply. They see transit volumes recovering to around 8 million barrels per day by year-end and potentially 12 million next year, while Oil products and natural gas remain tighter for longer.
Covert flows support Brent normalization
"We therefore expect shipping traffic through the Strait of Hormuz to gradually return to normal in the coming quarters."
"Our assumption is that transit volumes, including “dark transits,” will recover to around 8 million barrels per day by the end of the year and will even rise above that level next year. After six months, this gradual de-escalation would effectively have a similar impact on transport volumes as reaching an agreement."
"Taken together, this could mean that 13 million barrels per day of oil – out of the original 20 million barrels per day from the Gulf region – could reach the global market. In addition, oil production outside the Gulf region has risen by an average of 1.2 million barrels per day since the outbreak of the war. Taken together, this would reduce the remaining shortfall to approximately 5.8 million barrels per day."
"Should oil transits continue to rise in the coming year – for example, to 12 million barrels per day – the supply gap would narrow to less than 2 million barrels per day. For the global oil market, this would be of little significance overall. We therefore expect the oil price to ease in the coming quarters and return to near its pre-war levels by the middle of next year."
"Prices for petroleum products and natural gas are therefore likely to remain above their pre-war levels in the coming quarters as well."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Annual inflation in the United States (US), as measured by the change in the Consumer Price Index (CPI), held steady at 3.4% in August, the US Bureau of Labor Statistics (BLS) reported on Friday. This print came in line with the market expectation.
On a monthly basis, the CPI rose by 0.4% following the 0.1% increase recorded in the previous month. The core CPI, which excludes volatile food and energy prices, increased by 0.3% on a monthly basis, compared to the market expectation of 0.2%, and 2.4% on a yearly basis, down slightly from 2.5% in July.
Market reaction to US August inflation data
The US Dollar (USD) gathered strength against its major rivals with the immediate reaction to the August inflation data. At the time of press, the USD Index was up 0.15% on the day at 99.25.
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 strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.27% | 0.15% | -1.20% | 0.27% | 0.43% | 1.09% | 0.84% | |
| EUR | -0.27% | -0.12% | -1.45% | 0.00% | 0.18% | 0.83% | 0.58% | |
| GBP | -0.15% | 0.12% | -1.44% | 0.14% | 0.30% | 0.95% | 0.70% | |
| JPY | 1.20% | 1.45% | 1.44% | 1.58% | 1.73% | 2.38% | 2.12% | |
| CAD | -0.27% | -0.01% | -0.14% | -1.58% | 0.21% | 0.82% | 0.57% | |
| AUD | -0.43% | -0.18% | -0.30% | -1.73% | -0.21% | 0.65% | 0.39% | |
| NZD | -1.09% | -0.83% | -0.95% | -2.38% | -0.82% | -0.65% | -0.25% | |
| CHF | -0.84% | -0.58% | -0.70% | -2.12% | -0.57% | -0.39% | 0.25% |
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).
This section below was published as a preview of the US August inflation data at 08:30 GMT.
- The US Consumer Price Index is expected to rise by 3.4% YoY in August, matching July’s increase.
- Annual core CPI inflation is expected to edge lower to 2.4% from 2.5%.
- Inflation report could significantly influence the market pricing of next week’s Fed decision and the USD performance.
The US Bureau of Labor Statistics (BLS) will publish the August Consumer Price Index (CPI) data on Friday. The report is expected to show a small decline in annual core inflation. Any divergence from analysts’ estimates could influence the Federal Reserve’s (Fed) policy outlook and impact the US Dollar’s valuation.
The monthly CPI is forecast to rise by 0.4%, following the 0.1% increase recorded in July, while the annual reading is seen holding steady at 3.4%. Core CPI figures, which exclude volatile food and energy prices, are expected to post an increase of 0.2% and 2.4%, on a monthly and yearly basis, respectively.
Following a nearly 22% surge in July, Crude Oil prices held steady in August, ending the month virtually unchanged as the US and Iran keep failing to reach a solution to restore naval activity in the Strait of Hormuz, while avoiding further escalation in military action.
US core CPI data seen contained as goods weakness offsets firm services
According to economists at TD Securities, the upcoming US CPI report should show that “underlying inflation stayed under control in August,” with “the core expected to rise 0.19% m/m.” They expect “the services segment [to] be the main driver of inflation, while core goods prices likely acted as a drag, posting a modest m/m drop.” On an annual basis, TD Securities projects that “core CPI rose 2.3% on a y/y basis, down 10 bps vs July, while headline inflation likely stayed unchanged at 3.4% y/y.” The bank cautions that “risks to our forecasts [are] skewed to the upside” given their assumption of “a number of large price declines in tariff-exposed goods categories.”
How could the US Consumer Price Index report affect EUR/USD?
While speaking at the Reuters NEXT Newsmaker event in Washington last week, Federal Reserve (Fed) Governor Christopher Waller outlined a conditional reaction function. He explained that a steady policy rate is preferred if August inflation shows continued progress, yet even a modest upside surprise could trigger a “small adjustment” higher. While Waller reiterated that inflation remains “significantly elevated” and that it may not take much acceleration to justify a hike, he acknowledged an “encouraging” disinflation and a solid growth and labor backdrop.
Although the CME Group FedWatch Tool’s probability of a 25 basis points (bps) increase in the interest rate at the upcoming policy meeting declined slightly below 50% following his comments, the upbeat employment data for August, published one day later, reaffirmed healthy labor market conditions and caused markets to reassess the odds of a tightening step. Currently, there is about a 70% chance of a Fed rate hike next week.
A weaker-than-expected increase in the monthly core CPI, below the 0.2% forecast, could cause market participants to scale back bets on a rate increase and trigger an immediate USD selloff, opening the door for a leg higher in EUR/USD heading into the weekend. Conversely, a reading of 0.3% or higher could boost the USD and put EUR/USD under bearish pressure.
Strategists at Brown Brothers Harriman (BBH) emphasize that Friday’s US August CPI release is “the main market driver that will decide the Fed’s September 16 rate decision.” They argue that “a hot CPI print would all but seal a September hike and underpin a firmer USD,” whereas “a cooler reading would strengthen the case for a hold and leave USD vulnerable to a dovish Fed repricing.” However, BBH cautions that “even if a September Fed hike becomes a done deal, we doubt USD will make new cyclical highs,” noting that tightening by other major central banks is limiting policy divergence.
At the same time, DBS Group Research notes that, despite recent volatility, “there are no signs that price pressures are broadening out.” The bank argues that the upcoming US CPI release will be pivotal for near-term Fed expectations, suggesting that “CPI and core CPI of 0.4% MoM sa and 0.3% MoM respectively may well be the minimum that would nudge market participants to increase the odds of imminent tightening.” By contrast, DBS believes that “a 0.2% print in both figures would probably see the odds of imminent tightening fall closer to zero.”
Eren Sengezer, European Session Lead Analyst, shares a brief technical outlook for EUR/USD:
“EUR/USD clings to a bullish stance in the short-term technical outlook, with the Relative Strength Index (RSI) indicator on the daily chart holding above 50 and the pair trading well above the 100-day and 50-day Simple Moving Averages (SMA). The 200-day SMA, currently located at 1.1635, aligns as a pivot level. Once the pair confirms that level as support, technical buyers could remain interested. In this scenario, 1.1700 (upper arm of the Bollinger Band, static level) could be seen as an interim resistance level ahead of 1.1800 (static level).”
“On the downside, a relatively wide support region seems to have formed at 1.1560-1.1520, where the 100-day SMA, lower arm of the Bollinger Band and the 50-day SMA are located. If the pair retreats below this region, 1.1460 (static level) could be seen as the next support level before 1.1350 (static level).”
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.
- WTI Oil falls more than 4% on Friday as traders take profits following a strong rally earlier this week.
- US crude Oil inventories decline less than expected, adding further downward pressure on prices.
- Fresh attacks around the Strait of Hormuz keep global supply concerns alive and could limit the downside in Oil prices.
West Texas Intermediate (WTI) US Oil drops 4.54% on Friday and trades around $96.00 at the time of writing. The crude Oil comes under heavy profit-taking pressure following its strong advance earlier this week, while a smaller-than-expected decline in United States (US) crude inventories adds further pressure on prices.
WTI nevertheless remains sharply higher for the week after benefiting from an increase in the geopolitical risk premium linked to the conflict between the United States and Iran. Friday’s decline therefore primarily reflects profit-taking as investors also assess the latest US inventory data.
The Energy Information Administration (EIA) reports that US crude Oil inventories fell by 391K barrels in the week ending September 4, following a 4.45M decline in the previous week. Markets had expected a larger draw of 1.6M barrels. The modest decline suggests that the balance between supply and demand in the US market remains less tight than anticipated.
Geopolitical tensions in the Middle East, however, remain likely to limit WTI’s correction. US President Donald Trump said on Thursday that he was not seeking a deal with Iran and suggested that Oil prices could remain elevated until after the US midterm elections in November.
Risks surrounding the region’s key shipping routes also remain in focus. The Islamic Revolutionary Guard Corps (IRGC) said its navy struck a US Saildrone-type unmanned vessel in the Strait of Hormuz. Any further disruption in this strategic waterway could fuel concerns over global Oil supplies.
Meanwhile, Yemen’s Houthis have seized the port city of Mocha, strengthening their presence near the Bab al-Mandeb Strait. Escalating tensions around two crucial routes for global energy shipments therefore keep a geopolitical risk premium embedded in Oil prices, even though it is not enough on Friday to offset profit-taking.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
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