Forex News
- AUD/USD slips as US CPI data temper expectations for near-term Fed rate cuts.
- US headline inflation met forecasts, while core CPI softened modestly.
- Cautious Fed expectations and weak Australian Consumer Sentiment weigh on the Aussie.
The Australian Dollar (AUD) trades on the back foot against the US Dollar (USD) on Tuesday, pressured by a firmer Greenback following the release of the latest US inflation figures. At the time of writing, AUD/USD trades around 0.6677, retracing all of the previous day’s gains.
Data released by the US Bureau of Labor Statistics showed that the Consumer Price Index (CPI) rose 0.3% MoM in December, matching market expectations and unchanged from November. On an annual basis, headline inflation held steady at 2.7%, also in line with forecasts.
Meanwhile, core CPI, which excludes volatile food and energy components, increased 0.2% MoM, coming in below expectations of 0.3% and matching the previous month’s reading. On a yearly basis, core inflation stood at 2.6%, undershooting the 2.7% market forecast and unchanged from November.
From a monetary policy perspective, the data suggest inflation is moderating only gradually, as it remains above the Federal Reserve’s (Fed) 2% target. This backdrop has tempered expectations for near-term rate cuts, reinforcing the view that the central bank will stick to a cautious easing path.
Markets continue to price in around two Fed rate cuts later this year, while widely expecting policymakers to keep interest rates unchanged at the January 27-28 meeting.
Additional support for the US Dollar came from remarks by St. Louis Fed President Alberto Musalem, who said inflation remains "closer to 3% than 2%" but expects it to ebb this year as the labour market cools in an "orderly" way. Musalem warned that the risk of inflation persistence is "still with us," arguing there is "little reason for further easing of policy in the near term."
At the same time, he noted that a materialisation of job-market risks or a faster-than-expected decline in inflation could make additional rate cuts appropriate.
In Australia, data released earlier on Tuesday showed Westpac Consumer Confidence fell 1.7% in January, after plunging 9% in December, offering little support to the Aussie.
Looking ahead, attention turns to US economic releases on Wednesday, including Retail Sales and the Producer Price Index (PPI). Markets will also monitor comments from several Fed officials for additional guidance on the monetary policy outlook.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- WTI posts strong gains on Tuesday, supported by a rising geopolitical risk premium.
- Escalating tensions in Iran fuel concerns over potential disruptions to global Oil supply.
- Prospects of a resumption of Venezuelan Oil exports cap the upside.
West Texas Intermediate (WTI) US Oil trades around $60.80 per barrel on Tuesday, up 2.45% on the day, extending a four-day bullish move. The US Crude Oil benchmark has returned to its highest levels in two months, supported by a renewed surge in geopolitical tensions in the Middle East.
Oil markets remain focused on the situation in Iran, where intensifying domestic unrest and a tougher tone between Tehran, Washington and Tel Aviv are reviving fears of supply disruptions. Iran is one of the world’s major Crude Oil producers, and any threat to its production or export capacity is quickly priced into the market. Statements from US President Donald Trump, suggesting the imposition of an additional 25% tariff on countries doing business with Iran, have reinforced this risk premium, even if the actual impact of such measures on physical flows remains uncertain.
In this context, several analysts note that markets are currently more sensitive to geopolitical risks than to short-term fundamentals. According to analysts at Barclays, investor attention is firmly focused on regional instability and political rhetoric, against a backdrop of relatively resilient global demand.
However, expectations of a partial return of Venezuelan supply are helping to prevent a sharper rally in prices. According to Reuters, international commodity traders such as Trafigura and Vitol are expected to provide logistical support for the resumption of Venezuelan Oil exports at the request of the US government. The first vessel could be loaded as early as this week, adding supply to the international market.
Overall, the current balance in WTI reflects a tug of war between elevated geopolitical risks, which are keeping prices above $60.00, and expectations of additional supply that could temper bullish momentum. In the near term, Oil price dynamics are likely to remain closely tied to political developments surrounding Iran and to concrete signals regarding the restart of Venezuelan exports.
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.
- USD/CAD trades without a clear direction as US inflation data confirm a slow disinflation process.
- Expectations for Federal Reserve rate cuts ease after CPI data, modestly supporting the US Dollar.
- The Canadian Dollar draws support from higher Oil prices, limiting moves in the pair.
USD/CAD trades around 1.3880 on Tuesday at the time of writing, virtually unchanged on the day, amid mixed macroeconomic signals from the United States (US) and Canada-specific supportive factors.
The latest data released by the Bureau of Labor Statistics confirms that US inflation continues to cool at a gradual but still incomplete pace. The Consumer Price Index (CPI) rose 2.7% YoY in December, matching the previous month’s reading and market expectations. However, the core CPI, which excludes the volatile food and energy components, remained unchanged at 2.6% on an annual basis, falling short of expectations for a slight uptick. On a monthly basis, headline inflation increased by 0.3%, while core inflation rose by 0.2%, with shelter costs remaining the main driver of monthly price pressures.
These figures reinforce the view that the disinflation process is ongoing, strengthening expectations for a more gradual monetary easing from the Federal Reserve (Fed). Markets now assign nearly a 95% chance that the Fed will keep interest rates unchanged at its January meeting.
US labor market indicators are also sending mixed signals. Data from Automatic Data Processing (ADP) show that the four-week average of private-sector job gains edged up to 11,750 jobs per week in mid-December, from 11,000 previously. This suggests that job creation remains positive but modest, insufficient to fully dispel concerns about an economic slowdown.
On the Canadian side, the Canadian Dollar (CAD) finds support from higher Oil prices. As Canada is the largest Crude exporter to the United States, energy prices remain a key driver for the currency. West Texas Intermediate (WTI) US Oil prices extend gains for a fourth consecutive day, trading around $61 per barrel, supported by supply concerns, partly linked to rising geopolitical tensions involving Iran. Market participants are also awaiting the release of the American Petroleum Institute’s (API) weekly Crude Oil stockpiles report, due later in the day, which could further influence energy market sentiment.
In this environment, the balance between US inflation data that tempers expectations for rapid Fed easing and Oil-driven support for the CAD helps keep USD/CAD in a consolidation phase, in the absence of a strong near-term catalyst.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.25% | 0.27% | 0.64% | 0.10% | 0.55% | 0.50% | 0.47% | |
| EUR | -0.25% | 0.03% | 0.39% | -0.15% | 0.30% | 0.25% | 0.22% | |
| GBP | -0.27% | -0.03% | 0.34% | -0.17% | 0.28% | 0.23% | 0.19% | |
| JPY | -0.64% | -0.39% | -0.34% | -0.51% | -0.06% | -0.12% | -0.14% | |
| CAD | -0.10% | 0.15% | 0.17% | 0.51% | 0.45% | 0.40% | 0.37% | |
| AUD | -0.55% | -0.30% | -0.28% | 0.06% | -0.45% | -0.05% | -0.08% | |
| NZD | -0.50% | -0.25% | -0.23% | 0.12% | -0.40% | 0.05% | -0.03% | |
| CHF | -0.47% | -0.22% | -0.19% | 0.14% | -0.37% | 0.08% | 0.03% |
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).
- USD/JPY climbs toward 159.00 as the US Dollar strengthens after the CPI report.
- US headline inflation met forecasts, while core CPI softened modestly.
- Rising political uncertainty in Japan keeps the Yen under pressure.
The Japanese Yen (JPY) weakens further against the US Dollar on Tuesday as the Greenback strengthens following the release of the latest US inflation report. USD/JPY trades around 159.00 at the time of writing, hovering near levels last seen in July 2024.
According to the US Bureau of Labor Statistics, the Consumer Price Index (CPI) rose 0.3% MoM in December, matching market expectations and unchanged from November. On an annual basis, headline inflation held steady at 2.7%, also in line with forecasts.
Meanwhile, core CPI, which excludes volatile food and energy components, increased 0.2% MoM, coming in below expectations of 0.3% and matching the previous month’s reading. On a yearly basis, core inflation stood at 2.6%, undershooting the 2.7% market forecast and unchanged from November.
From a monetary policy perspective, inflation remains above the Federal Reserve's (Fed) 2% target but shows little sign of re-accelerating, reinforcing expectations that the central bank will stick to a gradual easing path.
Combined with last week’s mixed US labour-market data, the report has strengthened the case for the Fed to keep interest rates unchanged in the near term, with markets widely expecting a prolonged pause through the first quarter while still pricing in around two rate cuts later in the year.
US President Donald Trump reiterated his criticism of Fed Chair Jerome Powell following the inflation release. In a post on Truth Social, Trump said the inflation numbers were ‘great’ and again labelled Powell ‘Too Late,’ urging the Fed to cut interest rates.”
Trump’s remarks come at a sensitive time as concerns over the central bank's independence have intensified following reports of a criminal investigation linked to Powell’s testimony on the Fed’s headquarters renovation.
Traders also parsed comments from St. Louis Fed President Alberto Musalem, who struck a cautious tone on the monetary policy outlook. Musalem said he sees ‘little reason for further easing of policy in the near term,’ adding that policy is ‘well positioned to balance risks on both sides.’ While he described the latest inflation reading as encouraging for views that inflation will converge toward 2% this year.
Beyond US-driven moves, the Yen has also remained under pressure from domestic factors. Political uncertainty in Japan has intensified after reports suggested Prime Minister Sanae Takaichi may dissolve the lower house and call a snap general election as early as February.
The prospect of an early vote has fueled expectations of looser fiscal policy and heavier political spending, reviving concerns over Japan’s already large debt burden.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.13% | 0.18% | 0.49% | 0.02% | 0.43% | 0.33% | 0.30% | |
| EUR | -0.13% | 0.05% | 0.39% | -0.11% | 0.30% | 0.20% | 0.20% | |
| GBP | -0.18% | -0.05% | 0.32% | -0.16% | 0.25% | 0.15% | 0.15% | |
| JPY | -0.49% | -0.39% | -0.32% | -0.47% | -0.06% | -0.17% | -0.17% | |
| CAD | -0.02% | 0.11% | 0.16% | 0.47% | 0.42% | 0.31% | 0.30% | |
| AUD | -0.43% | -0.30% | -0.25% | 0.06% | -0.42% | -0.10% | -0.11% | |
| NZD | -0.33% | -0.20% | -0.15% | 0.17% | -0.31% | 0.10% | -0.01% | |
| CHF | -0.30% | -0.20% | -0.15% | 0.17% | -0.30% | 0.11% | 0.00% |
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).
Fed’s Musalem (St Louis) said the US economy is likely to grow at or above its potential in 2026, helped by fiscal support and the lagged effects of earlier rate cuts. He noted that inflation remains closer to 3% than 2% but is expected to ease over the year, arguing that policy is now around neutral and well positioned to respond in either direction as the labour market continues to cool in an orderly way.
Key Quotes
I expect the economy to grow at or above potential in 2026.
Inflation is closer to 3% than 2%, but we anticipate it will ebb this year; the labour market is cooling in an orderly way.
Policy is in a good place to react in any direction.
Supported december rate cut because they saw a slightly higher risk to the labour market, moderating the risk of accelerating inflation.
Today's inflation rate is encouraging for views that it will converge more towards 2% this year.
Monetary policy is now right around neutral.
See little reason for further easing of policy in the near term.
Materialising job market risks or a faster fall in inflation might make more cuts appropriate.
Unemployment rate is around the neutral rate of unemployment right now, with job growth around the breakeven point of 30K to 80K per month.
Unemployment claims, layoff announcements, and other metrics suggest the labour market is resilient.
There are robust tailwinds, including fiscal and lagged impacts of rate cuts, to spur growth.
Still see the risk that inflation will be more persistent than expected.
Goods and housing inflation should ease over the year.
It is inadvisable to have an accommodative policy at this point.
Hopeful that the US is in a higher productivity regime, but it's too early to call it.
The Fed should not "outsource" its rate decisions to assumptions about productivity.
Companies are expressing "cautious optimism" about the economic outlook; consumption is "resilient", and labour markets are "normalised".
The Fed is committed to returning inflation to 2%.
The candidates for next Fed chair are all highly qualified.
The Fed operates on a regime of open debate and evidence; that won't change under a new chair.
Don't expect the Fed's reaction function to change much under the new chair, given the breadth of opinion among 19 policymakers.
There are deeper issues around housing affordability and supply than mortgage interest rates.
QE is about removing duration; bill purchases right now are very short term.
Current situation stops well short of fiscal dominance or financing the government.
- GBP/USD edges lower after US CPI shows easing core inflation, reinforcing Fed cut expectations for 2026.
- Markets rule out a January Fed cut despite softer data amid political tensions surrounding Fed leadership.
- Traders await UK GDP and US PPI, Retail Sales for fresh directional signals.
The British Pound (GBP) turns negative on Tuesday, yet it remains near its opening price after the latest US inflation report opens the door for the Federal Reserve to continue easing policy in 2026. At the time of writing, GBP/USD trades at 1.3450, down 0.03%.
Sterling holds steady as US inflation cools, expectations for further Fed easing increase
The US Consumer Price Index (CPI) in December increased 0.3% MoM, but in the twelve months through December, the CPI rose 2.7% unchanged from November’s print. Core CPI for the same period was unchanged at 0.2% MoM, and on an annual basis was below estimates of 2.7%, at 2.6%.
Although the data was positive, market participants do not expect a Fed rate cut in the January meeting, following the clash between the Fed Chair Jerome Powell and the Trump administration.
Money markets have priced in nearly 50 basis points of interest rate cuts by the Fed towards the end of 2026, according to Prime Market Terminal.
Meanwhile, St. Louis Fed President Alberto Musalem is crossing the wires. He said the economy is expected to grow at or above potential, reiterating that inflation is closer to 3% than 2%, but would ebb this year. Musalem added that policy is in a good place and supported a December cut “because saw slightly higher risk to labor market.”
Regarding the UK, the economic docket is absent with traders waiting for the release of Gross Domestic Product (GDP) figures on Thursday. The GDP is projected to remain unchanged at 0% in November, which would be an improvement compared to October’s 0.1% contraction.
In the US, Wednesday’s schedule will feature the Producer Price Index (PPI) for October and November, along with Retail Sales data for November.
GBP/USD Price Forecast: Technical outlook
The GBP/USD daily chart shows the pair is consolidating at around the 1.3390-1.3498 area, capped on the upside by the 1.3500 figure, and by the 200-day Simple Moving Average (SMA) at 1.3388.
For a bullish continuation, traders must clear 1.3500 to challenge the next cycle high at 1.3567, the yearly peak. Up next lies 1.3700. Conversely, if bears push prices below 1.3400, expect a test of the 200-day SMA, with further downside seen at the 100-day SMA at 1.3369.
Pound Sterling Price This week
The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.15% | -0.32% | 0.56% | -0.22% | -0.01% | -0.25% | -0.11% | |
| EUR | 0.15% | -0.18% | 0.78% | -0.04% | 0.14% | -0.10% | 0.04% | |
| GBP | 0.32% | 0.18% | 0.94% | 0.12% | 0.32% | 0.08% | 0.23% | |
| JPY | -0.56% | -0.78% | -0.94% | -0.80% | -0.60% | -0.83% | -0.69% | |
| CAD | 0.22% | 0.04% | -0.12% | 0.80% | 0.19% | -0.03% | 0.11% | |
| AUD | 0.01% | -0.14% | -0.32% | 0.60% | -0.19% | -0.23% | -0.10% | |
| NZD | 0.25% | 0.10% | -0.08% | 0.83% | 0.03% | 0.23% | 0.13% | |
| CHF | 0.11% | -0.04% | -0.23% | 0.69% | -0.11% | 0.10% | -0.13% |
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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Economic Indicator
Consumer Price Index (YoY)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The YoY reading compares the prices of goods in the reference month to the same month a year earlier.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Last release: Tue Jan 13, 2026 13:30
Frequency: Monthly
Actual: 2.7%
Consensus: 2.7%
Previous: 2.7%
Source: US Bureau of Labor Statistics
The US Federal Reserve (Fed) has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
- EUR/GBP trims earlier losses as dip buyers emerge near the 0.8650 region.
- A quiet macro calendar on both sides of the Channel keeps trading subdued.
- The broader technical structure remains bearish, with the pair trading near multi-month lows.
The Euro (EUR) recovers modestly against the British Pound (GBP) on Tuesday, trimming earlier losses after attracting dip-buying interest near the 0.8650 region. At the time of writing, EUR/GBP trades around 0.8664, holding close to multi-month lows amid a thin economic calendar on both sides of the Channel.
From a technical perspective, EUR/GBP remains within a well-defined downward-sloping channel that has guided price action since November 2025, keeping the broader bias tilted to the downside.
The 21-day Simple Moving Average (SMA) has slipped below the 50-day SMA, and both are trending lower, underscoring persistent selling pressure.
On the upside, the 0.8700 psychological level caps immediate recovery attempts. A sustained break above this zone would shift focus toward the upper boundary of the descending channel, which aligns closely with the 21-day SMA. A clear move beyond this confluence would start to weaken the bearish structure and allow for a deeper corrective bounce.
On the downside, a decisive break below the 0.8650 region would strengthen bearish momentum and increase the risk of a continuation toward the 0.8600 handle, a level last seen in August 2025.
Momentum indicators are showing early signs of stabilization. The Moving Average Convergence Divergence (MACD) remains below the signal line and the zero level, but the flattening histogram points to fading downside momentum.
Meanwhile, the Relative Strength Index (RSI) is hovering near 34 after recovering from oversold territory, suggesting scope for near-term consolidation.
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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