Forex Today: Market volatility set to rise on key GDP and inflation data
Here is what you need to know on Wednesday, October 30:
The action in foreign exchange markets remain subdued early Wednesday as investors gear up for key macroeconomic data releases. The European economic docket will feature inflation and Gross Domestic Product (GDP) data for Spain, Italy and Germany, as well as GDP figures for the Eurozone. Later in the day, ADP Employment Change data from the US will be watched closely and the US Bureau of Economic Analysis will publish the first estimate of the annualized GDP growth for the third quarter.
After edging higher during the European trading hours on Tuesday, the US Dollar (USD) Index lost its traction on disappointing JOLTS Job Openings data for September and closed the day virtually unchanged. Early Wednesday, the index continues to move sideways above 104.00. Meanwhile, US stock index futures trade marginally higher following the mixed action seen in Wall Street on Tuesday. The US GDP report will also include quarterly Personal Consumption Expenditures (PCE) Price Index readings.
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 Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.28% | -0.40% | -0.02% | 0.16% | 0.77% | 0.25% | -0.19% | |
| EUR | 0.28% | 0.00% | 0.18% | 0.44% | 1.13% | 0.51% | 0.11% | |
| GBP | 0.40% | -0.00% | 1.02% | 0.56% | 1.18% | 0.62% | 0.37% | |
| JPY | 0.02% | -0.18% | -1.02% | 0.24% | 0.14% | -0.48% | -0.64% | |
| CAD | -0.16% | -0.44% | -0.56% | -0.24% | 0.56% | 0.02% | -0.31% | |
| AUD | -0.77% | -1.13% | -1.18% | -0.14% | -0.56% | -0.63% | -1.00% | |
| NZD | -0.25% | -0.51% | -0.62% | 0.48% | -0.02% | 0.63% | -0.44% | |
| CHF | 0.19% | -0.11% | -0.37% | 0.64% | 0.31% | 1.00% | 0.44% |
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).
EUR/USD fell below 1.0800 on Tuesday but staged a rebound in the American session to end the day flat. The pair holds steady at around 1.0820 to begin the European session. In addition to above-mentioned data, the European Commission will publish business and consumer sentiment figures for October.
GBP/USD registered small gains and closed above 1.3000 on Tuesday. The pair stays in a consolidation phase early Wednesday. The UK government will release the Autumn Forecast Statement and unveil the Autumn Budget later in the day.
During the Asian trading hours, the data from Australia showed that the Consumer Price Index (CPI) rose 0.2% on a quarterly basis in the third quarter. This reading followed the 1% increase recorded in the second quarter and came in slightly below the market expectation of 0.3%. On a yearly basis, the CPI rose 2.8%, compared to analysts' estimate of 2.9%. AUD/USD stays under modest bearish pressure and trades near 0.6550 in the European morning on Wednesday.
USD/JPY failed to gather directional momentum and ended the day flat on Tuesday. The pair stays relatively quiet early Wednesday and fluctuates in a narrow band above 153.00.
Gold gathered bullish momentum and gained more than 1% on Tuesday. XAU/USD continues to stretch higher toward $2,800 and trades at a new record-high on Wednesday.
GDP FAQs
A country’s Gross Domestic Product (GDP) measures the rate of growth of its economy over a given period of time, usually a quarter. The most reliable figures are those that compare GDP to the previous quarter e.g Q2 of 2023 vs Q1 of 2023, or to the same period in the previous year, e.g Q2 of 2023 vs Q2 of 2022. Annualized quarterly GDP figures extrapolate the growth rate of the quarter as if it were constant for the rest of the year. These can be misleading, however, if temporary shocks impact growth in one quarter but are unlikely to last all year – such as happened in the first quarter of 2020 at the outbreak of the covid pandemic, when growth plummeted.
A higher GDP result is generally positive for a nation’s currency as it reflects a growing economy, which is more likely to produce goods and services that can be exported, as well as attracting higher foreign investment. By the same token, when GDP falls it is usually negative for the currency. When an economy grows people tend to spend more, which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation with the side effect of attracting more capital inflows from global investors, thus helping the local currency appreciate.
When an economy grows and GDP is rising, people tend to spend more which leads to inflation. The country’s central bank then has to put up interest rates to combat the inflation. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold versus placing the money in a cash deposit account. Therefore, a higher GDP growth rate is usually a bearish factor for Gold price.
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