Forex Today: German Inflation and US GDP Revision to Grab Attention
Economic Data in Focus
- Germany: Preliminary Consumer Price Index (CPI) for August
- US: Second estimate of annualized Gross Domestic Product (GDP) growth for Q2
- US: Weekly Initial Jobless Claims
- US: Pending Home Sales for July
Market Summary
- FX: Investors are adopting a cautious approach ahead of key data releases.
- US Dollar (USD): Strengthens against major rivals after touching its lowest level in over a year on Tuesday.
- EUR/USD: Dips below 1.1100 on Wednesday, recovers slightly on Thursday.
- GBP/USD: Corrects lower, rebounds above 1.3200.
- USD/JPY: Registers modest gains, remains within weekly range.
- Gold: Slumps below $2,500 during US trading hours, recovers slightly.
- NZD/USD: Surges to its highest level since January near 0.6300.
German Inflation Data
Destatis will release preliminary CPI data for August. Inflation in Germany has been a significant concern, with the annual rate reaching 7.9% in July. A higher-than-expected reading could further pressure the European Central Bank (ECB) to raise interest rates aggressively.
US GDP Revision
The Bureau of Economic Analysis will publish the second estimate of GDP growth for the second quarter. The initial estimate showed a 0.9% contraction. A revision to a positive growth rate would be considered a positive sign for the US economy.
Gross Domestic Product (GDP)
- Definition: Measures the total value of goods and services produced in a country over a given period.
- Importance: A key indicator of economic growth and health.
- Impact on Currencies: Higher GDP growth tends to strengthen a country's currency due to increased demand for its exports and attractive investment opportunities.
Impact of GDP on Gold
- Rising GDP: Leads to higher inflation, prompting central banks to raise interest rates.
- Higher Interest Rates: Reduce the opportunity cost of holding cash over gold, making gold less attractive.
Table: US Dollar Price Changes
| Currency | Price Change |
|---|---|
| EUR | 0.55% |
| GBP | 0.25% |
| JPY | -0.25% |
| CAD | 0.37% |
| AUD | 0.14% |
| NZD | 0.94% |
| CHF | 0.84% |
List of Economic Indicators and Their Potential Impact
- Positive Indicators:
- Higher GDP growth
- Stable or rising inflation
- Low unemployment
- Negative Indicators:
- Negative GDP growth
- High inflation
- Rising unemployment
Outlook
Investors will be closely monitoring today's economic data releases for clues about the health of the global economy. Positive surprises could support risk appetite and lead to a rise in riskier assets such as stocks and emerging market currencies. Conversely, weak data could trigger a flight to safety and support the US dollar.