Forex Today: US Dollar selling pressure eases as key inflation data loom

10 November, Tuesday: Key market developments to watch

The USD Index fell more than 0.5% on Monday. The US Dollar (USD) opened the week on the defensive. By early Tuesday, the index is consolidating below 102.00, with investors holding back from sizeable positions before the crucial October inflation release. Speeches from policymakers at the Federal Reserve (Fed), European Central Bank (ECB) and Bank of England (BoE) are also scheduled throughout the day.

US Dollar Performance This Week

This week's percentage moves in the US Dollar (USD) against the major currencies listed are set out below. Its largest decline was against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.80%	-0.76%	-0.27%	-0.06%	-0.78%	-1.30%	-0.14%
EUR	0.80%		0.05%	0.53%	0.76%	0.12%	-0.51%	0.67%
GBP	0.76%	-0.05%		0.49%	0.70%	0.07%	-0.56%	0.62%
JPY	0.27%	-0.53%	-0.49%		0.22%	-0.56%	-1.02%	0.09%
CAD	0.06%	-0.76%	-0.70%	-0.22%		-0.74%	-1.28%	-0.05%
AUD	0.78%	-0.12%	-0.07%	0.56%	0.74%		-0.63%	0.45%
NZD	1.30%	0.51%	0.56%	1.02%	1.28%	0.63%		1.20%
CHF	0.14%	-0.67%	-0.62%	-0.09%	0.05%	-0.45%	-1.20%

Percentage movements between the major currencies are displayed in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. To read USD (base)/JPY (quote), for instance, choose the US Dollar on the left and follow its row across to the Japanese Yen. The intersecting cell gives the percentage change for that pair.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

A recovery in risk appetite on Monday left the USD struggling to hold its ground against other currencies. After heavy selling the previous week, Wall Street's main indices opened the new week strongly, with the Nasdaq Composite advancing more than 3% on Monday. The positive sentiment extended into Tuesday's Asian session: Korea's KOSPI Index climbed more than 4%, while Japan's Nikkei added nearly 3% on the day. US stock index futures, however, are largely flat during European trading, suggesting the risk rally is losing momentum.

A monthly increase of 0.3% in October, down from September's 0.6% rise, is the market forecast for the Consumer Price Index (CPI) release. Core CPI, which strips out volatile food and energy prices, is expected to increase 0.2% over the same period. Annual readings will be absent from this report because the government shutdown left a gap in the October 2025 data.

US Dollar momentum at risk from below-forecast US inflation

The US inflation release will be scrutinised by both market participants and the Fed “for evidence of spillover effects from higher energy prices.” That is the assessment of analysts at MUFG/BTMU. They point out that “recent core CPI readings have surprised to the upside over the last couple of months putting pressure on the Fed to tighten policy,” although “consensus expectations are looking for a softer core CPI print of 0.2% M/M in October.” In MUFG/BTMU's view, that result “would help put a dampener on the US Dollar’s upward momentum in the near-term,” as “the US Dollar appears to be running ahead of short-term yield spreads,” the bank observes. This suggests “a hawkish surprise maybe required to maintain US Dollar strength.”

EUR/USD is confined to a narrow range above 1.1200, consolidating Monday's advance of more than 0.7%.

GBP/USD recovered 0.7% on Monday, reversing the previous Friday's sharp fall. Early in Tuesday's European session, the pair is stable near 1.3450.

Gold built on the previous week's strong performance, adding nearly 1.75% on Monday to finish at $4,140. An early Tuesday pullback has left the precious metal lower, though it remains above $4,100.

USD/JPY settled near 158.00 early Tuesday after declining about 0.3% on Monday. According to the Bank of Japan's (BoJ) Summary of Opinions for its October monetary policy meeting, some members favoured further rate rises in the near term. Others considered it appropriate to leave policy settings unchanged while assessing risks to the economy and prices for some time.

China's October trade figures, released during Asian trading, showed annual growth of 35.2% in Exports and 41.6% in Imports. The trade surplus consequently narrowed from $133.53 billion to $105.28 billion. The release had no discernible effect on AUD/USD, last trading at 0.6920 with virtually no change on the day.

Inflation: Key Questions Answered

Inflation: Measuring price increases

The increase in the cost of a representative basket of goods and services is measured by inflation. Headline inflation is generally reported as a percentage change month on month (MoM) and year on year (YoY). More volatile components, including food and fuel, are excluded from core inflation because geopolitical developments and seasonal factors can cause their prices to fluctuate. Economists concentrate on the core measure. It is also the measure targeted by central banks, whose mandate is to keep inflation manageable, usually at around 2%.

Consumer Price Index (CPI): Tracking changes in costs

Price movements in a basket of goods and services over a given period are tracked by the Consumer Price Index (CPI). The readings are normally presented as percentage changes month on month (MoM) and year on year (YoY). Central banks target core CPI, which removes volatile food and fuel components. A core CPI reading above 2% typically leads to higher interest rates; a reading below 2% generally has the reverse effect. Higher interest rates support a currency, so rising inflation usually strengthens it. Falling inflation tends to produce the opposite outcome.

Inflation and its effect on foreign exchange

A country's currency tends to appreciate when inflation is high and depreciate when inflation is low, a relationship that can appear counter-intuitive. To curb higher inflation, the central bank will normally raise interest rates. The higher returns attract additional global capital from investors seeking an attractive place to hold their money.

Gold prices: The link to inflation

Historically, investors sought Gold during periods of high inflation as a store of value. They still often buy it for its safe-haven characteristics during severe market turmoil, but this is not the usual response in most circumstances. High inflation prompts central banks to raise interest rates to contain it. Those higher rates weigh on Gold by increasing the opportunity cost of owning it rather than holding an interest-bearing asset or keeping money in a cash deposit account. Conversely, lower inflation generally supports Gold: it brings interest rates down and makes the precious metal a more attractive investment alternative.