Forex Today: US Dollar looks vulnerable as focus shifts to December CPI data
|Here is what you need to know on Thursday, January 12:
Financial markets stay relatively quiet early Thursday as investors gear up for December inflation data from the US. The US Dollar Index continues to move up and down in a tight range slightly above 103.00, the benchmark 10-year US Treasury bond yield holds above 3.5% following Wednesday's decline and US stock index futures trade flat. The US economic docket will also feature the weekly Initial Jobless Claims and there won't be any high-impact data releases from the Eurozone.
US CPI Preview: Forecasts from 10 major banks, price pressures to ease further.
Wall Street's main indexes registered strong gains for the second straight day on Wednesday and made it difficult for the US Dollar to stay resilient against its major rivals during the American trading hours. On a yearly basis, the Consumer Price Index (CPI) in the US is forecast to 6.5% in December from 7.1% in November. The Core CPI, which excludes volatile food and energy prices, is expected to edge lower to 5.7% from 6%.
Meanwhile, the data from China showed that the annual CPI rose to 1.8% in December from 1.6% as expected. Nevertheless, the Shanghai Composite Index remains on track to end the day virtually unchanged.
Hawkish comments from European Central Bank (ECB) officials helped the Euro gather strength on Wednesday and EUR/USD pair touched its highest level in nearly eight months at 1.0777 before retreating toward 1.0750 early Thursday. ECB Governing Council member Olli Rehn said that rates will have to rise significantly in the next couple of meetings to dampen inflation. Similarly, ECB policymaker Pablo Hernandez de Cos noted that they will need to continue to hike rates at a steady pace to protect themselves against the risk of a persistent upward shift in inflation expectation.
US December CPI Preview: EUR/USD and USD/JPY are pairs to watch.
GBP/USD struggled to make a decisive move in either direction and closed flat at around 1.2150 on Wednesday. The pair was last seen moving sideways near that level.
USD/JPY came under modest bearish pressure early Thursday and declined below 132.00. Japanese media Yomiuri reported earlier in the day that the Bank of Japan was planning to review the side effects of massive monetary easing in next week's policy meeting.
Gold price continued to edge higher on Wednesday and reached its highest level since early May at $1,887. With the 10-year US T-bond yield holding steady in the early European morning, XAU/USD stays quiet slightly above $1,880.
Bitcoin extended its rebound and gained nearly 3% on Wednesday, closing the fifth straight day in positive territory. BTC/USD preserves its bullish momentum and trades near $18,200 early Thursday, already gaining more than 1%. Similarly, Ethereum rose 4% on Wednesday and climbed to its highest level in two months at $1,418 on Thursday before retreating toward $1,400.
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