US December CPI was lighter than expected and that helped to stall the dollar rally. The Swiss franc was the top performer while the New Zealand dollar lagged. UK Dec CPI came in weaker than expected but cable manages to regain 1.30 as USD is sold across the board. Trump added some important reminders with regards to the conditions to the US-China trade deal. More on retail woes below.  US PPI and Empire manufacturing are due today, followed by the Fed's Beige. A new trade was issued yesterday, while the Premium Video (5 Trading Points) is posted below for subscribers.  There are currently 8 trades open in FX, indices, commodities and crypto.

On Tuesday, US CPI rose 2.3% in December compared to 2.4% expected and the same report showed flat year-over-year weekly earnings growth versus the +0.8% consensus. The dollar sagged after the release and that gave an opening for retracements in the euro and pound.

USD/JPY also stalled at 110. Further selling came on a report saying that the US hadn't agreed to reduce further tariffs in the phase one deal until at least after the election. That sparked some risk off sentiment but it shouldn't have been a surprise. The US already reduced the autumn tariffs when it announced the deal and there were no rumours or expectations of further cuts. Later, Mnuchin said they would review tariffs after a phase 2 deal was signed.

The main risk in the day ahead is a sell-the-fact on the deal signing. However it's almost too-obvious of a risk to materialize. Still, the runaway moves in momentum stocks have us wary.

If there is to be a reckoning it will come on the economic side. The big picture theme for early 2020 is monitoring how businesses investment responds to news of a phase one trade deal. While the deal will be signed on Wednesday, it was announced Dec 13 and that bump should begin to materialize soon. If so, early signs may show up in Wednesday's Beige Book report. It's due out at 1900 GMT and given all the good news that's been priced into markets in the past two months, it's imperative that some positive economic momentum begins to materialize early in 2020 and this release is a good place to start.


Back to Retail Concerns

There are also rumblings about a poor US retail sales report due Thursday, in light of shocking guidance by retailing giant Target. Ashraf mentioned to watch 2 things: the VVIX relative to the VIX, even as the latter remains below 13.0. And, the  flattening of the US yield curve as the yield spread between 10 and 2 year yields drops to 22.9.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

Latest Forex Analysis

Editors’ Picks

EUR/USD near daily lows with mixed US data

The EUR/USD pair continues trading just above the 1.1000 level, as US Durable Goods Orders rose by 2.4%, largely surpassing the market’s expectations, although core readings plummeted in the red.


GBP/USD below 1.3000 ahead of BOE

The dollar continues to advance against all of its major rivals, getting an additional boost from upbeat CB Consumer Confidence. GBP/USD trading around 1.2980. BOE to have a monetary policy meeting this Thursday.


Bitcoin moving on the razor edge

Yesterday's positive day along the crypto board has brought the BTC/USD pair to the borderline between a bearish market and a free space where it can grow again in search of new historical highs. 

Read more

WTI bounces off lows, back above $53.00/bbl

After hitting new lows in levels last seen in early October 2019 near $52.00, prices of the WTI have managed to regains some attention and have retaken the $53.00 mark per barrel.

Oil News

USD/JPY Forecast: Consolidating at lows, bearish

Coronavirus-related fears and upcoming first-tier event keeping investors in cautious mode. US Durable Goods Orders seen posting a tepid advance in December. USD/JPY at risk of resuming its decline once below 108.65.


Forex Majors