Forex Today: All eyes on US inflation data, BoC rate decision

Here is what you need to know on Wednesday, July 12:

The US Dollar continues to weaken against its rivals, with the US Dollar Index (DXY) dropping to its lowest level in two months below 101.50 early Wednesday. June Consumer Price Index (CPI) data from the US will be watched closely by market participants. The Bank of Canada will announce monetary policy decisions and Governor Tiff Macklem will speak on the policy outlook. In the late American session, the US Federal Reserve will publish its Beige Book.

The positive shift witnessed in risk sentiment after Wall Street's opening bell on Tuesday caused the USD to come under renewed selling pressure. The Dow Jones Industrial Average gained nearly 1% and the S&P 500 rose 0.7%, while the DXY closed in negative territory for the fourth straight day. Early Wednesday, US stock index futures trade modestly higher. Annual CPI inflation in the US is forecast to decline to 3.1% in June from 4% in May.

CPI Data Preview: US inflation expected to slow down in June.

During the Asian trading hours, the Reserve Bank of New Zealand announced that it left the policy rate unchanged at 5.5% as expected and noted that rates will need to remain at a restrictive level for the foreseeable future. "Committee agreed that monetary conditions are restricting spending and reducing inflationary pressure as anticipated," RBNZ noted in its press release. Despite the pause in tightening, NZD/USD gathered bullish momentum and was last seen trading in positive territory above 0.6200.

The BoC is forecast to raise its policy rate by 25 basis points to 5%. USD/CAD trades at its lowest level since late June near 1.3200 in the early European session.

Bank of Canada Preview: Three reasons to expect a CAD rally on an interest rate hike.

EUR/USD registered small gains on Tuesday and continued to stretch higher in the Asian session on Wednesday. The pair holds comfortably above 1.1000 in the European morning

Following a technical correction that saw the pair dropped to the 1.2750 area on Tuesday, GBP/USD gathered bullish momentum and surged beyond 1.2900. The pair was last seen trading at its strongest level in 15 months at around 1.2950. 

USD/JPY broke below 140.00 and fell to a fresh monthly low. The pair trades deep in negative territory below 139.50 mid-week.

Gold price edged higher on Tuesday as the benchmark 10-year US Treasury bond yield returned below 4%. XAU/USD clings to small daily gains above $1,930 in the European morning.

Bitcoin stays relatively quiet and posts small daily gains near $30,700. Ethereum continues to fluctuate in a tight channel at around $1,900.