Forex Today: Calm before the US CPI storm

Eren Sengezer FXStreet

Here is what you need to know on Tuesday, February 14:

Markets remain quiet early Tuesday as investors move to the sidelines while preparing for key macroeconomic data releases that will ramp up the volatility. The European economic docket will feature the Employment Change and Gross Domestic Product data for the fourth quarter. In the early American session, the US Bureau of Labor Statistics will release the all-important Consumer Price Index (CPI) inflation data for January.

US Consumer Price Index Preview: US Dollar vulnerable to violent crash, every 0.1% in Core CPI matters.

Following a cautious start to the week, markets turned risk-positive in the second half of the day with Wall Street's main indexes posting gains of more than 1% on the day. In turn, the US Dollar struggled to preserve its strength and the US Dollar Index (DXY) closed in negative territory. Early Tuesday, US stock index futures trade flat and DXY holds steady slightly above 103.00 while the benchmark 10-year US Treasury bond yield moves sideways within a touching distance of 3.7%.

During the Asian trading hours, the data from Australia showed that National Australia Bank's Business Confidence Index improved to 6 in January from -1 in December. On a negative note, Westpac Consumer Confidence Index dropped to -6.9% in February from 5% in January. AUD/USD failed to build on Monday's gains following the mixed data and was last seen trading flat on the day above 0.6950.

The Reserve Bank of New Zealand reported that the Inflation Expectations for the first quarter dropped to 3.3% from 3.62%. NZD/USD lost its traction after this data and turned negative on the day below 0.6350.

As expected, the Japanese government nominated Kazuo Uedo to become the next governor of Bank of Japan (BoJ) on Tuesday. Former Financial Services Agency (FSA) chief Ryozo Himino and career central banker and BoJ executive Shinichi Uchida are also nominated as the two deputy governors. USD/JPY showed no immediate reaction to this development and was last seen moving sideways at around 132.00.

EUR/USD took advantage of the weaker US Dollar in the second half of the day on Monday and closed in positive territory above 1.0700. The pair edges higher toward 1.0750 in the early European morning on Tuesday.

GBP/USD gathered bullish momentum on Monday and erased all the losses it suffered on Friday. The UK's Office for National Statistics reported on Tuesday that the ILO Unemployment Rate unchanged at 3.7% in three months to December as expected with the Claimant Count Change arriving at -12.9K. The wage inflation, as measured by the Average Earnings Excluding Bonus, climbed to 6.7% on a yearly basis in the same period from 6.5%. With the initial reaction to these figures, the pair extended its recovery beyond 1.2150 on Tuesday.

Gold price failed to stage a rebound on Monday and registered its lowest daily close in a month slightly above $1,850 as the 10-year US T-bond yield held steady at around 3.7%. Early Tuesday, XAU/USD stages a technical correction and stays in positive territory above $1,860.

Bitcoin dropped to its lowest level in nearly three weeks below $21,400 on Monday but erased its losses to close the day flat. Early Tuesday, BTC/USD trades flat slightly below $21,800. Ethereum registered small losses on Monday and trades within a touching distance of $1,500 on Tuesday.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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