Forex Today: CPI-inspired dollar selloff pauses ahead of mid-tier data

Eren Sengezer FXStreet

Here is what you need to know on Thursday, August 11:

The US Dollar Index (DXY), which tracks the greenback's performance against a basket of six major currencies, lost more than 1% on Wednesday after the data from the US showed that annual inflation declined to 8.5% in July from 9.1% in June. DXY stays in a consolidation phase above 105.00 early Thursday as investors await the weekly Initial Jobless Claims and the Producer Price Index (PPI) data from the US. Following Wednesday's impressive rally, Wall Street's main indexes remain on track to open in positive territory with US stock index futures rising between 0.35% and 0.5%. Meanwhile, the benchmark 10-year US Treasury bond yield continues to fluctuate between 2.7% and 2.8%.

Commenting on the inflation data, Chicago Fed President Charles Evans said that they were not finished with rate hikes. On a similar note, Minneapolis Fed President Neel Kashkari and San Francisco Fed President Mary Daly both argued that it was too early to declare victory on inflation. According to the CME Group FedWatch Tool, markets are pricing in a 56% probability of the Fed opting for a 50 basis points rate hike in September.

US Inflation Analysis: It is peak inflation only until the Fed's verdict, stock rally at risk.

EUR/USD climbed to its highest level in a month at 1.0368 on Wednesday but retreated to the 1.0300 area in the European session on Thursday.

GBP/USD gained more than 100 pips on Wednesday and advanced toward 1.2300 before losing its bullish momentum. Ahead of Friday's growth data from the UK, the pair stays relatively quiet above 1.2200.

UK GDP Preview: Early confirmation of BOE’s recession forecast.

USD/JPY fell sharply on soft US inflation data but the T-bond yields' resilience helped the pair find support. As of writing, USD/JPY was moving sideways in a narrow band below 133.00.

Gold advanced beyond $1,800 for the first time in nearly two months on Wednesday but failed to preserve its bullish momentum. After having closed the day with small losses on Wednesday, XAU/USD continues to inch lower and was last seen trading below $1,790.

Bitcoin benefited from the risk-positive market environment and gained nearly 4% on Wednesday. BTC/USD pushes higher toward $25,000 and early Thursday. Ethereum is trading at its highest level in two months and closes in on $2,000.

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.

EUR/USD deflates to fresh lows, targets 1.1600

The selling pressure on EUR/USD now gathers extra pace, prompting the pair to hit fresh multi-week lows in the 1.1625-1.1620 band on Friday. The continuation of the downward bias comes in response to further gains in the US Dollar as market participants continue to assess the mixed release of US Nonfarm Payrolls in December.

GBP/USD breaks below 1.3400, challenges the 200-day SMA

GBP/USD remains under heavy fire and retreats for the fourth consecutive day on Friday. Indeed, Cable suffers the strong performance of the Greenback, intensified post-mixed NFP, and trades at shouting distance from its critical 200-day SMA near 1.3380.

Gold flirts with yearly tops around $4,500

Gold keeps its positive bias on Friday, adding to Thursday’s advance and challenging yearly highs in the $4,500 region per troy ounce. The risk-off sentiment favours the yellow metal despite the firmer tone in the Greenback and rising US Treasury yields.