Forex Today: Dollar rises alongside yields on hot US inflation

Eren Sengezer FXStreet

Here is what you need to know on Friday, February 11:

The dollar outperformed its rivals on Thursday as US Treasury bond yields surged higher after the data from the US showed the annual Consumer Price Index climbed to a new four-decade high of 7.5% in January. The University of Michigan's flash February Consumer Sentiment Index will be featured in the US economic docket on Friday. Ahead of the weekend, the FOMC will submit its semi-annual Monetary Policy Report to Congress.

The CME Group's FedWatch Tool shows that markets are pricing a 90% probability of a 50 basis points (bps) rate hike in March. The benchmark 10-year US Treasury bond yield, which gained nearly 5% on Thursday, is sitting at its highest level since August 2019 above 2%. Meanwhile, St Louis Fed President James Bullard told Bloomberg News that he would prefer a 50 bps hike in March and added that he would want the Fed to raise its policy rate by 100 bps by July. Heightened expectations for an aggressive policy tightening weighed heavily on stocks, the Nasdaq Composite lost more than 2%, the S&P 500 fell 1.8% and the CBOE Volatility Index (VIX) surged nearly 20%.

January inflation scorches US markets: Fed cornered on rate increases.

EUR/USD stays under bearish pressure below 1.1400 in the early European session. The data from Germany showed that the Harmonized Index of Consumer Prices in January was up 5.1% on a yearly basis, matching the advance estimate and the market expectation.

GBP/USD is edging lower toward 1.3500 following mixed data releases. The UK's ONS reported that the GDP expanded by 1% in the fourth quarter, compared to analysts' estimate of 1.1%. Meanwhile, Industrial Production and Manufacturing Production grew by 0.4% and 1.3%, respectively, in 2021.

USD/JPY climbed above 116 for the first time since early January and seems to have gone into a consolidation phase.

Gold advanced to its strongest level in two weeks above $1,840 on Thursday but ended up closing the day in the negative territory amid rising US T-bond yields. XAU/USD stays on the back foot early Friday and pushes lower toward $1,820.

The risk-averse market environment hurt cryptocurrencies on Thursday and Bitcoin lost 2%. BTC/USD trades in the red near $43,000 in the early European morning. Ethereum erased 5% on Thursday and was last seen testing $3,000 support.

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 recedes to daily lows near 1.1850

EUR/USD keeps its bearish momentum well in place, slipping back to the area of 1.1850 to hit daily lows on Monday. The pair’s continuation of the leg lower comes amid decent gains in the US Dollar in a context of scarce volatility and thin trade conditions due to the inactivity in the US markets.

GBP/USD resumes the downtrend, back to the low-1.3600s

GBP/USD rapidly leaves behind Friday’s decent advance, refocusing on the downside and retreating to the 1.3630 region at the beginning of the week. In the meantime, the British Pound is expected to remain under the microscope ahead of the release of the key UK labour market report on Tuesday.

Gold looks inconclusive around $5,000

Gold partially fades Friday’s strong recovery, orbiting around the key $5,000 region per troy ounce in a context of humble gains in the Greenback on Monday. Additing to the vacillating mood, trade conditions remain thin amid the observance of the Presidents Day holiday in the US.

Bitcoin consolidates as on-chain data show mixed signals

Bitcoin price has consolidated between $65,700 and $72,000 over the past nine days, with no clear directional bias. US-listed spot ETFs recorded a $359.91 million weekly outflow, marking the fourth consecutive week of withdrawals.

The week ahead: Key inflation readings and why the AI trade could be overdone

It is likely to be a quiet start to the week, with US markets closed on Monday for Presidents Day. European markets are higher across the board and gold is clinging to the $5,000 level after the tamer than expected CPI report in the US reduced haven flows to precious metals.

Monero Price Forecast: XMR risks a drop below $300 under mounting bearish pressure

Monero (XMR) starts the week under pressure, recording a 4% decline at press time on Monday after a 7% drop the previous day, putting the $300 support zone in focus.