Here is what you need to know on Wednesday, January 12:
The greenback faced renewed selling pressure in the second half of the day on Tuesday as FOMC Chairman Jerome Powell adopted a cautious tone with regards to policy outlook. Following a 0.4% decline, the US Dollar Index seems to have steadied around mid-95s as investors await December Consumer Price Index (CPI) data from the US. November Industrial Production data will be featured in the European economic docket as well.
US Inflation Preview: Dizzying heights of 7% would cement a March hike, supercharge the dollar.
During his confirmation hearing before the Senate, Powell said that they need to focus more on the inflation goal than the maximum employment goal and reiterated that they expect price pressures to last well into 2022. On policy outlook, Powell said that the economy doesn't need a highly accommodative policy but he noted that they would need several meetings to come up with a plan on how they will reduce the balance sheet. “At some point perhaps later this year we will start to allow the balance sheet to run off, and that’s just the road to normalizing policy," Powell explained.
Powell's less-hawkish-than-expected comments triggered a rally in US stock markets and the S&P 500 gained nearly 1%. The benchmark 10-year US Treasury bond yield, which reached its highest level above 1.8% earlier in the week, closed in the negative territory on Tuesday and was last seen posting small daily losses at 1.73%. Nevertheless, the CME Group FedWatch Tool shows that there is only a 25% chance of the Fed leaving its policy rate unchanged in March. In the meantime, US stocks futures indexes are up 0.15% and 0.25%, suggesting that the market mood could remain upbeat in the American session.
EUR/USD climbed toward the upper limit of its six-week-old range near 1.1380 and stays relatively quiet around that level early Wednesday.
GBP/USD extended its rally and reached its strongest level in more than two months above 1.3640 in the early European session on Wednesday.
USD/JPY managed to shake off the bearish pressure despite falling US Treasury bond yields on Wednesday as the improving risk sentiment made it difficult for the JPY to find demand. The pair was last seen posting small daily gains near 115.30.
Gold capitalized on declining US T-bond yields and gained more than 1% on a daily basis on Wednesday. XAU/USD seems to have gone into a consolidation phase around $1,820 and the pair is likely to remain sensitive to fluctuations in yields.
The risk-positive market environment helped cryptocurrencies find demand and Bitcoin gained more than 2% before turning quiet around $43,000 on Wednesday. Similarly, Ethereum rose nearly 5% and holds its ground above $3,200 so far.
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD rebounds from multi-week lows, trades above 1.0750

EUR/USD came under heavy bearish pressure and declined to its weakest level in three weeks below 1.0750 on Friday after the stronger-than-expected Nonfarm Payrolls data. Week-end flows, however, helped the pair erase its daily losses.
GBP/USD remains on track to snap three-week winning streak

GBP/USD recovered toward 1.2550 after coming in within a touching distance of 1.2500 in the second half of the day after Nonfarm Payrolls came in at 199,000 for November. Despite the recent rebound, the pair remains on track to snap a three-week winning streak.
Gold retreats below $2,020 as US yields push higher

Gold broke below its daily range and declined toward $2,010 with the immediate reaction to the upbeat US November jobs report. Although XAU/USD managed to recover toward $2,020, rising US Treasury bond yields triggered another leg lower.
Bitcoin price could retrace to $42,000 if US Nonfarm Payroll comes in at 180,000

Bitcoin price just like other assets, is highly impacted by the macro-financial developments. This includes the Nonfarm Payrolls (NFP) report released by the BLS of the United States.
The week ahead – Fed, ECB and Bank of England rate decisions

When the Federal Reserve kept rates unchanged back in November for the second meeting in a row there was still the distinct possibility that the final meeting of 2023 would provide the possibility of one more rate rise to round off the year in line with Fed policymakers dot plot forecasts of 5.6%.