Forex Today: Powell downs US Dollar, eyes on key inflation and PMI data

Here is what you need to know on Thursday, December 1:

The US Dollar stays on the back foot on the first trading day of December as markets position themselves for a smaller Federal Reserve rate increase. The 10-year US Treasury bond yield stays near 3.6% after having lost nearly 4% on Wednesday and US stock index futures trade in positive territory. Later in the session, the US Bureau of Economic Analysis will release the Personal Consumption Expenditures (PCE) Price Index data, the Fed's preferred gauge of inflation, for October. The ISM's Manufacturing PMI report for November will also be featured in the US economic docket.

US October PCE inflation & ISM Manufacturing PMI Preview: Seen through Fed’s eyes.

In his last appearance before the Fed goes into the blackout period on Saturday, FOMC Chairman Jerome Powell said that it would make sense to moderate the pace of interest rate hikes. Powell further added that rates must ultimately go "somewhat higher" than what policymakers thought in September. Following Powell's remarks, the CME Group's FedWatch Tool shows that markets are pricing a nearly-80% probability of a 50 basis points Fed hike in December, compared to 66% on Tuesday. 

Meanwhile, Beijing officials announced that they will allow people who have tested positive for Covid in a number of residential communities to quarantine at home. Hong Kong's Hang Seng is up 1.5% on the day and Shanghai Composite remains on track to close modestly higher, pointing to an improving market mood early Thursday. 

After dropping to a fresh weekly low below 1.0300, EUR/USD gathered bullish momentum and ended up closing above 1.0400 on Wednesday, gaining more than 100 pips. The pair preserves its bullish momentum early Thursday and trades near 1.0450. 

GBP/USD made a sharp U-turn from 1.1900 and registered strong daily gains on Thursday. The pair continues to push higher and trades above 1.2100 in the European morning.

USD/JPY fell sharply on Wednesday and extended its slide early Thursday. The pair was last seen trading at its lowest level since late August below 136.50, losing more than 1% on a daily basis. In addition to the broad-based US Dollar weakness, comments from Bank of Japan (BOJ) officials seem to be putting additional weight on the pair. BOJ board member Asahi Noguchi said, depending on data, the timing of exiting from the easy policy could be pushed forward.

Fueled by the sharp decline witnessed in US T-bond yields, Gold price surged higher on Wednesday. XAU/USD preserves its bullish momentum and trades at its highest level in three weeks above $1,780.

Bitcoin benefited from risk flows and gained more than 4% on Thursday. BTC/USD was last seen consolidating its recent gains at around $17,100. Ethereum trades in a tight range slightly below $1,300 after having climbed over 6% on Thursday.