Forex Today: Risk flows cool off as focus shifts to US data, FOMC Minutes

Here is what you need to know on Wednesday, February 16:

The positive shift witnessed in market sentiment on heightened hopes for a de-escalation of the Russia-Ukraine conflict allowed risk flows to dominate the financial markets on Tuesday. Investors, however, remain cautious early Wednesday after US President Joe Biden noted that a Russian attack on Ukraine was still very much a possibility. Later in the day, January Retail Sales and Industrial Production data will be featured in the US economic docket. More importantly, the US Federal Reserve will release the minutes of the January policy meeting at 1900 GMT.

FOMC Minutes Preview: Dollar selling opportunity? Doves set for a comeback after hawkish meeting.

Russian President Vladimir Putin said on Tuesday that Russia does not want to go into war with Europe and announced that the decision on a "partial withdrawal of troops" had been taken. Later in the day, Putin said they were not satisfied with the assurance that Ukraine will not become a NATO member in near future. Nevertheless, Wall Street's main indexes gained more than 1% on Tuesday and the 10-year US Treasury bond yield rose 3%. The US Dollar Index snapped a three-day winning streak before going into a consolidation phase near 96.00 early Wednesday.

Earlier in the day, the data from China revealed that the Consumer Price Index (CPI) declined to 0.9% on a yearly basis in January from 1.5% in December. This print came in lower than the market expectation of 1% but failed to trigger a noticeable market reaction.

EUR/USD capitalized on the improving market mood and recovered to the 1.1350 area on Tuesday. The pair is moving sideways near mid-1.1300s in the early European session. Eurostat will publish December Industrial Production data later in the session.

GBP/USD clings to modest daily gains above 1.3550. The data published by the ONS showed on Wednesday that inflation in the UK, as measured by the CPI, edged higher to 5.5% on a yearly basis in January, surpassing the market expectation of 5.4%.

Gold lost nearly 1% and dropped to the $1,850 area, pressured by surging US Treasury bond yields. The precious metal is staying relatively quiet early Wednesday as investors eye fresh developments surrounding the Ukraine-Russia conflict.

Despite the renewed dollar weakness, USD/JPY managed to close in the positive territory on Tuesday with the safe-haven JPY struggling to find demand. The pair is posting small daily gains above 115.50. 

Bitcoin received a boost from risk flows on Tuesday and rose nearly 5% on a daily basis. BTC/USD is down modestly near $44,000 early Wednesday. Ethereum gained 9% and touched $3,200 before retreating toward $3,100.