Forex Today: US Dollar struggles to benefit from hawkish Fed commentary

Here is what you need to know on Thursday, February 9:

Despite hawkish comment from Fed officials, the US Dollar struggled to outperform its rivals mid-week amid retreating US Treasury bond yields. Bank of England (BoE) Monetary Policy Hearings will be watched closely by market participants and the European Commission will release its Economic Growth forecasts on Thursday. The US economic docket will feature the weekly Initial Jobless Claims data and investors will stay focused on central bank speak.

Wall Street's main indexes registered large losses on Wednesday led by the Communication Services sector which fell more than 4%. Meanwhile, the benchmark 10-year US Treasury bond yield snapped a three-day winning streak and lost nearly 2%, not allowing the US Dollar to capitalize on the risk-averse market environment. NY Fed President John Williams and Fed Governors Lisa Cook and Christopher Waller all noted that the Fed will need to keep a tight policy stance for some time, citing the uncertainty surrounding the inflation outlook.

Early Thursday, US stock index futures are up between 0.4% and 0.5% early Thursday, pointing to an improving market mood and the 10-year US T-bond yield holds steady at around 3.6%.

EUR/USD gained traction and climbed toward 1.0750 on Thursday after having closed virtually unchanged on Wednesday. The data from Germany revealed that the annual Harmonized Index of Consumer Prices (HICP) declined to 9.2% in January from 9.6% in December. This reading came much lower than the market expectation of 10% and made it difficult for the Euro to gather further strength. 

GBP/USD managed to register small gains on Wednesday and climbed a few pips above 1.2100 early Thursday. BoE Governor Andrew Bailey, Chief Economist Huw Pill and MPC members Silvana Tenreyro and Jonathan Haskel will respond to questions from the Treasury Committee on the policy decisions from 0945 GMT.

USD/JPY continues to fluctuate in a relatively narrow channel above 131.00 as investors anxiously await nominations for the next Bank of Japan Governor.

Gold price took advantage of falling US yields on Wednesday and closed the third straight day marginally higher. Early Thursday, XAU/USD trades slightly higher on the day at around $1,880.

Bitcoin closed below $23,000 on Wednesday and touched its lowest level in two weeks at $22,360 early Thursday. At the time of press, BTC/USD was down more than 1% on the day at $22,650. Following Tuesday's rally, Ethereum reversed its direction and lost more than 1% on Wednesday. ETH/USD stays on the back foot in the European morning and declines toward $1,600.