Forex Today: US Dollar struggles to find a foothold ahead of PPI

Here is what you need to know on Thursday, July 13:

The US Dollar suffered heavy losses against its major rivals on Wednesday as investors reacted to soft inflation data for June. The US Dollar Index (DXY) lost more than 1% on a daily basis and dropped to its weakest level in 15 months. Early Thursday, the DXY stays under modest bearish pressure and US stock index futures trade in positive territory. Industrial Production data for May will be featured in the European economic docket ahead of the weekly Initial Jobless Claims and Producer Price Index (PPI) data from the US later in the day.

The Consumer Price Index (CPI) in the US rose 3% on a yearly basis in June, following the 4% increase recorded in May. On a monthly basis, the CPI and the Core CPI both rose 0.2%. Although Federal Reserve (Fed) policymakers Neel Kashkari and Thomas Barkin noted that inflation was still too high, these comments failed to help the USD find demand. According to the CME Group FedWatch Tool, the probability of the Federal Reserve (Fed) raising its policy rate by 25 basis points (bps) again in December after a July rate hike dropped below 20% from 33% ahead of the CPI data. 

During the Asian trading hours, the data from China revealed that the trade surplus widened to $70.62 billion in from $65.81 billion in May. On a yearly basis, Exports and Imports declined 12.4% and 6.8% in that period, respectively.

EUR/USD gathered bullish momentum and broke above 1.1100. As of writing, the pair was trading at its highest level since March 2022 at around 1.1150.

GBP/USD extended its rally and climbed above 1.3000 for the first time in over 15 months early Thursday. Earlier in the day, the UK's Office for National Statistics reported that Industrial Production declined 0.6% on a monthly basis in May, while the real Gross Domestic Product contracted 0.1%.

The Bank of Canada (BoC) raised its policy rate by 25 basis points to 5% as expected following the July policy meeting. The Canadian economy has been stronger than expected, with more momentum in demand, the BoC noted in its policy statement. "The Governing council remains concerned that progress towards 2% inflation target could stall, jeopardizing return to price stability." USD/CAD closed deep in negative territory on Wednesday and continues to edge lower toward 1.3150.

USD/JPY lost nearly 200 pips on Wednesday and dropped to its weakest level in over three months near 138.00 in the Asian session on Thursday. The pair stays in a consolidation phase at around 138.50 in the European morning.

Gold price surged higher and climbed above $1,960. In additional to the broad based USD weakness, the 3% decline seen in the 10-year US Treasury bond yield after the US inflation data provided a boost to XAU/USD.

Bitcoin failed to benefit from improving risk mood and closed in negative territory on Wednesday. At the time of press, BTC/USD was moving sideways below $30,500. Ethereum failed to make a decisive move in either direction and closed virtually unchanged on Wednesday. ETH/USD stays relatively quiet at around $1,900 in the European session.