Forex Today: US inflation data fails to lift the US Dollar as focus shifts to PPI

Eren Sengezer FXStreet

Here is what you need to know on Friday, January 12:

The US Dollar (USD) outperformed its peers with the initial reaction to December inflation figures on Thursday but failed to preserve its strength as US Treasury bond yields turned south later in the American session. Although markets stay relatively quiet early Friday, Producer Price Index (PPI) data for December from the US could ramp up volatility ahead of the weekend.

US PPI Preview: Another positive surprise in the pipeline?

Inflation in the US, as measured by the change in the Consumer Price Index (CPI), rose to 3.4% on a yearly basis in December, the US Bureau of Labor Statistics (BLS) reported on Thursday. This print followed 3.1% in November and came in stronger than the market expectation of 3.2%. The Core CPI, which excludes volatile food and energy prices, rose 0.3% on a monthly basis as forecast. The USD Index climbed to a five-day high of 102.76 after the inflation report but closed the day flat below 102.50 as the benchmark 10-year US Treasury bond yield failed to hold above 4%.

US Dollar price this week

The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Pound Sterling.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.30%	-0.47%	0.12%	0.23%	0.24%	0.11%	0.14%
EUR	0.32%		-0.14%	0.44%	0.55%	0.57%	0.42%	0.47%
GBP	0.49%	0.19%		0.61%	0.72%	0.74%	0.61%	0.62%
CAD	-0.11%	-0.41%	-0.58%		0.12%	0.15%	0.00%	0.03%
AUD	-0.23%	-0.54%	-0.71%	-0.11%		0.04%	-0.14%	-0.09%
JPY	-0.27%	-0.56%	-0.72%	-0.11%	-0.01%		-0.11%	-0.10%
NZD	-0.08%	-0.39%	-0.55%	0.04%	0.15%	0.16%		0.05%
CHF	-0.13%	-0.48%	-0.63%	-0.02%	0.10%	0.10%	-0.05%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

During the Asian trading hours, the data from China revealed that the Consumer Price Index rose 0.1% on a monthly basis in December, up from the 0.5% decrease seen in November. Other data from China showed that the trade surplus widened to $75.34 billion in December from $68.39 billion. This reading surpassed the market forecast for a surplus of $74.75 billion. Nevertheless, the Shanghai Composite and the Hang Seng indexes both were last seen trading flat on the day. Meanwhile, US stock index futures post small losses in the early European session.

Following some volatile action in the American session, EUR/USD settled above 1.0950. European Central Bank Chief Economist Philip Lane will be delivering a speech during the European trading hours on Friday.

The UK's Office for National Statistics (ONS) reported on Friday that the Gross Domestic Product grew by 0.3% on a monthly basis in November following the 0.3% contraction recorded in October. The ONS also announced that Industrial Production and Manufacturing Production expanded by 0.3% and 0.4%, respectively, in the same period. GBP/USD showed no immediate reaction to these data and was last seen moving up and down in a narrow range above 1.2750.

After advancing to its highest level in a month near 146.50, USD/JPY reversed its direction and closed in the red on Thursday. The pair stays on the back foot early Friday and trades at around 145.00.

Gold benefited from retreating US bond yields in the second half of the day on Thursday and continued to edge higher in the Asian session on Friday. At the time of press, XAU/USD clings to marginal daily gains above $2,030.

(This story was corrected at 07:17 GMT to note the abbreviation for Producer Price Index is PPI, not CPI.)

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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