Forex Today: US inflation lent legs to the Dollar

The long-waited US inflation release came in stronger than initially estimated for the month of December, lending fresh oxygen to the greenback as investors now see the Federal Reserve potentially delaying its first interest rate cut. Friday will bring a highly interesting docket where US inflation will take centre stage again, although this time via Producer Prices. In addition, China releases its CPI prints and the always-relevant Trade Balance readings. In the UK, GDP figures, Industrial and Manufacturing Production will also be in the spotlight.

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

Higher-than-expected US inflation figures in December prompted investors to rethink the idea of the Federal Reserve trimming its interest rates in the second quarter. The USD Index (DXY) rose to new highs near 102.80, although that move fizzled out as the session drew to a close.

US equities gauged by the Dow Jones clinched an all-time high just past the 37800 yardstick before the CPI-driven knee-jerk, just to regain traction towards the end of the day.  

EUR/USD briefly flirted with the 1.1000 hurdle before the US CPI-led knee-jerk dragged spot to the 1.0930 zone. The pair, however, managed to regain composure along with the rest of the risk-associated assets afterwards.

GBP/USD added to Wednesday’s uptick and rose to the 1.2770/75 band, approaching the so-far 2024 tops ahead of key data releases at the end of the week.

USD/JPY could not sustain the early move to multi-week highs north of 146.00 the figure and retreated to the 145.60 region around the closing bell on Wall Street. The late corrective decline in the greenback as well as mixed US yields accompanied the pair’s price action.

There was no respite for the selling pressure in the Aussie dollar, which prompted AUD/USD to print new weekly lows near 0.6650 following a volatile session in the greenback and mixed activity in the commodity space, all ahead of key Chinese data due on Friday.

USD/CAD advanced to new four-week highs near 1.3440 on the back of tepid gains in the greenback and despite the marked recovery in crude oil prices.

Further losses saw Gold and Silver prices add to the weekly leg lower following the prospect that the Fed might not start cutting its interest rates as soon as anticipated.