Forex Today: The Dollar Remains Stable For The Time Being As Speculators Await US Inflation Data

On Wednesday, January 12, here is everything you need to know:

The Dollar came under further selloff weight in the second part of Tuesday’s session as FOMC Chair Jerome Powell maintained a cautious tone regarding the prospects for policy. 

The US Dollar Index appears to have stabilized in the mid-95s after a 0.4% fall, as speculators await US December Consumer Price Index (CPI) data. November Industrial Production figures will also be included in the European economic calendar.

Powell’s Statement

Powell stated in his Senate confirmation testimony that they must prioritize inflation over optimal employment and that they expect inflationary pressures to persist well beyond 2022. 

On the policy prospects, Powell stated that the economy does not require a very accommodating policy, but he added that additional meetings will be required to develop a strategy for shrinking the balance sheet. 

“At some time later this year, probably later this year, we will begin to let the financial statement runoff, and that is simply the beginning of the process of stabilizing policy,” Powell added.

Powell’s more dovish-than-expected remarks sparked a rise in US stock markets, with the S&P 500 gaining about 1%. 

After reaching its highest level of over 1.8% previously in the week, the benchmark 10-year US Treasury note yield ended in the red area on Tuesday and has now been observed reporting slight daily losses at 1.73% at the time of writing. 

Nonetheless, the CME Group’s FedWatch Tool indicates that the Fed’s policy rate will be constant in March and has a 25% likelihood of remaining unchanged. Meanwhile, US stock futures indices are up 0.15% and 0.25%, indicating that market sentiment may stay positive throughout the American session.

Major Currency Pairs

The EUR/USD advanced toward the upper threshold of its six-week-old range above 1.1380 and remained reasonably calm early Wednesday close to that level.

The GBP/USD currency pair maintained its gain on Wednesday, reaching its highest level in more than two months at 1.3640 in the early European session.

Despite falling US Treasury bond yields on Wednesday, the USD/JPY managed to avoid a negative impact, as improved risk perception made it more difficult for the JPY to find buyers. The cross was last observed gaining a tiny amount of ground every day at about 115.30.

In response to falling US Treasury bond rates, Gold surged more than 1% daily on Wednesday, the most recent day of gains. XAU/USD appears to have entered a consolidation period around $1,820, and the pair is expected to remain volatile in response to yield swings.

The risk-on climate aided cryptocurrency demand, as Bitcoin rose more than 2% before settling above $43,000 on Wednesday. Likewise, Ethereum gained about 5% and has maintained a price above $3,200 thus far.

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