Forex Today: US inflation data to drive the action ahead of central bank meetings

The US Dollar struggles to find demand early Tuesday as markets await the Consumer Price Index (CPI) data for November. The US Dollar Index stays in negative territory below 104.00 after posting small gains on Monday. The European economic docket will feature ZEW business sentiment survey for Germany and the Eurozone.

The high-yield of the latest 10-year US Treasury note auction that took place late Monday stood at   4.29%, down sharply from 4.51% in the previous auction. The 10-year US T-bond yield fell on this development and closed the day in the red, causing the USD to lose strength against its major rivals. Early Tuesday, the 10-year US yield is down nearly 1% on the day at around 4.2% and US stock index futures trade little changed. Meanwhile, the US Central Command reported that a merchant vessel in the Red Sea was struck by a land-based missile fired by Houthi rebels, causing investors to adopt a cautious stance.

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 New Zealand Dollar.

 USDEURGBPCADAUDJPYNZDCHF
USD -0.12%-0.17%-0.23%-0.22%0.25%-0.53%-0.42%
EUR0.11% -0.06%-0.11%-0.11%0.36%-0.42%-0.30%
GBP0.18%0.06% -0.05%-0.06%0.43%-0.35%-0.25%
CAD0.23%0.11%0.04% -0.01%0.48%-0.30%-0.20%
AUD0.22%0.10%0.05%0.01% 0.47%-0.30%-0.19%
JPY-0.25%-0.38%-0.53%-0.48%-0.49% -0.82%-0.68%
NZD0.53%0.41%0.34%0.30%0.29%0.78% 0.11%
CHF0.42%0.30%0.24%0.20%0.19%0.68%-0.10% 
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).

Inflation in the US, as measured by the change in the Consumer Price Index (CPI), if forecast to edge lower to 3.1% on a yearly basis in November from 3.2% in October. The Core CPI, which excludes volatile food and energy prices, is expected to rise 4% in the same period to match the previous increase.

The data from Australia showed earlier in the day that the National Australia Bank’s Business Confidence Index dropped to -9 in November from -3 (revised from -2) in September. The Business Conditions Index edged lower to 9 from 13. Reserve Bank of Australia (RBA) Governor Michele Bullock said on Tuesday that policymakers are taking a cautious approach with monetary policy and reiterated that they will continue to watch incoming data. AUD/USD gained traction in the Asian session and the pair was last seen testing 0.6600, rising 0.5% on a daily basis.

The UK’s Office for National Statistics report on Tuesday that the Employment Change in October was +50K. The ILO Unemployment Rate held steady at 4.2% in the three months to October while annual wage inflation, as presented by the change in the Average Earnings Including Bonus, dropped sharply to 7.2% from 8% in the same period. GBP/USD declined toward 1.2550 with the immediate reaction but managed to hold above that level.

EUR/USD closed the first trading day of the week virtually unchanged and started to edge higher toward 1.0800 early Tuesday.

The renewed USD weakness and the risk-averse market environment caused USD/JPY to turn south early Tuesday. At the time of press, the pair was down more than 0.5% on the day below 145.50.

Gold turned south and declined below $1,980 for the first time in nearly three weeks on Monday. Retreating US yields helped XAU/USD find a foothold and the pair was last seen inching higher toward $1,990.

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