Here is what you need to know on Wednesday, December 14:
The US Dollar suffered heavy losses against its major rivals on Tuesday after the data published by the US Bureau of Labor Statistics revealed that inflation continued to soften in November. The US Dollar Index consolidates its losses near 104.00 in the early European morning on Wednesday as markets gear up for the Federal Reserve’s policy announcements. US stock index futures trade modestly higher on the day following Tuesday’s risk rally and the 10-year US Treasury bond yield stays below 3.5%. The European economic docket will feature October Industrial Production data, which is unlikely to trigger a noticeable market reaction.
Fed December Preview: Will US Dollar selloff continue?
The Consumer Price Index (CPI) in the US declined to 7.1% on a yearly basis in November from 7.7% in October. The annual Core CPI fell to 6% in the same period, compared to the market expectation of 6.1%. Lower-than-expected CPI figures weighed on the US Dollar as the ‘Fed pivot’ narrative gained traction. Nevertheless, the Fed is still widely expected to raise the policy rate by 50 basis points following the December policy meeting and market participants will scrutinize the Summary of Economic Projections for hints of a dovish tilt in the policy outlook.
Federal Reserve Preview: How Powell may drain the Dollar of any dot-related gains.
EUR/USD gained more than 100 pips on Tuesday and reached its strongest level since early June at 1.0672. The pair was last seen moving sideways slightly below 1.0650.
After having reached a fresh multi-month high of 1.2443 on Tuesday, GBP/USD retreated modestly and closed below 1.2400 on Tuesday. The pair trades above 1.2350 early Wednesday. The data from the UK showed that the annual CPI declined to 10.7% in November from 11.1% in October and the Core CPI edged lower to 6.3% from 6.5%. These figures, however, were largely ignored by market participants.
Following Monday’s bullish action, USD/JPY fell sharply toward 135.00 on Tuesday. The data from Japan revealed earlier in the day that Industrial Production contracted by 3.2% on a monthly basis in October following September’s 2.6% decrease. The pair stayed relatively quiet during the Asian trading hours and extended its sideways grind above 135.00 into the European morning.
Gold price rose nearly 2% on Tuesday and climbed to its highest level in over five months. XAU/USD consolidates its gains at around $1,810 with the 10-year US T-bond yield’s losses remaining limited for the time being.
Bitcoin took advantage of the improving market mood on Tuesday and rose to its highest level in five weeks at $18,000. BTC/USD seems to have lost its bullish momentum early Wednesday as it trades slightly below $17,800. Ethereum rose 3.5% on Tuesday and started to consolidate its gains slightly above $1,300.
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