FX Today: US inflation takes center stage

The US Dollar (USD) faced renewed downward pressure on Monday, as investor worries resurfaced regarding the Federal Reserve’s autonomy. Market sentiment appears to be shifting toward expectations of a more accommodative Fed stance in the months ahead. Additionally, traders exercised caution in anticipation of Tuesday’s highly anticipated US Consumer Price Index (CPI) report.

Key Events to Monitor on Tuesday, January 13

The US Dollar Index (DXY) reversed its recent four-day winning streak, slipping back toward the 98.70 level amid increased selling. The spotlight will be on the latest inflation data, with other important releases including the NFIB Business Optimism Index, ADP Weekly Employment Change, New Home Sales, and the RCM/TIPP Economic Optimism Index. Furthermore, speeches are scheduled from Fed officials Williams, Musalem, and Barkin.

EUR/USD managed to recover some ground after its recent sharp pullback, approaching the 1.1700 threshold. Looking ahead, Germany’s annual GDP growth figures are due, followed by Industrial Production and the broader Eurozone Balance of Trade, all set for release on January 15.

The British Pound surged against the US Dollar, buoyed by the latter’s renewed weakness, and is now eyeing the 1.3500 mark. The next notable data point for the UK will be the BRC Retail Sales Monitor.

USD/JPY continued its upward momentum, breaking above the 158.00 level as risk appetite improved across markets. Upcoming Japanese data includes the Current Account balance, Bank Lending statistics, and the Eco Watchers Survey.

AUD/USD rebounded from recent declines, reclaiming the important 0.6700 level. The next focus for Australia will be the release of the Westpac Consumer Confidence Index.

WTI crude oil prices started the week on a positive note, supported by concerns over possible supply interruptions in Iran and ongoing developments in Venezuela.

Gold extended its rally for a third consecutive session on Monday, reaching a record high near $4,630 per troy ounce. The surge in gold was driven by renewed US Dollar weakness and escalating geopolitical tensions in the Middle East. Silver also climbed, surpassing $85.00 per ounce for the first time ever.