The US Dollar Index closed the third straight day in the negative territory on Thursday and extended its slide to a fresh two month low near 94.60 early Friday. The slight decline witnessed in the annual Producer Price Index (PPI) on Thursday made it difficult for the dollar to find demand and the benchmark 10-year US Treasury bond yield fell nearly 2%, putting additional weight on the currency. December Retail Sales, Industrial Production data and the University of Michigan’s advance Consumer Sentiment Index for January will be featured in the US economic docket.
While testifying before the US Senate for her confirmation hearing, Fed Governor Lael Brainard noted that they will be in a position to start lifting rates as soon as the bond purchase program ends. Meanwhile, Fed Governor Christopher Waller said three rate hikes in 2022 was a good baseline and added that the Fed could start shrinking the balance sheet by summer. Although these remarks failed to lift US T-bond yields, the 10-year reference is up more than 1% at 1.72% in the Europen morning, suggesting that the dollar could show some resilience against its rivals ahead of the data releases.
EUR/USD extended its rally on Thursday and continues to push higher toward 1.1500 on Friday. Eurostat will release the November Trade Balance data later in the session but the dollar’s market valuation is likely to remain the primary driver of the pair’s action.
GBP/USD closed flat near 1.3700 on Thursday but clings to small gains around 1.3730 early Friday. The UK’s Office for National Statistics will publish the November GDP, Trade Balance and Industrial Production during the European trading hours.
Gold staged a deep correction and slumped toward $1,810 on Thursday before regaining its traction on falling US T-bond yields later in the day. XAU/USD seems to have started the last day of the week on a firm footing and was last seen posting modest daily gains a little below $1,830.
USD/JPY broke below 114.00 for the first time in three weeks on Thursday and continued to edge lower during the Asian session. On a weekly basis, the pair is down nearly 200 pips.
Bitcoin lost its bullish momentum after testing $44,000 and lost 3% on Thursday before going into a consolidation phase around $43,000. On Thursday, Ethereum erased all the gains it posted on Wednesday but it seems to have found support near $3,200.