Forex Today: Why is US inflation taking centre stage?

Fresh selling pressure on the US Dollar (USD) has eroded part of Friday’s sharp gains as speculation about a possible US-Iran agreement resurfaced, also driving crude oil prices sharply lower.

Caution ahead of US inflation data has accompanied a weak start to the week for the US Dollar Index (DXY), which has slipped back below 102.00 as US Treasury yields edged lower across maturities. The data calendar begins with the NFIB Business Optimism Index, followed by ADP Employment Change Weekly, the Inflation Rate and the API’s weekly US crude oil inventory report.

After declining for two consecutive sessions, EUR/USD has recovered upward momentum to test the key 1.1200 resistance level. With no domestic data releases scheduled, attention turns to speeches from the ECB’s Cipollone and Lane.

A strong advance across risk-sensitive currencies has helped GBP/USD recover above 1.3400, reversing direction after two consecutive daily declines. The upcoming BRC Retail Sales Monitor will precede speeches from the BoE’s Lombardelli and Pill.

The week has opened with USD/JPY under pressure, slipping below 158.00 while remaining within its multi-day consolidation pattern for another session. The forthcoming releases include Household Spending, Current Account figures, Bank Lending data and the Eco Watchers Survey.

A marked improvement in risk sentiment has lifted AUD/USD back above 0.6900 after two successive daily retreats. Australia’s next scheduled releases are the Westpac Consumer Confidence gauge and NAB Business Confidence.

Renewed optimism over the US-Iran-Hormuz conflict has sent front-month WTI futures (December contract) lower again after two consecutive daily gains. Prices are hovering near multi-week lows below $87.00 per barrel.

Renewed US Dollar selling, lower US Treasury yields across maturities and a further daily decline in crude oil prices have lifted Gold to two-day highs above $4,100 per troy ounce.