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Dollar

• The dollar is neutral as most currencies experience minor moves ahead of the US CPI. There hasn’t been much movement in FX in European morning trade.
• It’s been relatively calm as we await the US CPI news later in the day. The European morning trading is anticipated to be more subdued and cautiously hopeful, and this is precisely what it will be.
• The dollar is trading more mixed, with minor changes across the board.  EUR/USD is still confined in a 21-pip range as buyers try to hold gains from yesterday, though resistance around 1.1383-86 remains in play.
• Meanwhile, GBP/USD is holding above 1.3600, which is encouraging for the upside move, which could extend towards the 200-day moving average @ 1.3733 next.
• Of course, mood will be influenced by the main risk event later today.
• Elsewhere, the USD/CAD is continuing to fall below 1.2550 as sellers keep the pair below its 100-day moving average.

• The pair is challenging the 61.8 retracement level of the latest upward surge @ 1.2546, but it might fall back to the 200-day moving average @ 1.2498. Today’s loonie attitude is aided by rising oil prices, which are up 0.8 percent to around $82.
• It’s all about today’s US CPI report, which will determine trade sentiment in the next days.

China

China’s December M2 money supply increased by 9.0 percent year on year, compared to the predicted 8.7 percent increase. The most recent Chinese credit data for December has been released.

• New yuan loans totaled 1.13 trillion yuan, compared to the estimated 1.25 trillion yuan.

• Previous 1.27 trillion

If it isn’t evident that China is still doing everything it can to boost the economy, this report at least emphasises it. Broad money growth is strong, with new yuan loans reaching a record high of 19.95 trillion in total for the year 2021. Yes, China is working on deleveraging activities as well, but they are not willing to sacrifice the economy totally.

Europe

• The dollar fell more, while Treasury rates fell further, allowing risk trades to surge.
• The tone has persisted since Monday’s ‘buy the dip’ rally, and the market understood Powell’s statements to fit with the flavour of the week. Sure, he’s not as thrilled about the balance sheet runoff, but that doesn’t imply he’s not on board. We’ll see how the Fed chooses to express this more formally in the coming months.
• For the time being, the dollar is somewhat weaker, with EUR/USD approaching resistance between 1.1383-86. Meanwhile, GBP/USD has risen over 1.3600 and is aiming for its 200-day moving average of 1.3733.
• USD/CAD has also broken through its 100-day moving average in a decline, with the pair aiming for its own 200-day moving average at 1.2498 next.
• Elsewhere, oil is looking up on a break over $80, which might lead to another test of $85 in the near future.
• For now, it will all come down to what the US CPI data has to give later today. This will provide the market with the next cues on how to proceed with the inflation debate and risk sentiment in the next days.