The US dollar index increased 0.42 percent during yesterday’s session due to the lack of clarity when Federal Reserve Chairman Jerome Powell said that the central bank would continue to unwind its balance sheet. While Powell reiterated the views of other policymakers that the Fed would be patient about interest rate hikes, he said the bank's balance sheet would be "substantially smaller" and raised concerns about the size of U.S. debt.
In overnight trading, it was a different story; the US-China trade talks appear to be heading towards a constructive, risk-positive result. For instance, the USD/CNH (US dollar – Chinese Yuan) is at its lowest level (strong Yuan) since August as China has pursued additional monetary and fiscal stimulus. China proxy trades (like EUR/USD) continue going higher (strong Euro), and this is also negatively affecting the US dollar. This morning, the US dollar index is falling 0.24 percent.
On the release front, the consumer price index for all urban consumers in the US declined 0.1 percent in December on a seasonally adjusted basis after being unchanged in November. Over the last 12 months, the all items index increased 1.9 percent before seasonal adjustment. Additionally, the index for all items less food and energy rose 0.2 percent in December, the same increase as in October and November.