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Inflation concerns surround US dollar

USD - United States Dollar

While the number of new job openings increased in December, new hiring declined according to a report released yesterday by the Department of Labor. Add in last week’s dismal job growth of 49,000 new jobs in January, its hard to paint a rosy picture for the US dollar. Of course, USD continued to lose steam while at the same time equity markets ramped up.

The $1.9 billion fiscal stimulus proposal inching through congress has investors frothing. However, concerns around inflation are creeping into the discussion. Today’s Consumer Price Index met expectations. The Bureau of Labor Statistics reported that the CPI grew 0.3% in January, and it increased 1.4% over the last 12 months. In addition, oil prices surpassed $60 a barrel for the first time since before COVID-19 lockdowns halted consumption.

Key Movers

Reports that Mario Draghi is on the precipice of forming a collation government and becoming the new Italian Premier helped EURUSD drive above the 1.21 level. While EURUSD did peak higher back in December, the pair has not held current levels since March 2018. Having pushed through 1.21 overnight the euro has bounced off last week's dip below 1.20.

Great British pound continued its gains for a fourth day against the USD as markets remain upbeat regarding the global economic recovery from the coronavirus pandemic induced downturn. Markets were buoyed by the US fiscal stimulus. Combined with continuing drops in new coronavirus cases worldwide, there are likely further gains for GBPUSD.

The Australian dollar tracked sideways through trade on Tuesday, maintaining a relatively narrow range in what was a largely uneventful trading day. Having extended beyond 0.77 on Monday, the AUD held onto gains bouncing between 0.7710 and 0.7740 as markets looked to consolidate positions following a 6-day risk positive run. Strength across Chinese Credit Data helped underpin the recovery narrative with slower growth in money supply. The AUD found support in a stronger CNY and higher commodity prices, and a weaker dollar opened the door for another push toward 0.78 US cents.

Expected Ranges

EUR/USD: 1.210 - 1.214 ▼

GBP/USD: 1.379 - 1.386 ▼

AUD/USD: 0.772 - 0.775 ▼

USD/CAD: 1.267 - 1.271 ▼