Forex Today: Dollar gains as stocks slide and metals tumble

Markets will be cautious as they await Chinese inflation data during the Asian session. Additionally, New Zealand's Electronic Card Retail Sales data and the Reserve Bank of New Zealand's inflation expectations for the third quarter will be released. Japan's upcoming data includes Machine Tool Orders for July.

Here is what you need to know on Wednesday, August 9:

Weaker-than-expected Chinese trade data has made markets cautious. Moody's downgrade of US banks has also weighed on risk sentiment. Adding to the negative sentiment was Italy’s announcement of a surprise windfall tax on bank profits. Fitch downgraded credit ratings for mid-size and small US lenders and warned about potential cuts to larger institutions.

The first round of Treasury auctions after the quarterly refunding announcement went well, with strong supply seen in the 52-week bill and 3-year note auctions. On Wednesday, the US will sell 10-year notes. US Treasury yields dropped, with the 10-year testing levels below 4.0% and the 2-year at 4.75%. Attention is focused on the July CPI report, to be released on Thursday.

Federal Reserve's Harker affirmed on Tuesday that he believes the central bank may be at a point where it can be patient and hold rates steady. He added that "sometime probably next year, we'll start cutting interest rates."

Following the negative trade data surprise, China will report July inflation on Wednesday. The Consumer Price Index is expected to decline 0.4% from a year earlier, and the Producer Price Index is forecast to fall to 4.1%.

The announcement of Italy's bank tax weighed on the Euro. The EUR/USD reached a bottom at 1.0927 and then rebounded, rising towards 1.0960, but the overall bias remains bearish.

GBP/USD trimmed losses during the American session, rising from below 1.2700 to 1.2750. Key UK GDP data is due on Friday.

USD/JPY rose despite lower government bond yields and risk aversion, reflecting a stronger US Dollar. The pair advanced for the second consecutive day, climbing back above 143.00. Japan will report Machine Tool Orders for July.

USD/CAD jumped, reaching levels above 1.3500, but then pulled back, approaching 1.3400. Canada will report June Building Permits.

Chinese growth concerns weighed on the Aussie and the Kiwi. NZD/USD reached a bottom at 0.6033, the lowest level in two months, and then rebounded to 0.6060. Earlier on Wednesday, Electronic Car Sales for July are due in New Zealand. Later in the day, the Reserve Bank of New Zealand will release its inflation expectations report.

AUD/USD fell to the lowest level in two months below 0.6500, and then, as the US Dollar weakened, it rose to 0.6550.

USD/MXN spiked to 19.28 and then pulled back toward 17.05, erasing gains as the Mexican Peso remains resilient. Mexico will report inflation on Wednesday.

It was a volatile session for crude oil prices. After a sharp decline during the Asian and European sessions, amid risk aversion, with WTI falling below $80.00, it rebounded and climbed back to the $83.00 area following an announcement from Saudi Arabia that it will continue boosting precautionary efforts to support the stability of the oil market.

Gold posted its lowest close in a month at $1,924 as it remains under pressure despite falling US yields. Silver continues to decline and broke below $23.00.

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