Here is what you need to know on Wednesday, December 15:
The greenback regathered its strength after the data from the US showed on Tuesday that producer prices rose by 9.6% on a yearly basis in November, marking the largest increase in more than a decade. As investors get ready for the Federal Reserve to announce its policy decision following the two-day meeting, markets stay relatively quiet early Wednesday. November Retail Sales data will also be featured in the American economic docket alongside the Consumer Price Index (CPI) figures from Canada.
US Retail Sales November Preview: The Fed looks to the consumer.
The Fed is widely expected to accelerate the tapering of its bond purchases amid heightened concerns over inflation remaining persistently high in the US. The Fed will also release the Summary of Economic Projections, the so-called dot plot, and reveal how policymakers see the timing of the first rate increase.
The benchmark 10-year US Treasury bond yield, which fell more than 4% on Monday, closed in the positive territory on Tuesday but stays below 1.5% early Wednesday. Wall Street's main indexes fell sharply for the second straight day to reflect a cautious market mood. A hawkish policy outlook could lift yields and provide a boost to the greenback in the second half of the day. In the meantime, the US House voted 221-209 to pass a $2.5 trillion increase in federal debt limit but this development doesn't seem to be having a significant impact on risk perception for the time being.
Fed Preview: Dollar hinges on 2022 rate hike dots, guide to trading the grand finale of 2021.
EUR/USD staged a rebound and rose above 1.1300 in the first half of the day on Tuesday but lost its traction in the American session with the dollar capitalizing on risk-off flows and hawkish Fed expectations. The pair is consolidating its losses around 1.1270 and is likely to extend its sideways grind ahead of the Fed's policy announcements.
Gold suffered heavy losses and dropped toward $1,770, the lower limit of its two-week-old trading range, amid rising US T-bond yields. XAU/USD seems to have gone into a consolidation phase around that level.
Fed December Preview: Gold stays vulnerable as Fed looks to battle inflation.
GBP/USD is clinging to small daily gains around 1.3250. The UK's Office for National Statistics reported on Wednesday that annual inflation, as measured by the Consumer Price Index (CPI), jumped to 5.1% in November from 4.2% in October.
USD/JPY continues to have a difficult time making a decisive move in either direction and stays relatively quiet above 113.50.
Bitcoin gained more than 3% on Tuesday but seems to have lost its bullish momentum before testing $50,000. Ethereum trades flat below $4,000 after staging a modest rebound on Tuesday.
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