Weakening dollar shakes the markets ahead of PPI data and jobless claims

On Thursday, the dollar suffered losses and was trading below key support levels as US inflation was not hotter than expected in December, prompting investors to cut long positions.

Amidst the rising tide of inflation in the markets, the US CPI report for December was highly expected. The headline reading of 7.0% y/y met market estimates, while the core reading of 5.5% exceeded expectations. While inflation hit 40-year highs, the data has actually been welcomed by investors who were expecting worse.

In the wake of US hot-red inflation data, stocks in Europe are likely to begin Thursday flat to lower as global markets falter.

Policymakers at the European Central Bank (ECB) have concluded that the inflation peak in Europe is approaching. While in the Eurozone, Industrial Production jumped 2.3% month-on-month in November, versus 0.5% forecasts and -1.3% revised earlier.

Markets at a glance

The EUR/USD spiked sharply after a weaker dollar caused it to break above 1.1400. EUR/USD is on the verge of retaking mid-November highs at 1.14555. Overstepping this hurdle can lead to a higher resistance area around 1.14990. If bullish momentum intensifies, the price can then move to 1.15693 in the vicinity of the 200-day exponential moving average.

GBP/USD continues to rise after crossing the 200-day EMA. The pair continues to push higher in the early European session and holds comfortably above 1.3700.

The USD/JPY pair fell to 114.50 area on Thursday, but the benchmark 10-year US Treasury bond yield is posting modest gains around 1.75 percent, thus limiting the pair's losses.

In addition to breaking above $1,800 earlier this week, gold registered impressive gains on Tuesday and continues to advance on Wednesday. XAU/USD is trading sideways above $1,820 early on Thursday.

Bitcoin gained more than 2% during two consecutive positive days, but its bullish momentum seems to have waned near $44,000.

Event of the day

The recent escalation in Fed policymakers' pressure is causing bond yields to consolidate their previous losses, which in turn challenge equity futures and riskier assets. On Thursday, however, a few policymakers, including those from the European Central Bank (ECB) and the Federal Reserve, will speak.

Aside from monetary policy signals, the December producer price index, another measure of inflation is then set to come out on Thursday. Investors also wait for weekly jobless claims, and the European Economic Bulletin will also have an impact on short-term movements in the pair.