The Dollar Index stabilized near the 96 point level on Tuesday, with the EUR/USD major currency pair still trading around 1.1330. Investors appear to be awaiting key US inflation data to guide the outlook for monetary policy.
Markets can also expect further hawkish commentary from Federal Reserve Chairman Jerome Powell, who will testify before the Senate, as well as other Fed officials who are expected to speak at separate events.
Goldman Sachs sees four rate hikes
Core U.S. CPI inflation, due for release on Wednesday, is expected to have risen to 5.4 percent in December from 4.9 percent the previous month.
Yields on 10-year U.S. bonds on Monday were at their highest in nearly two years, above the 1.8 percent level. This may be due to rising expectations of aggressive policy tightening by the U.S. central bank. Goldman Sachs expects the Fed to raise rates four times this year and begin reducing its balance sheet as early as July.
A downbeat start to January for bitcoin
The rise in U.S. bond yields may affect the valuation of traditional assets, such as gold, and riskier ones, such as stocks and cryptocurrencies. An ounce of gold costs around $1,800, and inflation data could affect the price of bullion, which provides a hedge against rising prices in the economy.
In the cryptocurrency market, bitcoin is trying to defend the $40,000 level after a sudden drop below that barrier and an equally quick comeback. Since the beginning of January, BTC seems to have lost more than 11 percent of its value, while since the November peak in the region of USD 69,000, the scale of decline is already more than 40 percent.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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