Forex Today: Crucial US inflation data to lift market volatility
Here is what you need to know on Wednesday, August 12:
Wednesday, August 12 saw major currency pairs trade within their typical ranges as investors refrained from significant positions ahead of the U.S. Consumer Price Index (CPI) data. The US dollar emerged as the strongest currency, outperforming the Japanese Yen. The market remained cautious, allowing the U.S. dollar to hold its ground against other major currencies.
Early Wednesday, the USD Index showed a marginal gain but stayed below the 100.00 level. U.S. stock index futures remained virtually unchanged after the Dow Jones and S&P 500 both closed in the red on Tuesday. Analysts from OCBC suggest that a meaningful shift in the Federal Reserve's policy outlook remains uncertain until the core CPI exceeds 0.3% month-over-month or higher than the 0.2% forecast.
Despite ongoing volatility in oil markets, the combination of a rangebound USD and a constructive risk backdrop should continue to support carry trades. Oil prices experienced a slight drop as hopes grew that the Strait of Hormuz could reopen, yet Iran's stringent conditions for Washington imply that near-term gains in energy supply are probable to be limited, dampening expectations of a swift improvement in the energy outlook.
President Donald Trump claimed that the situation with Iran was "going fine" and that U.S. forces had full control over the Strait of Hormuz. However, CNN refuted Trump's statement, pointing out that only eight vessels passed through the waterway on Tuesday, compared to an average of 120 before the conflict. The U.S. Energy Information Administration revised its crude oil price forecasts, anticipating that the barrel of West Texas Intermediate (WTI) would average $80.88 in 2026, down from the previous estimate of $76.26.
Commerzbank analysts note that the Strait of Hormuz remains a source of uncertainty, with conflicting signals suggesting that while talks are ongoing, a deal to restore normal shipping through the strait hasn't yet materialized. They add that lower energy prices in July should help ease headline inflation, but caution that the subsequent rise in oil prices may again exert upward pressure on inflation in the coming months.
EUR/USD continued to fluctuate around 1.1550, having closed almost unchanged on Tuesday. Germany's Destatis reported that July's annual CPI inflation had reached 2.8%. GBP/USD maintained a stable position around 1.3500 after failing to make a significant move either way on Tuesday. AUD/USD showed minimal gains following the Reserve Bank of Australia's (RBA) policy announcement, currently sitting at around 0.7050 in the European morning.
Gold (XAU/USD) experienced a reversal of its previous upward trend after reaching its highest level in two months above $4,430 on Tuesday and ended the day with a slight loss. XAU/USD regained momentum in the European session and moved towards $4,400.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — it may contain errors, so check the original before relying on it.
