FOREX TODAY: DEMAND FOR THE US DOLLAR IS HIGH AS INFLATION AND GEOPOLITICS TAKE CENTER STAGE

What you should be aware of on Tuesday, January 16 is as follows:

As investors evaluate the timing and volume of US Federal Reserve (Fed) in the context of the intensifying geopolitical unrest in the Middle East, risk aversion continues to be the dominant underlying theme thus far on Tuesday.

According to the CME Group's FedWatch Tool, markets are still pricing in a 25 in March, up from 63% one week earlier. After expecting cuts of 140 last week, traders are now forecasting cuts of 160 this year.

Fed Governor Christopher Waller's on Wednesday at 16:00 GMT, said aggressive wagers are in place. Waller announced a dovish policy reversal towards the end, which caused stocks to rise at the US Dollar's expense (USD).

Iran's Islamic Revolutionary Guard Corps (IRGC) launched missiles against sites close to the US Consulate in Erbil, Iraq, raising eyebrows on the geopolitical scene. Iranians responded to this month's terrorist strikes near General Qassem Soleimani's grave. Iran-backed Houthi rebels have attacked a US-owned cargo vessel off the coast of Yemen with an anti-ship ballistic Red Sea tension.

This comes after a Houthi rebel-fired anti-ship cruise missile was intercepted and destroyed by US fighter aircraft in Yemen en route to the USS Laboon destroyer in the Red Sea. Hossein Amir-Abdollahian, the foreign minister of Iran, denounces recent strikes on the Houthi and a breach of international law and issues a warning to the United States and Great Britain to swiftly end the Yemen war.

Ahead of the top-tier GDP report, markets are still tense, retreating into the US dollar for protection. After winning the Iowa Caucuses, Donald Trump cemented his lead in the Republican nomination.

Meanwhile, the US Dollar Index is up 0.51% at 103.00 at the time of publication, while the US S&P 500 futures, down 0.33% on the day.

The current US dollar price

The US dollar's (USD) percentage change compared to a list of major currencies is displayed in the table below. When compared to the Australian dollar, the US dollar was the strongest.

The major currencies' percentage movements relative to one another are displayed on the heat map. The quotation currency is selected from the top row, and the base currency is selected from the left column. For example, the percentage change shown in the box will indicate EUR (base)/JPY (quote) if you select the Euro from the left column and proceed along the horizontal line to the Japanese Yen.

Because of the risk-averse market conditions, the Antipodeans are the primary laggards in FX. While the NZD/USD has lost almost half a percent to trade at about 0.6170, the AUD/USD is sharply declining to approximately 0.6600. Regional mood data was ignored by risk-sensitive currencies.

The USD/JPY continues its recent positive trend over 146.00, following the increase in the rates on US Treasury bonds.

Despite the most recent hawkish chorus from the policymakers of the European Central Bank (ECB), EUR/USD is still in the negative below 1.0950. As anticipated, Germany's preliminary Real GDP for 2023 shrank by 0.3% annually. The spotlight shifts to Germany's ZEW sentiment survey next.

As we anticipate the important UK labor market report, the GBP/USD pair is losing momentum below 1.2700. The wage inflation figures will be the center of attention prior to the CPI release on Wednesday.

Regarding 1.3480, USD/CAD is maintaining its higher position as the WTI oil price surge fades. The Red Sea's geopolitical developments will keep people's attention. The Canadian CPI report will be eagerly examined by CAD traders as well.

Due to pressure from rising US Treasury bond yields and resurgent US Dollar demand, the price of gold is holding close to its lows around $2,050. At 4.003%, the yield on the benchmark 10-year US Treasury bond is 1.40% higher today.