Forex Today: US inflation data, Trump tariff talks to drive market action

Here is what you need to know on Wednesday, February 12:

Major currency pairs continue to fluctuate in relatively tight weekly ranges as investors gear up for the next key macroeconomic events. The US Bureau of Labor Statistics will release the Consumer price Index (CPI) data for January later in the day and Federal Reserve (Fed) Chairman Jerome Powell will testify before the House Financial Services Committee. 

Investors will also keep a close eye on fresh developments surrounding US President Donald Trump's trade policy. When asked if reciprocal tariffs will be announced on Wednesday, "we'll see" Trump responded while speaking to reporters late Tuesday. 

On the first day of his testimony before the Senate Banking Committee on Tuesday, Powell reiterated that they do not need to be in a hurry to adjust the monetary policy. "The US is economy strong overall; inflation is closer to 2% goal but still somewhat elevated," he noted in his prepared remarks. Powell is likely to read the same statement later today before responding to questions from lawmakers. After edging higher on Monday, the US Dollar (USD) Index lost its traction and closed in the negative territory on Tuesday. Early Wednesday, the index holds steady at around 108.00. Meanwhile, US stock index futures trade flat following the mixed action seen in Wall Street on Tuesday.

EUR/USD benefited from the renewed USD weakness in the American session and gained more than 0.5% on Tuesday. The pair holds steady above 1.0350 in the European morning on Wednesday.

GBP/USD staged a rebound and snapped a three-day losing streak on Tuesday. The pair trades in a narrow channel at around 1.2450 to begin the European session.

US President Donald's trade adviser Peter Navarro said late Tuesday that Australia was "killing the aluminum market," the day after Australian Prime Minister Anthony Albanese said that Trump had agreed to consider an exemption for Australia over steel and aluminum tariffs. This headline failed to trigger a noticeable reaction in AUD/USD. At the time of press, the pair was trading marginally lower on the day, slightly below 0.6300.

USD/JPY gathers bullish momentum early Wednesday and builds on its weekly gains, rising nearly 0.7% at around 153.50. Bank of Japan Governor Kazuo Ueda said early Wednesday that the Japanese central bank will continue to conduct its monetary policy with the aim of achieving its 2% inflation goal sustainably and stably.

Gold staged a deep correction from the record-high it set above $2,940 early Tuesday and closed the day in the red below $2,900. XAU/USD struggles to regain its traction and trades at around $2,890 early Wednesday.