Forex Today: US Dollar consolidates losses ahead of mid-tier data

Here is what you need to know on Wednesday, February 7:

The US Dollar (USD) struggles to gain traction early Wednesday, with the USD Index (DXY) holding steady slightly above 104.00 after snapping a two-day winning streak on Tuesday. Goods Trade Balance for December will be featured in the US economic docket and the US Treasury will hold a 10-year note auction later in the day. Several Federal Reserve policymakers are scheduled to speak during the American trading hours as well.

The USD weakened against its rivals on Tuesday amid retreating T-bond yields and a positive shift seen in risk mood. In the European morning, US stock index futures trade virtually unchanged and the 10-year yield fluctuates in a tight channel at around 4.1%. 

During the Asian trading hours, the data from New Zealand showed that the Unemployment Rate ticked up to 4% in the fourth quarter from 3.9% in the third quarter. This reading came in below the market expectation of 4.2%. In the same period, the Labor Cost Index was up 3.9% on a yearly basis. NZD/USD edged higher after the labor market data and was last seen trading modestly higher on the day above 0.6100.

The Leading Economic Index in Japan improved to 100 in December's flash estimate from 108.1, while the Coincident Index rose to 116.2 from 114.6. After falling 0.5% on Tuesday, USD/JPY showed no reaction to these figures and was last seen moving sideways slightly below 148.00.

USD/CAD turned south and closed below 1.3500 on Tuesday. The pair stays under modest bearish pressure early Wednesday. Bank of Canada (BoC) Governor Tiff Macklem reaffirmed that the BoC is done with rate hikes, stating that 5% is largely viewed as the level the BoC thinks is necessary to continue draining momentum out of inflation. He added that the policy discussion is shifting from whether or not policy is restrictive enough to how long it should remain restrictive.

EUR/USD extended its recovery toward 1.0800 early Wednesday after posting marginal gains on Tuesday. The data from Germany showed that Industrial Production contracted by 1.6% on a monthly basis in December.

GBP/USD trades in positive territory above 1.2600 in the European morning. On Tuesday, the pair rose 0.5% and erased a large portion of Monday's losses.

Gold benefited from falling US yields and rose toward $2,040 on Tuesday. Early Wednesday, XAU/USD moves up and down in a narrow band near $2,035.