Forex Today: PMI data and BoC policy announcements to ramp up volatility

Here is what you need to know on Wednesday, January 24:

Following Tuesday's choppy action, financial markets remain relatively quiet early Wednesday. S&P Global will release the Manufacturing and Services PMI reports for Germany, the Euro area, the UK and the US later in the day. In the American trading hours, the Bank of Canada (BoC) will announce monetary policy decisions.

The US Dollar came under bearish pressure early Tuesday, with the USD Index (DXY) falling below 103.00 for the first time in a week in the European session. The negative shift seen in risk mood, as reflected by the bearish opening in Wall Street, helped DXY gain traction in the second half of the day. A late rally in technology stocks, however, limited the USD's gains. Early Wednesday, the benchmark 10-year US Treasury bond yield continues to move sideways above 4% and US stock index futures trade modestly higher on the day.

The BoC is widely expected to leave its policy rate unchanged at 5% following the January policy meeting. Governor Tiff Macklem will comment on the policy outlook and respond to questions at a press conference starting at 15:30 GMT. Following Monday's upsurge, USD/CAD encountered resistance at around 1.3500 and closed in negative territory on Tuesday. The pair holds steady at around 1.3450 in the European morning.

EUR/USD climbed above 1.0900 in the European session on Tuesday but reversed its direction in the second half of the day and touched its weakest level in over a month near 1.0820. The pair staged a technical correction during the Asian trading hours and was last seen fluctuating in a tight channel above 1.0850.

After coming within a touching distance of 1.2750, GBP/USD turned south and registered marginal losses on Tuesday. Early Wednesday, the pair holds above 1.2700.

The data from Australia showed that the Judo Bank Composite PMI improved to 48.1 in January from 46.9 in December. AUD/USD ignored this data and was last seen moving sideways below 0.6600.

The Consumer Price Index in New Zealand rose 4.7% on a yearly basis in the fourth quarter, following the 5.6% increase recorded in the previous quarter. This reading matched the market expectation and failed to trigger a noticeable reaction. At the time of press, NZD/USD was virtually unchanged on the day near 0.6100.

Following a sharp decline seen in the early European session on Tuesday, USD/JPY turned north and erased its daily gains. The pair struggled to preserve its bullish momentum and retreated below 148.00 early Wednesday. 

For the fourth consecutive trading day, Gold failed to make a decisive move in either direction on Tuesday. In the European morning, XAU/USD continues to move up and down in a narrow band above $2,020.