Forex Today: US Dollar selloff pauses ahead of producer inflation data

Here is what you need to know on Friday, July 12:

The US Dollar (USD) suffered large losses against its major rivals on Thursday following June inflation data. After dropping to its weakest level in over a month near 104.00, the USD Index staged a rebound in the late American session and entered a consolidation phase at around 104.50 early Friday. The US economic calendar will feature Producer Price Index (PPI) data for June and the University of Michigan's preliminary Consumer Sentiment Index for July.

The US Bureau of Labor Statistics announced on Thursday that annual inflation in the US, as measured by the change in the Consumer Price Index, softened to 3% in June from 3.3% in May. On a monthly basis, the CPI declined by 0.1%. The core CPI, which excludes volatile food and energy prices, rose 3.3% on a yearly basis following the 3.4% increase recorded in May. Following these readings, the USD came under heavy selling pressure. The negative shift seen in risk mood later in the day, however, helped the currency erase some of its losses. US stock index futures trade mixed in the European session, while the benchmark 10-year US Treasury bond yield holds steady at around 4.2% after losing nearly 2% on Thursday.

EUR/USD gathered bullish momentum and tested 1.0900 during the American trading hours on Thursday. After meeting resistance at this level, the pair corrected lower but managed to stabilize above 1.0850. At the time of press, EUR/USD was moving sideways at around 1.0870.

GBP/USD extended its weekly rally and reached its highest level in nearly a year near 1.2950 on Thursday. The pair stays in a consolidation phase above 1.2900 in the European morning on Friday.

USD/JPY declined sharply after the US inflation data and lost nearly 2% on a daily basis. The severity of the pair's decline caused markets to wonder whether there was an intervention. Early Friday, USD/JPY holds steady above 159.00.

Gold benefited from falling US Treasury bond yields and the broad-based USD weakness on Thursday, reaching its highest level since late May above $2,420. XAU/USD edges lower early Friday but holds above $2,400.