Forex Today: Markets await US inflation data, BoC rate decision

Here is what you need to know on Wednesday, June 10:

Financial markets stay relatively quiet early Wednesday as investors gear up for key events. Later in the day, the US Bureau of Labor Statistics (BLS) will publish the Consumer Price Index (CPI) data for May. Additionally, the Bank of Canada (BoC) will announce monetary policy decisions.

Following the rally seen in the previous week, the US Dollar (USD) Index registered marginal losses both on Monday and Tuesday. In the European morning on Wednesday, the USD Index stays below 100.00, while US stock index futures lose between 0.15% and 0.5% on the day, reflecting a cautious market stance. On a yearly basis, the annual CPI inflation in the US is forecast to rise to 4.2% in May from 3.8% in April.

In the meantime, tensions in the Middle East remain high. The US Central Command said late Tuesday it launched retaliatory strikes against Iran following the downing of an American helicopter earlier in the week. According to Axios, the US military is targeting Iranian air defence and radar systems in south of Iran.

Iran's Islamic Revolutionary Guard Corps (IRGC) announced that they are ready for a decisive response to any further US attacks and said that they targeted Ali Al Salem Air Base in Kuwait with drones. Citing a US official, Reuters reported that the US struck nearly 20 targets and nearly all missiles and drones launched by Iran were intercepted.

During the Asian trading hours, the data from China showed that the annual CPI inflation held steady at 1.2% in May. However, the Producer Price Index (PPI) rose by 3.9% on a yearly basis, up sharply from the 2.8% increase recorded in April. After posting small losses on Tuesday, AUD/USD fluctuates in a tight range at around 0.7020 in the European morning on Wednesday.

USD/CAD touched its highest level in six months near 1.3970 on Tuesday but corrected lower to close the day flat. The pair trades in a narrow band below 1.3950 early Wednesday. The BoC is widely expected to keep the policy rate unchanged at 2.25% after the June policy meeting but investors will pay close attention to the language of the policy statement, especially around the inflation outlook and the potential for policy tightening in the near future.

Gold remains under bearish pressure after losing more than 1% on Tuesday and trades at its lowest level since late March at around $4,200.

EUR/USD holds its ground and trades near 1.1550 after registering small gains on Tuesday. On Thursday, the European Central Bank (ECB) will announce monetary policy decisions.

Following Tuesday's modest rebound, GBP/USD continues to inch higher early Wednesday and trades near 1.3400.

USD/JPY continues to move sideways above 160.00 in the European session on Wednesday. The data from Japan showed that the PPI rose 6.3% on a yearly basis in May, surpassing the 5.3% increase seen in April and the market expectation of 5.5%.