The dollar is mixed ahead of the weekend as the CPI-led rally has faded. Earlier in the day, the USD index peaked just above the 96.00 figure to settle around 95.75 in recent trading. However, the bearish potential surrounding the safe-haven greenback looks limited for the time being as US stock index futures point to more losses during the upcoming North American session as investors continue to digest higher-than-expected inflation data out of the United States.
Furthermore, the yield on the benchmark United States 10-Year Treasury note rose above the 2% figure for the first time since mid-2019, adding to the dollar’s broader bullishness. As such, EUR/USD bounced from one-week lows seen around 1.1370 earlier in the day to regain the 1.1400 figure. However, the common currency looks too fragile for the time being, and the pair is yet to confirm recovery on a daily and weekly closing basis as dollar demand could reemerge at any point while risk sentiment stays downbeat.
Previously, the euro’s ascent was capped by the 1.1500 barrier last seen three months ago. It looks like EUR/USD would stay below this region in the near term, with bearish risks persisting both in the medium term, especially as money markets now reflect an 80% change for a 0.5% Fed rate hike in March. In Europe, the Stoxx Europe 600 index slipped 0.7% after higher-than-expected inflation coupled with hawkish remarks from the Fed reinforced expectations of more aggressive interest rate hikes.
Risk sentiment was further dampened after Germany's Chambers of Industry and Commerce cut its 2022 growth forecast to 3.0% from 3.6% previously in October, citing rising energy prices, raw material shortages, and lack of skilled workers. On the positive side, German chancellor Olaf Scholz said the country to lift some restrictions next week as the COVID-19 peak is in sight. Elsewhere, gold prices struggle for direction around $1,830 after a bounce from the 20-DMA earlier in the day.
The precious metal had to give up a part of recent gains amid the rallying dollar but still looks relatively steady at this point, finishing the week with solid gains despite the recent sell-off from the $1,841 zone. In a wider picture, the downside potential is limited as long as the bullion stays above the $1,800 psychological level.