Here's What You Need to Know on Tuesday, January 21:

After falling sharply on the first trading day of the week, the US Dollar Index (USD) benefited from deteriorating risk sentiment and gathered bullish momentum on Tuesday (1/21). The European economic docket will feature the ZEW Survey data – Economic Sentiment for Germany and the Eurozone. Later in the day, December Consumer Price Index (CPI) data from Canada will be closely watched by investors.

During the early trading hours of the American session on Monday, reports of US President Donald Trump refraining from announcing first-day tariffs at his inauguration ceremony put the USD under selling pressure. Later in the day, Trump said they could impose tariffs on China if they make a TikTok deal and China doesn't agree to it. Additionally, he noted that they are thinking of imposing 25% tariffs on imports from Mexico and Canada, which sparked a USD rally during Asian trading hours on Tuesday.

The UK Office for National Statistics reported on Tuesday that the ILO Unemployment Rate edged up to 4.4% in the three months to November from 4.3%. Other details of the jobs report showed that Employment Change was +35K in the same period. Lastly, wage inflation, as measured by the change in Average Earnings Including Bonuses, rose to 5.6% from 5.2%, as expected. GBP/USD showed no immediate reaction to these figures and was last seen trading in negative territory below 1.2300.

After losing more than 1% on Monday, USD/CAD reversed its course and touched its highest level since March 2020 above 1.4500 in the Asian session on Tuesday before correcting lower towards 1.4450. On a yearly basis, the CPI in Canada is expected to rise by 1.8% in December, down slightly from the 1.9% increase recorded in November. (AL)

Source: FXstreet