Forex Today: Biggest US dollar rally since 2020

Here is what you need to know for the day ahead, Wednesday, September 14:

The US dollar soared on Tuesday on the back of data released by the Labor Department that reported on US Consumer Prices that unexpectedly rose in August. The dollar index DXY, which measures the greenback against a basket of currencies was up 1.5% at 109.85 in its biggest one-day percentage gain since March 2020. However, the US dollar remains below last week's two-decade peak of 110.79.

The yield on the US 10-year Treasury note rallied to 3.412%, while the yield on the 2-year note is now at 3.76% after stronger-than-expected US inflation data boosted investor bets that the Federal Reserve will need to stay aggressive in raising interest rates. The market is pricing in a third straight 75 basis points hike that would lift the Fed's current 2.25% to 2.5% policy rate range to 3% to 3.25%. However, rate contracts now also reflect about one-in-four odds of a surprise full-percentage-point increase at the Sept. 20-21 meeting. 

The single currency fell to a low of 0.9966 after hitting a nearly one-month high of 1.0198 in the previous session to the greenback on the back of hawkish talk from the European Central Bank.

GBP/USD rose to a two-week high after the British jobless rate dropped to its lowest level since 1974, while wages excluding bonuses rose by 5.2%, the highest rate since the three months to August 2021, but the US data whipsawed the price to a low of 1.1490 from 1.1715 the high.

The AUD/USD dropped more than 2%. USD/JPY rallied to a high of 144.68 putting it back on track for a fresh bull cycle high if the bulls stay the course for the day ahead. 

In cryptocurrencies, bitcoin, BTCUSD, was losing a whopping 12% $20,058.00 in an exaggerated reaction to the bearish price action in the general markets, which saw the S&P 500 dive about 4%.