Forex Today: US data to challenge the reign of the Dollar

The key report next week will be the US CPI. China's inflation data is also due. The UK will report GDP and employment. Regarding central banks, the European Central Bank will announce its decision. The US will also release other reports that could challenge the rally of the US Dollar.

Here is what you need to know for next week: 

The US Dollar Index has risen for the eighth consecutive week, reaching its highest close since February above 105.00. Economic data from the US, as well as divergences in outlook compared to Europe and the Eurozone, continue to support the strength of the US Dollar.

Next week, on Wednesday, the US Consumer Price Index (CPI) will be released. More inflation data, including the Producer Price Index (PPI) are due on Thursday. Additionally, Retail Sales and Jobless Claims are also on the docket. These numbers will represent an important challenge for the Dollar's rally. Evidence of a pronounced slowdown in economic activity and low inflation could make it difficult for the Dollar to extend its positive streak. Conversely, a rebound in inflation would provide further fuel to the rally.

On Saturday, China will release inflation data, which will be closely watched by the markets. The ongoing economic slowdown in China continues to be a negative factor for risk sentiment. Additionally, G20 meetings kick off during the weekend.

EUR/USD posted another week of losses and closed near the 1.0700 area, the lowest level in months. Apart from a strong Dollar, the Euro was affected by dampened expectations regarding the European Central Bank (ECB) and its monetary policy. The ECB will have its monetary policy meeting on Thursday, and it is unclear whether the central bank will raise interest rates further.

After a rebound, GBP/USD resumed its downside movement and fell below 1.2500, reaching its lowest level since June. The Pound erased previous weekly gains following dovish comments from Bank of England (BoE) officials. The UK will report employment data on Tuesday and GDP data on Wednesday.

USD/JPY posted the second-highest weekly close in decades, just below 148.00. The divergence between the Bank of Japan and the Federal Reserve continues to support the upside. Current levels may warrant more verbal intervention from Japanese authorities.

AUD/USD dropped to its lowest level in months, falling below 0.6400. The Aussie remains under pressure amid lower commodity prices and concerns about the Chinese economy. Australia will report employment data on Thursday.

USD/CAD resumed its upside movement after a pause last week. It approached 1.3700 but lost momentum. Positive employment data from Canada on Friday boosted the Loonie. The bias remains to the upside.

Metals experienced sharp declines, but Gold managed to remain above $1,900, while Silver fell below $23.00, approaching a key medium-term support level at $22.50.