Forex Today: Central bank speeches could drive the action ahead of US inflation

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

The US Dollar (USD) gathered strength against its rivals on Tuesday as markets turned cautious ahead of Thursday's highly anticipated inflation data. Early Wednesday, major currency pairs stay relatively calm. Comments from central bankers and the 10-year US Treasury note auction later in the day could impact currencies' valuations.

Wall Street's main indexes opened in negative territory on Tuesday. Escalating geopolitical tensions in the Middle East caused investors to stay away from risk-sensitive assets. Citing a senior US Defense Department official, CNBC News reported late Tuesday that Iran-backed Houthi militants launched the largest attack to date on commercial merchant vessels in the Red Sea. Although stock indices managed to erase a portion of earlier losses toward the end of the session, US stock index futures trade modestly lower in the European morning on Wednesday. Meanwhile, the benchmark 10-year US Treasury bond yield holds steady slightly above 4% and the USD Index stays above 102.50. New York Federal Reserve (Fed) President John Williams, who said back in December that they were not discussing rate cuts, will be delivering a speech in the late American session.

The data from Australia showed early Wednesday that the Consumer Price Index (CPI) rose 4.3% on a yearly basis in November. This reading followed the 4.9% increase recorded in October and came in a tad below the market expectation of 4.4%. After closing deep in negative territory, AUD/USD edged slightly higher during the Asian trading hours and was last seen trading at around 0.6700.

GBP/USD lost its traction after rising above 1.2750 on Tuesday and registered daily losses. The pair stays on the back foot and trades below 1.2700 in the early European session on Wednesday. Bank of England Governor Andrew Bailey will testify later in the day and respond to questions about the threat to financial stability posed by interest rate hikes. 

EUR/USD edged lower on Tuesday after failing to make a decisive move on Monday. The pair was last seen trading below 1.0950. European Central Bank (ECB) Vice-President Luis de Guindos is scheduled to deliver a speech during the European trading hours on Wednesday.

Following Tuesday's choppy action, USD/JPY gathered bullish momentum and climbed above 145.00 on Wednesday. The data from Japan revealed earlier in the day that Labor Cash Earnings rose by only 0.2% on a yearly basis in November. This reading followed the 1.5% increase recorded in October and missed the market expectation of 1.5% by a wide margin.

Gold reversed its direction after climbing above $2,040 and closed the day virtually unchanged. XAU/USD stays under modest bearish pressure and trades in the red slightly above $2,020 early Wednesday.