Forex Today: Dollar sell-off loses steam ahead of EU inflation, ADP employment data

Here is what you need to know on Wednesday, February 2:

The greenback continued to weaken against its rivals on Tuesday and the US Dollar Index (DXY) erased a large portion of the previous week's gains. The risk-positive market environment made it difficult for the dollar to find demand and the benchmark 10-year US Treasury bond yield returned below 1.8% to weigh further on the currency. Early Wednesday, the DXY seems to have gone into a consolidation phase above 96.00. Markets await January Consumer Price Index (CPI) data from the euro area and the ADP's private-sector employment report for the US ahead of Thursday's highly anticipated central bank meetings.

After rising nearly 2% on Monday, the S&P 500 Index opened modestly on Tuesday but ended up closing the day in the positive territory. Early Wednesday, US stock index futures are up between 0.1% and 0.35%.

EUR/USD stays relatively quiet below 1.1300 heading into the European session. CPI in the euro area is forecast to decline to 4.4% on a yearly basis from 5% in December. A soft inflation print could cause the shared currency to lose interest.

GBP/USD is fluctuating in a tight range above 1.3500. The market expectation is for the Bank of England to raise its policy rate by 25 basis points on Thursday.

USD/JPY fell for the third straight trading day on Tuesday pressured by retreating US Treasury bond yields. The pair was last seen moving sideways at aroun115.00.

NZD/USD lost its bullish momentum following the mixed jobs report and was last seen trading flat on the day near 0.6630. The Unemployment Rate in New Zealand declined to 3.2% in the fourth quarter from 3.4%. On a negative note, Employment Change arrived at +0.1% in Q4, falling short of the market expectation of 0.3%.

Gold rose toward $1,810 on Tuesday but gave back the majority of its daily gains before closing near $1,800. The yellow metal is trading in the negative territory early Wednesday.

Bitcoin extended its rebound on Tuesday but seems to have lost its bullish momentum before testing $40,000. Ethereum closed the last two trading days in the green and gained nearly 7% during that period before going into a consolidation phase at around  $2,700.