Forex Today: US Dollar retreats ahead of key US inflation data

Here is what you need to know on Thursday, August 10:

The US Dollar struggles to find demand early Thursday as investors remain on the sidelines while waiting for the all-important Consumer Price Index (CPI) data from the US. The US Dollar Index stays in negative territory below 102.50 after posting small daily losses on Wednesday. The US economic docket will also feature the weekly Initial Jobless Claims report and several Federal Reserve (Fed) policymakers will be speaking later in the day. 

US CPI Data Preview: Core inflation expected to stick close to 5%.

The annual CPI in the US is forecast to rise 3.3% in July, at a slightly stronger pace than the 3% increase recorded in June. Ahead of the inflation data, the CME Group FedWatch Tool shows that markets are pricing in a more than 25% probability of the Fed raising the policy rate one more time this year.

Meanwhile, the benchmark 10-year US Treasury bond yield holds steady at around 4% and US stock index futures trade in positive territory despite concerns over escalating US-China tensions. US President Joe Biden signed the bill late Wednesday that will restrict US investments in certain Chinese entities. In response, "we hope that the US side will respect the laws of market economy and the principle of fair competition, refrain from artificially impeding global economic and trade exchanges and cooperation, as well as setting obstacles for the recovery of world economic growth," said a spokesperson for China's Commerce Ministry.

EUR/USD continues to inch higher toward 1.1000 after registering small daily gains on Wednesday. The European Central Bank's (ECB) monthly Economic Bulletin is expected to be released later in the day.

GBP/USD closed in the red for the second straight day on Wednesday but managed to hold above 1.2800. The pair trades in a narrow channel early Thursday. The UK's Office for National Statistics will release second-quarter Gross Domestic Product (GDP) figures on Friday.

USD/JPY continued to stretch higher and touched its strongest level in a month near 144.00 on Thursday. The data from Japan showed earlier in the day that the Producer Price Index (PPI) rose 3.6% on a yearly basis in July, down from 4.1% in June but slightly higher than the market expectation of 3.5%.

Gold price extended its weekly slide and dropped below $1,920 for the first time since July 11 on Wednesday. XAU/USD stays relatively quiet early Thursday and fluctuates slightly below that level.

Following Tuesday's failed attempt to break above $30,000, Bitcoin edged lower on Wednesday. At the time of press, BTC/USD was moving sideways at around $29,500. Ethereum holds steady at around $1,850 after closing the day virtually unchanged on Wednesday.