The US Dollar is dropping ahead of the US inflation numbers, which will be released later this morning. The weakness throughout the day could reflect traders’ expectations for another substantial downturn in US inflation. Still, it is uncertain that the figures will really move the needle as investors could wait to place bets until the Fed’s last meeting of the year on Wednesday.

CPI year on year is forecasted to rise by 3.1% which would be slightly softer than the 3.2% pace recorded in October. The number was just released as writing and came in at 3.1%, as expected.

The data is mostly in line with expectations outside of a slight uptick in the month on month. A softer dollar and lower interest rates are helping gold stabilize after yesterday’s drop. The S&P 500 closed yesterday at a new high for the year, this rally carried over into the Asian session.

EUR/USD is trading higher this morning and is supported by positive data showing that the ZEW Economic Sentiment Index for the Eurozone improved sharply to 23 in December from 13.8 in November. The USD is softer against all the G10 currencies ahead of what is expected to be a softer CPI report.

GBP/USD is relatively flat on the day and has received mild support from upbeat UK employment data. Data remained flat at a 4.2% rate in October with the number of jobless workers increasing by 16k instead of the 20.3k expected.

USD/CAD is extending its losses for the third consecutive day. Crude oil prices are holding steady today providing support for the Canadian Dollar. All eyes will be on the Fed this Wednesday for some guidance on rates.

USD/MXN is trading lower on the day as general USD weakness across the board is driving currency markets. Mexican President Andres Manuel Lopez Obrador has mentioned that more needs to be done to curb inflation. Banxico rate announcement on Thursday is a notable event that could influence market movements. Expectation is that Banxico will maintain cash rates at the unchanged level of 11.25%