FX markets are consolidating ahead of tomorrow's important December US CPI release. But the Dollar bias is lower, economists at ING note.

Dollar remains vulnerable

“Assuming no upside surprises in inflation then and the increasing focus on China firmly supporting domestic demand, the risk environment is being read as positive.”

“As always, we think the short end of the US yield curve will play a major role in FX markets and as long as two-year US Treasury yields continue to hover near the range lows at 4.20/4.25%, the Dollar will stay on the soft side.” 

“DXY remains soft and we would say the near-term bias remains towards the 102.00 area, unless tomorrow's US CPI release throws a hawkish curveball.”