The US Dollar (USD) is modestly lower for a second day. US PPI came in below consensus expectations yesterday, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD edges lower as US yields dip

"This morning’s CPI data is expected to come in at up 0.4% in the December month, with core forecast to rise 0.3%. Those sorts of results would give a 2.9% increase in headline prices over the year, up for m 2.7% in November, with core prices steady at 3.3% in the year."

"While PPI was a bit softer than expected some components (domestic airfares) relevant as inputs for PCE were somewhat elevated. The devil will be in the details for the CPI report as well. US yields remain elevated but have edged back from recent peaks. Markets are also reflecting some caution about what sort of tariff regime will follow next week’s inauguration, weighing on the USD."

"Extended USD positioning and somewhat frothy USD sentiment continue to suggest—to me, at least— that the USD is prone to consolidation or a correction."