Eurozone inflation surged to a 3-year high in December, giving the euro a much-needed boost after a mixed session yesterday.  Supported by stronger energy prices, stronger inflation will have the ECB breathing a sigh of relief. The central bank has chasing inflation with an aggressive QE plan that will continue to run through the end of the year, but this pickup could indeed help the bank normalize policy over the longer term.

The minutes from the December FOMC meeting are due at 1pm EST, and are likely to impact markets in a big way. After hawkish signals from Fed chair Janet Yellen’s press conference for the December meeting and the committee’s forecast of three rate hikes in 2017, investors are looking for confirmation of a stronger economic outlook for the US. Although the current Fed has been staunchly apolitical, investors are looking for any mentions of fiscal policy and whether that will be a driver for the FOMC’s actions in the coming year.  Near-term risks for the USD stem from dovish tones towards risk or the economic outlook.

Risk-appetite is on today, and investors are turning to EM and commodity currencies. In emerging markets, the South African rand and Brazilian real are up over a cent against the dollar, while the Canadian and Aussie dollars are taking the spotlight in the commodity space.

The peso is once again under pressure. After Ford cancelled a 1.6 billion investment in Mexico yesterday sent the pair soaring, the dollar is once again flexing its muscles and testing moves higher across the morning.

EURUSD:  Euro has taken its first gains against the USD after an upside surprise in EU inflation.

GBPUSD:  Benefitting from a weaker USD, the pound has steadily gained across the morning.

AUDUSD: The Australian dollar is up 0.65% today, boosted by flows into commodity currencies.

USDCAD: Downward pressure on the USD and paired with a move up in commodities pushed USD/CAD to 3-week lows this morning.